Dispute Settlement DS426
21/05/2013 12:00
Canada — Measures Relating to the Feed-in Tariff Program
Short title: | Canada — Feed-In Tariff Program |
Complainant: | European Union |
Respondent: | Canada |
Third Parties: | United States; Japan; Australia; China; Chinese Taipei; India; Saudi Arabia, Kingdom of; Brazil; Korea, Republic of; Mexico; Norway; Turkey; El Salvador |
Agreements cited: (as cited in request for consultations) | GATT 1994: Art. III:4 Subsidies and Countervailing Measures: Art.1.1, 3.1(b), 3.2 Trade-Related Investment Measures (TRIMs): Art. 2.1 |
Request for Consultationsreceived: | 11 August 2011 |
Panel Reportcirculated: | 19 December 2012 |
Appellate Body Reportcirculated: | 6 May 2013 |
Consultations
Complaint by the European Union. (See also DS412)
On 11 August 2011, the European Union requested consultations with Canada regarding Canada's measures relating to domestic content requirements in the feed-in tariff program (the “FIT Program”).
The European Union claimed that the measures are inconsistent with Canada's obligations under Article III:4 and III:5 of the GATT 1994 because they appear to be laws, regulations or requirements affecting the internal sale, offering for sale, purchase, transportation, distribution, or use of equipment for renewable energy generation facilities that accord less favourable treatment to imported equipment than that accorded to like products originating in Ontario; that the measures could be internal quantitative regulations relating to the mixture, processing or use of a specified amount or proportion of equipment for renewable energy generation facilities which require that equipment for renewable energy generation facilities be supplied from Ontario sources; and that the measures appear to require the mixture, processing or use of equipment for renewable energy generation facilities supplied from Ontario in specified amounts or proportions, being applied so as to afford protection to Ontario production of such equipment, contrary to the principles of Article III:1 of the GATT 1994.
The European Union also claimed that the measures appear to be inconsistent with Article 2.1 of the TRIMs Agreement because they appear to be trade-related investment measures that are inconsistent with the provisions of Article III of the GATT 1994.
Finally, the European Union alleged that it appears that a subsidy is granted under the measures because there would be a financial contribution or a form of income or price support, and a benefit is thereby conferred. It is also claimed that the subsidy would be a prohibited subsidy under Articles 3.1(b) and 3.2 of the SCM Agreement because it appears to be provided “contingent … upon the use of domestic over imported goods”, namely contingent upon the use of equipment for renewable energy generation facilities produced in Ontario over such equipment imported from countries such as the European Union.
On 25 August 2011, the United States requested to join the consultations. On 26 August 2011, Japan requested to join the consultations. Subsequently, Canada informed the DSB that it had accepted the requests of Japan and the United States to join the consultations.
On 9 January 2011, the European Union requested the establishment of a panel.
Panel and Appellate Body proceedings
At its meeting on 20 January 2012, the DSB established a panel. Australia, China, India, Japan, Saudi Arabia, Chinese Taipei and the United States reserved their third party rights. Subsequently, Brazil, El Salvador, Korea, Mexico, Norway and Turkey reserved their third-party rights.
Following the agreement of the parties, the panel was composed on 23 January 2012.
On 13 June 2012, the Chairman of the panel informed the DSB that the panel would not be able to issue its report within six months. The timetable adopted by the panel after consultations with the parties envisaged that the final report would be issued to the parties by September 2012. However, due to the complexities of the dispute, it would not be possible for the panel to complete its work within this time-frame. The panel now expects to complete its work by the end of November 2012.
On 19 December 2012, the panel report was circulated to Members.
Summary of key findings
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On 5 February 2013, Canada notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the panel. On 11 February 2013, the European Union notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the panel. On 4 April 2013, the Chair of the Appellate Body informed the DSB that due to the time required for completion and translation of the Appellate Body reports, it would not be able to circulate its reports within 60 days. It was estimated that the Appellate Body reports would be circulated no later than 6 May 2013.
On 6 May 2013, the Appellate Body report was circulated to Members.
Summary of key findings Canada filed a Notice of Appeal on 5 February 2013. The European Union filed an other appeal on 11 February 2013. The measures at issue in this dispute are the FIT Programme implemented by the Government of Ontario and related FIT and microFIT Contracts. As regards Canada's and the European Union's appeals concerning Article III:8(a) of the GATT 1994, the Appellate Body upheld the Panel's finding that paragraph 1(a) of the Illustrative List in the Annex to the TRIMs Agreement did not obviate the need for the Panel to undertake an analysis of whether the challenged measures are outside of the scope of application of Article III:4 of the GATT 1994 by virtue of the operation of Article III:8(a) of the GATT 1994. The Appellate Body reversed the Panel's findings that the Minimum Required Domestic Content Levels of the FIT Programme and related FIT and microFIT Contracts are laws, regulations, or requirements governing the procurement by governmental agencies of electricity within the meaning of Article III:8(a) of the GATT 1994. The Appellate Body also declared moot and of no legal effect the other intermediate findings made by the Panel. Moreover, the Appellate Body found that the Minimum Required Domestic Content Levels prescribed under the FIT Programme and FIT and microFIT Contracts do not meet the conditions of the derogation in Article III:8(a) of the GATT 1994. It thus found that the challenged measures are not covered by Article III:8(a) of the GATT 1994 and that, consequently, the Panel's conclusion that the Minimum Required Domestic Content Levels prescribed under the FIT Programme and related FIT and microFIT Contracts are inconsistent with Article 2.1 of the TRIMS Agreement and Article III:4 of the GATT 1994, stands. In the light of its findings, the Appellate Body did not consider it necessary to address Canada's claim that the Panel failed to fulfil its obligations under Article 11 of the DSU in concluding that the Government of Ontario purchases electricity under the FIT Programme “with a view to commercial resale”. As regards the European Union's appeal relating to Article 1.1(b) of the SCM Agreement, the Appellate Body reversed the Panel's finding that the European Union failed to establish that the challenged measures confer a benefit within the meaning of Article 1.1(b) of the SCM Agreement, because the Panel erred in defining the relevant market and in its benefit analysis. In the light of these findings, the Appellate Body did not find it necessary to address the European Union's alternative claim that the Panel acted inconsistently with Article 11 of the DSU. Nevertheless, the Appellate Body was unable to complete the analysis as to whether the challenged measures confer a benefit within the meaning of Article 1.1(b) of the SCM Agreement and whether Canada acted inconsistently with Articles 3.1(b) and 3.2 of the SCM Agreement.The Appellate Body recommended that the DSB request Canada to bring its measures found in the Appellate Body Report, and in Panel Report as modified by the Appellate Body Report, to be inconsistent with the TRIMs Agreement and the GATT 1994 into conformity with its obligations under those Agreements. |
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