DS: European Union and certain Member states — Certain measures concerning palm oil and oil palm crop-based biofuels

With regard to the EU measures at issue, the Panel found that:

• the 7% maximum share and the high ILUC-risk cap and phase-out were technical regulations within the meaning of Annex 1.1 to the TBT Agreement;
• Malaysia failed to establish that the high ILUC-risk cap and phase-out was inconsistent with the obligation in Article 2.4 of the TBT Agreement to use relevant international standards as a basis for technical regulations;
• Malaysia failed to establish that the 7% maximum share and the high ILUC-risk cap and phase-out were inconsistent with the obligation in Article 2.2 of the TBT Agreement to ensure that technical regulations are not more trade-restrictive than necessary to fulfil a legitimate objective;
• the European Union administered the high ILUC-risk cap and phase-out inconsistently with Article 2.1 of the TBT Agreement by failing to conduct a timely review of the data used to determine which biofuels were high ILUC risk, and because there were deficiencies in the design and implementation of the low ILUC-risk criteria, which resulted in arbitrary or unjustifiable discrimination between countries where the same conditions prevail;
• Malaysia had not established that the European Union acted inconsistently with Article 2.5 of the TBT Agreement by failing to explain the justification for preparing, adopting or applying the 7% maximum share and the high ILUC-risk cap and phase-out in terms of Articles 2.2 to 2.4 of the TBT Agreement;
• Malaysia had not established that the high ILUC-risk cap and phase-out was inconsistent with the obligation in Article 2.8 of the TBT Agreement to whenever appropriate specify technical regulations in terms of performance rather than design or descriptive characteristics;
• regarding the claims under Article 2.9 of the TBT Agreement, the European Union acted inconsistently with: (i) Article 2.9.2 by failing to notify the proposed 7% maximum share and the proposed high ILUC-risk cap and phase-out measures; and (ii) Article 2.9.4 by having failed to organize a commenting process in respect of the proposed 7% maximum share and the proposed high ILUC-risk cap and phase-out measures in accordance with the requirements of that provision;
• the low ILUC-risk certification procedure was a “conformity assessment procedure” within the meaning of Annex 1.3 to the TBT Agreement;
• Malaysia failed to establish that the low ILUC-risk certification procedure was inconsistent with the obligation in Article 5.1.1 of the TBT Agreement to ensure that conformity assessment procedures grant access for suppliers of like products originating in the territories of other Members under conditions no less favourable than those accorded to suppliers of like products of national origin or originating in any other country;
• the low ILUC-risk certification procedure, as set out in Article 6 of the Delegated Regulation, was inconsistent with Article 5.1.2 of the TBT Agreement since deficiencies in the implementation of the low ILUC-risk procedure had created unnecessary obstacles to international trade;
• Malaysia failed to establish that the European Union  acted inconsistently with the obligation in Article 5.2.1 of the TBT Agreement to ensure that conformity assessment procedures are undertaken and completed as expeditiously as possible;
• regarding the claims under Article 5.6 of the TBT Agreement, the European Union acted inconsistently with: (i) Article 5.6.1 of the TBT Agreement by failing to publish a notice of the proposed low ILUC-risk certification procedure at an early appropriate stage in such a manner as to enable interested parties in Malaysia and other WTO Members to become acquainted with it; (ii) Article 5.6.2 of the TBT Agreement by failing to notify the proposed low ILUC-risk certification procedure; and (iii) Article 5.6.4 of the TBT Agreement by having failed to organize a commenting process in respect of the proposed low ILUC-risk certification procedure in accordance with the requirements of that provision;
• Malaysia had not established that the European Union acted inconsistently with the obligation in Article 5.8 of the TBT Agreement to ensure that conformity assessment procedures which have been adopted are published promptly or otherwise made available in such a manner as to enable interested parties in other Members to become acquainted with them;
• Malaysia failed to establish that the European Union acted inconsistently with Article 12.3 of the TBT Agreement, as informed by Article 12.1 of the TBT Agreement;
• Malaysia had not established that the high ILUC-risk cap and phase-out or the low ILUC-risk certification procedure was inconsistent with the obligation in Article XI:1 of the GATT 1994 to not institute or maintain any prohibitions or restrictions on the importation of any product of the territory of another Member;
• the high ILUC-risk cap and phase-out was inconsistent with Article III:4 of the GATT 1994 because it accorded less favourable treatment to palm oil-based biofuel from Malaysia than that accorded to like products of EU origin;
• the high ILUC-risk cap and phase-out was inconsistent with Article I:1 of the GATT 1994 because it did not accord an advantage to palm oil-based biofuel from Malaysia that was accorded to like products imported from third countries;
• insofar as Malaysia challenged the low ILUC-risk certification procedure as a separate measure under Article III:4 and Article I:1 it had not established any inconsistency with these obligations;
• the European Union acted inconsistently with Article X:3(a) of the GATT 1994 by administering the high ILUC-risk cap and phase-out in Article 26 of RED II in a manner that was not reasonable, to the extent that deficiencies in the design and implementation of the low ILUC-risk criteria and procedure did not provide for the elements needed for palm oil-based biofuel to be certified as low ILUC-risk;
• with respect to Article XX of the GATT 1994: (i) the high ILUC-risk cap and phase-out was a measure relating to the conservation of exhaustible natural resources that was made effective in conjunction with restrictions on domestic consumption or production within the meaning of Article XX(g); (ii) the high ILUC-risk cap and phase-out was a measure necessary to protect human, animal or plant life or health within the meaning of Article XX(b); (iii) it was unnecessary to rule on whether the high ILUC-risk cap and phase-out was a measure necessary to protect public morals under Article XX(a); and (iv) the high ILUC-risk cap and phase-out had been administered in a manner that constituted arbitrary or unjustifiable discrimination between countries where the same conditions prevail because the European Union failed to conduct a timely review of the data used to determine which biofuels were high ILUC risk, and because there were deficiencies in the design and implementation of the low ILUC-risk criteria and certification procedure.

With regard to the French TIRIB measure, the Panel found that:

• the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure was inconsistent with Article III:2, first sentence, of the GATT 1994, because it resulted in the application of internal taxes to imported palm oil-based biofuel in excess of those applied to the like domestic rapeseed and soybean oil crop-based biofuels;
• the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure was inconsistent with Article III:2, second sentence, of the GATT 1994, because it resulted in dissimilar taxation between imported palm oil-based biofuel and the directly competitive or substitutable domestic rapeseed and soybean oil crop-based biofuels, and this dissimilar taxation was applied so as to afford protection to domestic production;
• the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure was inconsistent with Article I:1 of the GATT 1994, because it granted an advantage to imported rapeseed and soybean oil crop-based biofuels that was not immediately and unconditionally accorded to like palm oil-based biofuel imported from Malaysia;
• with respect to Article XX of the GATT 1994: (i) the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure was a measure relating to the conservation of exhaustible natural resources that was made effective in conjunction with restrictions on domestic consumption or production within the meaning of Article XX(g); (ii) the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure was a measure necessary to protect human, animal or plant life or health within the meaning of Article XX(b); (iii) it was unnecessary to rule on whether the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure was a measure necessary to protect public morals under Article XX(a); and (iv) the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure had been administered in a manner that constituted arbitrary or unjustifiable discrimination between countries where the same conditions prevail, because the European Union failed to conduct a timely review of the data used to determine which biofuels were high ILUC risk, and had failed to demonstrate the existence of any provisions or flexibilities for palm oil-based biofuels to be certified as low ILUC-risk;
• Malaysia failed to establish that the French TIRIB measure provided a specific subsidy that caused adverse effects in the form of serious prejudice under Articles 5(c), 6.3(a) and 6.3(c) of the SCM Agreement.

The Panel found that Malaysia failed to establish a prima facie case of violation under the TBT Agreement or the GATT 1994 with respect to any Lithuanian measure(s) that fell within its terms of reference.