Source: EURLEX
Language: en
Format: md

**EUROPEAN UNION**

**THE EUROPEAN PARLIAMENT** **THE COUNCIL**

**Brussels, 22 January 2021**
**(OR. en)**

**2019/0273 (COD)** **PE-CONS 52/20**

**COMER 175**

**WTO 327**

**CODEC 1178**

**LEGISLATIVE ACTS AND OTHER INSTRUMENTS**

Subject: REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE
COUNCIL amending Regulation (EU) No 654/2014 concerning the
exercise of the Union’s rights for the application and enforcement of
international trade rules

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**REGULATION (EU) 2021/…**

**OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL**

**of …**

**amending Regulation (EU) No 654/2014**

**concerning the exercise of the Union’s rights for the application**

**and enforcement of international trade rules**

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular

Article 207(2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Acting in accordance with the ordinary legislative procedure **[1]**,

**1** Position of the European Parliament of 19 January 2021 (not yet published in the Official
Journal) and decision of the Council of ….

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Whereas:

(1) Regulation (EU) No 654/2014 of the European Parliament and of the Council **[1]** establishes

a common legislative framework for the exercise of the Union’s rights under international

trade agreements in certain specific situations. One of those situations relates to the dispute

settlement mechanisms set up by the Agreement establishing the World Trade

Organization (WTO) and by other international trade agreements, including regional or

bilateral agreements. Regulation (EU) No 654/2014 enables the Union to suspend

concessions or other obligations under international trade agreements after dispute

settlement proceedings are concluded.

(2) Regulation (EU) No 654/2014 does not deal with situations where the Union has a right of

action in response to a measure maintained by a third country but dispute settlement

through adjudication is blocked or otherwise not available for reasons of non-cooperation

of the third country which has adopted the measure.

**1** Regulation (EU) No 654/2014 of the European Parliament and of the Council of
15 May 2014 concerning the exercise of the Union's rights for the application and
enforcement of international trade rules and amending Council Regulation (EC) No 3286/94
laying down Community procedures in the field of the common commercial policy in order
to ensure the exercise of the Community’s rights under international trade rules, in particular
those established under the auspices of the World Trade Organization (OJ L 189, 27.6.2014,
p. 50).

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(3) The WTO Dispute Settlement Body has been unable to fill the outstanding vacancies on

the WTO Appellate Body (the ‘WTO Appellate Body’). The WTO Appellate Body is no

longer able to fulfil its function from the moment when there are fewer than three WTO

Appellate Body Members left. Until that situation is resolved and in order to preserve the

essential principles and features of the WTO dispute settlement system and the Union’s

procedural rights in ongoing and future disputes, the Union has sought to agree interim

arrangements for appeal arbitration pursuant to Article 25 of the WTO Understanding on

Rules and Procedures Governing the Settlement of Disputes (the ‘WTO Dispute Settlement

Understanding’). That approach was endorsed by the Council on 27 May 2019,

15 July 2019 and 15 April 2020 and supported in the European Parliament resolution of

28 November 2019 on the crisis of the WTO Appellate Body. If a WTO Member refuses to

enter into such an arrangement, and files an appeal to a non-functioning WTO Appellate

Body, the resolution of the dispute is effectively blocked.

(4) A similar situation might arise under other international trade agreements, including

regional or bilateral agreements, where a third country does not cooperate in the manner

necessary for dispute settlement to function, for example by failing to appoint an arbitrator

and where there is no mechanism provided to secure the functioning of dispute settlement

in such a situation.

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(5) If dispute settlement is blocked, the Union is unable to enforce international trade

agreements. Therefore, it is appropriate to extend the scope of Regulation

(EU) No 654/2014 to cover such situations.

(6) To that end, the Union should be able to expeditiously suspend concessions or other

obligations under international trade agreements, including regional or bilateral

agreements, if effective recourse to binding dispute settlement is not possible because the

third country does not cooperate in making such recourse possible.

(7) It is also appropriate to set out that where measures are taken to restrict trade with a third

country, such measures should not exceed the nullification or impairment of the Union’s

commercial interests caused by the measures of that third country, in line with the Union’s

obligations under international law.

(8) Measures to be adopted pursuant to this Regulation relate specifically to international trade

in that they are essentially intended to govern such trade and have direct and immediate

effects on it and, therefore, fall within the scope of the Union’s exclusive competence

pursuant to Article 207 of the Treaty on the Functioning of the European Union **[1]** .

**1** Opinion 2/15 of the Court of Justice of 16 May 2017, ECLI:EU:C:2017:376, paragraph 36.

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(9) Services and intellectual property rights account for a large and growing share of world

trade and are covered by international trade agreements, including regional or bilateral

Union agreements. Measures in the fields of trade in services and trade-related aspects of

intellectual property rights should therefore be included in the scope of the trade policy

measures available to the Union to make Regulation (EU) No 654/2014 more consistent

and effective.

(10) This Regulation should ensure the coherent application of the enforcement mechanism in

trade disputes relating to international trade agreements, including regional or bilateral

agreements. The enforcement mechanism of the Trade and Sustainable Development

chapters of the Union’s international trade agreements forms an integral part of the

Union’s trade policy and this Regulation would apply to the suspension of concessions or

other obligations and the adoption of measures in response to breaches of those chapters, if

and to the extent that such measures are permitted and are warranted by the circumstances.

(11) The review clause of Regulation (EU) No 654/2014 should also cover the application of

the amendments to that Regulation introduced by this Regulation.

(12) Regulation (EU) No 654/2014 should therefore be amended accordingly,

HAVE ADOPTED THIS REGULATION:

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_Article 1_

Regulation (EU) No 654/2014 is amended as follows:

(1) in Article 1, point (b) is replaced by the following:

‘(b) rebalancing concessions or other obligations in the trade relations with third

countries, when the treatment accorded to goods or services from the Union is altered

in a way that affects the Union’s interests.’;

(2) in Article 2, point (b) is replaced by the following:

‘(b) “concessions or other obligations” means tariff concessions or other obligations or

benefits in the field of trade in goods or services, or concerning trade-related aspects

of intellectual property rights, that the Union has committed itself to applying in its

trade with third countries by virtue of international trade agreements to which it is a

party;’;

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(3) Article 3 is amended as follows:

(a) the following point is inserted:

‘(aa) following the circulation of a WTO panel report upholding, in whole or in part,

the claims brought by the Union, if an appeal under Article 17 of the

WTO Dispute Settlement Understanding cannot be completed and if the third

country has not agreed to interim appeal arbitration under Article 25 of the

WTO Dispute Settlement Understanding;’;

(b) the following point is inserted:

‘(ba) in trade disputes relating to other international trade agreements, including

regional or bilateral agreements, if adjudication is not possible because the

third country is not taking the steps that are necessary for a dispute settlement

procedure to function, including unduly delaying the proceedings amounting to

non-cooperation in the process;’;

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(c) point (d) is replaced by the following:

‘(d) in cases of modification of concessions or commitments by a WTO member

under Article XXVIII of the GATT 1994 or Article XXI of the General

Agreement on Trade in Services (GATS), where no compensatory adjustments

have been agreed and, as regards services, compensatory adjustments are not

made in conformity with the findings of the arbitration pursuant to Article XXI

of the GATS.’;

(4) in Article 4, paragraph 2 is amended as follows:

(a) the following point is inserted:

‘(ba) where measures are taken to restrict trade with a third country in situations

under point (aa) or (ba) of Article 3, the level of such measures shall not

exceed the nullification or impairment of the Union’s commercial interests

caused by the measures of that third country;’;

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(b) point (d) is replaced by the following:

‘(d) where concessions or commitments are modified or withdrawn in the trade

with a third country in connection with Article XXVIII of the GATT 1994 and

the related Understanding **[1]**, or with Article XXI of the GATS and the related

implementing procedures, they shall be substantially equivalent to the

concessions or commitments modified or withdrawn by that third country, in

accordance with the terms established in Article XXVIII of the GATT 1994

and the related Understanding or Article XXI of the GATS and the related

implementing procedures.’;

(5) Article 5 is amended as follows:

(a) in paragraph 1, the following points are inserted:

‘(ba) the suspension of obligations regarding trade in services and the imposition of

restrictions on trade in services;

(bb) the suspension of obligations with respect to trade-related aspects of

intellectual property rights granted by a Union institution or agency and valid

throughout the Union, and the imposition of restrictions on the protection of

such intellectual property rights or their commercial exploitation, in relation to

right-holders who are nationals of the third country concerned;’;

**1** Understanding ‘Interpretation and Application of Article XXVIII’.

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(b) the following paragraphs are inserted:

‘1a. When selecting measures to be adopted pursuant to point (ba) of paragraph 1 of

this Article, the Commission shall always consider measures according to the

following hierarchy of steps:

(a) measures relating to trade in services requiring an authorisation valid

throughout the Union and based on secondary legislation, or, where no

such measures are available,

(b) measures relating to other services in areas where extensive Union

legislation exists, or, where no such measures are available,

(c) measures which the information-gathering exercise conducted pursuant

to Article 9(1a), as provided for in point (a) of Article 5(1b), has

demonstrated would not impose a disproportionate burden on the process

of administration of relevant national regulations.

1b. Measures adopted pursuant to points (ba) and (bb) of paragraph 1 shall:

(a) be subject to an information-gathering exercise pursuant to Article 9(1a);

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(b) be adjusted, if necessary, by means of an implementing act pursuant to

Article 4(1) where, after a review conducted pursuant to Article 9(1a),

the Commission concludes that the measures are of insufficient

effectiveness or impose an unreasonable burden on the process of

administration of relevant national regulations. Such review by the

Commission shall be first conducted six months after the date of

application of the measures and at intervals of twelve months thereafter;

(c) be subject to an evaluation report, six months after their termination and

based inter alia on stakeholder input, which shall examine their

effectiveness and operation, and draw possible conclusions for future

measures.’;

(6) in Article 6, the following paragraph is added:

‘3. Regarding trade-related aspects of intellectual property rights, the term “nationals”

shall be understood in the same sense as it is used in paragraph 3 of Article 1 of the

WTO Agreement on Trade-Related Aspects of Intellectual Property Rights.’;

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(7) in Article 7, the first subparagraph of paragraph 2, point (c) is replaced by the following:

‘(c) in cases of the withdrawal or modification of concessions or commitments by a WTO

member under Article XXVIII of the GATT 1994 or Article XXI of the GATS, when

the third country concerned accords adequate and proportionate compensation to the

Union after the adoption of an implementing act under Article 4(1),’;

(8) Article 9 is amended as follows:

(a) paragraph 1 is replaced by the following:

‘1. The Commission shall seek information and views regarding the Union’s

economic interests in specific goods or services sectors, or regarding specific

trade-related aspects of intellectual property rights, in the application of this

Regulation, through a notice in the _Official Journal of the European Union_ or

through other suitable public communication means, indicating the period

within which input is to be submitted. The Commission shall take the input

received into account.’;

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(b) the following paragraph is inserted:

‘1a. When the Commission envisages measures pursuant to point (ba) or (bb) of

Article 5(1), it shall inform and conduct consultations with stakeholders, in

particular industry associations, affected by possible commercial policy

measures and with Member State public authorities involved in the formulation

or implementation of legislation regulating the affected fields. Without unduly

delaying the adoption of such measures, the Commission shall, in particular,

seek information on:

(a) the impact of such measures on third country service providers or

right-holders who are nationals of the third country concerned and on

Union competitors, users or consumers of such services or intellectual

property rights holders;

(b) the interaction of such measures with relevant Member State regulations;

(c) the administrative burden which may be occasioned by such measures.

The Commission shall take utmost account of the information gathered during

such consultations.

The Commission shall provide an analysis of the envisaged measures to

Member States when proposing the draft implementing act pursuant to

Article 8.’;

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(9) Article 10 is replaced by the following:

‘ _Article 10_

_Review_

1. At the earliest possible opportunity after … [the date of entry into force of this

amending Regulation], but no later than one year after that date, the Commission

shall review the scope of this Regulation, taking into account in particular the

commercial policy measures that may be adopted, as well as its implementation, and

shall report its findings to the European Parliament and the Council.

2. In acting pursuant to paragraph 1, the Commission shall undertake a review aimed at

envisaging under this Regulation additional commercial policy measures suspending

concessions or other obligations in the field of trade-related aspects of intellectual

’
property rights. .

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_Article 2_

This Regulation shall enter into force on the […] day following that of its publication in the _Official_

_Journal of the European Union_ .

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

_For the European Parliament_ _For the Council_

_The President_ _The President_

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