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Revised EU Trade Enforcement Regulation Published

Mayer Brown
16/02/2021

On Friday, February 12, 2021, revisions to the European Union (EU) Trade Enforcement Regulation, Regulation (EU) No 654/2014, were published in the EU’s Official Journal.1 The revised Trade Enforcement Regulation enables the EU to adopt countermeasures when it obtains a favorable ruling from a dispute settlement panel of the World Trade Organization (WTO) or in bilateral and regional agreements and when the other party fails to cooperate on the adjudication of the dispute. The publication follows the swift completion of a legislative process that was initiated with a proposal by the European Commission (Commission) in December 2019.2

The revised Trade Enforcement Regulation not only incorporates the essential revisions proposed by the Commission but also includes several amendments introduced by the European Parliament (EP).3 Whereas the Commission’s proposal was limited to the introduction of two provisions enabling the EU to retaliate in a situation where its counterparty fails to cooperate on the dispute settlement, the EP introduced several amendments that extend the scope of the Trade Enforcement Regulation to cover services and intellectual property rights (IPRs), in addition to goods.4 Several members of the EP indicated that this is a reflection of the growing importance of services and IPRs as a share of global trade. In addition, the revised Trade Enforcement Regulation includes an amendment adopted by the EP that confirms that the regulation also applies to the enforcement mechanism of the Trade and Sustainable Development chapters of the EU’s international trade agreements.5

Importantly, the revisions to the Trade Enforcement Regulation are accompanied by two joint declarations by the Commission, the Council and the EP. The first joint declaration expresses the desire by the Council and EP for the Commission to quickly prepare a legislative proposal for an instrument to dissuade or offset “coercive actions by third countries that would force policy choices on the EU” by allowing for “the expeditious adoption of countermeasures triggered by such actions.6 This “Anti-Coercion Instrument” should shield the EU from undue foreign influence over its domestic policy and was already contemplated by the Commission in 2020.7 The second joint declaration reiterates the EU’s continued commitment to a “multilateral approach to international dispute settlement, rules-based trade, and international cooperation to achieve the Sustainable Development Goals of the United Nations” and the EU’s intention to cooperate to ensure the effective functioning of the WTO’s Appellate Body.8

In addition to these joint declarations, the Commission adopted two separate declarations and a statement on issues related to the revised Trade Enforcement Regulation. The first declaration, “on compliance with international law,” reiterates the Commission’s intention to have other WTO members agree to appeal proceedings under the interim appeal procedure as long as the Appellate Body is unable to resume its operations. In addition, the declaration reiterates the Commission’s intention to act in conformity with the International Law Commission’s (ILC) Articles on the Responsibility of States for Internationally Wrongful Acts.9 This declaration and the proclaimed intention to act in compliance with international law would also appear to limit the ability to challenge measures adopted by the EU’s trading partners in response to a situation in which the EU appeals a panel report “into the void,” i.e., files an appeal before the currently non-operational Appellate Body, as the EU has done previously.10

In the second declaration, the Commission reiterates its intention to “pay equal attention to alleged breaches of the trade and sustainable development provisions of EU trade agreements as to alleged breaches of market access systems.11 Of particular note is that the Commission states it will “prioritise those cases which are particularly serious in terms of their effect on workers or the environment in a trade context, which have systemic importance and which are legally sound12 (emphasis added).

Finally, the Commission’s statement indicates that the Commission will consult private stakeholders that would be affected by commercial policy measures against third countries adopted under the revised Trade Enforcement Regulation. This statement should be read as seeking to convey the message that the Commission will seek to avoid a situation in which sectors unrelated to a particular trade dispute become entangled or even serve as “collateral damage.” This can be seen as a response to the retaliation in the saga between the United States and the EU regarding two major aerospace companies, which led to many European-based companies feeling sacrificed as a result of a dispute between two trade hegemons to which they were not a party.

The revised Trade Enforcement Regulation entered into force on February 13, 2021, and the Commission is required to review the scope of the regulation within a year after its entry into force.13 It is another instrument in the Commission’s toolbox to strengthen what it has coined its “Open Strategic Autonomy”14 and follows the appointment of Mr. Denis Redonnet as “Chief Trade Enforcement Officer” in July 2020.15

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1 Regulation (EU) 2021/167 of the European Parliament and of the Council of 10 February 2021 amending Regulation (EU) No 654/2014 concerning the exercise of the Union’s rights for the application and enforcement of international trade rules. See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32021R0167.

2 Mayer Brown Perspective “With Appellate Body (Re)-Appointment Process Blocked, European Commission Proposes Updates to Trade Enforcement Regulation” of December 13, 2019. See https://www.mayerbrown.com/en/perspectives-events/publications/2019/12/with-appellate-body-re-appointment-process-blocked-european-commission-proposes-updates-to-trade-enforcement-regulation.

3 See https://www.europarl.europa.eu/RegData/seance_pleniere/textes_adoptes/provisoire/2021/01-19/0004/P9_TA-PROV(2021)0004_EN.pdf.

4 See Articles 1(2), 1(5)(a), 1(6) and 1(8)(a) of Regulation 2021/167.

5 Recital (10) of Regulation 2021/167.

6 Joint Declaration of the Commission, the Council and the European Parliament on an instrument to deter and counteract coercive actions by third countries. See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.C_.2021.049.01.0001.01.ENG&toc=OJ%3AC%3A2021%3A049%3ATOC

7 EP, Hearing of Executive Vice-President Valdis Dombrovskis on trade portfolio, October 2, 2020. See https://www.europarl.europa.eu/news/en/press-room/20201001IPR88310/hearing-of-executive-vice-president-valdis-dombrovskis-on-trade-portfolio.

8 Joint Declaration of the European Parliament, the Council and the Commission. See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.C_.2021.049.01.0002.01.ENG&toc=OJ%3AC%3A2021%3A049%3ATOC.

9 Commission declaration on compliance with international law. See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.C_.2021.049.01.0003.01.ENG&toc=OJ%3AC%3A2021%3A049%3ATOC.

10 WTO, EU appeals panel report on EU dumping methodologies, duties on Russian imports. See https://www.wto.org/english/news_e/news20_e/ds494apl_28aug20_e.htm.

11 Declaration of the Commission. See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.C_.2021.049.01.0005.01.ENG&toc=OJ%3AC%3A2021%3A049%3ATOC.

12 Declaration of the Commission. See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.C_.2021.049.01.0005.01.ENG&toc=OJ%3AC%3A2021%3A049%3ATOC.

13 Article 1(9) of Regulation 2021/167.

14 European Commission, Introductory Remarks by Commissioner Phil Hogan at OECD Global Forum on Responsible Business Conduct, 19 May 2020. See https://ec.europa.eu/commission/commissioners/2019-2024/hogan/announcements/introductory-remarks-commissioner-phil-hogan-oecd-global-forum-responsible-business-conduct_en.

15 See https://ec.europa.eu/commission/presscorner/detail/es/mex_20_1407.