Court of First Instance Decision Leaves EU Companies Vulnerable to WTO Penalties
Decision Underscores Conflict Between WTO and EU Law
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Brussels – 14 December 2005: CD Cartondruck AG, a German manufacturer of high end cardboard packaging, together with their legal counsel, Crowell & Moring, expressed their disappointment today with the Court of First Instance decision denying Cartondruck's claim for damages resulting from European Union (EU) banana market reforms. The judgment leaves EU companies unprotected in instances where the EU takes regulatory decisions that are lawful under EU rules but which are subsequently found to violate the rules of the World Trade Organisation (WTO).
The decision comes five years after Cartondruck filed an action for compensation due to injury suffered when EU banana market reforms adopted in 1998 were subsequently found to violate WTO principles. Consequently, the United States received permission from the WTO to impose higher banana import tariffs which directly impacted imports into the US of Cartondruck cardboard shipping containers, resulting in financial costs to the company of approximately € 1.5 million.
According to Steffen Schnizer, Chief Executive of Cartondruck, “The consequences of this decision are disappointing but clear: in any instance where the EU adopts trade-related measures that are found to be in breach of WTO obligations and EU trading partners impose punitive measures as a result, the cost of those measures will be borne directly by individual EU businesses and consumers, instead of by the EU as a whole.”
Werner Berg, partner at the law firm of Crowell & Moring and Cartondruck's legal counsel, also underscored the implications of the Court's decision for the international trading system as a whole. “This case highlights the potentially severe consequences for individual companies when their governments run afoul of WTO principles. It also highlights the challenges posed when a WTO member adopts measures that are perfectly legal under its own system, but which are found to be inconsistent with WTO rules. At a time when the world's trade community has gathered in Hong Kong to discuss the future of the WTO system, those consequences and challenges need to be addressed,” said Berg.
In light of the Court of First Instance decision, CARTONDRUCK is vigorously examining all options available to it, including the possibility of appeal to the European Court of Justice, and will take a decision on these options in the coming days.
Cartondruck is a leading manufacturer of printed and processed collapsible cardboard cartons for proprietary products, many of which are intended for the US market. As an innovative medium-sized business, Cartondruck is flexible enough to satisfy even the most individual customer requirements whilst offering world-wide service. When the counter-veiling duties by the US became effective Cartondruck fulfilled its long term client commitments and maintained its impressive customer services despite the severe damages incurred.
Crowell & Moring LLP's International Trade Group covers the spectrum of transactional, regulatory, and litigation issues involved in the movement of goods and services across national borders. Werner Berg's practice focuses on the entire spectrum of European Union and German trade and antitrust law. Crowell & Moring LLP is a full-service law firm with more than 300 attorneys practicing in litigation, antitrust, government contracts, corporate, intellectual property and more than 40 other practice areas. Based in Washington, D.C., the firm has offices in Brussels, California, and London.
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