Having talked to some people, and read some things, and looked at an old blog post, I think I now see a few of the legal issues that could arise in relation to the Ontario feed in tariff WTO complaint brought by Japan and the EU against Canada.
First, with regard to the GATT Article III:4 claim, it seems clear that there is a domestic content requirement. However, as noted in the old blog post and the comments thereto, perhaps Article III:4 does not apply because the measure constitutes government procurement that falls under Article III:8(a), as the Ontario Power Authority is a government entity. A key question would be whether all of the terms of Article III:8(a) are met here. That provision states: "The provisions of [Article III] shall not apply to laws, regulations or requirements governing the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale."
Second, as to the SCM Agreement Article 3.1(b) claim, again it seems clear that there is a domestic content requirement. But it still needs to be shown that there is a subsidy, one element of which is that there must be a "financial contribution." Here's the SCM Agreement definition of financial contribution:
(a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i.e. where:
(i) a government practice involves a direct transfer of funds (e.g. grants, loans, and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees);
(ii) government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits);
(iii) a government provides goods or services other than general infrastructure, or purchases goods;
(iv) a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments;
So where does this measure fall? As I understand it, the key "subsidy" part of the measure is that the Ontario Power Authority is buying clean energy from individuals at above market prices. That sounds like it would be covered by the "government purchase" category in item (iii). But that part only covers purchases of "goods." Is energy a "good" or a "service"? If it's a service, it would not be covered by this provision, and thus perhaps there is no financial contribution here. Could it then be covered by (i) as a "direct transfer of funds"? The U.S. - Aircraft panel said no: "transactions properly characterized as purchases of services are excluded from the scope of Article 1.1(a)(1)(i)." See paras. 7.949-970. That issue is on appeal: http://www.worldtradelaw.net/na/ds353-8(na).pdf See para. 3.
And finally, of course, as discussed in the last post, Canada could try invoking a GATT Article XX defense, certainly to the Article III:4 claim, but also to the SCM Agreement claim.
Those are the issues that came to mind. Any others I've left out? Any other thoughts? Anything I've misunderstood about how this measure works?
