International Desk

Nctm International Desk assists Italian enterprises in their internationalisation process in all countries in the world. It operates directly or through leading correspondent foreign law firms, selected with no exclusivity obligation, serving as single contact point for the client, to which it remains close, interpreting its needs, dealing with all Italian and foreign legal and tax aspects as a whole, ensuring the quality of the final result as well as the constant control of professional costs.
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7/04/2017

As it is known, the EC put forward an initial circular economy package in July 2014, but withdrew the legislative proposal on waste included in the package in February 2015, in order to make way for a new proposal. On 2 December 2015, the same Institution presented its new circular economy package containing a Communication and four legislative proposals on EU waste policy[1]. This package included also an Action Plan to support the circular economy in each step of the value chain, from production to consumption, repair and manufacturing, waste management and secondary raw materials that are fed back into the economy. The Commission committed to undertake the detailed list of actions within its current mandate.

The aim of the Commission Report is “[…] to present a complete overview of the action already delivered in the implementation of the EU Action Plan since its adoption in December 2015, and to introduce key deliverables for 2017”. From a procedural point of view, the European Parliament position can be described as follows.

In its Report adopted on 24 January 2017, the Committee on Environment, Public Health and Food Safety (ENVI) proposes to raise the ambition of the targets; to introduce separate targets for reuse, food waste, marine litter and waste oils; to introduce a single circular method; and to make derogation for individual MS subject to stricter conditions. The Report also reinforce the implementation of the waste hierarchy, make extended producer responsibility mandatory for specific waste streams, and strengthen requirements related to separate waste collection. The Committee on Industry, Research and Energy (ITRE) adopted its opinion on 13 October 2016. Votes on Proposals are take place during the last Plenary Session on 14 March 2017. The amendments adopted are relating to the proposal for a Directive amending Directives 2000/53/EC on end-of-life vehicles, 2006/66/EC on batteries and accumulators and waste batteries and accumulators, and 2012/19/EU on waste electrical and electronic equipment.[2]

The Council is said to be close to reaching a common understanding on the Proposals, which are among the Maltese Presidency’s priorities and thus can be expected before the end of June 2017.

2017 is also a crucial year to develop a policy dialogue with stakeholders. In the occasion of the Inter-Institutional Stakeholders Conference on Circular Economy held in Brussels on 9-10 March, the Commission and the European Economic and Social Committee will launch a circular economy stakeholders platform.

During 2016 the European Commission has put in place a number of key initiatives to support the circular economy. These initiatives cover the full value chain, from production to consumption, waste management and use secondary raw materials. They are presented below in chronological order of their completion. The proposals presented are concerning: Online sales of goods (December 2015); Fertilisers (March 2016); Ecodesign (November 2016); Food waste (December 2016); Waste-to-Energy (January 2017) and the Proposal to amend the Directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment (January 2017).

Two issues are approached by the Commission in a special way: the Platform to support the financing of circular economy (January 2017), and the Green Public Procurement.

Relating to the first issue, together with the Report on the Implementation the Commission launched a platform with the European Investment Bank (EIB), financial market participants and business to increase awareness of the circular economy business logic and improve the uptake of circular economy projects by investors. While the business case for the circular economy is clear, this message still has to reach s good part of businesses in the EU and of the financial and banking sector.

New Green Public Procurement criteria was published by the Commission in 2016 for office buildings, for roads and for computers and monitors. These can be used by public authorities on a voluntary basis, and include requirements relevant to the circular economy. For examples, computers and monitors have to be designed so that they can be repaired with commonly available tools and that batteries can be easily replaces, and the possibility to upgrade them is rewarded. The used of recycled materials for the construction of roads and buildings is encouraged. As public procurements accounts for a large proportion of European consumption the inclusion of requirements related top circularity in public authorities purchasing will play a key role in the transition towards a circular economy.

The European Commission adopted some other new texts in five sectors[3].

The first one is a “stepping up enforcement “of the revised Waste Shipment Regulation. On July 2016, the Commission adopted an implementing act setting out a preliminary correlation table between customs and waste codes. This new tool will help customs officials identify waste crossing EU borders illegally, for instance labelled as second-hand goods. It will strengthen the enforcement of the Waste Shipment Regulation and will help to prevent the leakage of valuable raw materials out of the EU.

Separate waste collection across EU Member States is a good practice that Commission has identify throughout 2016 reviewing the state of implementation of separate collection, including an assessment of the legal framework and the practical implementation of separate collection systems. Based on this assessment, the review led to a set of recommendations addressing different levels of decision-making. The recommendations have been discussed with stakeholders and EU Member States in a conference held on 29 January 2016. In addition, Horizon 2020 is supporting this work stream by financing a number of concrete projects in this area[4].

Relating to the water reuse, in June 2016, guidelines were issued under the Common Implementation Strategy from the Water framework Directive[5] with the aim to better integrate water reuse in water planning and management. “As water scarcity has worsened in some parts of the EU, the reuse of treated wastewater in safe and cost-effective conditions is valuable but under-used means of increasing water supply and alleviating pressure on resources. Facilitating water reuse in agriculture will also contribute to recycling of nutrients by substitutions of solid fertilisers”[6].

On November 2016, the Commission proposed an industry-wide voluntary protocol on the management of construction and demolition waste. The aim of the protocols is to improve the identification, source separation and collection of waste, as well as logistics, processing, and quality management. The protocol will this thus increase trust in the quality of recycled materials and encourage their use in the construction sector.

Based on volume, construction and demolition waste is the largest waste stream in the EU. The Waste Framework Directive 2008/98/EC establishes a target of 70% of construction and demolition waste to be recovered by 2020. However the potential for reuse and recycling of this waste stream is not being fully exploited. One obstacle is the lack of confidence in the quality of construction and demolition recycled materials. Horizon 2020 is also supporting several innovation projects in this area.

The recast of the Renewable Energy Directive[7] as part of the package on Clean Energy package was the occasion for the European Commission for adopting sustainability criteria for all bioenergy uses. In order to limit pressure on limited biomass resources, the Commission proposed that only efficient convention of biomass to electricity should receive support. This will facilitate synergies with the circular economy in the uses of biomass and particularly wood, which can be used for a range of products as well as for energy.

The 2017 Commission Work Programme confirms the full commitment to ensure the timely implementation of the Circular Economy Action Plan. During this year, the Commission will propose a Plastic Strategy to improve the economics, quality and uptake of plastic recycling reuse, to reduce plastic leakage in the environment and to decouple plastics production form fossil fuels.

The Commission will also put forward a detailed analysis of the legal, technical or practical problems at the interface of chemical, product and waste legislation that may hinder the transition of recycled material into the productive economy. In particular, the Commission will consider options to improve information but substances of concern in products and waste, and options to facilitate the management of substances of concern found in recycled materials. The objective is not only to promote non-toxic material cycles, but also enhance the uptake of secondary raw materials.

The Commission will also come forward with a legislative proposal on minimum quality requirements to promote the safe reuse of treated waste water, while ensuring the health and environmental safety of water reuse practices and free trade of food products in the EU.

The monitoring framework assessing the progress of the circular economy in the EU and its Member States will also presented in 2017 [8].

Circular Economy is a reality with benefits for all Europeans. The consistent delivery of the Action Plan and a swift adoption of the legislative proposals on waste and fertilisers will help to bring clear directions to investors and support the transition.

 

 

[1] See Across The EUniverse, number eleven, April 2016  “Circular Economy – More Flexible Law: The 2015 Legislative Package”.

[2] COM(2015)0593 – C8-0383/2015-2015/0272(COD). Ordinary legislative procedure: first reading.

[3] A sixth sector is the object of a revised text relating to the Updated Guidance on Unfair Commercial Practices Directive ( Directive 2005/29/EC, in OJEU L 149 – 11.5.2005 ).  On May 2016 the Commission adopted a revised version of its guidance which includes specific elements to make green claims more trustworthy and transparent.

[4] Horizon 2020 is the biggest EU Research and Innovation program ever with nearly €80 billion of funding available over 7 years (2014 to 2020) – in addition to the private investment that this money will attract. It promises more breakthroughs, discoveries and world-firsts by taking great ideas from the lab to the market.

[5] OJEU L 327, 22.10 2000.

[6] “ Using historical data, expert judgment and multivariate analysis according to the Water Framework Directive”, in marine Pollution Bulletin, vol. 55.issue 1-6, 2007, p.28.

[7] Directive 2009/28/EC, in OJEU L 140, 5.6.2009

[8] In 2017 the implementation of the Ecodesign working plan will have an increased focus on circular economy and resources efficiency beyond energy efficiency. The Commission will also publish the Fitness Check on EU Ecolabel and EMAS .

7/04/2017

On 13 March the Commission has adopted a report (hereinafter, the “Report”) on the mandatory labelling of the list of ingredients and the nutrition declaration for alcoholic beverages. The Commissioner for Health and Safety, Vytenis Andriukaitis, said: “This report supports the right of people in the European Union to be fully informed about what they drink. Moreover, it does not identify any objective grounds justifying the absence of the list of ingredients and nutrition information on alcoholic beverages. The expansion of voluntary initiatives from the sector has already been ongoing and is brought to the fore in the report”.

This Report responds to the obligation set for the Commission by Article 16(4) of Regulation 1169/2011 on the provision of food information to consumers. The Regulation establishes the basis for a high level of consumer protection in relation to food information, ensuring that consumers are not misled by food labels and can make informed choices.

Under the current rules, unlike for other foods, the indication of the list of ingredients and the nutrition declaration is not mandatory for alcoholic beverages. With the nutrition declaration having become mandatory for the vast majority of pre-packed food as of 13 December 2016, the particular situation of alcoholic beverages is now even more salient. European consumers have therefore reduced access to the nutrition declaration and to the list of ingredients with the exception of ingredients which may have an allergenic effect.

Therefore, consumers are informed only when a substance or a product, amongst those listed in the Regulation as the most common allergens, is present in alcoholic beverages, like sulphites that are often added to wine.

However, other food ingredients which were not considered for the listing of substances that could trigger allergic reactions in certain groups of consumers are not in the Regulation and would therefore not be present on the label of alcoholic beverages due to the absence of a list of ingredients.

This approach does not seem to be entirely suitable given the recognition of the importance of information and the rights of citizens to be adequately informed of what they consume.

Regarding nutritional labelling, recital 42 of the Regulation encourages food business operators to provide on a voluntary basis the information contained in the nutrition declaration for foods such as alcoholic beverages for which the possibility should be given to declare only limited elements of the nutrition declaration.

Another EU provision on the labelling of alcoholic beverages is set out in Regulation (EU) No. 1308/2013 which provides on exhaustive set of technical standards which fully cover all oenological practices, manufacturing methods and means of presentation and labelling of wines.

In view of the lack of legal action in this area, some Member States have adopted national rules requesting partial indication of ingredients for certain alcoholic drinks. Even if the provisions for the nutrition declaration are fully harmonised, some Member States are also notifying national measures addressing the nutrition declaration for alcoholic beverages. Such behaviour contributes to an increased risk of market fragmentation.

The Report shows that the sector is more and more prepared to provide responses to consumers’ expectation to know what they are drinking. This is demonstrated by the expansion of concerted or independent voluntary initiatives developed and implemented by the sector to provide consumers with information on the list of ingredients, the energy value and/or the full nutrition declaration on or off label. It has to be particularly noted that a rising number of alcoholic beverages present on the EU market already bear the full nutrition declaration.

On the basis the Report, the EU alcoholic drinks industry should propose, within a year, a harmonised approach aiming to provide consumers with information about the ingredients present in alcoholic beverages and the nutritional value of alcoholic beverages. This proposal will be assessed by the Commission. Should the Commission consider the self-regulatory approached proposed by the industry as unsatisfactory, it would then launch an impact assessment to review further available options in line with Better Regulation principles.

In line with the need of transparency on foodstuffs, the European Parliament adopted on 15 March its position on the new Regulation on Official Controls (hereinafter, the “OC Regulation”), proposed by the European Commission to increase Member States’ ability to prevent, eliminate or reduce health risks to humans, animals and plants. The OC Regulation provides a package of measures that will strengthen the enforcement of health and safety standards as an international reference for integrated rules covering the whole agri-food chain.

The new rules aim at modernising and simplifying the European control system to ensure that food in the European Union is safe along the entire agri-food chain. They overhaul the current system and will provide a single framework for all official controls.

From one hand, EU citizens will benefit from safer products and more effective and more transparency on how controls are carried out to ensure food safety and high standards for plant health, animal health and welfare and to prevent the fraud. From another hand, businesses and authorities will benefit from reduced administrative burdens and more efficient processes.

Official controls, undertaken by competent authorities in each Member State, serve to check whether these rules are correctly implemented. It consists in checks performed by Member States in order to verify that businesses comply with agri-food chain rules. These rules cover the safety and quality of food and feed and also apply to agri-food chain products entering the EU from third countries and via the Internet. Consequently, e-commerce must be part of official controls. The OC Regulation aims to tackle food fraud. This includes checking compliance against marketing standards for agricultural products. Financial penalties for fraud will need to reflect the expected economic gain or a percentage of the turnover made by fraudulent operator.

The previous regulation, adopted in 2004, initiated the integration of rules on official controls. The OC Regulation, proposed by the Commission in 2013, takes it further in providing comprehensive risk-based control rules along the agri-food chain. This will allow national authorities to put their resources where they are most needed.

The OC Regulation will enter into force 20 days after its publication in the Official Journal of the EU. The rules will be gradually phased in to give EU countries and industry the time to adapt.

 

7/04/2017

This article seeks to introduce non-lawyers to the Commission’s new proposal on dumping. The circumstances are complex. The proposal is all about China and it’s not about China at all. It’s about special and general methods for calculating dumping. It’s about burdens of proof and litigation strategies. It’s about the correct interpretation of China’s WTO Accession Protocol. However, an examination of the themes underlying the Commission’s proposal reveals some simple ideas and gives guidance on how to improve it.

The Commission’s radical new thinking on dumping

The Commission proposal [COM(2016) 721final] to change the EU’s approach to the calculation of dumping is all about China and nothing to do with China at all. In fact, there’s no mention of China. This is natural given the nature of the proposal. The proposal seeks to end the EU system of classifying, in law, countries as market or non-market economies and replace it with a system of classifying countries as WTO or non-WTO.

At the same time the proposal is all about China. This is because the reflections on the functionality of the EU’s dumping methodologies came about while considering the consequences of the expiry of one sentence of Article 15 of China’s 2001 WTO Accession Protocol as well as reflections on the market distortions which are evident in China.

Under current EU law, the world is divided into market economies and non-market economies. China is defined as a non-market economy. The method for calculating the level of dumping from market economies is set out in Article 2(1) to 2(6) in the basic anti-dumping Regulation [Regulation 2016/1036] and in Article 2(7) for non-market economies (the analogue country approach). As today, China is classified as a non-market economy, the Commission uses Article 2(7) to calculate dumping from China. Under the new proposal, Article 2(7) would apply to non-WTO members only and the provisions of Article 2(1) to 2(6) would apply to all WTO Members, including China, whether or not they are market economies.

Not only is China defined in law as a non-market, it is not a market economy in reality. When it joined the WTO in 2001, China agreed that it was not a market economy. Rules were written into Article 15(d) of its WTO Accession Protocol [WT/L/432] setting out the procedure to be followed if China was to demonstrate that it had made the transition to a market economy. These rules did not expire in December 2016. China has tried in the past to demonstrate that it was a market economy to the EU, but on three occasions the EU Commission has found that China did not meet all the EU’s five criteria. In the last months, the responsible EU Commissioners have all confirmed that China is still not a market economy.

That being said, the definition of China as a non-market economy will no longer be relevant for the calculation of dumping in EU law. The issue for the Commission is the level of the distortions in any particular economy rather than how the law classifies that economy. And, as market distortions can found in all economies whatever their market classification, the Commission proposal seeks to improve the mechanisms for addressing these distortions wherever they are found.

The proposal recognises that the current text of 2(1) to 2(6), which will in the future apply to all WTO members, may not be adequate to address problems with calculating dumping from countries such as China. If the market is distorted then the costs and prices on that market are distorted as well. Thus, they may not be suitable for the calculation of dumping (which measures the difference between the price in the market of origin and the price for export to the market of sale). For this reason, the Commission proposes to add Article 2(6a) to the basic anti-dumping Regulation to address significant market, and therefore price, distortions.

This article looks at the new approach being proposed. Some fundamental questions are asked about the overall approach being taken. The article then describes the changes being make and finally makes some suggestions as to improvement.

Does China get market economy status by default?

The change from classifying countries as market economies or non-market economies has profound effects on EU dumping investigations. The classification system has the big advantage of giving certainty to the system. Today complainants know how dumping from non-market economies should be calculated and how to construct a prima facie case on the basis of methodology set out in Article 2(7). The proposal removes this certainty. The methodology proposed for the future to show prima facie evidence of dumping is vague. To what extent do complainants bear the burden of proving that there are distortions in a particular economy? And if distortions are considered to be present what costs and prices can be used. This lack of certainty is at the basis of the concerns raised by many observers and users of the dumping instrument.

It has also raised the question whether the Commission is proposing that China should be granted market economy status by default. By removing the classification system, the Commission seeks to side-step the consequences of the issue of China’s status. Under the proposal, the classification of a particular market becomes irrelevant. This in turn means that the specific consequences of the expiry of one sentence of Article 15 of the WTO Accession Protocol on dumping methodologies also becomes irrelevant. In addition, the Commission also tries to side-step or anticipate the consequences of the outcome of the WTO dispute settlement procedure that China has launched against the current EU classification system.

All WTO economies will now be considered equal in law and subject to the general WTO dumping methodologies set out in Article 2(1) to 2(6). If any one of these economies is significantly distorted then the significant distortions provisions of Article 2(6a) will come into play. But Articles 2(1) to 2(6) are the provisions applicable to market economies and not non-market economies. If the Commission had intended to change the non-market provisions it would have added the new provisions to Article 2(7) rather than to Article 2(6). And if the intention was to introduce a completely new methodology surely it should have been placed in a new 2(8). By introducing the changes to the market economy provisions the Commission is in fact proposing to bring China within the market economy provisions of both EU and WTO law.

In law, the implication of the Commission’s approach is that the EU is abandoning the idea that Article 15 of the Accession Protocol can be the legal basis for treating China differently from other WTO members. This is despite the fact that only one sentence of Article 15 expires, that there is significant debate as to the legal consequence of that expiry, and that Article 15 as a whole is a recognition, by China and all other WTO members, that China was not a market economy in 2001 and that it cannot be considered a market economy until it demonstrates that it is one. China has failed to demonstrate that it is a market economy and yet the Commission seeks to treat it equally with market economies. This is unfortunate.

We now turn to the provisions of the Commission’s proposal.

Significant distortions

Article 2(6a) is divided into five subparagraphs (also, a little confusingly, lettered (a) to (e)). Paragraph (a) would allow the Commission to determine, in the course of a specific investigation, that there are significant distortions in the economy of the country of origin of the goods, and that therefore the price of the good from that country can be constructed using input costs and prices from outside the country of origin. Paragraph (b) then provides a non-exhaustive list of what might be considered a significant distortion. These include government interference in the market or any other factor distorting free market forces.

The idea of significant distortions is not provided for in WTO law or the laws of any other country. It’s a completely new concept. This has good and bad consequences. The main disadvantage is that it is not clear how it will work. On the plus side, it allows room for the EU to address the substantive problems of distortions of costs and prices in all countries.

The not knowing how it will work is maybe not the biggest problem. With time, we will learn. But there is a lot to learn and there is concern that EU industry will be harmed during the learning process. What are significant distortions and what are the consequences of the finding of a significant distortion? In many energy-rich middle eastern or north African countries the energy market is both isolated from world markets and prices are kept artificially low. Is this a significant distortion? And does that distortion affect the whole market or just the energy market?

Taking this idea a step further, China’s market for capital and finance is both closed and government managed. Only state-owned banks are licenced and those banks are obliged to finance industries considered to be favoured under the five-year plans. Most observers agree that this is a significant distortion: it is the basis of the build-up of massive overcapacities in many sectors. But is the distortion only felt in the finance and capital market or does it infect the whole economy. In a particular anti-dumping investigations does this mean that when constructing the price of the good in China all input costs and prices must be taken from outside China or only some? What has to be learnt over the coming years is what weight to give to the different distortions in a given economy and the consequences of that weight. All parties will have to become familiar with the traceability of distortions though production processes.

A significant gap in the Commission’s proposal is that it does not spell out clearly how the new approach should be considered in WTO law. General WTO law allows the construction of the price (the legal term is called the normal value) when the price is not set ‘in the ordinary course of trade’ or because a ‘particular market situation’ makes an input cost or price unreliable. The general WTO law is reflected in Article 2(1) to 2(6) of the basic anti-dumping regulation.

As the Commission considers that the general WTO rules apply, then the concept of significant distortions must come within the general WTO rules for the construction of prices and thus will be framed by the general WTO rules on what can be considered as being ‘in the ordinary course of trade’ or a ‘particular market situation’ and not by the Protocol of Accession which defines China as a non-market economy.

The WTO has not given members much guidance on what these concepts mean. Recently, the EU lost a WTO dispute settlement case about constructing the Argentinian price for Biodiesel. The EU had considered the soya price in Argentina distorted thus distorting the Biodiesel price. The WTO Appellate Body found that the EU had not shown in sufficient detail how an export tax on soya had distorted the Argentinian soya price. The AB did not find that a distortion could never be found. Rather it found that the EU had not proved the distortion in sufficient detail. A good aspect of Biodiesel for the purposes of the Commission’s new approach is that it shows off-shore price benchmarks can be used as a reference when local prices are distorted. But again, very little guidance was given by the Appellate Body as to how this would work. Can the distorted price be replaced completely or can it only be adjusted upwards towards the off-shore benchmark price and if it can be adjusted upwards, by how much?

This highlights the fundamental problems addressed previously: has the Commission abandoned too easily (and too early) the possibility of using the WTO Accession Protocol as a legal basis for special rules for China or will the proposed new rules in Article 2(6a) turn out only to be an embellishment of the existing rules in Article 2(1) to 2(6) which in turn are the general WTO rules. A second question is whether the general WTO rules on which Article 2(1) to 2(6) is based are sufficiently robust to support the new significant distortions approach.

The Country reports

Paragraph (c) of the Commission’s proposal provides that the Commission may issue Reports on distortions in markets around the world. These Reports would list distortions in the economies (or sectors of the economy) in the countries for which they would be written.

The reports would not draw any conclusions as to the impact of the distortions or the weight to be given to them. Rather the reports would be placed on the file of the of a particular investigation and the parties to that investigation would have ample opportunity to comment on them. Decisions on the consequences of the distortions would only be taken in the context of the specific investigation. In other words, if the investigation concerned a particular steel originating in China, the Report would allow the parties to the investigation to consider the distortions in the report and to argue the weight and the consequences of the distortions for that particular steel product. The Commission in turn would only make conclusions on the distortions in relation to that steel product.

Paragraph (d) of the Commission proposal provides that complainants may rely on the contents of reports when making complaints. Under EU and WTO law a complainant must show prima facie evidence of dumping. To do that the complainant must be able to know how to measure the dumping and therefore what prices from the country of origin to use. Paragraph (d) seeks to give clarity on this issue.

This aspect of the proposal gives rise to three basic problems. One, what if there is no country report? Or, what if the country report does not address all sectors of an economy and in particular the sector of concern to the complainant? Second, what are the consequences of the distortions? It is the complainant which much first determine the consequences of any particular distortion because on the basis of the weight that a complainant will give to that distortion the complainant will either dismiss all costs and prices in constructing the price and use off shore benchmarks or it will only dismiss a limited number of the input costs and prices. Third, what if the complainant gets it wrong? Does that mean the complaint has not met the prima facie test? Fourth, how will the exchange of evidence between the complainants and the exporting producers play out in the course of the investigation? What certainty can the complainants place on the report? What extra evidence might be needed to be placed on the file to show the impact of any one distortion on a particular product? Finally, what is the status of the three reports that the Commission has already issued that conclude that China has not met the five EU criteria for market economy status and that the economy is thereby distorted?

All these questions hinge around the issue of burden of proof. Under the current approach complainants know to use Article 2(7) and the clear rules set out in that article for non-market economies. Under the new proposal, there is only the uncertainty of the significance of the distortions for particular products. A particular distortion might be relevant for one product and not another or have difference consequences for the different products. But most importantly who will have the burden of showing the consequence of the distortion for a particular product.

The fact that any particular report does not draw conclusion has advantages. The main advantage is that it would not be a formal decision of the Commission and therefore not subject to challenge before the EU courts in Luxembourg (for those who might have standing to challenge it). And it is clear that the drawing up of reports would ease the burden on complainants which do not have the resources to find distortions in third country markets. But it cannot be denied that the new approach is more complex than the current approach and that it requires more work from EU complainants.

The proposal does not align the EU with the US

Underlying the Commission’s proposal, but not spelt out in it, is a shift to a Costs of Production method for constructing the price in the country of origin where there are significant distortions. The Commission will break down the costs of production into different factors. It is not known what these factors will be, but they are likely to include: capital, labour, raw materials, parts, energy, land, maintenance as well as accounting issues such as depreciation, administration and profits.

If one of the factors is distorted then the price will be constructed using an undistorted benchmark from outside the country of origin. This is current Commission practice for market economies. If more than one factor is distorted then more non-country of origin benchmarks can be used. One of the many questions to be determined is whether a particular distortion of the economy in the country of origin affects all the factors of production or only one, or some, of them and which costs or prices to use in constructing the costs of production. Would a distortion in the energy sector or in the provision of capital to a market be sufficient to distort the costs and prices of all or more than one factors of production?

The Commission is clearly attempting to mirror the approach taken in the United States to calculating dumping from non-market economies. The US uses the Factors of Production approach. However, the Commission Cost of Production approach is significantly different from the US Factors of Production approach and cannot be considered an alignment with it.

First, the US uses the factors of production approach for non-market economies only and thus the very use of the factors of production approach is based on the preliminary determination that a country has or has not a market economy. The US determined in 2006 that China was not a market economy and, until that determination is changed, complainants in the US have the certainty of using this approach when making complaints.

Second, because the US approach is based on the preliminary determination that a country is non-market, all values or costs and prices of all factors of production are taken from off-shore benchmarks. Thus, the complainant knows, in making the complaint, how to get a value for all the factors of production and can easily construct the price for the country of origin.

Third, the US approach does not allow the use of any costs and prices from the country of origin. The EU approach will result in a mix of both country of origin and international benchmarks as, unlike the US, it starts from an examination of country of origin prices.

Fourth, the US approach means that because of the 2006 determination that China is a non-market economy complainants in the US do not bear the burden of proving that a particular cost or price is distorted.

In simple terms, the US approach gives certainty. The EU approach does the opposite.

Improving on the Commission’s approach

The Commission’s approach is not without merit. It seeks to address the economic reality, and the consequences, of distortions to markets rather than the legal classification of those markets.

 

The Commission seeks to balance the absence of certainty in WTO law as to the substance of the concepts of ‘not in the ordinary course of trade’ and ‘particular market situation’ and the need to give effect to those concepts in EU law. The Commission proposal is intentionally flexible so as to allow for the implementation of the future rulings of the WTO as to how the concepts should be interpreted.

But it is this very flexibility that is causing such concern for the Union industry. These concerns relate to the functioning of the new system, its ability to provide an effective tool to address the evident distortions of the market in China, what new burdens will be placed on complainants and whether, over time, lawyers will whittle away the room for the Commission to achieve the promises it has made for the new system: that it will result in measures as effective as under the current Article 2(7) calculation methodology.

The uncertainty could be removed by recognising that the 2001 Accession Protocol provides a sufficiently strong basis for treating China differently from other WTO members. The WTO will, in the not too distant future, determine the full scope of this possibility.

That being said, amendments could be introduced into the proposal to remove many of the uncertainties inherent in the current text. Changes to the Commission proposal could include:

  1. In paragraph 6a(a) make clear that the new methodology is, in law, a new and stand-alone methodology, as the Commission insists it is, and not simply an embellishment of the existing Article 2(1) to 2(6) market economy approach. This can be achieved by removing the reference to ‘when applying this provision or any other relevant provision of this Regulation’ and or by placing the new provisions in a new Article 2(8).
  2. In paragraph 6a(a) ensure that the stand-alone methodology also allows the use of off-shore prices for the product concerned (rather than just values for the different factors of production of that product). This would ensure that the new rules allow the use of an off-shore price for the product concerned as a whole as well as allowing for the use of off-shore values for each element of the cost of production. This can be ensured by including the words ‘….. the normal value shall be based on a price or a price to be constructed ….’
  3. In paragraph 6a(a) remove the phrase ‘with a similar level of economic development as the exporting country’. This is too limiting of the range of sources for obtaining un-distorted prices.
  4. In paragraph 6a(b) expand the list of distortions to include the five NME criteria used heretofore and in particular reference to the absence of a competitive and independent financial sector and a functioning bankruptcy system. In other words, make reference to systemic distortions of markets.
  5. In paragraph 6a(c) require that the Report comes to a prima facie conclusion giving greater certainty to complainants and parties to investigations. This would bring the EU closer to the US system and lessen the burdens on EU complainants.
  6. In paragraph 6a(c) allow the use of old reports examining the market economy status of different countries as well as the conclusions of investigations of dumping of other products.
  7. In paragraph 6a(c) introduce a right for exporting producers to establish that the significant distortions do not distort costs and prices in the sector producing the product under consideration. This would reflect, but be more comprehensive than, the market economy treatment provisions in Article 2(7) and implement the provisions of Article 15(d) of China’s Accession Protocol.
  8. In paragraph 6a(d) expand the use of the Report and introduce the idea that a finding of distortions is prima facie evidence that prices and costs are not reliable and that all costs and prices to be used in constructing the normal value should come from off-shore benchmarks. This would improve the alignment of the EU system with that of the US.
  9. In paragraph 6a(d) introduce special rules to allow industries with a large incidence of SMEs to use prices for the product concerned rather than having to construct the normal value based on international benchmarks.
  10. In paragraph 6a(e) introduce a time limit on discussions of the methodology to be used.

Create a new paragraph 6a(f) to deal with the consequences of less than adequate cooperation by exporting producers and introducing consequences for lack of cooperation. For example, in the absence of cooperation or in the presence of significant distortions, the lesser duty rule should not be applied.

Conclusion

The changes proposed in this note would have the effect of giving more certainty to both complainants and exporting producers in EU anti-dumping investigations. This can only be to the benefit of all.

7/04/2017

Global plastics production has grown exponentially since the 1960s, reaching 311 million tonnes produced in 2014, a twentyfold increase. It is expected to reach up to 1.2 [1] billion tonnes annually by 2050. The European plastic industry plays a vital role in the EU economy, with 1.45 million employees and a turnover of 350 billion (including converters and machine building producers). While EU plastics production has stabilised over recent years, its share on the global market is decreasing. In Europe over 40% of plastics are used in packaging, 20% is used in construction and less than 10% by the automotive industry. Other common applications include furniture, household appliances, electric and electronic goods and agricultural uses. While plastics materials are a driver of our economy, a number of environmental issues related to their production, use and end-of-life need to be tackled. Externalities are not systematically factored into the prices either of the materials itself or the final product. Packaging applications are particularly relevant; their functionally has to weigh in with their considerable littering potential. Consumer behaviour also comes into play.

 

The transition to a more circular economy, where the value of products, materials and resources is maintained in the economy for as long as possible, and the generation of waste minimised, is an essential contribution to the EU’s efforts to develop a sustainable, low carbon, resources efficient and competitive economy. Plastics is one of the five priority areas addressed in the “EU action plan for the Circular Economy”[2]. The latter sets out a clear commitment to preparing a strategy “…that addressed the challenges posed by plastics throughout the value chain and taking into account their entire life-cycle, such as reuse, recyclability, biodegradability, the presence of hazardous substances of concerns in certain plastics and marine litter”.[3]

The implementation of the existing acquis, notably on separate collection of plastic waste is a key prerequisite. The plastics strategy intends to support and complement these measures by providing a systemic perspective and creating synergies with other actions, such as on prevention, eco-design, work on the interface between waste, chemicals and products policies, measures to boost markets for secondary raw materials, use of economics instruments.

 

It has been estimated that globally, in 2013, 5 to 13 million tonnes of plastic waste end up in the environment, in particular in the oceans[4]. Plastic packaging is estimated to represent the highest share, as its weight, size and low-value make it prone to uncontrolled disposal. As regards marine litter, while land-based sources are predominant, sea-based sources such as shipping or fishing are not negligible. This problem is global, as the bulk of plastic leakage takes place outside of the EU ( in particular in fast-growing Asian economies) and collective efforts are needed. New sources of plastic leakage, e.g. single-use plastic products and microplastics, are on the rise, posing new potential threats to animal and human health. Microplastics – used intentionally in products or generated during the products’ life cycle, e.g. through car tyre wear or from washing clothes – are of particular concern as their small size (less than 5 mm) increases their potential toxicity.

 

Therefore, the level of marine pollution with plastic litter and microplastics are alarming. Microplastics are entering the food chain worth yet unknown consequences. The 2015 Circular Economy Action Plan referred to an aspirational 30% reduction target for litter items found on beaches and for fishing gear found at sea.

Biodegradable plastics could be a positive development in specific circumstances, but could exacerbate consumer negligence, the exiting leakage problem, the release of microplastics in solis and water and the risk of cross-contamination of conventional plastic waste streams. Work on definitions and standards is needed (biodegradable, compostable, home-compostable). Oxo-degradable plastic fragments over time into small particles which remain in the environment and may increase pollution. Directive 2015/720[5] on plastic bags requires to the Commission top present a report examining the impact of the use of oxo-degradable plastic carrier bags on the environment.

 

The EU Legal Basis to act is based on articles 114 and 191 of the Treaty on the Functioning of the European Union (TFEU).

The main problem addressed by this initiative cannot be addressed through exclusive action at the level of the Member States because of their trans-boundary nature (e.g. marine plastics pollution) and of potential ramifications for the internal market. In the absence of a strategic European dimension, uncoordinated or unilateral actions by Member States would risk increasing market fragmentation. While actions at national and local level can help address some of the problems’ drovers (e.g. ensuring good implementation of the waste management rules or using economic instruments to encourage more sustainable practice), a number of key obstacles to, e.g. higher plastic reuse and recycling, can potentially be removed at lower societal costs through EU actions ( e.g. creating the right framework for economies of scale in material and product design, recycling, improving cooperation and informatics flows across a trans-national value-chain, avoiding market fragmentation and ensuring a level playing field for economic operators).

 

Pursuing the objectives included in the Circular Economy Action Plan[6], these should directly contribute to its implementation, but also to the EU’s jobs and growth agenda and the Energy Union’s vision for a low carbon, energy efficient economy. The strategy and pursuance of its objectives will also contribute to the implementation of actions under the UN Agenda 2030, more specifically towards achievement of the Sustainable Development Goals.

 

Indeed, the Strategy should seek to improve framework conditions for investments and innovations that enable the plastic and related industries and the entire value chain using plastics to become more circular, resource efficient and reduce its carbon footprint, in line with the climate and energy goals of the EU. It will require innovation of the whole plastics system, built on a shared vision and enhanced cooperation between all stakeholders.

 

[1] OECD Global Forum, Mechelen 2010,”Sustainable management and recovery potential of plastic waste”.

[2] See “Across the EUniverse” Number 11, “ Circular Economy-More flexible Law. The 2015 Legislative Package”. About the implementation of the Action Plan, the European Commission published a Report dated 26.1.2017 ( COM(2017) 33 FINAL)

[3] This follows up on the  “Green Paper On a European Strategy on Plastic Waste in the Environment”, European Commission, COM(2013) 123 final .

[4] WorldWatch Institute, January 2015.

[5] Directive 2015/720 of 29 April 2015, emending Directive 94/62/EC as regards reducing the consumption of lightweight plastic carrier bags, in OJEU L 115.

[6] Decoupling plastics production from virgin fossil feedstock and reducing its life-cycle GHG impacts; improving the economics, quality and uptake of plastic recycling and reuse, and reducing plastic leakage into environment.

7/04/2017

The 25th of March marked the 60th anniversary of the signing of the 1957 Treaty of Rome creating the European Economic Community. The EEC entered into effect in 1958 and has changed all our lives since. I was five at the time and spent the next 25 years fairly ignorant of the organisation despite the fact that my father drafted many of the tax laws necessary for Irish membership in 1973 and I qualified as a lawyer in Ireland in 1980.

 

It was only after a couple of years practicing Irish law in Dublin that I began taking EEC law seriously. I completed specialist post graduate degrees in EEC law in Amsterdam and at the European University Institute in Fiesole and in 1986 I moved to Brussels to practice what for me was the new world of EEC law. I moved to Brussels not out of love of the city but because it was the only place, at that time, where a lawyer could practice EEC law full time. It was then considered a marginal speciality. In fact, a number of my lawyer friends advised against it. They argued that EEC law was not real law and it was not the basis for a successful career. And they were right. At first. There was not that much law work around.

 

The EU in the mid 1980s was very different from today. There were still borders and border posts between the Member States. Products crossing the borders still had to go through customs procedures, get back and pay taxes, show compliance with health and safety requirements and many of the other procedures now carried out at the external frontiers of the Union. It is true that actual customs duties had been removed but non-tariff barriers to trade were very present. The EU was sufficiently divided and broken up that individual Member States were still able to keep their individual trade relations with third countries for certain products.

 

Legal work in Brussels at that time broke down into three broad areas: competition, anti-dumping and free movement. The biggest problems on free movement were in relation to food standards and product safety. What is now Article 26 TFEU prohibited quantitative restrictions on movement and measures having an equivalent effect. Article 36 set out the exceptions on the basis of the protection of the health and life of humans, animals and plants. The questions before the courts were whether an Irish government campaign to ‘Buy Irish’ was a restriction on free movement or whether France could be held liable for not preventing farmers stopping Spanish goods crossing the border. In practice this meant that there was little free movement of foodstuffs as each Member State set their own standards.

 

And then came Cassis de Dijon in 1979. This changed everything (even if it too a bit of time to sink in). The Court of Justice ruled that as most standards had the same objective of protecting health and safety they could be considered equivalent. Member States should mutually recognise the validity of each others standards. The formula handed down by the judges was that if a good was legally produced and marketed in one Member State then it should be able to move freely into a second state.

 

Member States with high standards were concerned that products would be legally placed on the market in low standard Member States and then undermine the higher standard. In addition, manufacturing could move from high standard to low standard states. The EU’s reaction was comprehensive and all encompassing. The decision was taken to change the approach to standards and to move away from product specific standards in the food sector and move to minimum health and safety standards. And it was decided to change the decision-making rules and reintroduce majority voting in the Council.

 

The 1992 programme was designed to complete the single market. This programme foresaw the adoption more than 300 laws in a five-year period that would allow the removal of the physical, economic and technical borders between the Member States and the completion of the external frontier of the Community. Work is still going on to complete the single market particularly for services but for the most part it is complete for goods.

 

In Competition, the work was two fold. One main strand of work was in relation to distribution and agency agreement. To what extent could manufacturers tie-in their agents and distributors and restrict their ability to sell outside the zones for which they had an agreement. These were the exclusive rights to sell in one Member State and not in another. What was an exclusive distributor for Germany to do if a French customer asked for goods. Could they sell or not? And could manufacturers use intellectual property to maintain divisions in the single market.

 

The second strand of work in competition law was the break-up of national monopolies. To what extent could it be considered that national and most often state owned energy or transport or telecommunication companies be considered to be in abuse of their dominant or exclusive positions in different Member States? Slowly competition law was applied to break down the monopolies and introduce competition.

 

The liberalisation of certain sectors at the Member State level automatically resulted in the need to regulate these sectors at the EU level. This implied the granting of greater competence to the Union to undertake the regulatory functions inherent in the management of the single market. So over the 1990s and into the 2000s the Member States slowly increased the competence of the Union and slowly improved the way in which decisions were to be made in Brussels. In a series of changes to the Treaty of Rome leading to the Lisbon Agreement (the failed constitution agreement) we changed the Community to the Union, we gave greater power to the Parliament, we gave more competence to the Union.

 

As all this happened the nature of law work changed. As the Union got more competence and became the regulator of the single market for more and more sectors, decisions of the institutions had a greater and greater impact on industry and there was a notable increase in litigation to annul Commission and Council decisions. The Commission as the executive of the Union became stronger. This in turn allowed the Commission to implement the competences it had in a more robust manner. This can be seen in relation to competition law. The focus shifted from distribution and dominance so as to complete the single market to attacking collusion between enterprises across the single market.

 

Lawyers also become more involved in the formulation and the quality of laws. In other words, lobbying. The idea that lawyers were lobbyists was, and for many still is, problematical. But why should this be? Lobbying is in fact advocacy. But rather than trying to persuade a judge as to the correctness of your arguments you are trying to persuade the legislator of the correctness of your analysis. The more lobbing there is the better the law is.

 

The last 30 years have been eventful and fun to have been part of. One case, bananas, lasted from 1988 to 2010. The hormones case lasted 10 years. Today we are working on the EU’s relationship with China and the US which will last for many years to come. The EU has built competence on the environment, on health and safety and the welfare of consumers. We have built and protected the common values of the EU. It has been fun, yes, but important too. We need another sixty years and more to continue the great European project.

 

Europe Must Go On 

The 60th anniversary of the Treaty of Rome sees the EU much changed from its early origins. We have moved from an economic community to a Union based on civil and human rights and the values common to the peoples of Europe. It has been, and is, a great success.

 

However it is clear that the Union is not without its troubles on this important anniversary. The Brexit negotiations are about to start. There are nationalist and decentralizing tendencies in many Member States and important elections in Germany and France. There are real problems of immigration and the absence of, or the uneven distribution of, economic growth.

 

These problems should not daunt us. Our fathers in the integration process faced greater problems. They sought to make peace and to make an institution to guarantee peace from the ashes of the most destructive of European wars.

 

What we must do is face up to our problems and resolve them. We have great shoulders to stand on. We have been given the evolving EU treaties, the Single Market, a strong Court of Justice in Luxembourg, good competition law, the rights of citizens, in other words a strong legal framework.

 

This is no time for faintheartedness. We must move on with courage and ensure that the Union is with us for more than another 60 years.

In this issue, we analyse a decision of the Italian Consiglio di Stato according to which the publication of applications for renewal of existing maritime port concessions in the EU Official Journal is not required. Any third party wishing to submit competing bids is however guaranteed by the possibility of preventively inquiring about the expiry of a concession as well as by the investigation conducted by the Port Authority (today Port System Authority), which must comply with the principle of selecting the tenderer offering the «best guarantees for a profitable use of the concession».

We then examine the differences in Italian law between a contract of carriage and a procurement contract for the supply of carriage services. It is important to properly classify the type of contract, and here we explain why.

Let us then examine two recent judgments of the Italian Regional Administrative Courts. The first one is on the possible ways of awarding a maritime concession. The second one relates to the applicability of the Italian Public Procurement Code to the management of intermodal freight terminals, the unavoidable consequences of which are summarised here.

In light of the forthcoming entry into force of the IMO Convention for the Control and Management of Ships’ Ballast Water and Sediments, we look at the impact it is expected to have on the shipping sector. One of the major problems is that, to date, there are no clear indications on how to make ships compliant with the new standards. Moreover, there are countries who have more stringent regulations than the IMO Convention. The risk is therefore to invest in equipment that can be deemed unsuitable at a later stage.

A recent ruling of the Italian Supreme Court allows us to briefly discuss the issue of non-payment of insurance premiums and consequent suspension of cover. The Supreme Court confirmed that insurance coverage applies if an insured event occurs within the «grace period», regardless of whether the next premium instalment is paid.

Concerning airports, the Italian Supreme Court opened the door to possibly finding liability on the part of ENAC (the Authority supervising airport activities and air transport in Italy) in case of airplane damage caused by poor maintenance of taxiways.

Finally, we conclude with our usual review of the news from the world of maritime and port labour. The most important news is about the renewal, in Italy, of the National Collective Bargaining Agreement for shipping agencies’ executives, which brought some improvement to the current situation.

We want to thank our colleagues at Nctm Brussels’s office for their contributions highlighting the most significant actions taken by EU institutions in the international shipping and trade sector.

You will also find a list of our events taking place at our Milan and Rome offices, in addition to the usual update on our firm’s activities over the past two months.

According to the Court of Cassation a concordato plan not describing in detail how it can be implemented is not feasible
The Court of Cassation (decision No. 4915 of 27 February 2017) lowered the threshold allowing the Bankruptcy Court to review the feasibility of the concordato preventivo proposal.

Does a concordato proposal need to assign all future earnings to the creditors ?
The Court of Florence (November 2, 2016) confirmed that the debtor can retain part of his assets, with a view to support the company’s recovery and in derogation to principles of liability of the debtor

Cram down pursuant to Art. 182-septies of the Italian Bankruptcy Law, if the agreement is more convenient for the bank than bankruptcy liquidation
A ruling of the Court of Padua of 31 December 2016 is compared with few other known Court decisions regarding the extension of the effects of a debt restructuring agreement to dissenting financial creditors

 

 

In this issue, we explore the new “Project Review” rule provided for by Article 202 of Italian Legislative Decree No. 50/2016, which allows the State to revoke funding previously granted for projects which – upon later and more in-depth review – are found no longer to meet the cost benefit ratio. What will the impact of this new rule be on port infrastructure projects in Italy? Are we at the beginning of a new era? We come back to the Italian port reform issue, this time to examine the ordinance power vested in the President of the Port System Authority. Analysing a judgment of the Regional Administrative Court of Liguria, we note how case law anticipated the reform when recognising the ordinance power of the President of the Port Authority even in the absence of an express statutory provision. We then deal with the need for prior review by the EU Commission of State funding projects involving upgrade works on EU ports. On 23 January 2017 the new EU Regulation on port governance was approved. We give a first insight on the main issues covered by the Regulation: financial transparency and the provision of port services. We examine the request to amend Directive 2009/13/EC, aimed at delivering better working conditions to seafarers in accordance with the amendments made in 2014 to the Maritime Labour Convention (MLC / 2014). We also provide some updates on maritime employment agencies. We then focus on a recent decision of the European Commission on State aid, which further helps improve the general understanding of the criteria to be met in order for State aid in port and airport matters to be deemed compatible with EU law. Finally, we draw our attention to an interesting decision of the Consiglio di Stato regarding the interruption of airport handling services, which is forbidden when deemed detrimental to the public interest in operation of scheduled air transport services.] We want to thank our colleagues at Nctm Brussels’s office for their contributions highlighting the most significant actions taken by EU institutions in the international shipping and trade sector. You will also find a list of our events taking place at our Milan and Rome offices, in addition to the usual update on our firm’s activities over the past two months.

As we settle into 2017 the drama of Brexit and Trump seem to have eased somewhat. While the drama might have lifted it doesn’t mean that the complexities that these two phenomena have introduced and are introducing into the practice of law have gone away. In fact, the more we reflect on what needs to be done to achieve Brexit the less clear the situation is. This week President Trump will outline what he means by the Wall and taxes on imports of goods. From a WTO law point of view it can only be disruptive and even destructive. The drama might have gone but the work is only beginning. In this issue we have a range of contributions covering how the Russian constitutional court has reacted to the European Court of Human Rights rulings in favour of the owners of Yukos, the OECD’s review of its own bribery rules, the EU’s new proposed ePrivacy Regulation, how the European Court of Auditors confirms our understanding of the responsibilities and obligations of Port Authorities in relation to concessionaires. We explain the new Italian Save the Banks decree and show how the EU Commission has a strong role in every step of the process and look at how the Commission proposes disciplining insurance distribution agents.

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