OPINION OF ADVOCATE GENERAL

LÉGER

delivered on 6 April 2006 1( )

Case C‑351/04

Ikea Wholesale Ltd

v

Commissioners of Customs & Excise

(Reference for a preliminary ruling from the High Court of Justice of England and Wales, Chancery Division)

(Dumping – Imports of cotton-type bed linen originating in Egypt, India and Pakistan – GATT 1994 – Recommendations and rulings of the Dispute Settlement Body of the World Trade Organisation (WTO) – Legal consequences – Normal value – Amounts for selling, general and administrative costs and profits – Dumping margin – Practice of ‘zeroing’ – Existence of injury – Relevant economic factors and indices – Reimbursement of duties paid)

1. The origin of this reference for a preliminary ruling lies in a dispute concerning the repayment of anti-dumping duties due in respect of the import, into the Community, of cotton-type bed linen originating in India and Pakistan. The imposition of those duties gave rise to the instigation of a dispute settlement procedure before the World Trade Organisation (‘the WTO’), which found the duties to be incompatible with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (‘the Anti-Dumping Agreement’). ( )

2. In the present proceedings the High Court of Justice of England and Wales, Chancery Division, is asking the Court for a decision, in view of the recommendations and rulings of the WTO Dispute Settlement Body (‘DSB’), on the validity of the regulations imposing the anti-dumping duties at issue in the light of Community law. If any of the regulations were to be invalid, the national court also raises a question about the procedures for any repayment of the duties.

3. Consideration of this reference for a preliminary ruling will entail more specifically an examination of whether it is necessary to take into account, for the purposes of a decision on validity, the recommendations and rulings of the DSB. It also calls for examination of the legality of the regulations determining the method of economic analysis adopted by the Community authorities for the purpose of imposing the anti-dumping measures at issue.

I – Legal framework

A – The Uruguay-round multilateral international agreements

4. On 15 April 1994, the European Community signed the Final Act concluding the Uruguay Round of multilateral trade negotiations, the Agreement establishing the WTO and all the agreements and understandings in Annexes 1 to 4 thereto (‘the WTO agreements’).

5. Those annexes include, in particular, the 1994 General Agreement on Tariffs and Trade (‘GATT 1994’) and the Understanding on Rules and Procedures Governing the Settlement of Disputes (‘the Understanding’). ( )

6. Following signature of the Final Act, the Council adopted Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994). ( )

1. The WTO Agreement

7. As is clear from the preamble to the WTO Agreement, the parties to the agreement have agreed to enter into ‘reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations’.

8. In the words of Article III(2) of the WTO agreement, the WTO is to be ‘the forum for negotiations among its Members concerning their multilateral trade relations …’.

9. Article II(2) of the agreement states that ‘the agreements and associated legal instruments included in Annexes 1, 2 and 3 … are binding on all Members’. ( )

2. GATT 1994

10. This agreement is to be found in Annex 1A to the WTO Agreement and is a multilateral agreement on trade in goods.

11. Article VI(1) of GATT 1994 provides that dumping, ‘by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry’.

12. That provision is implemented by the Anti-Dumping Agreement, which determines the conditions under which anti-dumping measures can be imposed.

13. Article 2 of the agreement, headed ‘Determination of Dumping’, provides, at 2.1, that ‘a product is to be considered as being dumped, i.e. introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country’.

14. A determination as to whether dumping exists thus requires the normal value of the like product on the domestic market of the country of origin to be established (Article 2.2), as well as the export price of the product concerned (Article 2.3), in order to establish the dumping margin (Article 2.4). ( )

15. In addition to determining whether dumping exists, it is also necessary to ascertain whether the practice causes material injury to a domestic industry in the importing country. To that end, Article 3.4 of the Anti-Dumping Agreement sets out the factors to be taken into account in the examination of the impact of the dumped imports on the domestic industry concerned.

16. Finally, under Article 18.4 of the agreement, each contracting party is required by the agreement to take ‘all necessary steps, of a general or particular character, to ensure … the conformity of its laws, regulations and administrative procedures with the provisions of this Agreement …’.

3. The Understanding

17. The Understanding is found in Annex 2 to the WTO Agreement. The DSB is responsible for implementing recommendations and rulings adopted on the basis of the Understanding. ( )

18. The object of the Understanding is, pursuant to Article 3(2) thereof, ‘to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law’.

19. In the absence of a mutually agreed solution as between the parties, the objective of the dispute settlement mechanism established by the Understanding is ‘to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements’.

20. Where immediate withdrawal of the measure found incompatible cannot be secured, the Member concerned is, under Article 21(3) of the Understanding, given a reasonable period of time to comply.

21. Where the Member concerned fails to comply within the reasonable period, Article 22(2) of the Understanding also allows the Member to enter into negotiations over a period of time with any party to the dispute with a view to finding mutually acceptable compensation. Failing that, any party may request the DSB to suspend the application to the Member concerned of concessions or other obligations.

B – Community legislation

1. The rules relating to protection against dumped imports from countries not members of the European Community

22. At the material time, the rules were laid down by Council Regulation (EC) No 384/96.( )

23. The regulation was adopted by the Community in respect of its obligations stemming from Article 18(4) of the Anti-Dumping Agreement with the aim of transposing, so far as possible, the terms of that agreement in order ensure its proper and transparent application. ( )

24. Under the basic regulation the Commission is competent to conduct an investigation and impose a provisional anti-dumping duty, whilst the Council is competent to adopt a definitive anti-dumping duty. ( ) Those duties are imposed by regulation and are collected by Member States in the form and at the rate specified in the regulation imposing them. ( )

25. In order to introduce an anti-dumping measure, the Community authorities must make a finding of dumping and of material injury caused to the ‘Community industry’ as a result. ( ) They must also ascertain whether it is in the Community interest to impose an anti-dumping duty.

26. According to Article 1(1) of the basic regulation, ‘[a]n anti-dumping duty may be applied to any dumped product whose release for free circulation in the Community causes injury’.

27. Article 1(2) provides that a product is to be considered as being dumped ‘if its export price to the Community is less than a comparable price for the like product [( )], in the ordinary course of trade, as established for the exporting country [( )]’.

28. The normal value of the like product is determined by reference to the criteria laid down in Article 2 of the regulation. It is, as a general rule, determined by reference to actual prices in the country of origin. However, when there are no sales of like products in the ordinary course of trade, Article 2(3) of the basic regulation allows recourse to a ‘constructed’ normal value of the product, determined, in particular, on the basis of the cost of production in the country of origin plus a reasonable amount for selling, general and administrative costs (‘SG & A costs’) and profits.

29. Article 2(10) of the basic regulation then lays down the criteria on the basis of which the institutions draw a ‘fair’ comparison between the export price of the product concerned and the normal value of the like product. This comparison, which may be made in accordance with three methods set out in Article 2(11) of the regulation, allows the dumping margin to be determined. The latter is ‘the amount by which the normal value exceeds the export price’. ( )

30. Article 3 of the basic regulation sets out the criteria by reference to which it is necessary to determine whether injury is caused to the Community industry.

31. When it is established that dumped imports in the Community are causing material injury, the Community authorities must finally determine, in accordance with Article 21 of the basic regulation, whether the Community interest requires anti-dumping measures to be taken. ( )

32. For all cases, Article 9(4) of the regulation provides that the amount of definitive anti-dumping duty ‘shall not exceed the margin of dumping established but it should be less than the margin if such lesser duty would be adequate to remove the injury to the Community industry’. ( )

33. Failing that, Article 11(8) of the basic regulation provides that ‘an importer may request reimbursement of duties collected where it is shown that the dumping margin, on the basis of which duties were paid, has been eliminated, or reduced to a level which is below the level of the duty in force’.

2. The contested anti-dumping duties concerning imports of cotton-type bed linen originating in Egypt, India and Pakistan

a) Imposition of the contested anti-dumping duties

34. Following the imposition by the Commission of a provisional anti-dumping duty on imports into the Community of cotton-type bed linen originating in Egypt, India and Pakistan, ( ) the Council adopted, under the basic regulation, Regulation (EC) No 2398/97. ( )

35. The contested regulation confirmed the Commission’s findings that these were dumped imports causing material injury to the Community industry and imposed, in the interest of the Community, a definitive anti-dumping duty.

b) The DSB’s finding against the contested anti-dumping duties

36. Following the imposition by the contested regulation of definitive anti-dumping duties on its exports of bed linen, the Republic of India, on 3 August 1998, applied through the DSB for consultation with the European Community. ( ) Since no mutually agreed solution was reached as a result of those consultations, the Republic of India requested the DSB, pursuant to Article 4(7) of the Understanding, to establish a panel to examine the compatibility of the regulation with the relevant WTO provisions.

37. In its report, published on 30 October 2000, ( ) the DSB panel, first, found that the Community had infringed Article 2.4.2 of the Anti-Dumping Agreement, in using the practice of ‘zeroing’ negative dumping margins when establishing the weighted average dumping margin. Second, it found that the Community had acted inconsistently with Article 3.4 of the Anti-Dumping Agreement in its determination of whether there was injury to the Community industry, in taking into account information pertaining to producers who were not part of the domestic industry as defined by the authorities responsible for the investigation and in failing to evaluate all relevant factors having a bearing on the state of that industry.

38. The Community brought an appeal before the DSB Appellate Body, which, in its report of 1 March 2001, ( ) upheld the Panel’s finding that the Community’s practice of ‘zeroing’ in the anti-dumping investigation in question was incompatible with Article 2.4.2 of the Anti-Dumping Agreement. Furthermore, the Appellate Body found that the Community had also acted inconsistently with Article 2.2.2(ii) of that agreement when calculating the ‘constructed’ normal value of the product and, in particular, the amounts pertaining to profits.

39. On 12 March 2001 the DSB adopted the reports of the Panel and the Appellate Body and called on the Community, under Article 19(1) of the Understanding, to bring their measure into conformity with the Anti-Dumping Agreement.

40. In accordance with Article 21(3)(b) of the Understanding, the Republic of India and the Community agreed a reasonable time for implementation of the DSB’s recommendations and rulings, which expired on 14 August 2001.

c) Review of the contested anti-dumping duties by the Community following the DSB’s recommendations and rulings

41. On 23 July 2001, the Council adopted Regulation (EC) No 1515/2001 on the measures that may be taken by the Community following a report adopted by the WTO Dispute Settlement Body concerning anti-dumping and anti-subsidy matters. ( )

42. The aim of the regulation is, according to the fourth recital in its preamble, to permit the Community, where it considers this appropriate, to bring a measure taken under, inter alia, the basic regulation into conformity with the recommendations and rulings contained in a report adopted by the DSB.

43. To that end, Article 1(1)(a) of Regulation No 1515/2001 provides that the Council can repeal or amend the disputed measure.

44. Further, under Article 2(1) of the regulation, ‘the Council may also take any of the measures mentioned in Article 1(1) in order to take into account the legal interpretations made in a report adopted by the DSB with regard to a non-disputed measure, if it considers this appropriate’.

45. Lastly, Article 3 states that such measures ‘shall take effect from the date of their entry into force and shall not serve as basis for the reimbursement of the duties collected prior to that date, unless otherwise provided’.

46. It was on the basis of Article 1(1)(a) of Regulation No 1515/2001 that the Council adopted, on 7 August 2001, Regulation (EC) No 1644/2001, ( ) which reassessed, on the basis of the DSB’s recommendations, the findings concerning the imports originating in India made in the contested regulation.

47. This reassessment concerned the determination of the ‘constructed’ normal value of the like product, the calculation of the weighted average dumping margin (no ‘zeroing’ was applied) and, finally, the determination of injury.

48. In the light of that reassessment, the Council confirmed the existence of dumping causing injury to the Community industry as a result of the imports originating in Egypt, India and Pakistan. It found, however, that dumping existed at lower levels and reduced the rate of anti-dumping duties imposed by the contested regulation in relation to the exports made by India. ( ) The Council also decided to suspend the application of the anti-dumping measures. ( )

49. Next, on the basis of Article 2 of Regulation No 1515/2001, the Council deemed it appropriate to reassess the measures relating to imports originating in Egypt and Pakistan (which had not been challenged before the DSB), adopting Regulation (EC) No 160/2002. ( )

50. Article 1 of that regulation suspended the application of anti-dumping duties established by the contested regulation with regard to imports originating in Egypt and provided that those duties were to expire on 28 February 2002. ( )

51. Article 2 of the regulation terminates the proceeding with regard to imports originating in Pakistan, since the revised calculation showed that no dumping existed for exports of the product concerned made by any of the Pakistani companies.

52. In view of the repeal of the measures relating to imports originating in Pakistan and the expiry of the measures relating to imports originating in Egypt, the Council reassessed its findings relating to imports originating in India. On conclusion of that review, carried out under Article 11(3) of the basic regulation, ( ) the Council adopted Regulation (EC) No 696/2002 ( ) which confirmed the definitive anti-dumping duty imposed on Indian imports, as amended by Regulation No 1644/2001.

II – The dispute and the main proceedings

53. By letter dated 10 June 2002, Ikea Wholesale Ltd (‘Ikea’ or ‘the claimant’) sought repayment from the Commissioners of Customs and Excise (‘the Commissioners’) of anti-dumping duties paid in respect of imports of cotton-type bed linen from India and Pakistan. Ikea sought repayment of GBP 230 301.74 in respect of duties imposed on its imports from Pakistan in the period between March 2000 and January 2002, and GBP 69 902.29 corresponding to a portion of the duty imposed on its imports originating in India in the period between March 2000 and August 2001.

54. That claim for repayment was made on the basis of Articles 236 and 239 of the Community Customs Code. ( ) In support of its claim, Ikea pleaded the unlawfulness of the contested regulation and, in particular, of the Community authorities’ methodology in calculating the duty. The claimant relied in particular on the findings in the DSB reports.

55. The Commissioners rejected the claim and confirmed that decision following a formal departmental review, holding, first, that the contested regulation imposed a definitive anti-dumping duty on those imports during the period in issue and, second, that Regulations Nos 1644/2001 and 160/2002 did not provide for any retrospective reimbursement of duties already collected.

56. Ikea then brought an appeal against the Commissioners’ review decision before the VAT and Duties Tribunal (London). By decision dated 8 September 2003, the Tribunal dismissed the appeal on the ground, inter alia, that, since Ikea had not brought an action for annulment pursuant to Article 230 EC, the regulations at issue had become definitive against it.

57. On 31 October 2003, Ikea appealed against that decision to the High Court of Justice of England and Wales, Chancery Division. It maintained, first, that the regulations at issue were not of direct and individual concern to it for the purposes of Article 230 EC. Second, the claimant submitted that those regulations were unlawful.

58. The High Court set aside the decision of the VAT and Duties Tribunal as it found that Ikea did not have standing to bring a direct action for annulment before the Community Courts under Article 230 EC, since neither the contested regulation nor Regulations Nos 1644/2001 and 160/2002 were of direct and individual concern to it. That being so, the High Court held that the claimant was able to contest those regulations in the proceedings before it challenging the refusal to repay duties and that it was necessary for it to refer a question to the Court for a preliminary ruling on the validity of the regulations in issue.

III – The reference to the Court

59. As it entertained some doubts as to the lawfulness of the contested regulation and of Regulations Nos 1644/2001, 160/2002 and 696/2002 (‘the subsequent regulations’), the High Court of Justice of England and Wales, Chancery Division, decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:

‘(1) In the light of the findings of the Panel of the dispute settlement body of the WTO in its report dated 30 October 2000, paragraph 7.2(g) and (h), WT/DS1412/R, and of the Appellate Body of the dispute settlement body of the WTO in its decision dated 1 March 2002, paragraphs 86 to 87, WT/DS1141/AB/R, is all or part of Council Regulation (EC) No 2398/97 of 28 November 1997 imposing a definitive anti-dumping duty on imports of cotton-type bed linen originating in Egypt, India and Pakistan … incompatible with Community law, in that it:

(a) applied a wrong methodology in calculating the amounts for selling, general and administrative expenses and for profits, contrary to Article 2(6)(a) of Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the Community, as amended, and Article 2.2.2(ii) of the Anti-Dumping Agreement;

(b) applied a wrong methodology incorporating the practice of “zeroing” in determining the existence of dumping margins when comparing normal value with export price, contrary to Article 2(11) of Regulation No 384/96 and Article 2.4.2. of the Anti-Dumping Agreement; and/or

(c) failed to evaluate all the relevant injury factors having a bearing on the state of the Community industry and erred in determining the injury to the Community industry by relying on evidence obtained from companies outside the Community industry, contrary to Article 3(5) of Regulation No 384/96 and Article 3.4 of the Anti-Dumping Agreement?

(2) Are any or all of:

(a) Council Regulation No 1644/2001 amending Regulation (EC) No 2398/97 imposing a definitive anti-dumping duty on imports of cotton-type bed linen originating in Egypt, India and Pakistan and suspending its application with regard to imports originating in India;

(b) Council Regulation 160/2002 amending Regulation (EC) No 2398/97 imposing a definitive anti-dumping duty on imports of cotton-type bed linen originating in Egypt, India and Pakistan and terminating the proceeding with regard to imports originating in Pakistan; and/or

(c) Council Regulation (EC) No 696/2002 confirming the definitive anti-dumping duty imposed on imports of cotton-type bed linen originating in India by Regulation (EC) No 2398/97, as amended and suspended by Council Regulation (EC) No 1644/2001;

incompatible with Community law (including Articles 1, 7(1) and 9(4) of Regulation No 384/96 read in the light of Articles 1, 7.1 and 9 of the Anti-Dumping Agreement) in so far as (i) they were adopted on the basis of a reassessment of information which was collected during the original investigation period, which reassessment showed that no dumping or lower levels of dumping had taken place during the original investigation period; but (ii) the above regulations fail to provide for reimbursement of sums already paid pursuant to Regulation No 2398/97?

(3) Are Regulations Nos 1664/2001, 160/2002 and 696/2002 further incompatible with Articles 7(2) and 9(4) of Regulation No 384/96 and the principle of proportionality, in that they allow for a level of anti-dumping duty, for the period prior to their entry into force, that is not strictly proportionate to the amount of dumping or injury the duty is intended to offset?

(4) Do the answers to the above questions differ in respect of exports originating in India as against Pakistan, given:

(a) the procedures followed before the dispute settlement body of the WTO; and/or

(b) the findings of the Commission recorded in Regulations Nos 1664/2001, 160/2002 and 696/2002?

(5) In the light of the answers to the above questions:

(a) must a national customs authority repay all or part of the anti-dumping duties which it has collected pursuant to Regulation No 2398/97; and

(b) if so, to whom and under what conditions should repayment be made?’

IV – The object of the questions referred to the Court

60. By its first question, the national court is asking the Court for a decision on the validity of the contested regulation. It is a question, first, of ascertaining whether the recommendations and rulings made by the DSB in its reports on imports of cotton-type bed linen are binding on the Court in its appraisal of the validity of the regulation under Community law and, second, of determining whether the assessment undertaken by the Community authorities in establishing the definitive anti-dumping duties at issue was lawful.

61. By its second and third questions, the national court is asking the Court about the validity of the subsequent regulations. The issue turns on whether, by failing to provide for the reimbursement of the anti-dumping duties collected pursuant to the contested regulation, the subsequent regulations are contrary to the basic regulation (read in the light of the Anti-Dumping Agreement) and, in particular, to the principle of proportionality.

62. Against that background, the national court, by its fourth question, wonders whether the answers to the preceding questions differ depending on whether the imports originated in India as against Pakistan.

63. Finally, by its fifth question, it asks the Court to set out, should it be appropriate, the conditions under which any repayment of duties paid under the contested regulation should be made.

64. I shall examine the questions raised in the order set out above.

V – The validity of the contested regulation

65. By its first question, the referring court asks the Court, in essence, whether the contested regulation should be declared incompatible with the basic regulation given that the DSB found the contested regulation to be incompatible with the Anti-Dumping Agreement.

66. The question arises, since, it should be recalled, the aim of the basic regulation is, in accordance with the fifth recital in the preamble, to transpose into Community law the rules of the Anti-Dumping Agreement in order to ensure their proper and transparent application.

67. Those rules include, inter alia, rules relating to the determination of whether dumping and injury exist. Thus, the methods of calculation in Articles 2.2.2(ii) and 2.4.2 of the Anti-Dumping Agreement and the factors mentioned in Article 3.4 of the agreement for the determination of injury are transposed in almost identical terms in the basic regulation.

68. In its judgment in Petrotub and Republica v Council, ( ) the Court held that, in adopting the basic regulation, the Community had intended to satisfy its obligations arising from the Anti-Dumping Agreement. In that regard, the Court noted that, by means of Article 2(11) of that regulation, the Community authorities had intended to implement the particular obligations laid down by Article 2.4.2 of that agreement. ( )

69. That being so, the Court held that, in accordance with the line of cases starting with its judgment of 7 May 1991 in Nakajima v Council, ( ) its task is to review the legality of a Council regulation imposing definitive anti-dumping duties which is founded on the basic regulation – as is the case of the contested regulation – in the light not only of Community law but also of the Anti-Dumping Agreement.

70. In my view, that finding applies, in the same terms, in this case. With Articles 2(6)(a) and 3(5) of the basic regulation, the Community did indeed intend to implement the particular obligations laid down by Article 2.2.2(ii) and Article 3.4 of the Anti-Dumping Agreement respectively.

71. In those circumstances and following the case-law cited above, the validity of the contested regulation must, in my view, be assessed in the light not only of the relevant provisions of the basic regulation but also of the corresponding rules of the Anti-Dumping Agreement.

72. It is also to be noted that there is no appreciable difference in the formulation of the relevant provisions of the basic regulation and that of the corresponding rules of the Anti-Dumping Agreement.

73. The origin of this case actually lies in the fact that the DSB interpreted the relevant rules of the Anti-Dumping Agreement differently from the way in which the Community institutions had interpreted the corresponding provisions of the basic regulation when adopting the contested regulation.

74. In those circumstances, the issue is whether the DSB’s interpretation of the relevant rules of the Anti-Dumping Agreement is binding on the Court in its interpretation of the corresponding provisions of the basic regulation and, consequently, in its review of the legality of the contested regulation in the light of that agreement.

75. In other words, in transposing the provisions of the Anti-Dumping Agreement into Community law, is the Community bound by the interpretations of the DSB?

76. Before considering whether the contested regulation is valid, it is therefore necessary to decide whether the recommendations and rulings of the DSB, when interpreting the provisions of the Anti-Dumping Agreement may, in this instance, bind the Court.

A – Effect of the DSB’s recommendations and rulings in the determination of the validity of the contested regulation

77. I share the view of the Council and the Commission that the DSB’s interpretation of the Anti-Dumping Agreement in its reports on imports of bed linen is not binding on the Court in its assessment of the validity of the contested regulation.

78. If the DSB’s findings were to be binding, they would inevitably determine the Court’s interpretation of the corresponding rules of Community law.

79. Such an outcome would jeopardise the autonomy of the Community legal order in the pursuit of its own objectives.

80. An international treaty must be interpreted not solely by reference to the terms in which it is cast but also in the light of its objectives. Article 31(1) of the Vienna Convention on the Law of Treaties of 23 May 1969 ( ) states, in this connection, that ‘[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to [its] terms … in their context and in the light of its object and purpose’. ( )

81. Thus, the fact that the wording of the provisions of the Anti-Dumping Agreement and that of the corresponding Community provisions is the same does not mean, to my mind, that they must necessarily be interpreted in the same way.

82. Any interpretation of the DSB is governed by the nature of the WTO and the objectives which it pursues. Those objectives differ appreciably from those pursued by Community law.

83. Although the WTO Agreement contains a set of rules which are binding on the Contracting Parties, ( ) it is first and foremost a forum within which Members conduct negotiations concerning their multilateral trade relations.

84. The objective of the international trading system is not to create either a legal order based on the rule of law or a single market similar to that developed within the European Community. ( ) Far more modestly, it forms a common institutional framework within which the Contracting Parties negotiate ‘by entering into reciprocal and mutually advantageous arrangements’ ( ) about their rights and obligations with a view, in particular, to reducing barriers to trade and eliminating discriminatory treatment in international trade relations. ( )

85. In the pursuit of those objectives, the provisions of the WTO Agreements are interpreted in accordance with approaches and methods which are different from those which may be favoured by the Community courts.

86. For example, pursuant to Article 3(2) of the Understanding, those provisions are to be clarified ‘in accordance with customary rules of interpretation of public international law’. ( ) Furthermore, the official interpretation of the WTO Agreements is within the jurisdiction of the WTO political organs, the Ministerial Conference ( ) and the WTO General Council. ( )

87. In those circumstances, given the nature of the WTO and the Community and the objectives pursued by each of them, I take the view that to acknowledge that the Court could be bound by the interpretation of the DSB would jeopardise the autonomy of the Community legal order.

88. To admit of the contrary view would also call in question the exclusive jurisdiction of the Community judicature under Article 220 EC in the interpretation of the rules of Community law.

89. It is true that in its Opinion 1/91, ( ) the Court accepted that ‘[w]here an international agreement provides for its own system of courts, including a court with jurisdiction to settle disputes between the Contracting Parties to the agreement, and, as a result, to interpret its provisions, the decisions of that court will be binding on the Community institutions, including the Court of Justice’. ( ) The Court also held that ‘[a]n international agreement providing for such a system of courts is in principle compatible with Community law. The Community’s competence in the field of international relations and its capacity to conclude international agreements necessarily entail the power to submit to the decisions of a court which is created or designated by such an agreement as regards the interpretation and application of its provisions’. ( )

90. However, in that opinion, the Court noted that the agreement in question had the effect of introducing into the Community legal order a large body of legal rules which was juxtaposed to a corpus of identically-worded Community rules. ( ) It therefore found that the objective of the agreement in question ‘[determined] not only the interpretation of the rules of the agreement itself but also the interpretation of the corresponding rules of Community law’. ( )

91. Consequently, the Court held that ‘in so far as it conditions the future interpretation of the Community rules on free movement and competition, the machinery of courts provided for in the agreement conflicts with Article 164 of the EEC Treaty [now Article 220 EC] and, more generally, with the very foundations of the Community’. ( )

92. In those circumstances and even though the juxtaposition of the rules of the Anti-Dumping Agreement and of Community law is not as extensive as that noted by the Court in Opinion 1/91, the findings made by the Community judicature are, in my view, valid, a fortiori, for the dispute settlement mechanism established by the WTO Agreements.

93. Notwithstanding the marked improvements which accompanied the transition from the GATT to the WTO ( ) – in particular those introduced in order to strengthen the dispute settlement mechanism – that mechanism does not, in my view, provide for the creation of a body in the nature of a court.

94. Thus, under Article 19 of the Understanding, reports drawn up by panels and appellate bodies are merely recommendations. ( ) As to decisions, they do not, in my view, constitute binding judicial acts either as to form or as to substance. Those decisions are adopted by the WTO General Council, which, even though it rules as a dispute settlement body, none the less constitutes a political body.

95. Moreover, notwithstanding the existence of the DSB, the Understanding places particular importance on negotiation between the parties to the dispute.

96. As has been stated, the Understanding seeks first and foremost ‘to secure a positive solution to a dispute’. ( ) Thus, although ‘prompt compliance with recommendations or rulings of the DSB is essential’, ( ) the contracting parties may none the less make provision for a reasonable time within which the contested measure is to be withdrawn. Failing that, the Contracting Parties may negotiate on ‘temporary measures’, ( ) such as ‘mutually acceptable’ compensation or suspension of concessions or other obligations. ( ) Although the DSB keeps under surveillance the implementation of adopted recommendations or rulings, ( ) nothing in the Understanding rules out the possibility that those measures, agreed in principle on a temporary basis, may endure.

97. It is on account of the importance placed on negotiation by the Understanding that the Court has consistently held that to require courts to refrain from applying rules of domestic law which are inconsistent with the WTO agreements would have the consequence of undermining the position of the legislative and executive organs of the Contracting Parties in their attempt to reach a mutually acceptable solution to the dispute in conformity with those rules. ( )

98. In view of all of the foregoing, I am therefore of the view that, in its determination of whether the contested regulation is valid, the Court cannot be bound by the interpretations of the DSB in its reports on imports of bed linen.

B – Validity of the contested regulation in the light of the basic regulation and the Anti-Dumping Agreement

99. By these questions, the national court is seeking to ascertain whether the Community authorities acted in a way which was incompatible with the applicable provisions of the basic regulation and the Anti-Dumping Agreement, first, in determining the constructed normal value of the product, second, in applying the ‘zeroing’ method when establishing the overall dumping margin and, third, in evaluating the scale of any injury to the Community industry.

100. Two preliminary observations appear to me to be called for.

101. The first relates to the extent of the review carried out by the Community judicature in relation to the imposition by the Council of anti-dumping measures.

102. It must be observed that in the sphere of the common commercial policy and, most particularly, in the realm of measures to protect trade, the Community institutions enjoy a broad discretion by reason of the complexity of the economic, political and legal situations which they have to examine. ( )

103. That discretion covers not only the adoption of the basic regulation – within the parameters defined by the Anti-Dumping Agreement – but also the specific anti-dumping measures adopted on the basis of that regulation. ( )

104. The Court has thus repeatedly held that (i) the choice between the different methods of calculating the dumping margin specified in a basic regulation, (ii) the evaluation of the normal value of a product ( ) and (iii) the determination as to whether there is injury ( ) require an appraisal of complex economic situations.

105. Judicial review of such an appraisal must thus be limited, following established case-law, to verifying that the relevant procedural rules have been complied with, that the facts on which the choice is based have been accurately stated and that there has not been a manifest error of assessment of those facts or a misuse of powers. ( ) However, the Community courts cannot substitute their own assessment for that of the competent institutions in the making of that choice.

106. Furthermore, that review must cover only the material available to the institutions at the time of adoption of the contested regulation. ( )

107. The second observation relates to the obligation to state reasons imposed on the Community institutions by Article 253 EC, in particular the scope of the obligation when those institutions adopt anti-dumping measures.

108. It is clear from settled case-law that the statement of reasons required by Article 253 EC must show clearly and unequivocally the reasoning of the institution adopting the measure, so as to inform the persons concerned of the reasons given for the measure adopted and thus enable them to defend their rights and the Community judicature to exercise its power of review. According to the Community judicature, the statement of reasons is none the less not required to go into every relevant point of fact and law. The extent of the obligation to state reasons must be assessed with regard to the context and the procedure in which the contested regulation was adopted and to all the legal rules governing the matter concerned. ( )

109. In this connection, as regards a regulation imposing a definitive anti-dumping duty, the Court has held that the Community authorities are not required to state all the details of their reasoning where the latter is not inconsistent with any objection raised in the administrative procedure by the undertakings concerned. ( )

110. In the light of those factors, it is necessary to ascertain whether the Community authorities, for the purposes of establishing the anti-dumping duties in question, made a manifest error of assessment, first, in determining the constructed normal value of the product, second, in using the practice of ‘zeroing’ when establishing the overall dumping margin and, third, in evaluating whether there was injury to the Community industry and, if so, the scale thereof.

1. Calculation of the constructed normal value of the product

111. The referring court asks the Court first of all about the compatibility with Articles 2(6)(a) of the basic regulation and Article 2.2.2(ii) of the Anti-Dumping Agreement of the method employed by the Community institutions in calculating the normal value of the products exported by the Indian and Pakistani companies.

112. It should be observed that, pursuant to Article 1(2) of the basic regulation, ‘[a] product is to be considered as being dumped if its export price to the Community is less than a comparable price for the like product, in the ordinary course of trade, as established for the exporting country’. ( ) Determination of dumping therefore entails a comparison between, on the one hand, the export price of the product under investigation and, on the other hand, the normal value of the like product on the domestic market of the country of origin. ( )

113. Determination of the normal value of the like product thus constitutes an essential step, which enables the authorities responsible for the investigation to establish whether there is dumping.

114. Pursuant to the first subparagraph of Article 2(1) of the basic regulation, the normal value of the like product is ‘normally … based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country’. ( )

115. Where there are no or insufficient sales of the like product in the ordinary course of trade, ( ) the normal value of the product is ‘constructed’, in accordance with Article 2(3) of the basic regulation, on the basis of the cost of production in the country of origin plus a reasonable amount for SG & A costs and for profits. According to the Court’s settled case-law, the purpose of that method is to determine the selling price of a product as it would be if that product were sold in its country of origin or in the exporting country. ( )

116. Determination of the amounts for SG & A costs and profits can be established by reference to four methods of calculation set out in Article 2(6) of the basic regulation.

117. As a general rule, those amounts are established on the basis of actual data pertaining to production and sales, in the ordinary course of trade, of the like product, by the exporter or producer under investigation.

118. When such amounts cannot be determined on this basis, they may be determined on the basis of ‘the weighted average of the actual amounts determined for other exporters or producers subject to investigation in respect of production and sales of the like product in the domestic market of the country of origin’ (subparagraph (a)).

119. They can also be determined on the basis of ‘the actual amounts applicable to production and sales, in the ordinary course of trade, of the same general category of products for the exporter or producer in question in the domestic market of the country of origin’ (subparagraph (b)) or of any other ‘reasonable method’ (subparagraph (c)).

120. The Court considers that those methods of calculation must be approached in the order of presentation and that each one must be applied in such a way as to keep the calculation reasonable. ( )

121. Article 2(6)(a) of the basic regulation reproduces, in virtually identical terms, the method of calculation found in Article 2.2.2(ii) of the Anti-Dumping Agreement. ( )

122. In its observations, the claimant expresses the view that neither Article 2(6)(a) of the basic regulation nor Article 2.2.2(ii) of the Anti-Dumping Agreement permits the Community authorities, when calculating the amounts for SG & A costs and profits, to use data relating to just one exporter or producer and to exclude the sales of other exporters or producers which were not made in the ordinary course of trade. ( )

123. First, it is necessary to ascertain whether, in the light of the abovementioned provisions, the Community institutions were entitled, in calculating SG & A costs and profits, to use data relating to just one exporter.

124. It should first of all be noted that, because of the large number of producers and exporters in the countries of origin concerned, the Commission decided to apply sampling techniques, in accordance with Article 17(1) of the basic regulation. ( ) It thus drew up a sample of companies for each of the exporting countries. ( )

125. Having noted that the domestic prices did not provide an appropriate basis for establishing normal value, the Community authorities decided to construct that normal value in accordance with Article 2(3) of the basic regulation, for all types of bed linen exported to the Community by the Indian, Pakistani and Egyptian companies.

126. That normal value was thus determined by adding to the cost of production of the product exported by each company a reasonable amount for SG & A costs and a reasonable amount for profits.

127. As regards imports originating in India, it is clear from the explanations provided by the Community authorities that only one company, included in the sample, was found to have had representative sales of the like product on the domestic market during the investigation period. ( ) It was also established that those sales could be considered as being made in the ordinary course of trade, since they were profitable.

128. The same finding was made in relation to imports originating in Pakistan. ( )

129. In those circumstances, the amount for SG & A costs and for profits, used for determining the constructed normal value of the like product in India and Pakistan, corresponds to the amounts for SG & A costs borne, and the profits made, by one Indian company and one Pakistani company.

130. In its observations, Ikea submits that it follows from a purely literal interpretation of the wording of Article 2(6)(a) of the basic regulation and Article 2.2.2(ii) of the Anti-Dumping Agreement, that those provisions clearly preclude use of data relating to just one exporter. ( )

131. Unlike the claimant, I do not consider such an analysis to be based, in the present case, on a manifest error of assessment.

132. To my mind, the use, in Article 2(6)(a) of the contested regulation, of the plural, in the expression ‘other exporters or producers’ does not preclude the use of data from a single undertaking. That finding is all the more compelling in a case in which the undertaking is the only undertaking, among those under investigation, to make, on the domestic market of the country of origin, representative sales of the like product during the period of investigation.

133. As to the use in Article 2(6)(a) of the basic regulation of the notion of ‘weighted average’, I share the Council’s view that it may equally well apply to the weighted average of the transactions of a single producer or exporter. ( ) That was the case in these proceedings.( )

134. In those circumstances, I am of the view that, when – as is the case in this instance – one company alone has made representative sales of the like product in the country of origin concerned, it is permissible for the Community authorities to use only the data relating to that company.

135. Second, it is necessary to ascertain whether disregarding, in the determination of the profit margin, the sales of other exporters or producers which were not made in the ordinary course of trade is an appropriate method of constructing normal value.

136. In the present case, the Community authorities found that the sales of the like product on the domestic market, since they had been made at prices below the cost of production, had not been made in the ordinary course of trade and could not therefore provide an appropriate basis for establishing normal value.

137. I do not share the view put forward by the claimant in its observations ( ) that the method of calculation used by the Community institutions in the course of the investigation in issue is contrary to the letter and spirit of Article 2(6) of the basic regulation and Article 2.2.2 of the Anti-Dumping Agreement.

138. First, such a method is in keeping with the principle laid down by the basic regulation and the Anti-Dumping Agreement, by virtue of which normal value must, as a general rule, be based on data relating to sales made in the ordinary course of trade. In my view, that principle emerges clearly from the terms of Articles 1(2) and 2(1) of the basic regulation, ( ) and from Article 2.1 of the Anti-Dumping Agreement.

139. Even in a case in which normal value must be constructed, Article 2(6) of the basic regulation and Article 2.2.2 of the Anti-Dumping Agreement expressly provide that the amounts for SG & A costs and for profits are to be based on actual data pertaining to production and sales, in the ordinary course of trade, of the like product.

140. That principle was recognised by the Court in Goldstar v Council. ( ) In that case the Court held that the concept of ordinary course of trade ‘is designed to exclude, for the determination of the normal value, situations in which sales on the domestic market are not made under conditions corresponding to the ordinary course of trade, in particular where a product is sold at a price below production costs …’. ( )

141. Second, the wording of Article 2(6)(a) of the basic regulation and Article 2.2.2(ii) of the Anti-Dumping Agreement does not expressly prohibit the exclusion of sales which were not made in the ordinary course of trade. Those provisions merely state that the sales to be used are sales of the like product on the domestic market of the country of origin.

142. That being so, the Community institutions did not, in my view, err in deciding to exclude, in their calculation of the constructed normal value of the product, sales by exporters and producers which were not made under conditions corresponding to the ordinary course of trade. ( )

143. In view of all the foregoing, I am of the view that the constructed normal value of the like product, for imports originating in India and Pakistan, was correctly established.

2. Determination of the dumping margin

144. The national court then seeks to ascertain whether the method of ‘zeroing’ used in establishing the overall dumping margins, as it was applied in the anti-dumping investigation at issue, is compatible with Article 2(11) of the basic regulation and Article 2.4.2 of the Anti-Dumping Agreement.

145. It should be borne in mind that Article 2(12) of the basic regulation provides that the dumping margin is ‘the amount by which the normal value exceeds the export price’. The margin is thus determined by the authorities responsible for the investigation which make a ‘fair’ ( ) comparison between the normal value of the like product and the export price to the Community.

146. Under Article 2(11) of the basic regulation, there are three methods of comparison. The first two are referred to as ‘symmetrical’ and allow for a comparison of a weighted average normal value with a weighted average of prices of all export transactions to the Community, or for a comparison of individual normal values and individual export prices to the Community on a transaction-to-transaction basis.

147. However, recourse may be had to a third ‘asymmetrical’ methodology when there is a pattern of export prices which differs significantly among different purchasers, regions or time periods (where reference is therefore made to ‘selective dumping’ or ‘targeted dumping’) and where the symmetrical methods do not reflect the full degree of dumping being practised. ( ) In those circumstances, it is possible to determine the existence of a dumping margin by comparing a normal value established on a weighted average basis to prices of all individual export transactions to the Community.

148. Article 2.4 of the Anti-Dumping Agreement also requires the comparison between the normal value and the export price to be ‘fair’. Furthermore, Article 2.4.2 of that agreement states, in relation to the first symmetrical method, that a comparison must be made between a weighted average normal value and a weighted average of prices of all ‘comparable’ export transactions. ( )

149. In the present case, it is clear from recital (46) to the provisional regulation that the dumping margin was calculated, in general, by comparing weighted average constructed normal value by type with weighted average export price by type. That methodology was confirmed in recital (29) to the contested regulation.

150. It is, however, clear from the documents before the Court that, in the calculation of the overall dumping margin, the Community authorities had recourse to the method of ‘zeroing’ negative dumping margins. ( )

151. Although it is regrettable that there is no explanation of this methodology in either the provisional regulation or the contested regulation, ( ) it appears that at the material time it was an established practice. Neither party made any specific statement in the course of the administrative procedure which could, in certain circumstances, have made it necessary to provide a more detailed statement of reasons in respect of the calculation of the overall dumping margin. ( )

152. In the light of the material provided by the Council and the Commission, the method, as it was applied in the present case, may be described briefly as follows. The Community authorities first established that the product under investigation – cotton-type bed linen – included a certain number of different models or types. For each of those models they calculated a weighted average normal value and a weighted average export price, which they then compared for each model. For some models, normal value was higher than export price and dumping was established (a ‘positive’ dumping margin). For other models, as normal value was lower than the export price, no dumping existed and the institutions established a ‘negative’ dumping margin. ( ) The Community authorities then added up the dumping amounts for all the models in respect of which dumping had been established in order to calculate the overall amount of dumping for the product under investigation. For all the models in respect of which no dumping had been established, the institutions treated all the negative dumping margins as zero. The total dumping amount was then expressed as a percentage of the total value of all the export transactions of all, dumped and non-dumped, models.

153. The claimant submits that such a method creates a ‘distortion’ of negative dumping margins. ( ) It also submits that the Community authorities now acknowledge that the practice is unlawful, basing its argument on the fact that the Community is currently challenging the United States of America before the WTO. ( )

154. To my mind, the practice of ‘zeroing’ dumping margins, as it was applied in the present case, is debateable. Even if the authorities responsible for the investigation are free to choose the most appropriate methods of calculation, the methods must none the less reflect the real extent of the dumping being practised. ( )

155. Although it is the case that the Court allowed the use of this method in Toyo v Council, that case involved a particular situation different from that in issue in the main proceedings.

156. In Toyo v Council, the dumping margin had been established on the basis of a comparison between the weighted average normal value and export prices calculated on the transaction-by-transaction basis. For the purposes of that calculation, export prices above the normal value had been ‘artificially’ reduced to the level of the normal value. The Court held that that transaction-by-transaction method, as it had been applied by the Community authorities, was the only method capable of ‘dealing with certain manœuvres in which dumping [was] disguised by charging different prices, some above the normal value and some below it’. ( )

157. That analysis does not, however, appear to be applicable to the particular situation in this case.

158. First, this case is not concerned with a transaction-by-transaction comparison but rather with a ‘weighted average-to-weighted average’ comparison.

159. Second, that method was applied to models or types of bed linen in respect of which a negative dumping margin had been found, even though the Community authorities were calculating the dumping margin for the product as a whole. ( )

160. In my view that was not, in the present case, an appropriate method for calculating the overall dumping margin.

161. Indeed, to my mind, where a dumping margin is calculated on the basis of a number of averages established by models, the dumping margin for the product under investigation should reflect the results of all the comparisons, including those in which weighted average export prices are higher than the weighted average normal value for certain models.

162. However, the ‘zeroing’ method, as it was applied in the present case, does not take full and proper account of the real prices of the export transactions which took place during the period of the investigation on certain models. As stated above, when they reduced certain margins to zero, the authorities attributed a zero value to the dumping margins relating to the models with a negative dumping margin. They therefore considered that the weighted average export price was equal to the weighted average normal value when it was in fact higher.

163. The effect of using that method was thus to modify, artificially, the results of the comparisons made and to inflate the dumping margin for the product as a whole.

164. A simple example based on concrete (although wholly fictitious) figures illustrates the effect of ‘zeroing’. That example might concern a producer in a third country exporting two models of bed linen to the Community, model A and model B.

For each of those models, the weighted average normal value is calculated on the basis of a particular number of domestic transactions and the weighted average export price is calculated on the basis of a particular number of export transactions.

Weighted average normal value Weighted average export price Dumping margin Dumping margin (applying ‘zeroing’) Model A 100 75 + 25 +25 Model B 125 150 - 25 0 Product (model A + model B) 0 +25





For model A, a comparison of the weighted average normal value and the weighted average export price reveals that there is a ‘positive’ dumping margin of 25. ( )

For model B, the same comparison shows that there is a ‘negative’ dumping margin of - 25.

If an overall dumping margin is calculated for the product as a whole on the basis of the margins established for the two models, the positive dumping margin found for model A (+ 25) is offset by the negative dumping margin found for model B (- 25), with the result that no dumping is established.

By reducing the negative dumping margin found for model B to zero, the overall dumping margin established for the product as a whole is higher (+ 25).

Expressed as a percentage of the cumulative value of all the export transactions relating to all the product models, that margin is equal to:

25 / 225 x 100 = 11.1 %

Thus, model B, in respect of which dumping was not found to exist, is subject, like model A, to anti-dumping duty.

165. Use of the ‘zeroing’ method may thus distort not only the size of the dumping margin but may also make it seem, for a particular model, that dumping existed where it did not.

166. It is to be noted, moreover, that in accordance with Article 2(10) and (11) of the basic regulation and Article 2.4 of the Anti-Dumping Agreement, the comparison must be ‘fair’. Article 2.4.2 of that agreement also states that the weighted average normal value must be compared with ‘a weighted average of prices of all comparable export transactions’. ( )

167. By ‘zeroing’ the negative dumping margins found for certain models, the authorities responsible for the investigation did not establish the dumping margin for the product as a whole on the basis of a comparison between the weighted average normal value and the weighted average of prices of all comparable export transactions, that is to say all the transactions concerning all the models of the product under investigation. In addition, such a comparison does not appear to me to be ‘fair’ within the meaning of the abovementioned provisions.

168. In its observations ( ), the Council submits that model ‘zeroing’ permitted the Community authorities to deal properly with cases in which the exporters’ dumping was targeted against specific types or models of the product under investigation. If that had been the case, the Community institutions should, in my view, have defined the product more narrowly.

169. Moreover, the mere fact that certain transactions show a negative margin does not necessarily mean that they entail targeted dumping.

170. In those circumstances, I tend to the view that by ‘zeroing’ the negative dumping margins established for certain models of bed linen, the Community institutions did not correctly establish the dumping margin for cotton-type bed linen originating in India, Egypt and Pakistan.

3. Determination of injury

171. The national court finally asks the Court to ascertain whether, in the light of Article 3(5) of the basic regulation and Article 3.4 of the Anti-Dumping Agreement, the contested regulation is valid in that, in the determination of injury, it used data relating to producers who were not included in the definition of the Community industry. It is also alleged that the Community authorities failed to evaluate all the relevant factors affecting that industry.

172. By virtue of Article 1(1) of the basic regulation, the mere fact that a product is dumped does not mean that an anti-dumping measure can be imposed. The import into the Community of the dumped import must also cause injury or a threat of material injury ( ) or material retardation of the establishment of such an industry. ( )

173. Under Article 3(2) of the regulation, a determination of injury is to be based on positive evidence and is to involve an objective examination of, inter alia, the impact of the dumped imports on the Community industry.

174. That determination involves, according to Article 3(5) of the regulation, an evaluation of all relevant economic factors and indices having a bearing on the state of the industry ( ) and on Community prices. ( )

175. The latter provision corresponds, it should be recalled, to the obligations deriving from Article 3.4 of the Anti-Dumping Agreement. ( )

176. In the first place, it is necessary to consider whether the Community authorities made a manifest error of assessment resulting in an incorrect finding of injury when they took into account data relating to companies which were not included in the definition of the Community industry.

177. In this case, the Community industry, for the purposes of Article 4(1) of the basic regulation, was defined as the 35 companies which had cooperated with the investigation and which represented a major proportion of the total Community production of cotton-type bed linen during the investigation period. ( )

178. In accordance with Article 17(1) of the basic regulation, ( ) the Community authorities decided to use a sample of 17 producers, representative of the Community industry. ( )

179. It is clear from recital (62) to the provisional regulation that the data necessary for the examination of injury caused to the Community industry were not analysed solely at the level of the Community industry or, in particular, at the level of the Community producers included in the sample. The analysis also concerned data relating to the entire Community. They were provided by recognised industry sources (in particular Eurocoton) and concerned Community trends in production, consumption, imports, exports and market share.

180. On the basis of its analysis of those data as a whole, the Commission found, in the course of imposing the provisional anti-dumping duties, that the pattern observed for total Community production was not replicated at the level of the 35 producers comprising the Community industry. It concluded from that that the Community industry was composed solely of the companies existing on the date on which the complaint was lodged and thus did not take into account the situation of undertakings which had ceased production during the assessment period (that is to say as at the time the complaint was lodged). ( )

181. During the administrative procedure, the exporters maintained that the data relating to the companies which were not included in the definition of the Community industry could not be used to reach a finding of injury.

182. Following that objection, the Council gave further details about the Commission’s assessment. Even though it recognised that the assessment of the economic situation of the industry to which the complaint relates is commonly based on an analysis of the Community industry, that assessment must, in its view, take into account the structure and nature of the industry under consideration. ( )

183. In this case, the data relating to the Community showed that the industry was characterised by strong competition between a high number of operators. The Council therefore took the view that the effects of the imports in question were likely to entail the disappearance of economic operators during the assessment period. It therefore did not want to limit the assessment of injury only to companies which were still operational at the end of the assessment period and which made up the Community industry.

184. To my mind such an analysis is not based, in this instance, on a manifest error of assessment.

185. It is true that under Article 3(5) of the basic regulation there must be an examination of the impact of the dumped imports on the Community industry. However, it is clear from the wording of Article 3(2) of the regulation that a determination of injury involves an objective examination.

186. In the present case, the Community industry, as defined, did not, it would seem, reflect actual market conditions in the Community. The study of the data collected shows that the trends noted at the Community level were, in certain cases, very different from those found for the Community industry. ( )

187. In those circumstances and in order to complete in as objective a way as possible the examination of the impact of the imports in question, it seems to me that the Community authorities were entitled to undertake a global assessment of the situation on the market concerned. A full analysis of the data, including those relating to the Community as a whole, can only enhance the legitimacy of the assessment that the authorities are required to carry out under Article 3 of the basic regulation.

188. Moreover, it is clear from the documents before the Court that the data relating to the Community were taken into account only to a limited extent. ( ) It is evident, in fact, that the finding of material injury was essentially based on the pattern of Community-industry prices observed for the sampled companies. In that regard, it must be noted that the exclusion of the contested data, in Regulation No 1644/2001, had no impact on the finding that the Community industry had suffered material injury. ( )

189. In those circumstances, there are no grounds for finding to be manifestly incorrect the Community authorities’ view that it was relevant, for the purposes of the examination of the injury caused to the Community industry, to use data relating to Community production as a whole.

190. In the second place, it is necessary to consider whether the Community authorities made a manifest error of assessment in not evaluating all relevant factors having a bearing on the state of the Community industry, which factors are referred to in Article 3(5) of the basic regulation and Article 3.4 of the Anti-Dumping Agreement.

191. In the present case, in order to determine whether the Community industry had suffered material injury, the Community authorities took account of some of the factors listed in Article 3(5) of the basic regulation and Article 3.4 of the Anti-Dumping Agreement. In particular, they took account of factors relating to the productivity of undertakings, such as profitability and employment, and took into account the level of prices, sales and market shares (by volume and by value). ( )

192. Contrary to the submissions made by the claimant in its observations, ( ) I do not take the view that the provisions mentioned above require an examination of all the factors listed. To my mind, the terms used clearly confer a discretion on the Community authorities in the examination and evaluation of those factors.

193. First, those provisions merely require an evaluation of the ‘relevant economic factors and indices having a bearing on the state of the [Community] industry’. ( )

194. Second, it is clear from the wording of the last sentence of Article 3(5) of the basic regulation and Article 3.4 of the Anti-Dumping Agreement that the list of economic factors and indices ‘is not exhaustive’. Under those provisions, no one or more of the factors can necessarily give decisive guidance.

195. It therefore appears that the list is purely indicative.

196. In my view, the Community authorities are required to examine, under those provisions, only the factors which may be relevant for the purpose of evaluating the injury suffered. In the present case, the Commission set out in some detail the factors causing injury ( ) and none of the parties concerned has, it seems, challenged that evaluation.

197. As to the examination relating to the relevance of those factors, it forms, in my view, part of a complex economic assessment in which the Community institutions enjoy a broad discretion. The authorities responsible for the investigation were therefore entitled to take the view that the matters relied on gave sufficient and decisive guidance.

198. It must therefore be found that the institutions, in evaluating, for the purpose of the examination of the impact of the dumped imports, only the relevant factors having a bearing on the state of the Community industry, did not exceed the margin of assessment which they are acknowledged to have in the evaluation of complex economic situations.

199. In those circumstances and given all of the foregoing, it must be concluded that the Community institutions made no manifest error of assessment, first, in determining the constructed normal value of the product and, second, in evaluating whether material injury was caused to the Community industry.

200. That conclusion is valid not only for the imports originating in India but also for those originating in Pakistan.

201. As regards the calculation of the constructed normal value of the like product, it has been seen that the Community authorities used the same methodology for India and Pakistan. ( )

202. In relation to the determination of injury, the Community institutions carried out a cumulative assessment of the effects on the Community industry of the imports originating in India, Egypt and Pakistan. ( ) In those circumstances, the findings of the Community authorities are valid, not only for imports originating in India, but also for products originating in Pakistan.

203. However, I consider the authorities to have acted in a manner incompatible with Article 2(11) of the basic regulation and Article 2.4.2 of the Anti-Dumping Agreement in applying, for the purpose of calculating the dumping margin for the product under investigation, the method of ‘zeroing’ the negative dumping margins determined by model. The illegality of that method of calculation affects the validity of Article 1 of the contested regulation, which fixes the rate of definitive anti-dumping duty for imports into the Community of cotton-type bed linen originating in India, Egypt and Pakistan.

204. For those reasons, Article 1 of the contested regulation should be declared invalid inasmuch as the Council applied, for the purpose of determining the dumping margin for the imports in issue in the present dispute, the method of ‘zeroing’ the negative dumping margins determined by model.

VI – The validity of the subsequent regulations

205. By its second and third questions, which it is appropriate to consider together, the national court asks the Court, in essence, for a decision on validity, in the light of Community law, of the subsequent regulations. The nub of those questions is whether, in not providing for the repayment of the anti-dumping duties collected pursuant to the contested regulation, the subsequent regulations are contrary (i) to Articles 1, 7(1) and 9(4) of the basic regulation (read with Articles 1, 7.1 and 9 of the Anti-Dumping Agreement) and (ii) to the principle of proportionality as expressed in Articles 7(2) and 9(4) of the basic regulation.

206. Whilst Article 7 of the basic regulation lays down the circumstances in which the Commission may impose a provisional anti-dumping duty, Article 9 of the regulation sets out the procedures for the imposition of a definitive duty.

207. Articles 7(1) and 9(4) of the regulation provide that those duties can be imposed only if (i) a provisional determination (provisional duty) or a final finding of fact (definitive duty) establishes that there is dumping and consequent injury to the Community industry and (ii) the Community interest calls for intervention to prevent such injury.

208. Pursuant to Article 7(2), and the last sentence of Article 9(4), of the basic regulation, the amount of the anti-dumping duty is not to exceed the margin of dumping established and should be less than the margin if such lesser duty would be adequate to remove the injury to the Community industry.

209. Those provisions transposed, in substance, the terms of Articles 7.1, 7.2 and 9.1 of the Anti-Dumping Agreement.

210. In its observations,( ) the claimant submits that the Council found, in Regulation No 1644/2001, that a lower level of dumping existed so far as Indian exports were concerned. It also submits that in Regulation No 160/2002, the Council found there to be no dumping so far as the imports from Pakistan were concerned. According to the claimant, the conditions laid down in the basic regulation were therefore not satisfied at the time when the definitive anti-dumping duty was imposed by the contested regulation. Consequently, Ikea submits that the Community authorities should have ensured that the subsequent regulations applied retroactively and provided for repayment of the anti-dumping duties paid under the contested regulation. In failing to provide for such repayment, the subsequent regulations infringed the principle of proportionality, since the Community industry enjoyed a much greater protection than necessary.

211. It is therefore necessary to ascertain whether, in failing to provide for repayment of the sums paid under the contested regulation, the Community authorities acted in a way which was incompatible with the applicable provisions of the basic regulation and the Anti-Dumping Agreement. To that end, a distinction will be drawn between Regulations Nos 1644/2001 and 160/2002, on the one hand, and Regulation No 696/2002, on the other hand, since they were adopted on different legal bases.

A – The validity of Regulations Nos 1644/2001 and 160/2002

212. Regulations Nos 1644/2001 and 160/2002 were adopted on the basis of Regulation No 1515/2001. The latter permits the Community to bring a measure taken under the basic regulation into conformity with the recommendations and rulings of the DSB concerning anti-dumping measures.

213. It will be recalled that Regulation No 1644/2001 varied, on the basis of the DSB’s recommendations, the findings concerning imports originating in India made in the contested regulation. In the light of that review, the Council found the level of dumping to be lower so far as those imports were concerned and, as a consequence, altered the rate of anti-dumping duty imposed by the contested regulation.

214. As regards Regulation No 160/2002, it terminated the proceeding with regard to imports originating in Pakistan, since the revised calculation showed that no dumping existed for exports of the product concerned made by any of the Pakistani companies.

215. Neither of the two regulations provided for repayment of the anti-dumping duties paid pursuant to the contested regulation. However, unlike the claimant, I do not take the view that the Community institutions were required, in the present case, to provide for such repayment.

216. Article 3 of Regulation No 1515/2001 expressly provides that ‘[a]ny measures adopted pursuant to this Regulation shall take effect from the date of their entry into force and shall not serve as basis for the reimbursement of the duties collected prior to that date, unless otherwise provided for’. ( ) As recital (6) to that regulation explains, the reason for that is that the recommendations and rulings of the DSB have only prospective effect. The Understanding requires only that the Member concerned comply with the recommendations and rulings, either immediately or within a reasonable period of time. ( )

217. The Council was therefore merely required, by virtue of its obligations under the WTO Agreement, to bring the contested regulation into conformity with the findings of the DSB. It therefore was under no obligation to confer retroactive effect on the revised calculation of anti-dumping duties concerning imports originating in India and Pakistan.

B – The validity of Regulation No 696/2002

218. Unlike Regulations Nos 1644/2001 and 160/2002, Regulation No 696/2002 was not adopted for the purpose of amending the contested regulation in the light of the recommendations and rulings of the DSB. The regulation merely confirms the definitive anti-dumping duty imposed on the Indian imports, as revised by Regulation No 1644/2001. That reassessment, based on Article 11(3) of the basic regulation, had the sole purpose of adapting, for the future, the anti-dumping duties imposed on imports of bed linen following the repeal of the measures relating to imports originating in Pakistan and the expiry of the measures pertaining to the imports from Egypt. ( ) Consequently, it seems to me that the Council was under no obligation to provide, in the course of that reassessment, for repayment of the duties paid pursuant to the contested regulation.

219. In the light of all the foregoing, my view is therefore that the Community authorities did not act in a manner incompatible with the applicable provisions of the basic regulation and the Anti-Dumping Agreement in not providing, in the subsequent regulations, for repayment of the anti-dumping duties paid pursuant to the contested regulation.

VII – The consequences following from the invalidity of the contested regulation

220. By its fifth question, the national court asks the Court, in substance, to set out the conditions for repayment of the anti-dumping duties paid pursuant to the contested regulation.

221. As regards the determination of the amount of anti-dumping duty to be repaid, it is, in my view, the responsibility of the competent Community institutions under Article 233 EC. The latter are required, by virtue of settled case-law, to take the measures that are necessary in order to comply with a judgment containing a ruling on a preliminary reference. ( )

222. Since it has been found here that Article 1 of the contested regulation is invalid, inasmuch as it applies a wrong methodology in calculating the dumping margin, the competent Community authorities ought, in my view, to review the contested regulation and recalculate, on the basis of the information gathered in the course of the initial investigation, the dumping margin for imports originating in India, Egypt and Pakistan.

223. If it is found that the actual dumping margin on the basis of which the definitive duties were paid is eliminated or reduced to a level which is below the level of the anti-dumping duty paid, it will be for the competent authorities to alter, as a consequence, the rate of anti-dumping duty imposed by the contested regulation and to inform the competent national authority of the amount of anti-dumping duties to be repaid.

224. In relation to the persons who might be able to obtain repayment, in my view any importer to have paid duties pursuant to the contested regulation must be able to make a claim for reimbursement, under Article 11(8) of the basic regulation, if it is established that at the time of payment the anti-dumping duties at issue were not lawfully due.

225. Article 11 of the basic regulation, headed ‘Duration, reviews and refunds’ provides, at subparagraph (8), that ‘an importer may request reimbursement of duties collected where it is shown that the dumping margin, on the basis of which duties were paid, has been eliminated, or reduced to a level which is below the level of the duty in force’.

226. To my mind, the scope of that provision is not limited just to cases in which the Commission has undertaken any of the review procedures under Article 11(2) to (7) of the basic regulation. Such a provision should, as I see it, also be able to cover cases in which, following a judgment of the Court finding the method used for calculating the dumping margin to be unlawful, it is established that the dumping margin has been eliminated or reduced to a lower level.

VIII – Conclusion

227. In the light of the foregoing considerations, I propose that the Court give the following answers to the questions referred to it by the High Court of Justice of England and Wales, Chancery Division:

(1) Article 1 of Council Regulation (EC) No 2398/97 of 28 November 1997 imposing a definitive anti-dumping duty on imports of cotton-type bed linen originating in Egypt, India and Pakistan is invalid inasmuch as the Council applied, for the purpose of determining the dumping margin for the product under investigation, the method of ‘zeroing’ the negative dumping margins determined by model.

(2) It will be for the competent institutions of the European Community to take the measures that are necessary in order to comply with the judgment ruling on the preliminary reference in this case.

(3) The importers which have paid duties pursuant to Regulation No 2398/97 must be able to make a request for reimbursement, pursuant to Article 11(8) of Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community.