On December 12, 2019, the European Commission ("the Commission") presented its Proposal ("the Proposal") for the revision of Regulation (EU) No. 654/2014 concerning the exercise of the European Union's ("EU") rights for the application and enforcement of international trade rules ("the Enforcement Regulation").1 The Proposal comes just days after the World Trade Organization's ("WTO") Appellate Body was reduced to just one member, after the term of the two other remaining members lapsed, as a result of the continuing blockade of the (re)-appointment process of Appellate Body members.2
The current Enforcement Regulation provides the EU with the ability to adopt trade sanctions ("commercial policy measures") after, inter alia, a favorable ruling by the WTO.3 These "sanctions" can take the form of increased tariffs, quotas or restrictions on access to government procurement markets.4 The Proposal foresees amendments to Articles 3, 4 and 10 of the Enforcement Regulation, whereby the proposed addition of points (aa) and (bb) to Article 3 is of greatest significance. If accepted, they would extend the scope of the Enforcement Regulation to situations where:
- a WTO panel report upholding claims brought by the EU is circulated, and an appeal under Article 17 of the WTO Dispute Settlement Understanding ("DSU") cannot be completed and if the third country has not agreed to interim appeal arbitration under Article 25 of the WTO Dispute Settlement Understanding; and
- in trade disputes relating to other international trade agreements, including regional or bilateral agreements, if adjudication is not possible because the third country is not taking the steps that are necessary for a dispute settlement procedure to function.
In essence, therefore, the proposed amendment allows the EU to retaliate in situations where the WTO's Dispute Settlement Body has not adopted a panel report or Appellate Body report authorizing the EU to suspend concessions or other obligations under the WTO's "covered agreements" as defined in the DSU.
The main focus and objective of updating the Enforcement Regulation is described in the Explanatory Memorandum to the Proposal as catering "for situations where, after the Union has succeeded in obtaining a favourable ruling from a WTO dispute settlement panel, the process is blocked because the other party appeals a WTO panel report ‘into the void’ and has not agreed to interim appeal arbitration under Article 25 of the WTO DSU." The upgrading of the Enforcement Regulation had already been reported to be one of the potential policy priorities of the Directorate-General for Trade under the new Commission.
The upgrading of the Enforcement Regulation would take place under the Ordinary Legislative Procedure, which means that the EU Member States as gathered in the Council, as well as the European Parliament, must give their approval. The Commission expects the approval process to be concluded by mid-2020.5
1 Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No. 654/2014 of the European Parliament and of the Council concerning the exercise of the Union's rights for the application and enforcement of international trade rules. See also the current Regulation: Regulation (EU) No. 654/2014 of the European Parliament and of the Council of May 15, 2014, concerning the exercise of the Union's rights for the application and enforcement of international trade rules and amending Council Regulation (EC) No. 3286/94 laying down community procedures in the field of the common commercial policy in order to ensure the exercise of the community's rights under international trade rules, in particular those established under the auspices of the World Trade Organization. Latest unofficial consolidated version: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:02014R0654-20151105.
3 Article 4(1) of the Enforcement Regulation. Such commercial policy measures may also be adopted (i) following the adjudication of trade disputes under other international trade agreements, including regional or bilateral agreements; (ii) for the rebalancing of concessions or other obligations, to which the application of a safeguard measure by a third country may give right pursuant to Article 8 of the WTO Agreement on Safeguards, or to the provisions on safeguards included in other international trade agreements, including regional or bilateral agreement; or (iii) in cases of modification of concessions by a WTO member under Article XXVIII of the GATT 1994, where no compensatory adjustments have been agreed.