29 January 2021
The EU’s revised Enforcement Regulation: more powers for the European Commission to enforce trade agreements
On 19 January 2021, the European Parliament adopted the European Parliament Legislative Resolution of 19 January 2021 on the 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. The adopted text will now be submitted to the Council of the EU (hereinafter, Council) to be formally adopted and subsequently published in the Official Journal of the EU. Over the past years, EU Institutions have been discussing to update the EU’s current Enforcement Regulation in order to ensure better enforcement of the trade commitments undertaken by the EU’s trading partners. The EU’s revised Enforcement Regulation will provide the European Commission (hereinafter, Commission) with extended powers to enforce such commitments. Most notably, the revised Enforcement Regulation extends its scope to include not only commitments related to goods, but also commitments regarding services and certain intellectual property rights.
The EU’s current Enforcement Regulation
The EU’s current Enforcement Regulation was adopted in 2014. The regulation established a common legislative framework, which empowers the Commission to take swifter action when enforcing the EU’s rights under international trade agreements. Prior to the Enforcement Regulation, the EU enforced its rights under international trade agreements through the Council’s adoption of regulations on a case-by-case basis, following proposals by the Commission (see Trade Perspectives, Issue No. 1 of 11 January 2013 and Issue No. 10 of 16 May 2014).
The EU’s current Enforcement Regulation applies in four situations: 1) Following the adjudication of a trade dispute, when the EU is authorised to suspend concessions or other obligations under agreements covered by the World Trade Organization’s (hereinafter, WTO) Understanding on Rules and Procedures Governing the Settlement of Disputes (hereinafter, DSU); 2) Following the adjudication of a trade dispute under other international trade agreements, such as regional or bilateral agreements; 3) For the rebalancing of concessions or other obligations, in accordance with Article 8 of the WTO Agreement on Safeguards, or similar provisions in other international trade agreements; and 4) When no compensatory adjustments were agreed when another WTO Member modified its concessions under Article XXVIII of the General Agreement on Tariff and Trade (hereinafter, GATT). By allowing the Commission to take countermeasures, the EU intends to pressure third countries to comply with their obligations under international or bilateral trade agreements to which they are parties.
Updating the EU’s Enforcement Regulation
On 12 December 2019, the Commission had published its proposal to amend the EU’s Enforcement Regulation, in order to primarily take into account the current dysfunctionality of the WTO Appellate Body, which ceased operations on 11 December 2019, as a result of the nomination process of new judges being blocked by the US Administration. Consequently, the WTO Appellate Body is currently unable to hear new appeals and WTO Members would be able to avoid binding rulings by launching appeals to panel reports that cannot be heard.
On 6 July 2020, the European Parliament’s Committee on International Trade (hereinafter, INTA) adopted its report concerning the Commission’s proposal to amend the EU Enforcement Regulation. The INTA Committee was generally supportive of the Commission’s proposal, but proposed a number of significant amendments, notably the extension of the scope of the regulation to include services and intellectual property rights (see Trade Perspectives, Issue No. 14 of 17 July 2020). Following various inter-institutional trilogue meetings, on 28 October 2020, the Council of the EU (hereinafter, Council), the European Parliament and the Commission reached a political agreement on the revised EU Enforcement Regulation.
The revised Enforcement Regulation: The key changes
The revised Enforcement Regulation maintains most of the provisions of the current Regulation, but, most importantly, extends its scope to include the enforcement of commitments regarding trade in services and trade-related aspects of intellectual property rights, such as trademarks, designs, and geographical indications.
With respect to the enforcement action, the revised Enforcement Regulation also distinguishes between services and intellectual property rights regarding the measures that the Commission is allowed to adopt. Concerning services, the Commission will be able to suspend obligations and impose restrictions on trade in services, whereas, for intellectual property rights, the suspension of obligations and the imposition of restrictions on the protection or commercial exploitation of intellectual property rights concerns “trade-related aspects of intellectual property rights granted by a Union institution or agency and valid throughout the Union” and to “right-holders who are nationals of the third country concerned”.
Article 5 of the Enforcement Regulation details the specific commercial policy measures that the EU may enact. Article 5(1) concerns the measures in relation to trade in goods. In view of the extended scope, the revised Enforcement Regulation provides for additional paragraphs (1a) and (1b). Article 5(1a) of the revised Enforcement Regulation concerns measures related to services and provides a hierarchy of three steps that the Commission must follow when deciding on the suspension of obligations regarding trade in services. Article 5(1b) establishes the requirements that any measure adopted in relation to the suspension of obligations regarding trade in services or to trade-related aspects of intellectual property rights must meet before its adoption. Notably, Article 5(1b)(c) requires such measures to “be subject to an evaluation report, six months after their termination and based inter alia on stakeholder input, which shall examine their effectiveness and operation, and draw possible conclusions for future measures”, as further defined in Article 9(1a).
Taking into account the paralysis of the WTO Appellate Body
Normally, under WTO rules, a WTO Member may adopt countermeasures only following the prior approval of the Dispute Settlement Body. This is reflected in Article 3(a) of the Enforcement Regulation. Notably, the new Article 3(aa) of the revised Enforcement Regulation will allow the Commission to adopt the measures listed in the Regulation also “following the circulation of a WTO panel report upholding, in whole or in part, the claims brought by the Union, if an appeal under Article 17 of the WTO Dispute Settlement Understanding cannot be completed and if the third country has not agreed to interim appeal arbitration under Article 25 of the WTO Dispute Settlement Understanding”. This is an important step taken by the EU to deal with the unfortunate impasse facing the WTO Appellate Body, which signals a more assertive stand by the EU and its willingness to take matters into its own hands should the WTO not be able to ultimately rule on a matter and sanction enforcement and should the other party not have agreed to the disciplines of the Multi-Party Interim Appeal (MPIA) mechanism.
A focus on cases that have a serious impact on workers and the environment
The EU’s focus on trade and sustainable development has increased over the past years and a Chapter on Trade and Sustainable Development has become standard in EU trade agreements. The revised Enforcement Regulation confirms the importance of the enforcement of the commitments under such chapters. Recital 10 of the Regulation amending the EU’s Enforcement Regulation underlines that “The enforcement mechanism of the Trade and Sustainable Development chapters of the Union’s international trade agreements forms an integral part of the Union’s trade policy and this Regulation would apply to the suspension of concessions or other obligations and the adoption of measures in response to breaches of those chapters, if and to the extent that such measures are permitted and are warranted by the circumstances”. In this context, the Commission notes, in a separate Declaration attached to the draft revised Enforcement Regulation, that it would pay equal attention to the alleged breaches of commitments under the Chapters on Trade and Sustainable Development and that it would “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 sound”.
Enforcement and implementation of trade agreements figure among the priorities of the current Commission and the revised Enforcement Regulation is just one example of this commitment (see Trade Perspectives, Issue No. 17 of 20 September 2019, Issue No. 1 of 17 January 2020 and Issue No. 22 of 27 November 2020). The legislative dossier for the revision of the Enforcement Regulation contains a Joint Declaration of the Commission, the Council and the European Parliament on an instrument to deter and counteract coercive actions by third countries. In this Joint Declaration, the Commission states that it “takes note of the concerns of the Parliament and Member States as to the practices of certain third countries to seek to coerce the Union and/or its Member States to take or withdraw particular policy measures” and notes that it “shares the view that such practices raise significant concerns”. Therefore, the Commission confirms its intention to examine “a possible instrument, which could be adopted in order to dissuade or offset coercive actions by third countries and which would allow the expeditious adoption of countermeasures triggered by such actions”. In September 2020, the Commission had committed to adopt a legislative proposal on an anti-coercion instrument by the end of 2021.
Imminent entry into force
Now that the European Parliament has adopted the text of the EU’s revised Enforcement Regulation, the Council is expected to formally adopt it, after which it will be published in the Official Journal of the EU and enter into force 20 days thereafter. Businesses should closely examine the revised rules and request the Commission to make use of the EU’s reinforced enforcement powers.
Chapter 19 on dispute settlement mechanism in the Regional Comprehensive Economic Partnership (RCEP) Agreement – a viable path to resolve disputes?
The Regional Comprehensive Economic Partnership (hereinafter, RCEP) Agreement, is an agreement established to expand and deepen the trade relationship between the Association of Southeast Asian Nations (hereinafter, ASEAN), its Member States (i.e., Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam) with the trading partners to which it is already linked by preferential trade agreements, namely Australia, China, Japan, Korea, and New Zealand (see Trade Perspectives, Issue No. 22 of 27 November 2020). The RCEP consists of 20 chapters, 15 annexes, and 54 market access schedules covering a wide range of issues, such as, inter alia, trade in goods, electronic commerce, government procurement, economic and technical cooperation, as well as dispute settlement. This article intends to highlight a number of the salient features, but also the possible shortcomings, of the dispute settlement system established by Chapter 19 of the RCEP on dispute settlement.
Chapter 19 on dispute settlement
Chapter 19 of the RCEP provides for a State-to-State dispute settlement mechanism, which largely follows current international practice in trade agreements. It contains detailed rules on, inter alia, the choice of forum, the panel procedures, the implementation of the panel’s final report, compliance review proceedings, compensation, and on the suspension of concessions or other obligations. Under the Agreement, the Parties to a dispute are encouraged to make every effort through cooperation and consultations to reach a mutually agreeable solution, including through alternative methods, namely through good offices, conciliation, and mediation.
Limiting the scope of application for dispute settlement
A number of chapters under the RCEP explicitly carve out the applicability of the dispute settlement mechanism under Chapter 19. This concerns the competition rules agreed under Chapter 13, the rules on small and medium sized enterprises (SMEs) under Chapter 14, commitments on Government procurement under Chapter 16, agreements on economic and technical cooperation under Chapter 15, as well as the rules on disputes on subsidies regarding trade in services under Article 8.
A number of other chapters also exclude the application of dispute settlement under Chapter 19, but for which the non-applicability is subject to a review two years after the RCEP will have come into effect. This concerns Chapter 5 on sanitary and phytosanitary (SPS) measures; Chapter 6 on standards, technical regulations, and conformity assessment procedures; Chapter 7 on anti-dumping and countervailing duties; and Chapter 12 on electronic commerce.
While it is not unusual in preferential trade agreements to exclude certain chapters that place an emphasis on cooperation from formal dispute settlement, the exclusions under the RCEP are much more significant. In fact, this broad list of exclusions basically means that dispute settlement under Chapter 19 is, currently, only available for disputes arising from border-related trade measures, such as tariffs and quantitative restrictions under Chapter 2 on trade in goods. This also means that the RCEP Parties will still have to rely on dispute settlement within the World Trade Organization (WTO) to settle matters under the excluded chapters, insofar as equivalent commitments have been undertaken by the Parties at WTO level.
While excluding Investor-State dispute settlement, the RCEP refers to the Parties’ BITs
Chapter 10 of the RCEP on Investment does not contain any provisions on an Investor-State Dispute Settlement (ISDS) mechanism, which would allow investors to a bring claim against a host State’s Government and which has become common practice in many international trade and investment agreements. During RCEP negotiations, the ISDS clause was one of the most controversial issues. It was opposed by several civil society groups and, ultimately, some of RCEP Parties’ governments.
While a dedicated ISDS mechanism is absent, Article 10.8 of the RCEP provides for a built-in work programme on ISDS, which mandates the Parties to enter into discussions on the issue within two years after the entry into force of the RCEP and with a timeline of three years for such negotiations to be concluded. Chapter 20 of the RCEP also confirms and recognises the existence of bilateral investment treaties (BITs) among the RCEP Parties, which are already in force and many of which include ISDS provisions. Accordingly, the RCEP does not, in any way, terminate existing international investment agreements between the Parties.
Choice of forum to provide legal certainty and avoid parallel proceedings
Chapter 19 attempts to avoid the possibility of parallel proceedings in different dispute settlement fora by requiring the complaining Party to choose a forum when a dispute concerns substantially equivalent rights and obligations under the RCEP or under another applicable relevant international trade or investment agreement. This type of provision is of great relevance given overlapping commitments in multiple agreements and has become standard in recently concluded trade agreements. The complaining Party is considered to have selected the forum when it has requested the establishment of a panel or the establishment of a dispute settlement panel under the international trade or investment agreement. The inclusion of an explicit choice of forum provision in the RCEP is essential in order to keep litigation costs associated with parallel proceedings low, as well as to provide legal certainty by avoiding subsequent rulings that could even be contradictory.
Well-developed Rules and Procedures for the panel proceedings
Article 19.13 of the RCEP sets out the general procedures for the panel proceedings, but also provides that more specific procedures would be adopted by the RCEP Joint Committee following the entry into force of the agreement.
The RCEP panel proceedings may include multiple complainants and third parties. Going beyond standard WTO dispute settlement rules, the RCEP directly grants more rights to third parties. For instance, third parties will have access to the disputing Parties’ written submissions, written versions of their oral statements, and their written responses to questions (subject to protection of confidential information) and will be allowed to respond in writing to any questions from the panel. As in WTO dispute settlement, a panel may grant such Parties additional rights regarding the proceedings, which are not further specified in the RCEP.
Demanding timetable and the absence of appellate review
Article 19.13.4 of the RCEP requires a panel to set up a fixed timetable for the panel process within 15 days of the date of its establishment. As a general rule, the timeframe from the date of the establishment of a panel to the issuance of the panel’s final report is not to exceed seven months. As a comparison, the timeframe for WTO panel proceedings is a maximum of nine months. However, in practice many cases in the context of WTO dispute settlement take longer than nine months to complete, due to the complexities of the claims. While it is important that commercial or trade disputes be settled promptly, the timetable provided under the RCEP appears to be ambitious and could be very demanding for Parties and panel members.
In contrast to the WTO DSU, which provides for appellate review to hear appeals of panel reports with respect to the covered issues and legal interpretations, the RCEP does not provide for an appellate review. Without the existence of an appellate body, the panel’s findings and determinations are final and binding, and no re-assessment of the legal interpretations can be obtained. Article 19.16 of the RCEP then provides for ‘compliance review’, which allows the Parties to settle disagreements relating to the implementation of a Panel’s final report through the establishment of a compliance review panel. Such panel is tasked with conducting an assessment of the factual aspects of any action taken by the responding Party to implement the final report, as well as the consistency of any such measure with the RCEP.
The effectiveness of the RCEP’s dispute settlement will have to be tested
The RCEP will only come into effect when six ASEAN Member States and three non-ASEAN signatories have deposited their instruments of ratification, acceptance or approval with the Agreement’s Depository. The immediate relevance of the RCEP’s dispute settlement mechanism remains questionable, as many chapters are currently still carved out from the application of the dispute settlement chapter. Consequently, there will likely be many cases in which disputing RCEP parties still have to rely on WTO dispute settlement to resolve the matters, assuming that the matters will fall within the scope of the WTO. Finally, the success will also depend on the Parties’ willingness to have recourse to such procedures.
Feed additives as a key tool to achieve sustainability of the EU food chain: The European Commission intends to modernise the legal framework to foster innovation
On 14 December 2020, the European Commission (hereinafter, Commission) published an evaluation of the current EU rules on the marketing of feed additives in the framework of its regulatory fitness and performance programme (hereinafter, REFIT). The REFIT programme is an EU initiative aimed at evaluating the performance of EU legislation and ensuring that it maximises the benefits for EU citizens and businesses, while minimising unnecessary burdens. The ‘fitness check’ is in line with the broad objective pursued by the European Green Deal of reducing the environmental impact of food production and, in this sense, a fit-for-purpose legislation on feed additives is considered crucial for achieving a sustainable agro-food industry.
The current EU legal framework for feed additives
The placing on the EU market, labelling, and use of feed additives is regulated by Regulation (EC) 1831/2003 of the European Parliament and of the Council of 22 September 2003 on additives for use in animal nutrition (hereinafter, Feed Additives Regulation). According to Article 2(2)(a) of the Feed Additives Regulation, feed additives are “substances, micro-organisms or preparations, other than feed material and premixtures, which are intentionally added to feed or water in order to perform one or more of the following functions: 1) favourably affect the characteristics of feed; 2) favourably affect the characteristics of animal products; 3) favourably affect the colour of ornamental fish and birds, 4) satisfy the nutritional needs of animals; 5) favourably affect the environmental consequences of animal production; 6) favourably affect animal production, performance or welfare, particularly by affecting the gastro-intestinal flora or digestibility of feedstuffs; or 7) have a coccidiostatic or histomonostaric effect”.
The Feed Additives Regulation subordinates the placing on the EU market of feed additives to a centralised authorisation process dealt with by the Commission. For an authorisation to be granted, Article 5 of the Feed Additives Regulation requires that the manufacturer provide sufficient information to demonstrate that the feed additive intended to be placed on the EU market is efficient and safe for animal health, human health, and the environment, and that its presentation would not mislead the users.
In accordance with the current rules, feed additives may be classified into the following categories: 1) Technological additives (e.g., preservatives, antioxidants or silage additives); 2) Sensory additives (e.g., flavourings or colourants); 3) Nutritional additives (e.g., trace elements or vitamins); 4) Zootechnical additives (e.g., digestibility enhancers or gut flora stabilisers); and 5) Coccidiostats. According to the Feed Additives Regulation, an application requesting the authorisation for placing a feed additive on the EU market must be submitted to the Commission. The Commission forwards the request to the European Food Safety Authority (hereinafter, EFSA) with a formal request of providing an opinion on the safety and efficacy of the feed additive based on the information provided by the applicant. Within three months from the receipt of the EFSA opinion, the Commission presents a draft Regulation to the EU’s Standing Committee on Plants, Animals, Food and Feed (PAFF Committee) to grant or deny authorisation. Article 9 to the Feed Additives Regulation establishes that authorisations for feed additives belonging to the categories of zootechnical additives, coccidiostats, histomonostats, and feed additives consisting of, containing or produced from GMOs, must include the name of the holder of the authorisation.
Possible areas of improvement
In the framework of the European Green Deal, the EU’s Farm-to-Fork Strategy establishes the following important objective: “to reduce the environmental and climate footprint of the EU food system and strengthen its resilience, ensure food security in the face of climate change and biodiversity loss and lead a global transition towards competitive sustainability from farm to fork”. In that respect, feed additives can play a role in reducing antimicrobial resistance, improving animal welfare, as well as mitigating the effects of climate change and environmental degradation.
The Commission intends to modernise the EU rules applying to feed additives and to adapt them to the goals of sustainable farming. There is unanimous agreement that a modern legal framework aimed at fostering innovation may support sustainability in several areas, for instance in the reduction of greenhouse gas (GHG) emissions resulting from farm operations and in reducing the loss of soil nutrients due to excessive rain and irrigation. Moreover, feed additives can play a role in limiting the eutrophication of water sources originating from the overly presence of minerals and nutrients released into the soil as a consequence of farming practices.
The evaluation, published on 14 December 2020, although admitting that the core objectives of the Feed Additives Regulation remain valid and relevant, identifies several areas of possible improvement, which might be addressed in order to increase the performance of the future feed additives authorisation process. The main problems identified relate to the insufficient support of innovation and the burdensome and lengthy authorisation process. The lengthy and costly authorisation procedure discourages the development of sustainable and innovative feed additives, such as those focused on animal well-being. This lack of innovation deprives farmers of important tools for the development of sustainable livestock production. Furthermore, the lack of flexibility in the authorisation process results in the limited availability of certain products, which have been developed by the industry, but experience difficult authorisation paths. At present, the Feed Additives Regulation categorises feed additives into five different categories according to their effect on animals and animal products. The process of creating new categories to respond to technological and scientific advancements is considered burdensome. A practical example is related to probiotics, which are innovative components considered useful in animal farming, for instance, as an alternative to increased hygiene practices and limiting the use of antimicrobials. For those intended uses, the industry is currently exploring ways to place those products on the EU market in the category of zootechnical additives.
Additional shortcomings have been identified in the analysis of the criteria required to demonstrate the efficacy of new feed additives. Those criteria are considered too vague by the industry in certain aspects and this complicates the preparation of the authorisation dossiers. This issue has partially been addressed by Regulation (EU) 2019/1381 of the European Parliament and of the Council of 20 June 2019 on the transparency and sustainability of the EU risk assessment in the food chain and amending Regulations (EC) 178/2003, (EC) 1831/2003, (EC) 2065/2003, (EC) 1935/2004, (EC) 1331/2008, (EC) 1107/2009, (EU) 2015/2283 and Directive 2001/18/EC (hereinafter, Transparency Regulation). Article 1 of the Transparency Regulation, which will apply from 27 March 2021, establishes a procedure defined as ‘pre-submission advice’, where the EFSA’s staff, “at the request of a potential applicant or notifier, provide advice on the rules applicable to, and the content required for the application or notification, prior to its submission” (see Trade Perspectives, Issue No. 22 of 29 November 2019).
According to the evaluation carried out by the Commission, an additional burden to innovation is created by the granting of generic authorisations (i.e., non-holder authorisations that allow any operator to place on the EU market a feed additive if it complies with the specifications of the authorisation). This mechanism puts the entire financial effort on the applicants, while other operators may manufacture and place the same substance on the market once the feed additive has been granted authorisation. The legal status of feed additives not linked to an authorisation holder might be modified by granting several years of exclusive rights, similar to the EU’s approach on novel foods laid down in Article 26 of Regulation (EU) 2015/2283 of the European Parliament and of the Council of 25 November 2015 on novel foods, amending Regulation (EU) No 1169/2011 of the European Parliament and of the Council and repealing Regulation (EC) No 258/97 of the European Parliament and of the Council and Commission Regulation (EC) No 1852/2001, which establishes that, in case of an inclusion in the application of newly developed scientific evidence or data, such information may not be used by other applicants during a period of five years.
The Commission’s consultation and feedback received
The Commission’s evaluation has been submitted to a public consultation, which closed on 25 January 2021. The feedback provided by stakeholders appears to agree with the Commission on the enormous potential that a modernised legal framework in the sector of feed additives may trigger in reducing the environmental impact of the farming sector. According to the feedback provided, there appears to be agreement that, in order to foster innovation and greater sustainability of the food chain, the new legal framework should tackle the lack of flexibility, namely by streamlining the mechanism of authorisation, by introducing new categories of feed additives, and by providing more protection to proprietary data.
However, some stakeholders are advocating for a higher degree of ambition in the reduction of animal testing, as part of the efficacy and toxicological studies required by the authorisation procedure. A transition from in-vivo to in-vitro methodologies has been suggested as an option for reducing unnecessary animal testing. Additional comments underlined that action should be taken to avoid shortages of feed additives for end users on the EU market. According to the industry, the dependence on the import of specific feed additives should be limited. With respect to the import of feed additives, some interested parties raised the issue that the EU should take into account the environmental standards of production in those third countries to which the manufacture is outsourced.
Way forward
The proposal from the Commission for a draft revised regulation on feed additives is expected to be published during the fourth quarter of 2021. After that, the draft will be evaluated at inter-institutional level in the framework of the EU legislative process and modifications are still expected to be taken on board at that time. Manufacturers of feed additives aiming at enhancing their position in the EU market are advised to closely monitor this legislative process and any proposed changes in order to adapt their application procedures, as well as their production and supply chains.
Recently Adopted EU Legislation
Customs Law
Market Access
Fruit and Agricultural Law
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Ignacio Carreño, Fabrizio De Angelis, Simone Dioguardi, Tobias Dolle, Michelle Limenta, Alya Mahira, Lourdes Medina Perez and Paolo R. Vergano contributed to this issue.
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