Post-Buenos Aires: Tackling Fisheries Subsidies Contributing to IUU Fishing through Unilateral Trade Measures?

At the Eleventh Ministerial Conference of the World Trade Organization (WTO) held in Buenos Aires in December 2017, Members failed to reach an agreement on discipline aimed at eliminating fisheries subsidies that contribute to illegal, unreported and unregulated (IUU) fishing. Instead, they decided to continue the negotiations on this issue with a view to adopting an agreement by the next Ministerial Conference in 2019, right before the target year (i.e. 2020) set by the UN Sustainable Development Goal 14 target 6 to prohibit certain forms of fisheries subsidies leading to IUU fishing.

Since January 2010, the EU has actively resorted to unilateral trade measures to combat IUU fishing occurring outside its territorial waters (i.e. restricting fishery products that originate from IUU fishing outside its territorial water from being imported into the EU) under Council Regulation (EC) No 1005/2008 (EU IUU Regulation). In light of the disappointment expressed by the European Commissioner for Trade Cecilia Malmström at the deficiencies of the WTO’s negotiating function, the EU might also apply unilateral trade measures to fishery products imported from certain States that provide fisheries subsidies contributing to IUU fishing. As will be explained later in this piece, it appears that the legal text itself and the EU’s flexible application of the EU IUU Regulation do not necessarily prevent the European Commission from heading into such a policy in the Post-Buenos Aires era.

Unilateral Trade Measures against Non-Cooperating States under the EU IUU Regulation

According to the EU IUU Regulation, the European Commission shall identify the third countries it considers as non-cooperating in combating IUU fishing. First, it shall notify these countries only of the possibility of their being identified as non-cooperating based on certain criteria and then provide them with a reasonable time to remedy the situation at issue (‘yellow card’). As the essential element examined for this identification, Article 31.3 of the EU IUU Regulation reads as follows.

A third country may be identified as a non-cooperating third country if it fails to discharge the duties incumbent upon it under international law as flag, port, coastal or market State, to take action to prevent, deter and eliminate IUU fishing.

Second, upon the subsequent decision by the Commission that the areas of concern and shortcomings at issue have not been addressed sufficiently by these pre-identified countries, the European Council shall decide to include them in a list of non-cooperating third countries (‘red card’). Because of this listing, the importation into the EU of fishery products caught by fishing vessels flying the flag of such countries shall be prohibited. Since the entry into force of the EU IUU Regulation in January 2010, the Commission has issued a yellow card to 25 countries and further proceeded to an import ban against six of those countries.

In sum, the primary task of the Commission here is to decide unilaterally whether the third countries concerned act in a consistent manner with their obligations under international law relating to the prevention, deterrence and elimination of IUU fishing. To this extent, it may be possible that such unilateral import restrictions under the EU IUU Regulation could be viewed as a form of countermeasures under customary international law against the wrongful acts of identified non-cooperating countries.

Lack of Disciplinary Measures for Fisheries Subsidies under Legally Binding Instruments

In the process of identifying non-cooperating third countries, the European Commission is required, among other tasks, to consider the ratification or accession of these countries to ‘international fisheries instruments’, including the UNCLOS, the United Nations Fish Stocks Agreement (UNFSA) and the Food and Agriculture Organization (FAO) Compliance Agreement. Importantly, these instruments that are legally binding in nature merely require Members ‘to take measures to prevent or eliminate excess fishing capacity’ in an abstract manner (e.g. Article 5(h) of the UNFSA) and do not contain any provisions that specifically refer to the grant by States of fisheries subsidies that contribute to IUU fishing or request that States curb the grant of fisheries subsidies that contribute to IUU fishing. Thus, the Commission has never directly based its (pre-)identification of the third countries concerned as non-cooperating in its finding that they continue the provision of fisheries subsidies that contribute to IUU fishing. In this sense, they appear inconsistent with these binding instruments.

Nevertheless, it should be noted that the Commission might find that the provision of fisheries subsidies contributing to IUU fishing indirectly constitutes a violation of these binding instruments, depending on the facts of the case. For example, in April 2015, the Commission decided to notify Thailand of the possibility of being identified as non-cooperating in fighting IUU fishing (yellow card). It found that ‘the Thai fleet operates illegally outside Thai territorial waters’ on the basis of (i) declining fish stocks in Thai territorial waters, (ii) reduced fishing area in third country waters and (iii) ‘an increasing fishing capacity (circa 4000 [Thai] commercial vessels in 2011 to 7000 in 2014)’. Then, based on these finding, the Commission concluded that it amounts to a violation of Articles 94.2(b) and 117 of the UNCLOS.

It is true that no reference was made by the Commission to whether the increase of the fishing capacity in Thai commercial vessels was derived from fisheries subsidies granted by the Thai Government. However, it would follow from this Commission’s decision that an increase of fishing capacity itself in commercial vessels could be treated as an indirect reason for the Commission to declare it a violation of the relevant international law.

How Will Legally Non-Binding Instruments Come into Play?

It must be also added that, when deciding whether the third countries concerned failed to discharge their duties under the relevant international law, the Commission has often found that they also failed to comply with legally non-binding (voluntary) instruments adopted by the FAO, such as the Code of Conduct for Responsible Fisheries (CCRF) and the International Plan of Action to Prevent, Deter, and Eliminate Illegal, Unreported and Unregulated Fishing (IPOA-IUU). The EU does not appear to make a clear distinction between legally binding and non-binding instruments, at least in the context of regulating IUU fishing. This trend can be found also in the EU’s proposal for WTO disciplines on fisheries subsidies in which the phrase ‘relevant international law’ referred to is specified further as also including non-binding instruments such as the CCRF.

While the CCRF contains no express provision requesting States to curb fisheries subsidies, the IPOA-IUU specifically requires States to ‘avoid conferring economic support, including subsidies, to companies, vessels or persons that are involved in IUU fishing’ (paragraph 23). In addition, the International Plan of Action for the Management of Fishing Capacity (IPOA-Capacity) also contains an explicit provision stipulating that ‘States should reduce and progressively eliminate all factors, including subsidies…which contribute, directly or indirectly, to the build-up of excessive fishing capacity’ (paragraph 26).

As of today, the European Commission has never based its decision to issue yellow or red cards on the finding that the provision of fisheries subsidies by the third countries concerned contributes to IUU fishing and, thus, is inconsistent with the above-mentioned non-binding instruments. Nevertheless, given the flexible practice of the Commission with respect to the application of legally non-binding instruments, it would not be unreasonable to expect that the Commission could decide in the future that a third country providing fisheries subsidies ‘involved in IUU fishing’ fails to discharge its commitments under the IPOAs and then possibly (pre-)identify it as non-cooperating in fighting IUU fishing.

Further Questions: Consistency with the WTO Agreement

Looking at the legal text itself and the flexible application by the Commission of the EU IUU Regulation, it could be preliminarily concluded that the Commission is not necessarily prevented from resorting to unilateral trade restrictions against third countries providing fisheries subsidies that contribute to IUU fishing. Such a shift to a unilateral approach is more likely, especially after the failure of the WTO in Buenos Aires to reach a multilateral agreement on curbing fisheries subsidies.

Adopting such trade restrictions against certain States will result in a dispute that concerns the WTO’s consistency, while an import ban under the EU IUU Regulation has not yet been subject to the WTO dispute settlement mechanism. According to the previous European Commissioner for Trade Karel De Gucht, the EU appears to understand that unilateral trade measures taken under the IUU Regulation can be WTO-consistent and at least be justified pursuant to Article XX(g) of the General Agreement on Tariffs and Trade 1994 (GATT 1994) relating to the conservation of exhaustible natural resources, including fish stocks.

Apart from the chapeau of Article XX of the GATT 1994, the question will occur, among others, as to whether there is a ‘sufficient nexus’ between fish stocks concerned and the EU, as was carefully confirmed in US–Shrimp between the United States (US) and sea turtles that are scientifically demonstrated to migrate through the waters of several countries including the US (Appellate Body Report, US–Shrimp, para. 133). This is so, especially when the Commission decides to identify a third country as non-cooperating on the ground that its fishing vessels recurrently engage in IUU fishing in territorial waters of other countries that are geographically detached from the EU (e.g. Thai vessels in the Mauritian EEZ).