DISPUTE SETTLEMENT

DS: India — Certain Measures Relating to Solar Cells and Solar Modules

This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

  

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Current status

 

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Key facts

Short title:
Complainant:
Respondent:
Third Parties:
Agreements cited:
(as cited in request for consultations)
Request for Consultations received:
Panel Report circulated: 24 February 2016
Appellate Body Report circulated: 16 September 2016

  

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Latest document

  

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Summary of the dispute to date

The summary below was up-to-date at

Consultations

Complaint by the United States.

On 6 February 2013, the United States requested consultations with India concerning certain measures of India relating to domestic content requirements under the Jawaharlal Nehru National Solar Mission (“NSM”) for solar cells and solar modules.

The United States claims that the measures appear to be inconsistent with:

  • Article III:4 of the GATT 1994;
     
  • Article 2.1 of the TRIMs Agreement; and
     
  • Articles 3.1(b), 3.2, 5(c), 6.3(a) and (c), and 25 of the SCM Agreement.

The United States also claims that the measures appear to nullify or impair the benefits accruing to the United States directly or indirectly under the cited agreements.

On 13 February 2013, Japan requested to join the consultations.  On 21 February 2013, Australia requested to join the consultations.

On 10 February 2014, the United States requested supplementary consultations concerning certain measures of India realting to domestic content requirements under “Phase II” of the Jawaharlal Nehru National Solar Mission (“NSM”) for solar cells and solar modules.

On 21 February 2014, Japan requested to join the consultations.

On 14 April 2014, the United States requested the establishment of a panel. At its meeting on 25 April 2014, the DSB deferred the establishment of a panel.

 

Panel and Appellate Body proceedings

At its meeting on 23 May 2014, the DSB established a panel.  Brazil, Canada, China, the European Union, Japan, Korea, Malaysia, Norway, the Russian Federation and Turkey reserved their third party rights. Subsequently, Ecuador, Saudi Arabia and Chinese Taipei reserved their third party rights. Following the agreement of the parties, the panel was composed on 24 September 2014.

On 24 March 2015, the Chair of the panel informed the DSB that the panel expects to issue its final report to the parties by late August 2015, in accordance with the timetable adopted after consultation with the parties.

On 24 February 2016, the panel report was circulated to Members. A day later, on 25 February 2016, the Chair of the panel informed the DSB that it had issued the final report to the parties on 28 August 2015 and that public circulation of the report was originally scheduled for late December 2015. However, due to several requests from the parties that the circulation be delayed due to continuing discussions relating to the dispute, the circulation of the panel report was delayed until 24 February 2016.

The claims brought by the United States concern domestic content requirements (DCR measures) imposed by India in the initial phases of India's ongoing National Solar Mission. These requirements, which are imposed on solar power developers selling electricity to the government, concern solar cells and/or modules used to generate solar power.

The Panel found that the DCR measures are trade-related investment measures covered by paragraph 1(a) of the Illustrative List in the Annex to the TRIMs Agreement. The Panel found that this suffices to establish that they are inconsistent with both Article III:4 of the GATT 1994 and Article 2.1 of the TRIMs Agreement. The Panel decided nonetheless to assess the parties' additional arguments under Article III:4 of the GATT 1994, and found that the DCR measures do accord “less favourable treatment” within the meaning of that provision.

Concerning the government procurement derogation in Article III:8(a) of the GATT 1994, the Panel found that the DCR measures are not distinguishable in any relevant respect from the domestic content requirements previously examined under this provision by the Appellate Body in Canada — Renewable Energy / Feed-In Tariff Program. Following the Appellate Body's interpretation of Article III:8(a) of the GATT 1994 in that case, the Panel found that the discrimination relating to solar cells and modules under the DCR measures is not covered by the government procurement derogation in Article III:8(a) of the GATT 1994. In particular, the Panel found that the electricity purchased by the government is not in a “competitive relationship” with the solar cells and modules subject to discrimination under the DCR measures.

India argued that the DCR measures are justified under the general exception in Article XX(j) of the GATT 1994, on the grounds that its lack of domestic manufacturing capacity in solar cells and modules, and/or the risk of a disruption in imports, makes these “products in general or local short supply” within the meaning of that provision. The Panel found that the terms “products in general or local short supply” refer to a situation in which the quantity of available supply of a product, from all sources, does not meet demand in a relevant geographical area or market. The Panel also found that the terms “products in general or local short supply” do not cover products at risk of becoming in short supply, and found that in any event India had not demonstrated the existence of any imminent risk of a short supply. The Panel therefore found that India failed to demonstrate that the challenged measures are justified under Article XX(j).

India argued that the DCR measures are also justified under Article XX(d) of the GATT 1994, on the grounds that they secure India's compliance with “laws or regulations” requiring it to take steps to promote sustainable development. The Panel considered that international agreements may constitute “laws or regulations”  within the meaning of Article XX(d) only insofar as they are rules that have direct effect” in, or otherwise form part of, the domestic legal system of the Member concerned. The Panel found that most of the instruments identified by India did not constitute “laws or regulations” within the meaning of Article XX(d), or were not laws or regulations in respect of which the DCR measures “secure compliance”. Therefore, the Panel found that India failed to demonstrate that the challenged measures are justified under Article XX(d).

On 20 April 2016, India notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretation in the panel report.

On 17 June 2016, upon expiry of the 60-day period provided for in Article 17.5 of the DSU, the Appellate Body informed the DSB that the circulation date of the Appellate Body report in this appeal was to be communicated to the participants and third participants shortly after the oral hearing, in the light of the scheduling of parallel appeals, the number and complexity of the issues raised in this or concurrent appellate proceedings, and the availability of translation services. On 8 July 2016, the Appellate Body informed the DSB that it expected to circulate its report in this appeal no later than 16 September 2016.

On 16 September 2016, the Appellate Body report was circulated to Members.

The Panel sustained the United States' claims that India's DCR measures are inconsistent with WTO non‑discrimination obligations under Article III:4 of the GATT 1994 and Article 2.1 of the TRIMs Agreement. The Panel also found that the measures are not covered by the government procurement exemption under Article III:8(a) of the GATT 1994, because the product being procured (electricity) was not in a “competitive relationship” with the product discriminated against (solar cells and modules). Moreover, the Panel found that India had not demonstrated that its measures are justified under Article XX(j), applicable to measures that are essential to the acquisition or distribution of “products in general or local short supply”, or Article XX(d), which establishes a general exception for measures necessary to “secure compliance” with a WTO Member's “laws or regulations” which are not themselves GATT-inconsistent. The Appellate Body upheld each of these Panel conclusions appealed by India.

With respect to Article III:8(a), the Appellate Body found that the Panel was properly guided by the Appellate Body's report in Canada — Renewable Energy / Canada — Feed-in Tariff Program, where the Appellate Body interpreted and applied Article III:8(a) to closely analogous facts involving the purchase of electricity and discrimination against generation equipment. Regarding Article XX(j), the Appellate Body stated that an assessment of whether products are in short supply should take into account the quantity of available supply of a product from all domestic and international sources, and that consideration should be given to all relevant factors, including the availability of imports, the level of domestic production, potential price fluctuations in the relevant market, and the purchasing power of foreign and domestic consumers. As for Article XX(d), the Appellate Body explained that in determining whether a respondent has identified a “rule” that falls within the scope of “laws or regulations” under Article XX(d), it may be relevant for a panel to consider factors such as the degree of normativity of the domestic or international instrument and the extent to which it operates to set out a rule of conduct or course of action that is to be observed within the domestic legal system of a Member.

One Appellate Body Member attached a separate opinion offering remarks regarding how he viewed the Appellate Body's adjudicatory function as well as its limits, and, consequently, why in his view the Division did — or did not — need to rule on certain of the issues appealed.

At its meeting on 14 October 2016, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.

 

Reasonable period of time

On 8 November 2016, India informed the DSB that, pursuant to Article 21.3 of the DSU, it intended to implement the DSB's recommendations and rulings in this dispute. On 1 December 2016, the United States and India informed the DSB that in order to allow sufficient time for them to discuss a mutually agreed period, they had agreed on deadlines for arbitration under Article 21.3(c) of the DSU.

On 16 June 2017, India and the United States informed the DSB that they had agreed that the reasonable period of time to implement the DSB's recommendations and rulings would be 14 months. Accordingly, the reasonable period of time was set to expire on 14 December 2017.

 

Implementation of adopted reports

On 14 December 2017, India informed the DSB that it had ceased to impose any measures found inconsistent with the DSB's findings and recommendations.

 

Proceedings under Article 22 of the DSU (remedies)

On 19 December 2017, the United States requested the authorization of the DSB to suspend concessions or other obligations pursuant to Article 22.2 of the DSU on the grounds that India had failed to comply with the DSB's recommendations and rulings within the reasonable period of time. On 3 January 2018, India objected to the United States' request pursuant to Article 22.6 of the DSU. India informed the DSB that it disagreed with the United States that India had failed to comply with the DSB's recommendations and rulings within the reasonable period of time. In its communication, India indicated that the United States had failed to enter into negotiations with India to agree on a mutually acceptable compensation and therefore, in India's view, the United States' request did not satisfy the conditions of Article 22.2 of the DSU.

At the DSB meeting on 12 January 2018, the matter was referred to arbitration pursuant to Article 22.6 of the DSU.

 

Compliance proceedings (recourse by India)

On 23 January 2018, India requested the establishment of a compliance panel pursuant to Article 21.5 of the DSU. At its meeting on 9 February 2018, the DSB deferred the establishment of a compliance panel. At its meeting on 28 February 2018, the DSB agreed to refer to the original panel, if possible, the matter raised by India. Brazil, Canada, China, the European Union, Indonesia, Japan, Korea, Norway, the Russian Federation, Singapore, Thailand and Chinese Taipei reserved their third-party rights.  

 

 

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