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SolarWorld Loses Legal Challenge Against Price Undertaking for Imported Solar Cells and Solar Modules Before Europe’s Highest Court

On 9 November 2017, in cases C-204/16 P and C-205/16 P, the European Court of Justice rejected a legal challenge brought by SolarWorld, a German producer of solar cells and solar modules. The challenge had been brought so as to overturn a lower tribunal's dismissal of SolarWorld’s request for annulment of the price undertaking between the EU and mainland China regarding the minimum price of imported solar cells and solar modules.

Definitive EU trade defence measures have been imposed on solar cells and solar modules from mainland China since 6 December 2013. The measures were imposed as a combination of tariffs on the one hand (anti-dumping duties ranging from 27.3% to 64.9% and countervailing duties ranging from 0% to 11.5%), and a minimum import price (MIP) on the other hand. With regard to the MIP, the Commission accepted a price undertaking, whereby certain exporting producers from mainland China agreed to sell their solar cells and solar modules to EU customers at a price at or above the MIP. In return for doing so, the anti-dumping and countervailing duties were not being levied on their imports into the EU.

On 28 February 2014, several European solar producers (SolarWorld, Brandoni Solare and Solaria Energia y Medio Ambiente) lodged an application for annulment of the MIP, arguing before the General Court of the European Union that the price undertaking should be removed from the EU regulations imposing the anti-dumping and countervailing duties.

The General Court, on 1 February 2016, dismissed the action as inadmissible, holding that the MIP is not “severable” from the definitive regulations imposing the anti-dumping and countervailing duties. The General Court, more precisely, found that the annulment of the MIP would alter the very spirit and substance of the definitive regulations, since an annulment of the MIP would “remove the exemption of [anti-dumping/countervailing] duties from which the imports of Chinese exporting producers who had consented to the undertaking accepted by the Commission benefited”.

On 1 April 2016, SolarWorld lodged an appeal against the order of the General Court, requesting the European Court of Justice to hold that “the General Court committed an error in law in finding that [the MIP] is not severable from the remainder of that Regulation”.

At the hearing before the European Court of Justice on 9 March 2017, SolarWorld argued that annulling the MIP would not alter the scope, spirit and substance of the imposed anti-dumping and countervailing duties, as “changing the form of measures does not change the scope of the Regulation imposing them”. According to SolarWorld, the objective of all anti-dumping and countervailing duties – irrespective of their form – is to adequately remove the injurious effects of dumping and subsidisation suffered by EU producers. The European Commission, in turn, argued that SolarWorld is asking the European Court of Justice to redraft the law and dramatically alter its substance by lifting the quantitative condition on the trade defence measures. According to the European Commission, annulling the MIP would have a major impact on the solar market, as most Chinese solar cells and solar modules entering the EU market are exempted from the anti-dumping and countervailing duties due to the mechanism of the MIP.

On 9 November 2017, the Court of Justice agreed with the original findings of the General Court, dismissing SolarWorld’s appeal in its entirety.

The Court of Justice stated that the EU regulations imposing the anti-dumping and countervailing measures were developed as “a set or a ‘package’”, imposing “two separate and complementary measures which seek to achieve a common goal, namely the removal of the injurious effect on the Union industry of Chinese [dumping/subsidies] relating to the products at issue, while safeguarding the interests of that industry.” The Court held that “the EU legislature considered the undertaking relating to the MIP, as well as the imposition of an ad valorem duty, to be a key means of achieving the objective pursued by [the regulations].

The Court of Justice concluded that annulling the MIP would “eliminate the alternative which the EU legislature wished to offer to Chinese exporting producers when adopting the [regulations] at issue. Taking account of the differences in the economic consequences of those two types of trade defence measures, such an annulment would therefore affect the very substance of the [regulations].

As previously reported, the trade defence measures on solar cells and solar modules were initially imposed for a period of two years. Due to an extension of the duties and the MIP for a period of 18 months in March 2017, the trade defence measures are now set to expire in September 2018.

Simultaneous to the extension of the trade defence measures on solar cells and solar modules, the Commission launched – on its own initiative – a partial interim review investigation. This review was explicitly limited to the form of the trade defence measures. On the basis of the partial interim review, the European Commission replaced the original price undertaking by a new, reduced and variable MIP as of 1 October 2017, creating separate MIPs for mono-crystalline solar cells, mono-crystalline solar modules, multi-crystalline solar cells and multi-crystalline solar modules.

Content provided by Picture: HKTDC Research
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