The Council of the European Union (the ‘Council’), in support of the Commission, successfully appealed to the Court of Justice (the ‘Court of Justice’) the ruling of the General Court of the European Union (the ‘General Court’) 28 finding that certain provisions in the WTO Anti-­‐Dumping Agreement have direct effect in the EU legal order.

The relation between the EU legal order and the WTO rules

The Rusal Armenal case deals with the relationship between the EU legal order and provisions set out in the WTO Agreements.

According to settled case-­‐law, provisions set out in the WTO Agreements are not in principle among the rules in light of which the EU Courts are to review the legality of measures adopted by the EU institutions. The general principle is thus that WTO law does not have ‘direct effect’ in EU law.

In Portugal v  Council, 29 the Court of Justice clarified that this principle is based on a variety of reasons, including (i) the subject-­‐matter and purpose of the WTO Agreements, whose compliance is founded on negotiations amongst contracting Parties rather than the binding effect of WTO rules, and (ii) the lack of direct effect of those provisions in the legal orders of many other WTO Members. Accepting that that EU Courts have direct responsibility for guaranteeing that EU law is compliant with WTO rules would deprive the EU legislature or the EU’s executive bodies of the discretion which is enjoyed by other WTO Members.

In Van Parys,30 the Court of Justice reinforced this general principle considering that WTO Dispute Settlement Body’s recommendations and decisions that find a EU measure to be inconsistent with provisions in the WTO Agreements do not have direct effect in the EU legal order either.

There are two exceptional situations to this general rule whereby the EU Courts can review the legality of an EU measures in light of the WTO Agreements. The first exception is known as the Fediol exception31 and applies where the EU act refers explicitly to specific provisions in a WTO Agreement. The second exception is known as Nakajima exception, 32 according to which the WTO rules have direct effect in the EU legal order where the EU intends to implement a particular obligation assumed in the context of those agreements.

The facts

Rusal Armenal concerned the validity of Regulation (EC) No 925/2009 (‘the contested Regulation’) by which the Council imposed an anti-­‐dumping duty on imports of certain aluminium foil originating, inter alia, in Armenia.33

In 2009 Rusal Armenal ZAO (the ‘Applicant’ or ‘Rusal’), a producer and exporter of aluminium products, established in Armenia, challenged the validity of Regulation (EC) No 925/2009 before the General Court. The Applicant argued, inter alia, that the methodology set out in Article 2(7) of Regulation (EU) No 1225/2009 ('the basic AD Regulation') to calculate the normal value for imports from non-­‐market economy countries was not applicable to it, since that methodology was not consistent to Article 2.7 of the WTO Anti-­‐ Dumping Agreement, read in conjunction with the Second Supplementary provision to Article VI of GATT 1994, set out in Annex I therein. In 2003 Armenia had become  a  WTO  Member.  According to the Applicant, from that moment on it was no longer possible for the EU institutions to consider that country as a ‘non-­‐market economy’ for the purpose of anti-­‐dumping investigations. As the Council had used the non-­‐market economy methodology set out in Article  2(7)  of  the  basic AD Regulation, the Applicant argued that the Council had  violated  the  general  scheme  of Articles 2.1 and 2.2 of the WTO Anti-­‐dumping Agreement regarding the determination of dumping.

By judgment of 5 November 2013, the General Court upheld the first plea in law put forward by Rusal and annulled the contested Regulation insofar as it imposed an anti-­‐dumping duty on Rusal’s imports.34 The Commission appealed to that judgment before the Court of Justice and the Council took part in the proceedings seeking to have that judgment set aside.

On 16 July 2015 the Court of Justice found the appeal to be well-­‐founded and set aside the judgment of the General Court.35

The Court of Justice first recalled its settled case-­‐ law according to which the WTO Agreements are not in principle among the rules in the light of which the EU Courts can assess the legality of measures adopted by the  EU  institutions.  The Court then examined whether the Nakajima exception could be applied in the case at hand.

The Court of Justice observed that Article 2(7) of the basic AD Regulation introduces a special regime for the calculation of normal value for imports from non-­‐market economy countries, including Armenia. The distinction between countries with  or  without  ‘market  economy status’ is not present in Article 2 of the WTO Anti-­‐ Dumping Agreement, or any other  provisions  in the WTO Agreements.

The rules laid down in Article 2(7) of the basic AD Regulation are therefore to be intended as the EU legislator’s choice to adopt a specific regime for calculating normal value in case of imports from countries without ‘market economy status’. Consequently and contrary to the General Court’s findings, Article 2(7) of the basic AD Regulation cannot be regarded as the implementation of any particular obligation  assumed  in  the  context of the WTO.

On this ground, the Court of Justice concluded that the Nakajima exception is not applicable in case at hand, and the General Court committed an error of law. The judgment of the General Court was therefore set aside.

The Council was assisted by a team from NCTM lead by Bernard O'Connor, Managing Partner of the Brussels office, assisted by Sébastien Gubel and Elena Bertolotto, associates.