Flury of WTO domestic regulatory autonomy cases continues: Ontario’s feed-in tariff program illegal

Just before the Christmas break, a WTO Panel ruled at the request of Japan and the EU that Ontario’s feed-in tariff program is illegal under the GATT and TRIMs agreement.  Feed-in tariff programs are a popular means to boost renewable energy. Typically, they imply that producers of renewable energy are nurtured through preferential, long-term and advantageous electricity purchase contracts (either through obliging private electricity distributors to enter into such contracts, such as in the infamous European PreussenElektra case, or such as in the case of Ontario’s law, through employment of a Government Agency which enters into these contracts). Governments are often tempted to throw ‘local content requirements’ into the mix: in the case of Ontario, domestic content requirements must be complied with in the design and construction of the relevant electricity generation facilities utilizing solar photovoltaic and wind power technology in order to qualify for guaranteed electricity prices offered under the FIT Program.

The Panel rejected the EU’s claim with respect to Subsidies, however it did accept that the regime infringed GATT Article III, as well as the Agreement on Trade-Related Investment Measures. The former to me was no great surprise. Infant industry arguments are often made with respect to renewable energy however these do not in my view carry much weight with respect to either solar, wind or hydropower. The finding on TRIMS is encouraging: it shows that the Agreement (I sometimes dub it a mini-MAI) does have some bite.

The EU has had internal issues with feed-in tariffs and the like (see e.g. my paper here on (di)similarities between EU and WTO law on the matter), and (update 5 May 2015) in the UK the Courts are considering the extent to which Article 1 of the first Protocol to the European Conention on Human rights (‘A1P1’), which protects property, shields investors in solar energy from changes in feed-in tariffs.

Geert.

Plain packaging and the Australian Constitutional debate: the Act does not amount to ‘acquisition’

Update 25 May 2015 BAT and PMI now have also launched in the High Court in the UK .with BAT putting aside the Australian ruling, reported below, as distinguishable, and PMI focusing on EU trade mark laws.

As reported earlier, the High Court of Australia held in the summer that the Australian Plain Packaging regulations are not unconstitutional. It has now also released its reasons for finding so. The relevant Commonwealth constitutional provision is Section 51(xxxi) which confers upon the Commonwealth Parliament the power to make laws with respect to:

“[t]he acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws”.

‘Just terms’ (including compensation) are only due if there is an ‘acquisition’; this, the High Court held, is not the case here. It notes (per French CJ)

‘Taking involves deprivation of property seen from the perspective of its owner. Acquisition involves receipt of something seen from the perspective of the acquirer. Acquisition is therefore not made out by mere extinguishment of rights.‘ (footnotes omitted).

And further

‘Importantly, the interest or benefit accruing to the Commonwealth or another person must be proprietary in character. On no view can it be said that the Commonwealth as a polity or by any authority or instrumentality, has acquired any benefit of a proprietary character by reason of the operation of the TPP Act on the plaintiffs’ property rights.’

There is plenty of scope for distinguishing the Australian constitutional arguments from other jurisdictions (indeed the judgment itself refers to distinctions with the US Constitution). Moreover, as I have already flagged in an earlier posting, the legal fronts on which this battle is fought are very wide. Immediate reactions during the summer (along the lines of ‘with this judgment there is no stopping plain packaging regulations’) seemed a bit premature to me –  they do all the more now that we have had a chance to read the actual judgment.

Geert.

International standards, Codex and a new SPS dispute in the making: EU US (Ractopamine)

Alberto Alemanno reports on some crucial developments in the development of international SPS standards. Prof Alemanno links to recent EU Agriculture Council conclusions which are a treasure trove of issues linked to the WTO’s room for domestic regulatory autonomy.

In brief, the FAO/WHO’s Codex Alimentarius Committee adopted limits for the use of ractopamine (a veterinary drug used to pimp pigs) which are more lenient than the EU’s (albeit stricter than those of the US). While the WTO Agreement on Sanitary and Phytosanitary Standards – SPS, encourages WTO Members to apply standards which conform with international standards, it also allows for recourse to the precautionary principle in the case of scientific uncertainty (Article 5.7).

The EU Ministers have decided to continue employing its own, stricter standard, and have instructed the European Commission to ensure that exporters to the EU that employ a weaker standard, set in place a parallel system for export to the EU (one which guarantees that the EU’s stricter standard is being abided by in export to the EU).

The EU’s resolve on this issue is firm. The likelihood of a challenge under the WTO Dispute Settlement very high. As Alberto points out, even in Beef Hormones, Article 5.7 was not employed. Before a WTO Panel would come to that, it would also have to assess the qualities of the relevant Codex decision as an international standard, given the slim majority with which it was adopted (which brings back memories of EC Sardines).

Risk management never fails to pop up on time for first term exam questions.

Geert.

EU law goes global – Compliance of landed fish and aquaculture products with EU legislation

Fisheries and aquaculture markets and regulation, are among the oldest in the world. Both economics and regulatory aspects of thee markets are often opaque. The challenge of their sustainable development typifies many hurdles for modern environmental and trade law. The European Parliament is commissioning research which will in a first instance map the application of EU law to said products. Hopefully it will also provoke some out of the box thinking on addressing regulatory challenges upstream.

There is no great difficulty in the principle of applying EU food and public health standards to the relevant imported products (although as the tender highlights, practical enforcement may be trickier). However from a legal point of view, the issues become more complex in a variety of ways, in particular

– when a jurisdiction decides to restrict or otherwise regulate imports of said products on the basis of their production and processing method carried out elsewhere. This difficulty is compounded when the criteria upon which the importing country regulates, are fuzzy. Examples would include ‘unsustainable management of fishing grounds’, in the absence of existing international standards.

– when a jurisdiction employs non-government labels to steer consumption in a certain direction. The legal complexity in using labels was of course recently clarified at the World Trade Organisation in US Tuna/Dolphin III.

The study to be commissioned by Parliament may not be designed to address all these issues – however jurisdictions like the EU increasingly test the limits of regulating production processes upstream (ie outside one’s jurisdiction) – often the only way effectively to regulate an environmental or public health issue.

Geert.

Plain packaging – One battle might be over, plenty to follow

I reported earlier that the plain packaging dispute is fought on many fronts. As has been widely reported, the domestic challenge to the Australian regime would seem to have been won by the Government (we have a small wait for the full ruling to be delivered).

However, this dispute is fought on many fronts. Over at the international economic law blog, Simon Lester gives an excellent summary of the status quo on the various issues, and links to academic thought on chances of success. Evidently the plain packaging rules are not home and dry yet.

As often, one should be careful what one asks for: Tasmania is reported to be pondering a gradual ban on smoking, allowing those adults who have picked up the habit to peter it out, while banning tobacco consumption to all others. This may be in response to an often heard argument: if smoking is that bad for you, why not ban it rather than happily cashing in on the coinciding taxation. In legal terms: given the cited health issues related to tobacco consumption, may a ban be the only proportionate action? (and what does that mean in consistency terms for other health issues such as obesity, high adrenaline sports, alcohol…).

Geert.

Use of Fair Trade labels in procurement decisions – Court of Justice of the EU in Max Havelaar

The Court of Justice of the EU has further completed its views on the use of criteria linked to sustainable development. These are criteria which do not simply refer to environmental characteristics of the product itself. Rather, they convey a message as to the overall ‘process and production methods’, known in jargon as ‘PPMs’, of a particular product or service.

In Max Havelaar, Case C-368/10, the Court had to decide on the use of specific labels in decisions awarding government purchases (‘procurement’) to a particular supplier.The province of North Holland had

–        inserted in the technical specifications a condition requiring the Max Havelaar and EKO labels or in any event labels based on similar or the same criteria;

–        included, for appraising the ability of operators, criteria and evidence concerning sustainable purchasing and socially responsible business, and

–        included, when formulating award criteria, a reference to the Max Havelaar and/or EKO labels, or in any event labels based on the same criteria.

The judgment is quite complex for those unfamiliar with (EU) procurement law In particular, the Court distinguishes in the exact room for manoeuvre between various stages of a procurement decision. Leaving detailed breakdown aside (reference is made to the judgment), the Court’s finding is basically that authorities must make use of descriptive conditions for such criteria, rather than solely referring to specific labels. However they may identify certain labels as leading to a presumption of these criteria having been met, provided of course they allow other proof to be submitted.

For WTO lawyers, judgments like these are not irrelevant. Arguably, adoption of private labels in procurement decisions, may well bring these labels within WTO, in particular, TBT (Agreement on Technical Barriers to Trade), discipline.

Geert.

WTO Appellate Body in Clove Cigarettes – Faites vos Jeux

Postscript 8 January 2016: the Advocate General of the WTO referred to the WTO case, in a challenge to the EU’s ban on menthol cigarettes, suggesting the EU wouldbe in WTO trouble had it not banned their sale.

The WTO Appellate Body’s Report in ‘Clove cigarettes’  was issued on 4 April. It is a dream ‘Trade and public health’ case and therefore generally a superb ‘trade and regulatory autonomy’ case. Under appeal were a number of the findings of the Panel in first instance. The WTO summarises the dispute as follows:

‘(the case) concerns Section 907(a)(1)(A) of the Federal Food, Drug and Cosmetic Act (“FFDCA”), which was added to the FFDCA by Section 101(b) of the Family Smoking Prevention and Tobacco Control Act.  This measure bans the production and sale of clove cigarettes, as well as most other flavoured cigarettes, in the United States.  However, the measure excludes menthol-flavoured cigarettes from the ban.  Indonesia is the world’s main producer of clove cigarettes, and the vast majority of clove cigarettes consumed in the United States prior to the ban were imported from Indonesia.’

Discrimination, necessity, the link between the Agreement on Technical Barriers to Trade (TBT – new under the WTO) and the General Agreement on Tariffs and Trade (applied since 1947 and with a richer case-law history), the possibility of employing regulatory objectives to decide upon ‘likeness’ between products: these and other issues are all dealt with by both Panel and AB. Per usual and not surprisingly (the same holds for many courts, nationally and internationally), the jury is out on many of the topics addressed. This leaves uncertainty of a similar ilk as after the Brasil Tyres case, the consequences of which I have analysed for JEL here.

Geert.

Compulsory licensing – India move will test room for manoeuvre under WTO and TRIPS

India’s ‘Controller of patents’ has granted Natco a ‘compulsory license’ (‘CL’) for Bayer’s Sorafenib Tosylate (marketed as Nexavar). The drug extends the lives of terminal liver and kidney cancer patients. Put differently: the controller has forced Bayer to grant a license to Natco, to produce the drug, specifying inter alia a (low) sales price and royalties to be paid to Bayer.  Natco is an Indian pharmaceutical company (no surprise there), with an increasing portfolio in pharmaceutical R&D. In other words reportedly not a typical ‘generics’ company.

The ruling is of course subject to appeal. It is also the subject of intense debate under the WTO, in particular the TRIPS Agreement. TRIPS (Articles 30-31) leaves room for a CL system and prima facie leaves a lot of room for manoeuvre to WTO Members to grants such licenses. However underneath Article 30-31’s surface lies quite a bit more than might be assumed. Moreover, even if one takes Members’ discretion in applying these Articles at face value, the articles must not be applied stand-alone. In other words they do not give carte blanche for introducing requirements leading to CL which might otherwise be WTO inconsistent.

Watch this space: this case is a nugget for, yet again, disciplining regulatory autonomy (see here and here) under the WTO.

Geert.

Exam questions, anyone? Plain packaging regulations and domestic regulatory autonomy

Update 10 June 2020 a lot has happened of course since this post – for the latest on the WTO front see the AB report confirming the legality of the measures under World Trade Organisation (TBT) rules.

Postscript January 2016 Reportedly the Permanent Court of Arbitration under UNCITRAL rules, has declined jurisdiction. The award is to be made public here once it has been cleared of confidential data.

Postscript June 2015: I have many other posts on the issue however I thought I”d here that in June 2015, Ukraine suspended its complaint against Australia. Simon Lester collates why. And end of May 2015, Norway Norway TBT plain packaing notification its plain packaging plans to the WTO TBT Committee, with extensive pre-emption of legal arguments against it.

Postscript 22 10 2013:  on the BIT front, see the interesting defence by the European Commission of BITs in October 2013 here. Reference is made ia to the ongoing Philip Morris and Vatenfall (Nuclear energy) issues.

Faculty everywhere have been handed a treasure trove of exam questions, courtesy of ‘plain packaging’ (students please look away now).  A variety of States are in the process of introducing ‘plain packaging’ requirements on tobacco products. Although they of course vary in detail, they generally require tobacco manufacturers to strip packaging of all tailored corporate content, resorting instead to prescribed generic packaging. The ‘plain’ packaging required is generally limited to brand name in standardised fashion (font size and lettering, colour…), joined by a number of health warnings (including, sometimes, images), excise duties requirements and ingredients listings.

Plain packaging ticks all the boxes of a classic ‘domestic regulatory autonomy’ dispute. It pitches the freedom of a sovereign State to pursue ‘regulatory’ interests (environment, public health, consumer protection, stability of the economy etc.) against the free trade commitments which the same State has voluntarily committed to. These trade commitments take the form of multilateral (such as the WTO, the EU’s Internal Market, or NAFTA) or bilateral (such as bilateral free trade agreements and customs unions) agreements. They most often do not, but sometimes do include procedural rights for private parties (as opposed to simply the States which have concluded the agreement) to launch legal proceedings should free trade (arguably) have been infringed. Such standing for private parties is the case in many BITs, i.e. Bilateral Investment Treaties, as well as for instance (subject to a number of whistles and bells), NAFTA.

Free trade agreements are not generally oblivious to the continuing desire of participating States to regulate the interests referred to above. Consequently they include room for ‘domestic regulatory autonomy’ to continue after the conclusion of the agreement, subject of course to checks and balances.

This fragile balance between free trade and regulatory autonomy is exactly what the current debate on plain packaging is all about. The issue is being fought on many fronts: At the World Trade Organisation, Ukraine have filed a complaint in March 2012 against Australia’s plain packaging laws on the basis of the TRIPS (intellectual property) and TBT (technical barriers to trade; product regulations) Agreements. Ukraine’s complaint is supported by a number of WTO Members with tobacco manufacturing interests.

Australia’s position is eagerly anticipated by other jurisdictions thinking of doing something similar.See e.g. here and here.

At a constitutional level, issues include free (commercial) speech (see here for the related issue of graphic warnings), expropriation (of the trademark), non-discrimination (why no plain packaging on alcohol, for instance).

At a level of BITs, the issue has rejuvinated the ‘regulatory takings’ debate (do new regulatory requriements of host States amount to a ‘regulatory taking’ (as compared to a straightforward expropriation) that may be incompatible with investment protection requirements. The Uruguay-Switserland (see here and enter search term ‘ICSID Case No. ARB/10/7’) and Australia-Hong Kong BITs are among those affected. One imagines that the necessity of the measure will be hotly contested, as the actual health impact of the measure is not entirely certain. See the (controversial) ruling of the European Free Trade Association’s Court on the related issue of display bans here and the excellent analysis of prof Alemanno.

One will have gathered: all of this is excellent material for those of us teaching Trade and regulatory law. Geert.

The EU’s external trade policy: Doha as well as FTAs

I have uploaded a short piece on the focus of the EU’s external trade policy given the continuing stalemate in the Doha Round over at the WTO.

However one spins the news coming out of the Geneva headquarters of the World Trade Organisation (‘WTO’), it would seem fair to say that the current ‘Doha’ or ‘Development’ or indeed ‘Millennium’ Round of multilateral trade negotiations is in dire straits. Overall agreement was narrowly missed in the summers of 2006 and again of 2008 (Doh!). Following this on-going failure, Free Trade Agreements (‘FTAs’) and Regional Trade Agreements (‘RTAs’) are very much en vogue, in the EU as elsewhere (Aha!).

Geert.