The return of the forbidden fruits: Van Parys II on the horizon

Bananas are back on the menu of the Court of Justice of the EU. The court of first instance of Brussels (Interim Decision of 17 May 2013, 196/33/13, in Dutch, not online) decided to refer a preliminary question to Luxembourg concerning the consistency of Council Regulation 1964/2005 regarding import tariffs for bananas with the EU’s obligations under the GATT. Soon the Court is to decide whether to address this question in a regular panel, or instead in a Grand Chamber. This decision itself will signal whether the Court considers this a fresh legal argument warranting scrupulous attention, or regards this simply as old, long-settled questions. In this post, I will argue that authoritative judicial clarifications would indeed be desirable in this case.

WTO law, a forbidden fruit in the Union legal order

Let us briefly recall the status quo in these matters. The case law concerning the EU’s import regime for bananas is a key chapter in the study of EU external relations law. This is so not least since these innocuous yellow fruits have long provided the ECJ with opportunities to rule on the role of WTO law in the Union legal order.

In essence, according to the ECJ, WTO law is among the fruits too high to reach for individuals, Member State government and Member State courts. Should these start to shake the tree, this may upset the political ‘scope for manoeuvre’ deemed necessary for the EU’s negotiators in the international trade arena. Plus, the Court likes to add, since other major trade powers such as the US and Japan do let the participants in their legal orders grasp these fruits, it would create a situation of imbalance if these high-hanging branches were only lowered to arm’s reach in the EU.

The basic stance of the ECJ towards obligations stemming from the international trading regime has changed only little since the days of the GATT. Concerning the latter, which lacked a compulsory (quasi-)judicial dispute settlement arrangement, the Court ruled that according to the preamble oft he GATT itself, it was an organization ‘based on the principle of negotiations undertaken on the basis of “reciprocal and mutually advantageous arrangements”’. Hence, it was ‘characterised by the great flexibility of its provisions’ (Case C-280/93 Germany v Council [1994] ECR I-04973, para 106). Consequently, neither individuals nor the Member States could make use of them in Luxembourg when challenging EU secondary measures, and also Member State courts were barred from applying these rules directly in their judgments (Case C-377/02 Van Parys [2005] ECR I-01465). After the watershed of establishing the WTO, and at its heart the Dispute Settlement Understanding (DSU), the Court stuck to this assessment. While it acknowledged that important changes had been effected by the Marrakesh agreements, it continued to insist that the new system ‘nevertheless accords considerable importance to negotiation between the parties’ (Case 149/96 Portugal v Council [1999] ECR I-8395, para 36).

However, already prior to the inception of the WTO, the ECJ established two exceptions to this rule, stemming, respectively, from its judgments in Fediol and Nakajima. Regarding Nakajima, it ruled that if EU legislation was intended to implement an obligation under the WTO, then these can be relied upon directly in the Union legal order. As to Fediol, it established that in the case of EU legislation specifically referring to GATT provisions, the latter be relied on as well. By virtue of these clear links between WTO law and EU law, two thin branches were lowered, allowing private parties in particular to lodge complaints in cases in which non-compliance with certain WTO obligations adversely affects them. These exceptions to the general rule were reiterated in the Van Parys judgment of 2005 (para. 49).

Van Parys II ante portas

In the litigation now pending at the court in Brussels, the complainant, again the Van Parys corporation, a Belgian company which imports bananas from Latin America into the Internal Market, tries to leverage these exceptions in order to make its case. In a nutshell, it claims to have paid too much in tariff duties between most of 2006 and until 2009. These were calculated on the basis of the tariffs established in Regulation 1964/2005 of 29 November 2005. The company argues that this regulation should be annulled, given that it was inconsistent with the EU’s obligations under the GATT. In particular, this inconsistency, according to the claimants, stems from the fact that the EU had failed to negotiate a new agreement in the framework of the WTO concerning the import of bananas from these particular ‘third countries’ (i.e. MFN countries which did not benefit from the preferential treatment accorded to ACP countries). The new banana regime to be applied in the EU, to which we also have to count Council Regulation (EC) No 2587/2001 of 19 December 2001, had been deemed inconsistent with WTO obligations by the WTO Appellate Body. According to the latter, the levels concessions existing prior to the EU’s new regime would remain in force until the negotiations between the EU and these ‘third countries’ were finalized and the EU has ‘rebound’ itself under the applicable procedures of the GATT. This happened with the Geneva Agreement on Trade in Bananas of 2009. According to the complainants in this case, the new regime was thus only applicable from 2009, not 2006.

The Brussels court, in its own preliminary assessment, recalls the general stance of the ECJ on reviewing EU measures in the light of WTO obligations, but also points to the exceptions mentioned earlier. The court opines that because the contested Regulation concerns the application of WTO obligations and because it refers in its preamble to the ‘rebinding’ negotiations under Article XXVII of the GATT (and noting also the reference in Regulation 2587/2001 to the pertinent WTO dispute settlement proceedings) that prima facie it would be possible to review the Regulation in light of WTO law.

Legal banana skin, or constitutional issue

While the referring court thus appears rather sympathetic to the complainants, it is now for the ECJ to decide on how to tackle this in its answer provided through a preliminary ruling. The ECJ has two basic options: Either the general rule applies, or we are faced here with a rare exception.

It can be argued that for the EU, a specific obligation of international law existed in the context of the WTO, to the extent that the Doha Article I Waiver, granted to the EU by the Ministerial Council in 2001, expressly bound the EU to reach a mutually agreed solution on imports from MFN countries. More specifically, the contents of the EU-Ecuador Memorandum of Understanding of 30 April 2001 (by which notably the negotiations at issue in Van Parys I were finally concluded), was recalled in the Doha Article I Waiver of 14 November 2001. In the latter document the Ministerial Council of the WTO affirmed that the EU was only given the waiver from Article I GATT (permitting the ACP-specific regime of the Cotonou agreement) to the extent that the EU would conclude Article XXVIII negotiations. The Doha Article I Waiver stated that EU-MFN countries for bananas had to negotiate a mutually agreed solution that would maintain at least ‘total market access’ to MFN countries. In other words, to Court is asked to rule whether the tariffication procedure of the WTO is directly effective, and whether the aforementioned Memorandum and Doha Article I Waiver that emphasize a specific outcome in those tariff negotiations, constitute an international obligation for the EU that does not permit any leeway for action to the Union. As a consequence of this strict obligation, the question arises whether it can be invoked within the EU legal order, not least with regard to secondary measures that are contrary to this obligation. Furthermore, when looking at the contested Regulation, there are indeed express references to the Doha Article I Waiver as well as the Memoranda concluded with Ecuador. In sum, the Court must respond whether its WTO case law captures also ‘non-implementation’ of a very specific international obligation in the context of the WTO through EU legislation – legislation which itself acknowledges to have been adopted in this international context.

This case does call for judicial clarification in at least two respects. Firstly, regarding the scope of the aforementioned exceptions (or the emergence of a possible third kind of exception as regards the tariffication procedures), but, secondly, also as to the general constitutional approach to international law in the EU legal order. It is an old story that while general friendly towards international law, WTO law, due to its allegedly special nature, merits to be exempted. However, we face countervailing tendencies in the EU as well: Non-trade related cases such as Intertanko and Kadi seem to signal a more closed approach by the ECJ towards international law. At the same time, new Article 3 (5) TEU requires the ‘strict observance’ of international law as a constitutional objective of the EU.  In recent case-law, the Court has clearly embraced this objective (see e.g., Air Transport Association of America, para. 101).

With these considerations in mind, this case is certainly about more than old bananas (which have all long been consumed or perished anyway) or money. It may be one of the rare cases in which an application of Fediol and/or Nakaijima is in reach,. In the bigger picture, it is about the perennial question of which exotic fruits from external legal orders can be seized by individual claimants and domestic courts in the EU, and which ones the ECJ deems unsafe for the enjoyment of the subjects of its own legal order.

8 comments

  1. Dalina Bachasingh

    To the author of this article, thank you for this analysis. I am a law student at University of Utrecht and I am writing my thesis on this case of “Van Parys II”. While reading your article, I noticed some informational details which I have not been able to find in online resources. Do you happen to have access to the Interim Decision of the court of first instance of Brussels? If so, could you provide me with information of how I can gain access to that decision myself? That would be very much appreciated. Thank you in advance.

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