This is a guest post from Mariana de Andrade, a post-doctoral researcher at the University of Milano-Biccoca and international sanctions and export control consultant for Studio Legal Padovan (Milan, Italy). The views expressed in this contribution are exclusively those of the author.
In December 2021, the European Commission submitted a proposal for an Anti-Coercion Instrument (ACI), a mechanism aimed at countering ‘economic coercion’ from third States against the interests of the European Union. The EU Commission has defined economic coercion as ‘a situation where a third country is seeking to pressure the Union or a Member State into making a particular policy choice by applying, or threatening to apply, measures affecting trade or investment against the Union or a Member State’. A notable example of the instances that motivated the EU to seek the adoption of an Anti-Coercion Instrument were the retaliatory measures imposed by China against Lithuania in response to the violations of the ‘One China principle’ by engaging in diplomatic relations with Taiwan.
The ACI foresees a mechanism through which the European Commission shall ascertain the existence of an ‘economic coercion’ by a third State, and in response take steps to counter and/or deter the coercion at stake. The reaction starts off through a formal request from the EU to the third State for it to cease the coercion. Where this request is not followed, the Commission shall then take ‘non-interventionist’ measures, in the terminology used by the proposal’s explanatory memorandum (i.e. international adjudication or other means of peaceful settlement of disputes). Where these measures do not lead to the cessation of the economic coercion, the Commission may adopt an ‘interventionist’ measure among those listed in Annex 1 to the ACI. Examples include: suspension of any tariff concessions and the imposition of new or increased customs duties; imposition of restrictions on the exportation of goods; suspension of applicable international obligations regarding trade in services; suspension of applicable international obligations with respect to trade-related aspects of intellectual property rights; suspension of applicable international obligations with respect to financial services.
This contribution examines the nature of the coercive measures addressed by the ACI, and if the EU response to coercion reflects ‘countermeasures’ within the sense of general international law. For clarity, this contribution refers to ‘countermeasures’ as measures violating international law, but whose wrongfulness is precluded because taken in response to a pre-existing violation of international law (according to the definition set forth by the Articles on the Responsibility of States for Internationally Wrongful Acts (ARSIWA)), and to ‘Union response measures’ (as referred to by the proposal) as the measures taken by the EU to deter economic coercion under the ACI. It is unclear whether the EU is seeking to respond to coercive measures deemed to violate international law for breaching the principle of non-intervention (scholars have argued in this direction here and here), or more generally to counter political measures that do not necessarily violate international law while seeking to coerce the EU and its member States (the meaning of ‘economic coercion’ in the ACI has been examined here). This contribution submits that the ACI is obscure, that there is an underlying incoherence in what the ACI seeks to counter, leaving the legal nature of the ACI and the ‘Union response measures’ in a limbo.
Different commentators have pointed out the possible conflict between the ACI and the legal regime of the World Trade Organization (‘WTO’; see e.g. here, here), as many of the measures listed in Annex 1 are regulated under the umbrella of the multilateral trading system. The relationship between the ACI and the WTO falls outside the scope of the present contribution, but these considerations must be born in mind for a better understanding of the problems raised by the ACI.
The ACI is now under discussion before the European Parliament. On October 2022, Trade Committee Members of the European Parliament backed the project and a draft report was adopted by the Parliament, featuring some amendments and clarifications to the Commission’s original proposal. These are the two instruments analysed below.
‘Economic coercion’: an internationally wrongful act?
Central elements of the legislative proposal hint that the ‘coercive measures’ addressed by the ACI are by definition violations of international law. For example, the 11th recital of the ACI proposed preamble states that ‘Coercion is prohibited under international law when a country deploys measures such as trade or investment restrictions in order to obtain from another country an action or inaction which that country is not internationally obliged to perform and which falls within its sovereignty, when the coercion reaches a certain qualitative or quantitative threshold, depending on both the ends pursued and the means deployed’. Additionally, the Parliament’s draft resolution proposes a recital invoking both the ARSIWA and the ‘Declaration on Principles of International Law concerning Friendly Relations and Cooperation among States in accordance with the Charter of the United Nations’ (UN General Assembly Resolution 2625 XXV/1970), recalling that the latter ‘states that no State may use or encourage the use of economic, political or any other type of measures to coerce another State in order to obtain from it the subordination of the exercise of its sovereign rights’. The recital moreover claims both instruments reflect customary law and are binding. It seems thus to imply that the coercion regulated by the ACI falls within the perimeter of those prohibited under international law.
In the same sense, in many ways, the ACI reproduces the dynamics set forth by general international law on State Responsibility, as codified by the ARSIWA. The ‘Union response measures’ proposed in ACI follow many of the substantive and procedural requirements in the law of countermeasures of the ARSIWA, such as the principle of proportionality and conditions where countermeasures should be lifted. One element worthy of note is the emphasis, especially in the Parliament’s draft, on the resort to ‘Union response measures’ as a means to seek reparation for the injury caused by the coercive action. Under general international law, reparation is due when there is a wrongful act. Indeed, according to the ARSIWA commentaries to countermeasures, these should be ‘taken against a State which is responsible for an internationally wrongful act in order to induce that State to comply with its obligations of cessation and reparation’. Therefore, imposing countermeasures to seek reparation implies the existence of a violation of international law.
More significantly, the ‘interventionist’ measures listed and available to the EU in case the ‘non-interventionist’ ones fail to succeed seem to offer a decisive clue to the inquiry. All measures listed by Annex 1 involve the suspension of EU’s international obligations, and therefore the violation of said obligations.
On the other hand, the drafting of the ACI, as well as the Parliament’s draft regulation, never explicitly qualify economic coercion as intrinsically prohibited. For this to be the case, the first step triggering the EU’s response should be to ascertain the violation of an international obligation; yet, nowhere does the ACI determines that the Commission should proceed in such manner. The very definition of economic coercion is open-ended. According to the proposed ACI, for a measure to qualify as ‘economic coercion’, the third State measure must (i) ‘interfere in the legitimate sovereign choices of the Union or a Member State by seeking to prevent or obtain the cessation, modification or adoption of a particular act by the Union or a Member State’ and (ii) ‘apply or threaten to apply measures affecting trade or investment’. The first limb of the definition potentially equates the coercive measure to a violation of international law since, as examined above, in other passages, the ACI submits that measures that interfere in the legitimate sovereign choices of the Union are a violation of the principle of non-intervention. Yet, the extent to which economic coercion may amount to a violation of the principle of non-intervention is unclear in international law (the ICJ’s Nicaragua decision is a landmark on this point). In any case, the proposed ACI, as well as the suggestions advanced by the European Parliament, do not explicitly state that economic coercive measures are by definition violations of international law.
The hints that there is an implied equivalence between economic coercion and a wrongful act are moreover put into question by ambiguous sections of the proposed instrument. Article 2(2) indicates that, to ascertain the existence of ‘economic coercion’, different aspects shall be taken into account, including ‘whether the third country is acting based on a legitimate concern that is internationally recognised’ (para (d)). While a coercive measure falling within the scope of this paragraph is not necessarily legal, the idea of a ‘legitimate concern that is internationally recognised’ can be viewed as incompatible with an internationally wrongful act. The drafting of Article 2(2) implies that this criterion is only one among others that shall be taken into consideration to determine the existence of economic coercion. The Parliament’s draft report, moreover, advances an amendment to this subparagraph: instead of legitimate concern, the Commission shall assess if the concern is ‘recognised as legitimate by international law and conventions’. Even if the measure under scrutiny has been taken based on a ‘legitimate concern that is internationally recognised’ (or even legal, in the terms of the Parliament’s drafting) this does not imply that the coercive character shall be refuted by the Commission.
Another illustration is the definition of ‘third-country action or measure’ in the Parliament’s draft resolution, that is ‘any type of action or measure, failure to act or threat thereof that is attributable to a third country’. ‘Failure to act’, conversely, is clearly defined as ‘failure by a third country to comply with its obligations under legally binding instruments of international law’. While the passive coercive measure amounts to a failure to comply with international obligations, the active coercive measure does not hinge on international obligations. As opposed to the explicit mention in the definition of ‘failure to comply’, the absence of a direct reference to a violation of international law in the definition of ‘action or measure’ can be interpreted as not requiring the existence of a wrongful act.
Conclusion
The above analysis leads to a conclusion that the proposed ACI is rather unclear with respect to the exact meaning and scope of the ‘coercive measures’ it sets to counter. Numerous elements in the ACI show the ambiguity in the proposed text; only some were analysed for illustrative purposes.
While the ACI relies on an open-ended definition of ‘economic coercion’ that may or may not amount to a violation of international law, the text foresees measures that, if deployed, would constitute violations of international obligations. These ‘Union response measures’ could only be justified (as lawful countermeasures) if the ‘economic coercion’ indeed amounts to an internationally wrongful act, because in breach of the principle of non-intervention. As noted by Raju, ‘the legality of any countermeasures adopted by the EU under the Draft Regulation hangs on the correctness of this assumption’. The author contends that not all coercive measures that do not violate specific international obligations are necessarily illegal.
I share his view, but I submit that the ACI does not assume the illegality of all economic coercive measures. In my view, the ACI deliberately leaves ambiguities as to whether economic coercion is automatically equated to a violation of international law. This ambiguity leaves wiggle room for the Commission to justify European responses as lawful ‘countermeasures’, even if the coercive act is within a grey area of legality under the principle of non-intervention.
At this stage, one must remark that another element that certainly influences the shape taken by the Commission’s proposal is the division of competences within the EU. The Commission’s competence in the field is restricted to the European Common Commercial Policy, whereas matters of foreign policy belong to the EU Council (EU Member States). Therefore, an instrument proposed by the Commission must be limited to the ambit of competence of the Common commercial policy. This limitation explains the ACI’s strange separation between economic coercive measures and responses, and political non-economic coercion and responses.
Arguably, the ACI’s lack of clarity on the nature of the economic coercion is the stem to other legal issues that have been raised by other commentators, such as the possible incompatibility between the ACI and WTO law. Although the EU argues otherwise, the ACI resembles the United States’ Section 301, which endows the US government with powers to take ‘all appropriate measures and feasible steps’ to counter ‘unjustifiable or unreasonable’ trade restrictions, ‘unjustifiable and unreasonable’ discriminatory acts or policies that restrict the United States commerce. In short, this piece of legislation allowed the United States to unilaterally determine the existence of ‘unjustifiable and unreasonable’ (why not coercive?) trade measures and act to counter this action. Section 301 was mostly deployed before the institution of the binding dispute settlement mechanism of the WTO. On a more general note, coercive measures, by their very nature, fall within the realm of foreign policy. Other contradictions in the ACI have been debated by commentators, but it seems that, perhaps, the ‘poisonous tree’ may be that the European Union is trying to regulate a field that is inherently political and thus naturally subject to discretion.
