1

By its appeal, the Council of the European Union seeks to have set aside the judgment of the General Court of the European Union of 27 September 2011 in Case T-199/04 Gul Ahmed Textile Mills v Council [2011] (‘the judgment under appeal’) by which that court annulled Council Regulation (EC) No 397/2004 of 2 March 2004 imposing a definitive anti-dumping duty on imports of cotton-type bed linen originating in Pakistan (OJ 2004 L 66, p. 1), in so far as it concerns Gul Ahmed Textile Mills Ltd (‘Gul Ahmed Textile Mills’).

2

Article 3 of Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community (OJ 1996 L 56, p. 1), as amended by Council Regulation (EC) No 1972/2002 of 5 November 2002 (OJ 2002 L 305, p. 1, ‘Regulation No 384/96’), entitled ‘Determination of injury’, provides:

‘1.   Pursuant to this Regulation, the term “injury” shall, unless otherwise specified, be taken to mean material injury to the Community industry, threat of material injury to the Community industry or material retardation of the establishment of such an industry and shall be interpreted in accordance with the provisions of this Article.

2.   A determination of injury shall be based on positive evidence and shall involve an objective examination of both (a) the volume of the dumped imports and the effect of the dumped imports on prices in the Community market for like products; and (b) the consequent impact of those imports on the Community industry.

3.   With regard to the volume of the dumped imports, consideration shall be given to whether there has been a significant increase in dumped imports, either in absolute terms or relative to production or consumption in the Community. With regard to the effect of the dumped imports on prices, consideration shall be given to whether there has been significant price undercutting by the dumped imports as compared with the price of a like product of the Community industry, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which would otherwise have occurred, to a significant degree. No one or more of these factors can necessarily give decisive guidance.

...

5.   The examination of the impact of the dumped imports on the Community industry concerned shall include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry, including the fact that an industry is still in the process of recovering from the effects of past dumping or subsidisation, the magnitude of the actual margin of dumping, actual and potential decline in sales, profits, output, market share, productivity, return on investments, utilisation of capacity; factors affecting Community prices; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments. This list is not exhaustive, nor can any one or more of these factors necessarily give decisive guidance.

6.   It must be demonstrated, from all the relevant evidence presented in relation to paragraph 2, that the dumped imports are causing injury within the meaning of this Regulation. Specifically, this shall entail a demonstration that the volume and/or price levels identified pursuant to paragraph 3 are responsible for an impact on the Community industry as provided for in paragraph 5, and that this impact exists to a degree which enables it to be classified as material.

7.   Known factors other than the dumped imports which at the same time are injuring the Community industry shall also be examined to ensure that injury caused by these other factors is not attributed to the dumped imports under paragraph 6. Factors which may be considered in this respect include the volume and prices of imports not sold at dumping prices, contraction in demand or changes in the patterns of consumption, restrictive trade practices of, and competition between, third country and Community producers, developments in technology and the export performance and productivity of the Community industry.

...’

3

The judgment under appeal contains the following findings:

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4

By application lodged on 28 May 2004, Gul Ahmed Textile Mills requested the General Court to annul Regulation No 397/2004 in so far as it concerns it.

5

Gul Ahmed Textile Mills relied on five pleas in law, alleging respectively:

6

The General Court considered it appropriate to rule first on the third part of the fifth plea. By the third part of the fifth plea, the applicant alleged, in essence, that the Council made an error of law by failing to examine whether the abolition of the previous anti-dumping duties and the implementation of a scheme of generalised tariff preferences in favour of the Islamic Republic of Pakistan at the start of 2002, had the effect of breaking the causal link between the injury allegedly suffered by the Community industry and the imports from Pakistan.

7

First, in paragraphs 45 to 51 of the judgment under appeal, the General Court noted that, from the start of the administrative procedure, the associations representing exporting producers of Pakistani bed linen drew the attention of the EU institutions to the fact that the injury allegedly suffered by the Community industry had been caused by two factors, namely the abolition of (i) the previous anti‑dumping duties and (ii) ordinary customs duties, in the context of the scheme of generalised tariff preferences in favour of the Islamic Republic of Pakistan, not by the dumping of products originating in Pakistan. The surge of imports of bed linen from Pakistan had, in the view of the Pakistani exporting producers, been facilitated by the exemption from certain duties and by the amendment of the legislative framework.

8

In paragraphs 53 to 59 of the judgment under appeal, the General Court found that, in order to discharge the obligation to examine, in accordance with Article 3(7) of Regulation No 384/96, all the ‘known factors other than the dumped imports which at the same time are injuring the Community industry’, the EU institutions had to separate correctly and distinguish the injurious effects of the dumped imports from the injurious effects of other known factors.

9

The General Court held, in paragraph 56 of the judgment under appeal, that the enumeration of ‘known factors other than the dumped imports’, in Article 3(7) of Regulation No 384/96 is not exhaustive but, on the contrary, indicative, as is shown by the use of the word ‘include’ introducing the list of factors which may be regarded as relevant. The General Court stated, in paragraph 57 of the judgment under appeal, that the common objective of Article 3(7) of that regulation and Article 3.5 of the 1994 Anti-dumping Code is to ensure that the imports forming the subject-matter of the investigation do not have attributed to them the possible negative effects of other possible factors having an impact on the injury suffered respectively by the Community or national industries, lest those industries have conferred upon them protection going beyond what is necessary.

10

The General Court held, in paragraph 59 of the judgment under appeal, that the abolition of the previous anti-dumping duties and ordinary customs duties under the scheme of generalised tariff preferences were known factors which the EU institutions had to take into account in assessing the reality of the causal link between the injury suffered by the Community industry and the imports from Pakistan of the product forming the subject-matter of the anti-dumping investigation.

11

The General Court inferred from this, in paragraph 84 of the judgment under appeal, that it was not apparent from the analysis carried out by the EU institutions, even in the form of a mere estimate, what the injury suffered by the Community industry would have been in the absence of any dumping; in other words, it was not apparent what injury would have arisen merely from the entry into force of the scheme of generalised tariff preferences and the abolition of the previous anti-dumping duties, whether in terms of loss of market share, reduction in profitability or performance of the industry referred to above, renunciation of lower segments of the market or any other relevant economic indicator.

12

Consequently, the General Court upheld the third part of the fifth plea in law, and, without examining the other pleas, annulled Regulation No 397/2004 in so far as it concerns Gul Ahmed Textile Mills.

13

In that context, the Council brought the present appeal against the judgment under appeal, supported by the Commission, the intervener at first instance.

14

The Council submits that the General Court infringed Article 3(7) of Regulation No 384/96, by misconstruing the concept of ‘other factors’ provided for in that provision. Admittedly, the Council states that the General Court correctly found that Article 3(7) requires, in principle, that the injurious effects of other known factors are separated and distinguished from the injury caused by the dumped imports. However, it submits that the General Court erred in concluding that the two factors at issue, namely the abolition of the previous anti-dumping duties and the implementation of a scheme of generalised tariff preferences constituted ‘other factors’ within the meaning of Article 3(7) of Regulation No 384/96. Consequently, the General Court erred in finding that, in the present case, the institutions infringed that provision because they failed to separate or distinguish the alleged injurious effects of the two factors at issue.

15

The Council contends that an ‘other factor’ within the meaning of Article 3(7) of the Regulation 384/96 is, by definition a factor that is unrelated to the dumped imports. The two factors at issue are intimately related to the dumped imports from Pakistan. In the Council’s view, ‘a factor that merely facilitates an increase in the dumped imports is not itself a separate factor causing injury, as any injury that results from an increase of the dumped imports is caused by the dumped imports, not by the factors facilitating the increase in dumped imports’. That interpretation is confirmed by the findings of a WTO panel report of 28 October 2011, entitled ‘European Union – Anti-dumping measures on certain footwear from China’ (WT/DS405/R).

16

The Council states that, notwithstanding the fact that the list in Article 3(7) of Regulation No 384/96 is not exhaustive as such, it does not include the two factors at issue as ‘other factors’ within the meaning of that provision. Changes to the legislative regulatory framework matter only in so far as they had an effect on the market and the two factors at issue could have had an effect only on the dumped imports. However, in the Council’s view, the two factors at issue did not affect the performance of the Community industry.

17

In addition, the Council submits that the legal error of the General Court is due to a misunderstanding of Article 3(6) and (7) of Regulation No 384/96, revealed by the statements in paragraph 84 of the judgment under appeal.

18

The Commission essentially supports the Council’s arguments.

19

Gul Ahmed Textile Mills contends that the claims in the appeal invalidly restrict the consideration of ‘other factors’ under Article 3(7) of Regulation No 384/96. The Council’s interpretation of the concept of ‘other factors’ is contrary to that provision. In addition, since the objective of that provision is to ensure that no injury is being attributed to dumped imports that results from another cause, there is no basis for an arbitrary limitation of the factors whose injurious effects are to be taken into account.

20

Gul Ahmed Textile Mills contends that, as regards the concept of ‘other factors’, it is not true that the factors at issue were ‘intimately related’ to the dumped imports. The removal of the previous anti-dumping duties reflected the European Union’s correction of the invalid imposition of measures in 1997, and had nothing to do with dumped imports, whether during the investigation period or before. The European Union’s granting of a special tariff preference to imports from Pakistan as of 1 January 2002 was not specific to bed linen imports, let alone to dumped bed linen imports. The amendments to the legislative framework of the market were due only to the action of the European Union and not ‘intimately related’ to actions of third country producers.

21

Gul Ahmed Textile Mills maintains that the factors at issue directly reduced the duty burden on all bed linen imports from Pakistan, thereby directly affecting the price levels of those imports on the European Union market. To characterise these tariff changes as ‘only facilitating an increase in the volume of dumped imports’ is manifestly inaccurate.

22

Gul Ahmed Textile Mills contends that the key question is whether the factors at issue would have directly influenced the level of any of the economic indicators which the EU institutions examine to determine whether and why the EU industry suffered material injury. Article 3(5) of Regulation No 384/96 requires an evaluation of ‘all relevant economic factors and indices having a bearing on the state of the industry’ and included in the illustrative list of Article 3(5) are ‘factors affecting Community prices’. Gul Ahmed Textile Mills states that as a direct result of the factors at issue, without any change to the FOB prices of the Pakistani producers, the EU producers were suddenly facing imports which entered the EU market at a price level very substantially lower than what they had been previously. Changes to the legislative framework thereby had a direct effect on the economic circumstances considered in the determination of injury and of causation between that injury and dumping.

23

It is apparent from recitals 108 to 115 of Regulation No 397/2004 that the EU institutions examined the factors which they regarded as factors other than the dumped imports.

24

In particular, the imports from India, Turkey, Romania, Bangladesh and Egypt were examined and the factors linked to the contraction of demand, imports and exports by the Community industry, and the productivity of that industry.

25

In assessing the causal link between the dumped imports and the injury sustained by the Community industry, it is not disputed that the EU institutions did not examine the two measures in question, that is the abolition of the ordinary customs duties under the scheme of generalised tariff preferences and the abolition of the previous anti‑dumping duties.

26

It should be noted that those measures concerned products originating in Pakistan and that Regulation No 397/2004 applies to all the Pakistani exporters. Thus, in accordance with that regulation, all exports of products listed therein constitute dumped imports within the meaning of Article 3 of Regulation No 384/96.

27

It is clear that the abolition of import duties of, first, 12% and, second, 6.7%, could have had the effect of facilitating and promoting the imports of the products concerned. However, the effect was on the dumped imports themselves.

28

It is apparent from the wording of Article 3(7) of Regulation No 384/96, in particular the words ‘Known factors … which are injuring the Community industry’, that that regulation requires the factors which are directly causing injury to be examined, which presupposes the existence of a direct causal link.

29

By contrast, in the present case, the changes to the legislative conditions under which the dumped imports take place cannot be regarded, as such, as causing injury. It is the imports themselves which are causing injury.

30

The dumped imports and the legislative conditions under which they take place are inseparable.

31

Therefore, the measures at issue which facilitate and promote imports are only indirect causes and cannot be regarded as ‘other factors’ within the meaning of Article 3(7) of Regulation No 384/96.

32

That interpretation is consistent with the report of the WTO Panel of 28 October 2011, entitled ‘European Union – Anti-dumping measures on certain footwear from China’, which examined the issue of the causal link between the lifting of an import quota and injury in the light of Article 3.5 of the 1994 Anti-Dumping Code. At point 7.527 of that report, it was found that the lifting of an import quota, which allows for an increase in the volume of dumped imports, is not itself a factor causing injury.

33

Import quotas are legislative conditions under which imports take place, in the same way as are customs duties on imports.

34

In those circumstances, the General Court erred in law in holding that the two factors at issue constitute ‘other factors’ within the meaning of Article 3(7) of Regulation No 384/96.

35

However, that conclusion does not prejudge the question whether the factors at issue must be taken into account when examining whether there is injury in accordance with Article 3(2), (3) and (5) of Regulation No 384/96.

36

The judgment under appeal must therefore be set aside.

37

In accordance with the first paragraph of Article 61 of the Statute of the Court of Justice of the European Union, where the Court of Justice sets aside a decision of the General Court, it may itself give final judgment in the matter, where the state of the proceedings so permits, or refer the case back to the General Court for judgment.

38

In the present case, the conditions in which the Court may itself give final judgment on the matter are not met.

39

Consequently, it is necessary to refer the case back to the General Court and to reserve the costs.

On those grounds, the Court (Fifth Chamber) hereby: