Export restrictions under scrutiny – the legal dimensions of export restrictions on personal protective equipment

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 “A crisis without borders cannot be resolved by putting barriers between us. And yet, this is exactly the first reflex that many European countries had. This simply makes no sense. Because there is not one single Member State that can meet its own needs when it comes to vital medical supplies and equipment. Not one.”

President of the EU Commission Ursula von der Leyen expressed this warning in her speech before the (empty) European Parliament on March 26, 2020. Her upfront criticism was primarily addressed to states with important suppliers of personal protective equipment (PPE), namely France, Germany, the Czech Republic and Poland, and did not come by surprise. All three had introduced unilateral export restrictions vis-à-vis both EU Member States and third countries to secure access to PPEs in light of the emerging corona crisis in early March. Eventually, the European Commission intervened in mid-March by issuing implementing regulations (EU) 2020/402 and (EU) 2020/426 on EU export restrictions on PPEs. The EU’s export restrictions regime applied only to all countries except for EU Member States in the first instance. Presumably due to diplomatic pressure, especially from Switzerland, the EU’s position changed insofar as a second implementing regulation now includes exemptions for the four EFTA-countries Switzerland, Norway, Liechtenstein and Island, and overseas countries and territories including the Faroe Islands from EU export restrictions on PPEs.

The following contribution examines the legal challenges arising in the context of export restrictions against PPEs under EU law before turning to the rules on export restrictions under the multilateral framework of the WTO.

Legality of PPE-export restrictions under EU law

The legality assessment of PPE-export restrictions under EU law takes two different angles. On the one hand, the legality of the EU’s newly adopted implementing regulations directed against third countries and on the other hand the legality of EU Member States’ export restrictions directed against other EU Member States under EU law.

The EU’s far-reaching export restrictions with respect to third countries are to be measured against the rules that are part of the common commercial policy under Art. 207, Art. 3 (1) (e) TFEU, an exclusive competence of the EU. The relevant provision is Art. 5 (1) of regulation (EU) 2015/479 which empowers the EU Commission to tie exports to third countries to prior authorization ‘to prevent a critical situation from arising on account of a shortage of essential products’. This is also the reason for why both implementing regulations (EU) 2020/402 and 2020/426 refer to regulation (EU) 2015/579 as their legal basis. The implementation of an authorization system with respect to third countries, as a consequence, squarely falls within the EU’s competence. Though national export restrictions against third countries have a potential of undermining the EU’s efforts in this domain, Art. 10 of regulation (EU) 2015/479 contains an Art. 36 TFEU-like justification clause allowing unilateral measures for the protection of health and life of humans.

A central question in the context of the world-wide occuring shortages of PPEs is how the EU’s authorization mechanism will ensure adequate transparency as it is up to the EU Member States to decide whether or not allow exports of PPEs. EU Member States, however, are not legally required to inform the EU Commission about denials or authorizations of exports, though they are of course invited to do so. For this reason, the EU cannot fully trace how national authorities in EU Member States actually handle the export restrictions.

With respect to export restrictions that apply within the internal market, one may argue that the German, French and Czech unilateral export restrictions of PPEs were implemented in conformity with the justification provisions of the TFEU. In the absence of any secondary EU legislation, unilateral export restrictions that limit exports of PPEs to other EU Member States, a priori contravene Art. 35 TFEU prohibiting ‘quantitative restrictions on exports and all measures having the same effects’. Art. 36 TFEU, however, justifies a deviation from Art. 35 TFEU where measures are to protect health and life of humans.

Despite their legal conformity, the EU Commission did not seem to be amused of unilateral recourse to intra-EU export restrictions. As noted in the applicable guidelines, “[n]o restriction should be imposed on the circulation of goods in the Single Market, especially (…) essential [and] health-related (…) goods, unless duly justified”. Given the Commission’s evident disapproval of unilateral export restrictions, the EU could make use of its powers to preserve the internal market pursuant to Art. 114 TFEU to prohibit intra-EU export restrictions in the case of future pandemics. Further and in more general terms, the EU could also resort to incentive measures to combat major cross-border health scourges and serious cross-border threats to health in accordance with Art. 168 (5) TFEU.

From a political point of view, unilateral action by EU Member States to secure their national supply of PPEs has sent ambiguous signals on the EU’s unity and solidarity. Even from a purely economic angle, export restrictions within the internal market involve the risk of compromising sufficient supply of PPE. As the European Commission notes in a recent communication, export restrictions ignore integrated supply chains, create bottlenecks to production of essential supplies, disrupt logistics and distribution chains and encourage stockpiling responses in the supply chain. Therefore, unilateral export restrictions vis-à-vis other EU Member States are legal under EU law, but their moral and political justification as well as their economic rationality may be highly disputed. Recent initiatives such as the Commission’s launch of four joint procurements of PPEs and its imitative of stockpiling medical equipment to fairly distribute such gear to EU Member States in need, may indicate that EU Member States have started to value uniting forces.

Export restrictions and WTO law

At the multilateral level, the legal implications of export restrictions have not been discussed in detail though many WTO members such as Russia or India have joined the club of states restricting or banning the export of PPE. This kind of reaction has made many observers reminiscent of export restrictions in the food market in 2008-10. Under WTO law, Art. XI:1 GATT “provides for a general ban on (…) export restrictions or prohibitions ‘other than duties, taxes or other charges’” (Panel in India – Quantitative Restrictions). This covers both de jure and de facto prohibitions and restrictions which is particularly relevant, as not all WTO members may adopt de jure restrictions and since only few export restrictions/bans have been notified to the WTO so far. Though Art. XI:1 GATT seems to be strict in the first place, Art. XI:2 (a) GATT provides for considerable policy-space. It allows ‘export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages (….) [of] products essential to the exporting contracting party’. The Appellate Body in China-Raw Materials specified the meaning of the elements of ‘temporarily’ (“for a limited time, (…) bridg[ing] a ‘passing need’”, para. 323) and ’essential’ (‘[a]bsolutely indispensable or necessary’, para. 326). Apart from Art. XI:2 (a) GATT, WTO members can either resort to the general exception of Art. XX (b) GATT which allows deviations from WTO obligations in the pursuit of the protection of human life and health. Depending on a potential deterioration of the current situation worldwide and following Emmanuel Macron´s and other government leaders´ parlance of ‘war’, the security exception of Art. XXI (b) (iii) GATT might come into play as justification clause as well. In relation to Art. XX GATT, however, the Appellate Body in China – Raw Materials already established that ‘whenever the requirements of Art. XI:2 (a) GATT are met, there would be no scope for the application of Art. XX GATT”. This would exclude Art. XX (b) GATT for the majority of cases and may speak in favor of a similar stance of panels (or the Appellate Body if it resumes its work) in relation to Art. XXI (b) (iii) GATT. Still, WTO dispute settlement organs could be now tasked to delineate Art. XI:2 (a) GATT in more detail from other exception clauses in potentially upcoming disputes on PPE export restrictions.

Summary

The analysis of current export restrictions on PPEs has vividly demonstrated that the EU Member States´ prompt unilateral actions did not contravene EU law but nevertheless created political tension between the respective EU Member States and the EU Commission. At the multilateral level, the legality of export restrictions primarily depends on their respective justification. Though this analysis indicates that export restrictions of PPEs are not per se illegal, this assessment should not blind us of the fact that export restrictions and export bans have detrimental economic implications and may not be desirable from a broader political perspective.

Editor’s Note: The reference to the AB´s jurisprudence on the terms of ‘essential’ and ’temporarily’ in Art. XI:2 (a) GATT was added after initial publication.

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