Arbitrator to set level of trade suspension in Indonesia–EU palm oil biofuels dispute

A WTO arbitrator was tasked on 19 March with determining the level of trade suspension Indonesia may impose on the European Union in the palm oil biofuels dispute, following Indonesia's request to suspend concessions worth US$ 2.8-5.6 billion annually. At the same meeting, the Dispute Settlement Body (DSB) also agreed to the EU's second request for a panel to review Chinese measures on global licensing terms for standard essential patents.

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DS593: European Union - Certain Measures Concerning Palm Oil and Oil Palm Crop-Based Biofuels�

On 9 March, Indonesia submitted a request for authorization to suspend concessions with respect to the European Union as a result of what it said was the EU's failure to bring its measures into compliance with the panel ruling in DS593.�

Indonesia told a special DSB meeting on 19 March that the reasonable period of time for the EU to comply with the ruling was 24 February and that, in its view, the EU failed to ensure compliance by that date.� As a result, Indonesia said it was requesting DSB authorization to suspend concessions on goods and/or other sectors (services sectors and/or intellectual property rights) at an annual level estimated at between US$ 2.8 billion and US$ 5.6 billion per annum.� Indonesia said the proposed level of suspension reflects the adverse effect and the nullification or impairment of benefits suffered by Indonesia's palm oil industry since the implementation of the EU measures.

The European Union said it strongly objects to Indonesia's proposed level of suspension and said the proposal was not in line with requirements under the WTO's Dispute Settlement Understanding (DSU).� The EU also said that it had offered Indonesia a so-called sequencing agreement which would remove any procedural uncertainty regarding Indonesia's right to pursue its request.

Indonesia said the absence of a sequencing agreement at this stage is a direct consequence of the untimely nature of the EU's offer, which did not allow sufficient time for meaningful domestic engagement with its domestic industry.

The DSB agreed to refer the matter to arbitration, as required by Article 22.6 of the DSU.

DS632: China - Worldwide Licensing Terms for Standard Essential Patents (SEPs)�

The European Union submitted its second request for the establishment of a dispute panel with respect to Chinese patent licensing measures. China had said it was not ready to accept the EU's first request for a panel at the DSB meeting on 24 February.

The EU reiterated its claim that China's measures unduly restrict the ability of patent owners to exercise and enforce their rights for non-Chinese patents in the territories of WTO members that grant those patents and that these measures undermine the principle of territoriality of patents. Moreover, patent owners cannot freely negotiate and conclude licensing contracts for the use of their non-Chinese patents in other territories. Consultations with China failed to resolve the matter, the EU said.

China said it was deeply disappointed with the EU's decision to proceed with its panel request.� The underlying issue in this dispute - the transnational litigation of private disputes concerning global royalty rates for SEPs - is both complex and novel, and no international resolution is currently available, it said.�

China said it has serious concerns regarding the EU's approach, which seeks to rely on a materially flawed interpretation in a recent dispute to support its claims. China said it will rigorously defend its measures in the panel proceedings and is confident that a panel will find them fully consistent with WTO rules.

The DSB agreed to the establishment of the panel.�

Japan, Canada, Colombia, Australia, Brazil, the United Kingdom, Viet Nam, Norway, Switzerland, the United States, Singapore, Pakistan, the Russian Federation, Indonesia and India reserved their third-party rights to participate in the proceedings. Other delegations wishing to reserve their third-party rights must do so within the next 10 days after this meeting through a written communication.

Next meeting

The next regular DSB meeting is scheduled for 21 April.

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