The ‘Mackerel War’ Goes to the WTO

In a typical David and Goliath story, the Faroe Islands – a small archipelago situated northwest of Scotland, halfway between Iceland and Norway, and inhabited by less than 50,000 people – have  requested consultations with the European Union under the WTO’s Dispute Settlement Understanding. The dispute, which concerns fishing rights in the North Atlantic, has been dubbed the ‘mackerel war’ although it primarily concerns herring – mackerel being described as an ‘associated’ species.

Atlanto-Scandian herring is the largest herring stock in the world. Heavy exploitation due to overfishing led the stock to collapse and to the cessation of all fishing from the early 1970s to the 1990s. Atlantic herring is highly migratory and during its life cycle it migrates between the 200-miles EEZs of several States. Today, fishing quotas are jointly managed by the Faroes, Iceland, Norway, Russia, and the EU under the Atlanto Scandian Management Arrangements. In recent years, the Faroes have been catching about 17 percent of the entire quota, although their allocated share is approximately five percent. The Faroes have justified the higher quota arguing, together with Iceland, that rising sea temperatures have led to an increase in fish stocks.

On 28 August 2013 the EU introduced ‘trade measures’ against the Faroe Islands. The measures include a prohibition on imports of herring and mackerel into the EU, as well as the prohibition of use of EU ports by Faroese vessels. The Faroes has condemned the EU sanctions and declared the measures a ‘contravention of… international obligations to cooperate on the management of shared fish stocks.’

The dispute has left the Danish Government in a difficult position. The Faroes (and Greenland) are part of the Kingdom of Denmark. The Danish Agriculture Minister, Mette Gjerskov, initially described the possibility of EU sanctions against the Faroes as ‘very unfortunate‘ adding that the Danish Government ‘are not interested in having sanctions levelled at one of the members of the Kingdom of Denmark.’

The Faroes are a self-governing territory with wide-ranging powers, but foreign and security policy are the responsibility of the Kingdom of Denmark. When the latter joined the EC in 1973, the Faroes chose not to do so. Even though they are constitutionally part of a EU Member State, the Faroes are treated as a third country from the perspective of EU law, and Article 299(6)(a) TEC categorically states that it ‘shall not apply to the Faroe Islands.’ Trade between the Faroes and the EU is governed by an agreement concluded in 1997.

All 28 EU Member States, including Denmark, are members of the WTO. The EU is also a member of the WTO in its own right. Denmark has been a respondent in a WTO complaint only once. The  case was brought by the United States (DS83) and was settled in 2001. No EU Member State has been a complainant in WTO dispute settlement. It is invariably the EU which brings WTO complaints, and WTO complaints are brought against the EU as a whole, even in cases when the measures subject to the dispute have been adopted by one Member State only (e.g. France in EC-Asbestos), provided the dispute relates to the GATT only (which falls under the EU’s exclusive competence). The Faroese dispute with the EU appears to fall within this category.

Currently the Faroes are not a WTO member in their own right, though they could potentially accede to the WTO as a separate customs territory under Article XII of the WTO Agreement. As non-members of the WTO, the Faroes cannot initiate proceedings under the WTO’s Dispute Settlement Understanding (Article 1 DSU). The Kingdom of Denmark represents the Faroes in the WTO, and, as such, it is the only possible complainant in this case. On 4 November 2013, the Kingdom of Denmark, in respect of the Faroes, notified the WTO Secretariat of a request for consultations with the EU regarding ‘the use of coercive economic measures in relation to Atlanto-Scandian herring’ (WT/DS469/1). Curiously, the WTO dispute pits one EU Member State (the Kingdom of Denmark) against the EU (of which Denmark is a member), and before an international forum outside the EU. The Danish Minster for Trade, Nick Hækkerup, regretted the escalation of the dispute.

On 16 August 2013, the Kingdom of Denmark, in respect of the Faroe Islands, also initiated arbitration proceedings under Annex VII of UNCLOS, claiming that the EU has failed to solve the dispute by peaceful means in accordance with UNCLOS Article 279. The Faroes have previously hinted that the EU has breached UNCLOS Article 63 by failing to cooperate in respect of shared and/or straddling stocks. In order for the Annex VII tribunal to have jurisdiction, it will be necessary for the Kingdom of Denmark to show that an attempt to settle the dispute by agreed means (set out in Article 279) has been unsuccessful, as required by Article 286.

The institution of parallel proceedings by Denmark before an Annex VII tribunal and the WTO echoes aspects of the Southern Bluefin Tuna and the Swordfish case (EU v Chile in the WTO (DS193), Chile v EU in ILTOS). The latter also involved parallel proceedings in the WTO and before an Annex VII tribunal. In Southern Bluefin Tuna, an Annex VII tribunal decided that it lacked jurisdiction on the basis of UNCLOS Article 281 because the SBT Convention provided an alternative means for dispute settlement, which precluded recourse to an Annex VII. Commentators have criticised the tribunal’s finding that it lacked jurisdiction even though the tribunal acknowledged that there were two separate disputes, one related to the SBT Convention and the other related to UNCLOS (see Separate Opinion by Sir Kenneth Keith).

As far as the dispute between the Faroes with the EU is concerned, the WTO complaint will allege violations of the EU’s obligations under the GATT (presumably, Article XI), whereas the Annex VII proceedings are likely to involve alleged violations of UNCLOS (presumable relating to said Article 63). Like in Southern Bluefin Tuna and in the Swordfish case, both disputes arise out of the same factual matrix, yet the legal bases for the parallel proceedings are distinct.

The Faroes’ forum shopping strategy is risky and could potentially trigger infringement proceedings by the European Commission, as in the Mox Plant case. In that case, another Annex VII tribunal stayed proceedings in favour of the Court of Justice of the European Union (CJEU). The Grand Chamber then concluded that ‘bringing proceedings under the [WTO] dispute-settlement system… without having first informed and consulted the competent [EU] institutions, Ireland ha[d] failed to comply with its duty of cooperation’ and infringed Article 344 TFEU. This provision requires EU Member States to submit dispute between them concerning the application and interpretation of EU law to the CJEU. The CJEU reasoned that as the EU was a party to UNCLOS, and that hence UNCLOS was part of the Community legal order. As a result, a dispute between two EU member states over UNCLOS was a dispute over EU law.

The CJEU is likely to reach a similar conclusion as regards WTO law and UNCLOS. As the EU is a WTO member, WTO law would be part of the Community legal order. The same reasoning applies to UNCLOS. Hence the CJEU might regard both the UNCLOS dispute and the WTO dispute as a dispute concerning EU law. It is doubtful that this position changes merely because Denmark is bringing the dispute on behalf of one of its self-governing territories. Only Denmark is in a position to initiate WTO dispute settlement and request arbitration under UNCLOS (even if this power is delegated to the Faroes under Danish law). However, an important distinguishing factor compared to Mox Plant could be that the EU treaties do not apply to the Faroes. Further parallel dispute settlements proceedings are unlikely. Both the EU-Faroes Fisheries Agreement and the EU-Faroes Trade Agreement provide only for consultations and referral to a Joint Commission, respectively.

The Faroese surely know how to navigate rough waters, but the sail ahead promises to be stormy. Their claims against the EU both before the WTO and the Annex VII tribunal may shed new light on  relationship between UNCLOS and WTO dispute settlement and EU law. Like the ‘cod wars’ in the past, the ‘mackerel wars’ may shape the development of international law in this area.