Bridges Weekly Trade News Digest • Volume 12 • Number 29 • 10th September 2008

EU Court Rejects Compensation Appeal in WTO Banana Dispute

Discuss this articleShare your views with other visitors, and read what they have to say

The European Court of Justice (ECJ) has rejected appeals for compensation for export revenue lost as a consequence of US sanctions imposed on goods in retaliation against the EU’s banana import duties. The US sanctions were permitted by the World Trade Organisation (WTO) after a ruling that the EU’s banana tariffs were illegal.

The European Community “cannot be called upon to make good damage resulting from a failure of its institutions to comply with World Trade Organisation agreements,” the ECJ stated in its ruling.

The European high court clarified that “an economic operator cannot claim a right to property in a market share which he held at a given time, since such a market share constitutes only a momentary economic position, exposed to the risks of changing circumstances.”

The ECJ, in dismissing the appeals by two Italian companies - FIAMM SpA and Giorgio Fedon & Figli SpA - and several of their US-based subsidiaries, confirmed a lower court decision that also denied any recompense to the companies. Six European companies whose products were affected by the US retaliatory measures appeared in the Court of First Instance in 2006.

The two Italian firms argued that they experienced a decline in export sales to the US after US duties were applied on a wide range of goods. Standby batteries, car horns, spectacles cases and leather accessories were among the goods for which the most recent claimants sought financial compensation.

The ECJ went further than the decision by Europe’s lower court - the Court of the First Instance -by stating that the European Commission could never be held liable in such cases.

Importantly for the EU, the dismissal of the appeal means that no precedent was set for punitive damages to be awarded to companies affected by retaliatory sanctions against EU products in the event of a lost WTO ruling.

The EU awards preferential tariffs on banana imports from some African, Caribbean and Pacific states that are former European colonies. However, the US has successfully challenged that policy at the WTO. While the EU amended the banana rules in 1998, the US argued that they still violated WTO regulations. In 1999 the US was granted permission to impose retaliatory duties on a number of European products amounting to US$190 million annually. The sanctions were lifted in 2001.

The WTO has consistently ruled against the EU banana tariff policy; Brussels is currently appealing the latest ruling in the dispute (see BRIDGES Weekly, 4 September 2008, http://ictsd.net/i/news/bridgesweekly/27660/).

ICTSD reporting; “Companies lose claim for compensation for fallout from WTO banana dispute,” REUTERS, 9 September, 2008; “EU court rejects damages claims in WTO banana case,” REUTERS, 9 September, 2008; “EU court rejects damages claim in EU-US trade spat,” DOW JONES, 9 September, 2008; “EU court throws out banana war lawsuit,” ASSOCIATED PRESS, 9 September, 2008.

One response to “EU Court Rejects Compensation Appeal in WTO Banana Dispute”

Ramiro Saravia 14th November 2008 at 16:37
The desicion of the Court is a step back on the WTO rules. Meanwhile the Members reject to incorporete automatically the international rule in their internal sistem, the WTO has les chance to develope strongly.