February 27, 2013
On February 5, 2013, Canada filed an appeal at the World Trade Organization (“WTO”) at the Government of Ontario’s request, appealing a Panel Report handed down by the WTO’s Dispute Settlement Board on December 19, 2012, which partially ruled that Ontario’s Feed-in-Tariff (“FIT”) Program with its domestic content requirements breach Canada’s international trade obligations.
In response to Canada’s appeal, on February 11 and February 15, 2013, Japan and the European Union (“EU”), the primary complainants in the initial dispute, counter appealed.
Summary of December 19, 2012 WTO Panel Report
The Panel Report found that the “local content requirements” in FIT Contracts (i.e., domestic content requirements) are inconsistent with the non-discrimination principles found in the General Agreement on Tariffs and Trade, 1994 (“GATT”) Article III (National Treatment) and the Trade-Related Investment Measures (TRIMs) Agreement Article II (National Treatment). Essentially, the concern is that domestic content requirements used in awarding FIT Contracts treat imported equipment, components, and suppliers differently than domestic products. However, a majority of the WTO Panel disagreed with Japan and the EU’s claim that domestic content requirements constituted prohibited subsidies per Article 1.1 of the Subsidies and Countervailing Measures (“SCM”) Agreement and found that Canada did not act inconsistently with Articles 3.1(b) and 3.2 of the SCM Agreement. The Panel Report concluded by recommending that Canada bring its domestic content requirements into conformity with its obligations under the GATT and TRIMs Agreement.
For more information about the Panel’s Report, please see my blog posting WTO Panel Releases Final Report Domestic Content Requirements.
Process for the Appeal
Parties to a dispute at the WTO can appeal a panel’s report – as Canada, Japan and the EU have done in this situation. However, appeals can only be based on points of law (i.e., legal interpretations) rather than re-examining findings of fact made by the established panel. Appeals are heard by three members of a permanent seven member Appellate Body of the WTO. Generally, the Appellate Body has up to three months to make its conclusions and report on the appeal.
For more information about the WTO’s appeal process, please see my blog posting WTO Likely to Deem Domestic Content Requirements Illegal.
Summary of Canada’s Appeal
Canada’s appeal primarily relates to the findings of the Panel Report that domestic content requirements are not removed from the obligations under Article III:4 of the GATT and that Canada had not established it was entitled to rely on Article III:8(a) of the GATT to remove the domestic content requirements from the operation of the TRIMs Agreement.
Canada’s three main appeal points include:
To view Canada’s appeal document, see the following WTO Dispute Resolution link: WT/DS412/10 and WT/DS426/9.
Summary of Japan and the EU’s Counter Appeals
Japan and the EU are mostly counter appealing to seek a reversal on the Panel’s findings that the FIT Program and FIT Contracts amount to government purchases of goods within the meaning of Article 1.1(a)(1)(iii) of the SCM Agreement and that Japan and the EU failed to establish that domestic content requirements confer a ‘benefit’ within the meaning of Article 1.1(b) of the SCM Agreement to electricity generators who participated in the FIT Program.
Some of the issues that Japan and the EU are counter appealing on include:
(a) If the Appellate Body reverses the finding and concludes that the FIT Program and FIT Contracts are subsidies within the meaning of Article 1.1 of the SCM Agreement, then the parties request that the Appellate Body find the FIT Program and Fit Contracts to be inconsistent with Article 3.1(b) of the SCM Agreement (i.e., such subsidies are prohibited subsidies as it is contingent upon the use of domestic over imported goods);
There is much industry concern over the effects of the initial Panel Report from December 19, 2012 and the effects of the possible rulings by the Appellate Body in Canada’s appeal. However, should the Appellate Body uphold the initial finding of the Panel, Canada (and therefore Ontario) will still have a ‘reasonable period of time’ to bring the FIT program into conformity with Canada’s international obligations. Regardless, domestically and in other countries with similar programs to Ontario’s FIT Program, the global community will have its eye anxiously on the final Appellate Body report.
Sven Walker is a Partner at Dale & Lessmann LLP, a Toronto, Ontario, Canada-based full service law firm with specific focus on renewable energy law and in particular solar, wind and biogas energy law. Sven is a legal counsel to a number of industry equipment and technology manufacturers, suppliers and installers, as well as investors, developers, purchasers, contractors, consultants and financing entities. To speak with Sven, please call 416-369-7848 or email him at firstname.lastname@example.org.
Tags: Renewable Energy