Introduction
Background
Questions under WTO law
Other international law regimes
Status of Faroe Islands
Comment


Introduction

On February 26 2014 a World Trade Organisation (WTO) dispute settlement panel was established at the request of the Faroe Islands, represented by Denmark, to rule over restrictions imposed by the European Union on Faroese vessels and imports of Faroese-caught mackerel and herring.

The Faroe Islands – a self-governing territory that is part of the Kingdom of Denmark, but not part of the European Union – first requested consultations with the European Union on November 4 2013 over the economic sanctions brought in response to the Faroe Islands unilaterally setting its fishing limits for herring. After failing to reach a mutually acceptable settlement during the consultations, a first request for the establishment of a panel was lodged in early January 2014, but was rejected by the European Union.

The Faroe Islands has also sought arbitration with the European Union under the United Nations Convention on the Law of the Sea (UNCLOS) concerning these coercive measures, which the European Union claims to be in response to non-sustainable fishing practices by the Faroe Islands. This dispute is part of a larger dispute on fishing levels for Atlanto-Scandian herring and Northeast Atlantic mackerel among five Northern Atlantic territories – the European Union, the Faroe Islands, Iceland, Norway and Russia – through whose territorial waters the fishing stocks migrate. It raises a number of novel questions under WTO law, the international law of the sea and EU law.

Background

In order to maintain fish stocks in the waters of their exclusive economic zones, and as required by UNCLOS, the five North Atlantic territories have set definitive limits for herring fishing and allocated a percentage of this total allowable catch among themselves since 2007. When these five coastal states failed to agree on the allocations for 2013, the Faroe Islands set its catch limit at approximately 100,000 tonnes, 17% of the total allowable catch. However, the European Union argued that this unilateral increase of its catch limit from the 5.16% level (ie, 31,000 tonnes) that the Faroe Islands has had under past arrangements is unwarranted and constitutes non-sustainable fishing. It notified the Faroe Islands in May 2013 that it was considering economic sanctions for this alleged violation of its UNCLOS obligations.

On August 20 2013, pursuant to a regulation relating to countries which engage in non-sustainable fishing practices, the European Union issued a regulation classifying the Faroe Islands as such a territory and imposed a total prohibition on imports and transshipment of herring and mackerel, as well as closing EU ports to Faroese and related vessels involved in herring fishing.

Questions under WTO law

In its request for the establishment of a panel, the Faroe Islands claims that the economic sanctions violate a number of provisions of the General Agreement on Tariffs and Trade, including:

  • Article I(1) on non-discriminatory treatment of Faroese herring and mackerel products;
  • Article V(2) on freedom of transit of goods across EU territory; and
  • Article IX(1) on the prohibition of quotas for imports of Faroese products.

While these claimed violations are likely to be upheld by an eventual panel, the crux of the dispute is likely to turn on whether Article XX exceptions apply. To defend its measures, the European Union will likely refer to Article XX(g), which exceptionally allows WTO-inconsistent measures if they relate to conservation goals for natural resources, as the WTO's appellate body has already found to include marine life in US – Shrimp. However, the European Union will have to demonstrate that its measures comply with Article XX, which requires that the EU's coercive measures not be "a means of arbitrary or unjustifiable discrimination" or "a disguised restriction on international trade".

Other international law regimes

The legality under international trade law of economic sanctions measures designed to enforce another state's compliance with other international agreements may be an issue in an eventual WTO dispute. In justifying its measures, the European Union stated that they were a response to the failure of the Faroe Islands to uphold its UNCLOS obligations, including Article 63, which requires that coastal states which share fishing stocks in their exclusive economic zones seek to agree to proper conservation measures.

At the same time, the International Tribunal for the Law of the Sea (ITLOS) in The Hague may have some reference to WTO law. It may consider not only the obligations of the Faroe Islands under UNCLOS, but also the European Union's other international obligations, including under WTO law, in the economic actions that the European Union took based on its finding that the Faroe Islands violated its UNCLOS commitments.

A larger issue, as these two dispute settlement systems review the same matter, is the chance of a conflict of international laws or the fragmentation of international legal regimes. Since the same dispute has been presented to WTO and ITLOS, the risk of multiple and even conflicting findings of law and fact in this situation is real. The two autonomous dispute settlement systems are not in a hierarchical relationship; nor is one body bound by the findings of the other.

Status of Faroe Islands

On another level, this case presents issues on international law. In its request for the establishment of a panel, the request is made "[o]n behalf of the Kingdom of Denmark in respect of the Faroe Islands", which is a self-governing territory. While Denmark's WTO membership covers the Faroe Islands, Denmark's status as an EU member state does not. Thus, the EU import ban prohibits Faroese fish products from being brought even into Denmark.

This WTO dispute is also the first to be initiated by an EU member state in its own right and not by the European Union or the European Union on behalf of one or several of its member states.

Comment

In addition to novel issues of international law, this dispute may be larger than a conflict between the Faroe Islands and the European Union over herring. Of the five coastal territories that fish for Atlanto-Scandian herring, Norway is reportedly considering its own economic sanctions, while Iceland has joined the Faroe Islands in maintaining that the EU measures are unlawful. Iceland has been involved in its own dispute with the European Union over the setting of its catch limit for mackerel, so the move against the Faroe Islands may bring other economic sanctions regarding fishing rights. At a time when the WTO is no longer looking closely at fisheries issues, this dispute has the potential to answer larger questions on international trade law and the law of the sea, with relevance to many fishing nations and the most appropriate WTO-consistent measures for sustainable fishing practices.

For further information on this topic please contact Charles Julien or Jordan Shepherd at King & Spalding LLP by telephone (+41 22 591 0800), fax (+41 22 591 0880) or email (cjulien@kslaw.com or jdshepherd@kslaw.com). The King & Spalding LLP website can be accessed at www.kslaw.com.