Where the party complained against in a WTO dispute appeals into the void and thereby blocks an adverse panel report from having legal effect, can the complaining party just treat the panel report as the final word and move forward with retaliation? The EU has set up a process for doing so, and may now give it a try for the first time. In a sense, the EU is declaring that "appeals into the void" are void.
The European Commission announced on Friday that it "has launched a public consultation on the possible use of the Enforcement Regulation in its dispute settlement case on Indonesian nickel export restrictions." It explained that "[t]his step was taken after Indonesia appealed the World Trade Organization (WTO) Panel Report on the matter – which was favourable to the EU – to a non-functional Appellate Body, thus effectively blocking the final and binding resolution of the dispute through the WTO." The Commission emphasized that it "will continue efforts to reach a mutually agreed solution to the nickel ore dispute, including continuing to invite Indonesia to join the Multi-Party Interim Appeal Arrangement (MPIA)."
The EU's public consultation notice is here, with a deadline of August 11 to submit comments. The notice explains the Enforcement Regulation as follows:
Regulation (EU) No 654/2014 of 15 May 2014 concerning the exercise of the EU's rights for the application and enforcement of international trade rules as amended by Regulation (EU) No 2021/167 provides the legal basis to address blockages in the WTO dispute settlement system and to prepare the EU for such situations where important economic interests in the effective enforcement of rules would be undermined.
Where action is necessary to safeguard the EU's interests in such cases, the EU may take appropriate commercial policy measures in response, on the basis of objective criteria.
And it estimates the amount of nullification or impairment -- which provides the basis for any countermeasures under the Enforcement Regulation -- in the Indonesian nickel case as follows:
The Commission has estimated the direct effect of the nullification and impairment to be around €350 million, while the indirect impact would be up to four times higher. The Commission has at this stage identified steel and stainless steel products as possible products for countermeasures.
Is the EU regulation consistent with WTO rules? Is appealing into the void consistent with those rules? Whatever the answer to those questions, what many people are looking for right now is a practical way forward in resolving trade disputes while the Appellate Body crisis continues. The EU approach is not ideal in terms of the rule of law (and I'm sure they would agree with this), but it may be the best option under the circumstances.
Some other questions I have are:
- How will Indonesia react to this? As I understand it, there are a number of EU-Indonesia trade issues in play right now, so the resolution of this dispute could end up being part of a broader package.
- How would people in the U.S. react to the EU taking this approach in some future dispute involving an EU complaint against the U.S.? (When I say "people in the U.S.," I'm thinking specifically of USTR, the White House, and members of Congress.) And what impact would such an EU action have on the current U.S. approach to WTO DS?
In other WTO appeal news, China and the EU have agreed to use DSU Article 25 in the event of an appeal in the DS610 and DS611 disputes. Both China and the EU are parties to the MPIA.
