(1)

Regulation (EU) No 654/2014 of the European Parliament and of the Council (2) 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.

(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.

(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 (3).

(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,

(1)

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

(2)

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

(3)

Article 3 is amended as follows:

(4)

in Article 4, paragraph 2 is amended as follows:

(5)

Article 5 is amended as follows:

(6)

in Article 6, the following paragraph is added:

(7)

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

(8)

Article 9 is amended as follows:

(9)

Article 10 is replaced by the following:

‘ Article 10

Review