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IKEA Holesale Ltd v   [2003] UKVAT(Customs) C00180 (08 September 2003)

CUSTOMS DUTY – Anti-dumping duties on imports of bed linen from India and Pakistan – Article 236 of the Community Customs Code – Council Regulation (EC) No 2398/97 Principle of the protection of legitimate expectations – Principle of proportionality – Appeal dismissed.

LONDON TRIBUNAL CENTRE

IKEA WHOLESALE LTD Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Peter H Lawson (Chairman)

Praful Davda FCA

Sitting in public in London on 7 July 2003

Mr Benoît Servais, of the Brussels Bar, for the Appellant

Daren Timson-Hunt, Barrister, for the Respondents

DECISION

This is an appeal by Ikea Wholesale Limited of Huntingdon Road, Thrapston, Northants NN14 4QT against a decision made on review by Miss Mita Chohan of the Commissioners' Office at Broad Street, Fiveways, Birmingham B15 1BG dated 27 November 2002. The appeal concerns anti-dumping duty totalling £300,203.83. The grounds of appeal were as follows:

"On 10 June 2002, Ikea Wholesale Ltd ("Ikea") claimed the repayment of duties wrongfully collected on imports of bed linen.

£320,301.74 corresponding to anti-dumping duties paid on imports of bed linen from Pakistan for the period 5 December 1997 to 30 January 2002; and

£69,902.99 corresponding to a portion of the anti-dumping duties paid on imports of bed linen from India for the period 5 December 1997 to 14 August 2001.

The above claims were made pursuant to Articles 236 and 239 of the Community Customs Code and were duly substantiated with copies of the transactions concerned. The claims were based on the grounds that the anti-dumping duties were unlawfully imposed and were therefore not legally due. More precisely, Ikea submitted that Council Regulation (EC) No 2398/97 imposing a definitive anti-dumping duty on imports of bed linen from, inter alia, Pakistan and India (the "Contested Regulation"):

- Applied a wrong methodology in calculating the amounts for administrative, selling and general costs ("SGA") and profits to be used in the constructed normal value of the Indian exporting companies;

- Applied a wrong methodology incorporating the practice of "zeroing" in determining the existence of dumping margins when comparing normal value with export price;

- Failed to evaluate all the relevant injury factors having a bearing on the state of the Community industry, and specifically all the factors set forth in Article 3 of the Basic Anti-Dumping Regulation (in particular its paragraph 5); and

- Erred in relying on the injury determination of the Community industry on companies outside the Community industry.

On the basis of the above arguments, Ikea submitted that the Contested Regulation is invalid.

In addition to the above grounds, Ikea submitted that the Council Regulations adopted after the Appellate Body Report and the Panel Report of the World Trade Organisation ("WTO") of 12 March 2001 are illegal insofar as they failed to provide for the repayment of the anti-dumping duties collected since the entry into force of the Contested Regulation. More precisely, Ikea submitted that these Council Regulations (which were further listed in the notice of appeal and are referred to as "the Subsequent Regulations"):

- infringed the rules of the Treaty, breached the fundamental principles of the Basic Anti-Dumping Regulation and of the relevant provisions of the WTO;

- breached the principle of the protection of legitimate expectations; and

- breached the principle of proportionality."

On 26 June 2002, the Commissioners rejected Ikea's claims on the grounds that Council Regulation (EC) No 160/2002 amending the Contested Regulation does not provide for the repayment of anti-dumping duties collected since 5 December 1997.

On 1 August 2002, Ikea requested a departmental review.

The reasons for rejecting Ikea's claim were:

1. Neither of the Subsequent Regulations provide for any retrospection;

2. The debt was legally owed within the definition of Article 236 of Council Regulation 2913/92.

The Contested Regulation imposed a definitive anti-dumping duty on imports of bed linen from, inter alia, Pakistan and India on 28 November 1997 (entry into force on 5 December 1997).

On 12 March 2001 the Dispute Settlement Body of the WTO adopted the Appellate Body Report and the Panel Report (as modified by the Appellate Body Report) on the case "European Communities – anti-dumping duties on imports of cotton-type bed linen from India, Pakistan and Egypt". These two reports concluded that the European Community acted inconsistently with the provisions of the WTO Agreement on Implementation of Article VI of the GATT 1994 (the "Anti-Dumping Code") for six of the 31 claims made by the Indian government. The four claims filed by Ikea in its notice of appeal against the Contested Regulation were all upheld by the Panel Report and/or the Appellate Body Report. Ikea submitted that these four claims refer to practices that are also incompatible with the EC anti-dumping rules.

Further to the adoption of the Appellate Body Report and the Panel Report, the Council issued two Regulations amending the Contested Regulation: Council Regulation (EC) No 1644/2001 and Council Regulation (EC) No 160/2002. The former Regulation reduced the amounts of definitive duties borne by the Indian exporting companies and temporarily suspended their collection. The latter Regulation terminated the proceeding against Pakistan on the grounds that no dumping was disclosed by the revised calculations.

However, these Regulations failed to provide for repayment of the anti-dumping duties wrongfully collected since 5 December 1997, although the possibility of allowing such repayment was specifically provided for in Article 3 of Council Regulation (EC) No 1515/2001 on the measures that may be taken by the Community following a report adopted by the WTO Dispute Settlement Body concerning anti-dumping and anti-subsidy matters.

The Subsequent Regulations were based on the provisions of Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community, as amended (the "Basic Anti-Dumping Regulation").

We recall that the Basic Anti-Dumping Regulation itself expressly refers in recitals 3 to 5 of its preamble to the provisions of Article VI of the GATT (1947) and to the Anti-Dumping Code. These provisions are enshrined in the Basic Anti-Dumping Regulation which, in general, repeats the provisions of the Anti-Dumping Code in almost identical terms.

Under Article 300.7 EC (former Article 228.7 of the EC Treaty), adherence to the Anti-Dumping Code is binding on the Community institutions and on Member States. It is also settled case-law that when examining the legality of anti-dumping measures, the Court must use the relevant GATT agreements as a benchmark. For that reason, references were made to the relevant Articles of the Anti-Dumping Code in the notice of appeal.

The Illegality of the Contested Regulation

(a) The Contested Regulation erred in calculating the amounts of SGA expenses and the amount of profits to be used in constructing the normal value of the Indian exporting companies.

Article 2.6 of the Basic Anti-Dumping Regulation relating to the methodology to be used by the Commission in constructing the normal value provides that amounts for SGA expenses and for profits are to be based on actual data pertaining to production and sales, in the ordinary course of trade of the like product, by the exporter or producer under investigation. When such amounts cannot be determined on this basis, paragraph (a) of the Article states that the amounts may be determined on the basis of "the weighted average of the actual amounts determined for other exporters or producers subject to investigation in respect of production and sales of the like product in the domestic market of the country of origin".

Article 2.2.2 of the Anti-Dumping Code provides for the same methodology in almost identical terms.

Paragraph 19 of the Contested Regulation refers to paragraphs 23 to 38 of the Provisional Regulation on the methodology used for the purpose of constructing normal value of the Indian exporting companies. The Provisional Regulation in its paragraph 26 states that since only one company had representative sales, the amount of SGA and profit incurred and realised by that company was used for the construction of normal value for all the Indian companies investigated. It also appears that, in calculating the amount of profits under Article 2.6(a), the Commission excluded sales by other exporters or producers that are not made in the ordinary course of trade.

Ikea submitted that the methodology used in calculating the amounts for SGA costs and profits to be used in constructing normal value for the Indian exporting companies was not compatible with the provisions of Article 2.6 of the Basic Anti-Dumping Regulation nor with the provisions of Article 2.2.2 of the Anti-Dumping Code.

In particular, Ikea argued that where there is data on SGA costs and profits for only one other exporter or producer, the text of both Article 2.2.2(ii) of the Anti-Dumping Code and Article 2.6(a) of the Basic Anti-Dumping Regulation and, in particular, the use of the terms "amounts" and "exporters or producers" in the plural, in combination with the reference to a "weighted average" of the "amounts", clearly indicate that the methodology of Article 2.6(a) of the Basic Anti-Dumping Regulation cannot be applied.

Thus, Ikea contended that the Contested Regulation is void as far as the determination of the dumping margins of the Indian exporters are concerned and insofar as the method the Commission used for calculating SGA costs and profits is not compatible with the provisions of Article 2.6(a) of the Basic Anti-Dumping Regulation and Article 2.2.2(ii) of the Anti-Dumping Code.

Moreover, on the calculation of profits, Article 2.6(a) of the Basic Anti-Dumping Regulation refers to "the weighted average of the actual amounts incurred and realised by other exporters or producers" (emphasis added).

Thus, in Ikea's view, the Contested Regulation erred in excluding those sales that were not made in the ordinary course of trade from the calculation of the "weighted average" under Article 2.6(a) of the Basic Anti-Dumping Regulation.

(b) The Contested Regulation applied a wrong methodology incorporating the practice of "zeroing" in determining the dumping margins when comparing normal value with export price.

Article 2.11 of the Basic Anti-Dumping Regulation on the determination of the dumping margin provides that the dumping margin should be established on the basis of one of the following methodologies:

- "a comparison of a weighted average normal value with a weighted average of prices of all export transactions to the Community" (the "First Methodology"); or

- "by a comparison of individual normal values and individual export prices to the Community on a transaction-to-transaction basis" (the "Second Methodology"); or

- a comparison of a weighted average normal value with individual export price transactions to the Community (the "Third Methodology") used where "there is a pattern of export prices which differs significantly among different purchasers, regions or time periods".

Article 2.4.2 of the Anti-Dumping Code is identical to Article 2.11 of the Basic Anti-Dumping Regulation.

When calculating the dumping margin for the Indian and Pakistani exporting companies the Commission compared, in general, the weighted average constructed normal value by type with the weighted average export price by type (paragraph 46 of the Provisional Regulation).

Although neither the Contested Regulation nor the Provisional Regulation make a specific reference to the use of "zeroing" negative dumping, Ikea's advisers understood from paragraph 11 of Council Regulation (EC) No1644/2001 amending the Contested Regulation, as well as from paragraphs 6 to 15 of Council Regulation (EC) No 160/2002 also amending the Contested Regulation, that the Commission applied "zeroing" when comparing export price with normal value for certain exporting companies.

The practice of "zeroing" negative dumping means that the export transactions made at prices above a weighted average normal value are not to be disregarded by the Commission but are imputed as zero. As a consequence, the negative dumping margins are not compensated with the positive margins.

The following table illustrates the distortion created by the "zeroing" of negative dumping:
Type Export Normal Dumping Dumping
Price Value Margin Margin
No Zeroing Zeroing
Sale 1 96 100 4 4
Sale 2 90 100 10 10
Sale 3 105 100 -5 0
Type A 291 300 9 14
Sale 1 130 120 -10 0
Sale 2 135 120 -15 0
Sale 3 140 120 -20 0
Type B 405 360 -45 0
Sale 1 100 90 -10 0
Sale 2 79 90 11 11
Sale 3 70 90 20 20
Type C 249 270 21 31

TOTAL -15 45

Ikea submitted that the practice of "zeroing" negative dumping when establishing the existence of margins of dumping, as applied by the Commission in the Contested Regulation for the Indian and Pakistani exporting companies, was inconsistent with Article 2.11 of the Basic Anti-Dumping Regulation and Article 2.4.2 of the Anti-Dumping Code. Thus, the Contested Regulation was void.

(c) The Contested Regulation failed to evaluate all the relevant injury factors having a bearing on the state of the Community industry and erred in relying on factors pertaining to companies outside the Community industry.

Ikea considered that the Contested Regulation did not show evidence that all the injury factors mentioned in Article 3.5 of the Basic Anti-Dumping Regulation were considered for the purpose of determining the impact of the dumped imports on the Community industry.

Article 3.5 of the Basic Anti-Dumping Regulation on the determination of injury provides that "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."

Ikea submitted that each of the factors listed in Article 3.5 of the Basic Anti-Dumping Regulation must be evaluated by the investigating authorities in each case in examining the impact of the dumped imports on the Community industry concerned. However, it was clear from paragraph 62 of the Provisional Regulation that certain data was not even collected by the Commission for all the factors listed in Article 3.5. Ikea therefore considered that the Contested Regulation failed to analyse all the injury factors for the purpose of determining the impact of the dumped imports on the Community industry.

Moreover, paragraph 34 of the Contested Regulation defines the Community industry as a group of 35 producers. However, it appears that for the purpose of the injury determination the Commission used information concerning companies that were not within the Community industry. This injury determination is irrelevant and contrary to the provisions of both Article 3.5 of the Basic Anti-Dumping Regulation and Article 3.4 of the Anti-Dumping Code.

For the reasons set out above, Ikea submitted that the Contested Regulation is unlawful and that the Commissioners should therefore reimburse Ikea the amounts of anti-dumping wrongfully collected.

As already stated in the notice of appeal the Contested Regulation was subsequently amended by two Council Regulations, namely Council Regulation (EC) No 1644/2001 and Council Regulation (EC) No 160/2002. It was also emphasised that Council Regulation (EC) No 696/2002 confirmed the finding of the Commission which reduced the level of anti-dumping duties to be imposed on Indian exporters. However, these three Regulations (the "Subsequent Regulations") failed to provide for repayment of the anti-dumping duties wrongfully collected since 5 December 1997.

Further, Ikea claimed that the Subsequent Regulations are void insofar as they failed to provide for the repayment of the anti-dumping duties collected since the entry into force of the Contested Regulation. Ikea relied on three arguments to support this claim. First, it submitted that the Subsequent Regulations infringed the rules of the Treaty and breached the fundamental principles of both the Basic Anti-Dumping Regulation and the Anti-Dumping Code. Secondly, it submitted that the Subsequent Regulations breached the principle of protection of legitimate expectations. Thirdly, that they breached the principle of proportionality.

(a) The Subsequent Regulations infringed the rules of the Treaty and breached the fundamental principles of both the Basic Anti-Dumping Regulation and the Anti-Dumping Code.

Ikea claimed that it is settled case-law that provisional or definitive anti-dumping duties may be imposed only if three conditions are concurrently satisfied; the existence of dumping, injury to the Community industry and a causal link between the dumping and the injury. These fundamental principles of Community anti-dumping law are to be found in Articles 1, 7.1 and 9.4 of the Basic Anti-Dumping Regulation as well as in Articles 1, 7.1 and 9 of the Anti-Dumping Code.

Ikea pointed out that the Subsequent Regulations evidenced that no dumping existed during the investigation period as far as exports from Pakistan were concerned and that a lower level of dumping existed as far as Indian exports were concerned. Consequently, the requisite conditions were not satisfied at the time the definitive anti-dumping duties were imposed by the Contested Regulation. If a correct application of the relevant provisions of the Basic Anti-Dumping Regulation had been made by the Commission in 1997, no duties would have been levied on Pakistani exports and a lower level would have been levied on Indian exports. That finding should have led the Council to grant reimbursement, in the Subsequent Regulations, of the anti-dumping duties wrongfully paid by Ikea and all the companies which paid the duties.

Since it was not the purpose of the Subsequent Regulations to adapt the anti-dumping duties imposed to changes in circumstances but voluntarily to comply with the recommendations of the Appellate Body Report and the Panel Report as modified by the Appellate Body Report of the WTO on 12 March 2001, Ikea considered that the Subsequent Regulations had the effect of reopening the original procedure. Contrary to the finding of a review, which would only have prospective effect, nothing prevented the Subsequent Regulations from having retroactive effect. To accept a different solution would result in the unjust enrichment of the Community at the Community importers' expense.

In a similar case, Medici Grimm KG of 29 June 2000, the Court of First Instance (the "CFI") ordered the Council to reimburse the anti-dumping duties paid by a related importer. In substance, the CFI held that where, in a review investigation covering the same investigation period as the original investigation, the Commission finds that there is no dumping or injury, it is no longer possible to consider that the conditions laid down to impose duties are satisfied at the time when the original Regulation was adopted and that trade-protection measures were necessary. The Court concluded that the institutions are bound to abide by all the consequences flowing from their choice of investigation period for the review in question and, since they found that the applicant was not engaged in dumping during that period, they must give that finding retroactive effect. The Court also held that its decision would have been different if the purpose of the review was to adapt the duties to changes in circumstances rather than re-examination of the factors which had given rise to the original duties.

Therefore, Ikea submitted that the Subsequent Regulations infringed the rules of the Treaty and breached the fundamental principles of both the Basic Anti-Dumping Regulation and the Anti-Dumping Code.

The Subsequent Regulations breached the principle of the protection of legitimate expectations

Further to the Appellate Body Report, the Commission announced in a press release that it would "comply swiftly with the ruling in the case at hand (within a few weeks). It [would] also revise its methodology in other investigations and existing measures, devoting all the necessary resources to this task".

Ikea, like the other Community importers of bed linen from Pakistan and India, was confident that the Commission's and the Council's intention was to comply with all the consequences of the finding of the Panel and Appellate Body Reports and would re-calculate the anti-dumping duties on the basis of the figures and data available at the time of the investigation. Accordingly, Ikea was confident that the Contested Regulation would be amended in such a way as to grant repayment of duties collected since 5 December 1997, or at least for the last three years, on the grounds that the original duties were based on erroneous calculation methodologies and a wrong application of the Basic Anti-Dumping Regulation and the Anti-Dumping Code.

These expectations are consistent with settled case-law and with the finding of the CFI in Medici Grimm which held that although, as a general rule, the principle of legal certainty precludes a Community act from taking effect as from a date prior to its publication, the position may exceptionally be otherwise where the purpose to be attained so requires and the legitimate expectations of the persons concerned are properly respected.

Therefore, Ikea submitted that the Subsequent Regulations are void insofar as they breached the principle of the protection of legitimate expectations.

The Subsequent Regulations breached the principle of proportionality.

According to Articles 7.2 and 9.4 of the Basic Anti-Dumping Regulation the amount of the anti-dumping duty may not exceed the dumping margin and it should be less if such lesser duty would be adequate to remove the injury. In other words, the level of anti-dumping duty should be strictly proportionate to the amount of dumping or injury it intends to offset.

Ikea submitted that the Subsequent Regulations breached the principle of proportionality. The Subsequent Regulations failed to grant repayment of duties wrongfully collected and the Community industry enjoyed, since the entry into force of the measures on 5 December 1997, much greater protection than necessary. This excessive protection was encompassed to the detriment of Community importers who paid the duties. The only way to iron out the benefit of these disproportionate measures would be to repay the duties which diminished the profitability margin of the importing companies on the product concerned.

Thus, Ikea submitted that the Subsequent Regulations are void insofar as they breached the principle of proportionality.

Conclusion: In light of the above arguments, Ikea respectfully requested the VAT and Duties Tribunal:

To grant Ikea immediate reimbursement of the anti-dumping duties wrongfully paid during the periods mentioned in Ikea's original claims under the Contested Regulation plus, where applicable, interest on these amounts;

Alternatively, if the Tribunal is not convinced that the Contested Regulation and the Subsequent Regulations are unlawful, to put the question of the validity of these Regulations before the European Court of Justice by way of preliminary ruling.

There was an agreed Statement of Facts, as follows:

Ikea Wholesale Limited ("the Appellant") at all material times carried on business as a producer and retailer of household goods.

During the period March 2000 to December 2001 the Appellant imported cotton-type bed linen from Pakistan into the European Community and paid £230,301.74 in anti-dumping duty.

During the period March 2000 to July 2001 the Appellant imported cotton-type bed linen from India into the European Community and paid £69,902.09 in anti-dumping duty.

By way of letter dated 10 June 2002, the Appellant applied for repayments of anti-dumping duty on the bed linen imports from both Pakistan in the sum of £230,301.74 and India in the sum of £69,902.09. The basis for the claim for repayment was that Regulation (EC) 2398/97 was invalid.

On 26 June 2002 the Respondents rejected the claim on the basis that there was no provision in Community law which permitted the reimbursement of the anti-dumping duty. On 1 August 2002, the Appellant requested a formal departmental review. This was acknowledged by letter dated 27 August 2002. The formal departmental review, which constitutes the decision that is the subject of the appeal is held in a letter dated 27 November 2002.

Council Regulation (EC) 384/96 of 22 December 1995 ("the Basic Regulation") provides for protective measures against the dumping of imports on the European Community of goods from non-Community countries.

Pursuant to the objectives of the Treaty establishing the European Community (Article 133) and the Basic Regulation, Council Regulation (EC) 2398/97 of 28 November 1997 imposed definitive anti-dumping duty on imports of cotton-type bed linen originating in Egypt, India and Pakistan with effect from 5 December 1997. This regulation was in force during the period that all the relevant importations were made by the Appellant.

On 3 August 1998 the Indian government applied through the World Trade Organisation Dispute Settlement Body ("WTODSB") for consultations with the European Community on the imposition of the anti-dumping duty imposed under Regulation 2398/97. On 17 August 1998 the Government of Pakistan joined the consultations. As a result of the failure of those consultations, the matter was referred for consideration by a WTODSB panel. The outcome of the deliberations of that panel are set out in the WTO Panel Report (Document WT/DS1412/R, dated 30 October 2000) (as amended) and the subsequent findings of the WTO Appellate Body (Document WT/DS141/AB/R, dated 1 March 2001), adopted by the WTO on 12 March 2001.

On 26 July 2001 Council Regulation (EC) 1515/2001 was published in the Official Journal of the European Communities (L201/10 dated 26.7.2001) setting out the measures to be taken by the European Community following a report adopted by the WTODSB on anti-dumping. Regulation 1515/2001 provides that WTODSB report recommendations only have prospective effect and it does not permit the reimbursement of duties unless otherwise provided for.

On 14 August 2001, as a result of the WTODSB report recommendations, Council Regulation (EC) 1644/2001 was published in the Official Journal of the European Communities (L219/1 dated 14.8.2001) suspending the application of anti-dumping duties in relation to imports of cotton-type bed linen originating in India, previously imposed by Council Regulation (EC) 2398/97. Regulation 1644/2001 contains no provision giving retrospective effect to the WTODSB recommendations for the reimbursement of duties.

On 30 January 2002, as a result of the WTODSB report recommendations, Council Regulation (EC) 160/2002 was published in the Official Journal of the European Communities (L26/1 dated 30.1.2002) terminating the anti-dumping proceeding concerning imports of cotton-type bed linen originating in Pakistan and suspending the anti-dumping duty in respect of imports of cotton-type bed linen originating in Egypt, previously imposed by Council Regulation (EC) 2398/97. Regulation 160/2002 thus terminated the application of anti-dumping duties on imports into the EU of cotton-type bed linen originating in Pakistan. Regulation 160/2002 contains no provision giving retrospective effect to the WTODSB recommendations or the reimbursement of duties.

Jurisdiction

It is necessary to state the jurisdiction of the Tribunal in this case. Mr Timson-Hunt provided us with useful guidance on this point.

The powers of the Tribunal arise from sections 14 and 16 of the Finance Act 1994. This appeal concerns a repayment of duty, which, not being an ancillary matter (as listed in Schedule 52 of that Act) falls to be categorised as "other decisions" under Section 16(5) Finance Act 1994. As it is a non-ancillary matter, the Tribunal may quash or vary any decision or replace it with its own decision. The Tribunal's jurisdiction on the legality and/or validity of an Act of the Community, including a Community Regulation, emanates from the EC Treaty, Article 234 (previously Article 177).

If the Tribunal finds that the position in Community law is clear and would be interpreted as such by Courts in other member States and the European Court of Justice ("ECJ"), then it can be applied by the Tribunal as acte Clair (Sri CILFITand Lanificio di Gavardon SpA v Ministry of Health [1982] ECR 03415 (Case C-283/81) at para 16-17. However, if it is necessary to decide the legality of a Community act in order to reach a decision, the Tribunal has no jurisdiction to find such acts unlawful and the matter must be referred to the ECJ for a preliminary ruling (EC Treaty, Article 234(2). The caveat to this is that the party challenging the Community act must have a right to make such a challenge.

The legality of Community acts can only be challenged in the ECJ and by one of three methods; either under Article 230, or 241 of the EC Treaty or indirectly through national courts by way of preliminary reference under the EC Treaty, Article 234 (ex Article 177).

Under Article 230, only member States, the Council or Commission can challenge a measure which is of general effect (Article 230(2)). Natural or legal persons (such as the Appellant) can only challenge the legality where the matter is of direct or individual effect (Article 230(4)) and these proceedings must be instigated within 2 months of the publication of the measure (Article 230(5)).

Under Article 241, notwithstanding the expiry period in Article 230(5), any party may challenge the legality of a Council or Commission Regulation.

Regulations are by their nature of general effect and therefore cannot be challenged by a person under Article 230 (they do not have direct effect).

However, the ECJ has held that ADD Regulations are 'hybrid' – they are of general effect for some importers, but are of direct and individual effect for all exporters and producers of the relevant goods and some importers (Nachi Europe GmbH v Hauptzollamt Krefeld [2001] ECR 1-01197 (Case C-239/99), judgment, para 21 and Adv Gen Jacob's Opinion, para 26 to 31.

Further, where a party is directly and individually concerned with a Regulation and can, but does not, challenge that Regulation under Article 230 within the time limit in Article 230(5), then that measure becomes definitive as against them, cannot be challenged thereafter either in the ECJ or in the national court and Article 241 can no longer be relied upon (Nachi, Judgment, para 30 to 37 (and in particular 37) see also the Adv Gen Jacob's Opinion, para 59). The ECJ also confirmed that to decline to allow a challenge through the domestic court where a party could have challenged the measure under Article 230 is not a denial of justice (Nachi Adv Gen Jacob's Opinion, para 74).

Therefore, in order for a Court or Tribunal to make a reference or permit the challenge of the legality of an ADD Regulation, it must be satisfied that the party challenging a Regulation was not subject to its direct and individual effect (e.g. had locus standi) and could not have challenged the Regulation under Article 230.

The conditions to establish locus standi under the EC Treaty, Article 230:

(a) For some time it was settled law that a person is only directly and individually concerned if the Community act affects them by reason of certain attributes which are peculiar to them or by reason of circumstances which they are differentiated from other persons (the 'Plaumann test' from Plaumann & Co v Commission of the European Community [1963] ECR 00095 (Case 25-62) (Judgment), para 3.

(b) In respect of anti-dumping, under the Plaumann criteria only where an importer was related to any and/or all of the exporters against which the ADD applied, was involved in the establishment of the retail prices within the Community upon which the ADD measures were based (in order to establish the export price) (Extramet Industie SA v Council of the European Communities [1991] 1-02501 (case C-358/89) (Judgment), para 14-15; Medici Grimm KG v Council of the European Union [2000] ECR 11-02671 (Case T-7/99) (Judgment), para 64-65 or there existed a set of factors which constitutes a situation which was peculiar to that importer, e.g. inter alia they were the largest Community importer of the product, would have difficulty in obtaining other supplies from sole or limited Community producer(s), or they are seriously affected by the ADD, would that importer be individually and directly concerned (Extrament Industrie (Judgment), para 16-17);

(c) This criterion was recently relaxed by the CFI in the case of Jégo-Quéré & Cie SA v Commissioner of the European Communities [2002] ECR 11-02365 (Case T-177/01), which ruled that it is only necessary for a natural or legal person to be regarded as individually concerned where the Community measure of general application affects his legal position, in a manner which is both definite and immediate, by restricting his rights or by imposing obligations on him. Further that the number and position of other persons who are likewise affected by the measure, or who may be so, are of no relevance in that regard (Jégo-Quéré, at para 51 (see also paras 27 and 50)).

If there was locus standi under Article 230 (and the burden is on the Appellant to show to the Tribunal in the negative before they can challenge a Regulation under the EC Treaty, Article 241), then the Tribunal cannot permit a preliminary reference to be made on the question of legality, as the challenged Regulations (one and/or any of them) are definitive as against the Appellant and became such 2 months after their entry into force.

The Respondents' case was simply that the measures to be taken in the event of a WTODSB Report as set out in the relevant Regulations are binding in their entirety on the Respondents, pursuant to the EC Treaty, Article 249 (ex Article 189) – see Fratelli Variola SpA v Amministrazione italiana delle Finanze [1973] ECR 00981 (Case C-34/73), para 15. In effect the Respondents are required to enforce and comply with the provisions of those Regulations.

Council Regulation (EC) 1515/2001, concerns the measures that may be taken by the Community following a WTODSB Report. The Preamble, para 6 to that Regulation and Article 3 of the same, provide that such findings only have a prospective effect and any measures taken pursuant to that regulation shall not serve as a basis for the reimbursement of duties, unless otherwise provided for.

Council Regulation (EC) 1644/2001, dated 7 August 2001, suspended the ADD against India and provided that the ADD would expire six months thereafter (subject to no review being requested). The Preamble, (para 72), states that on full examination of the facts established in the original investigation and in taking account of the WTODSB recommendations, the imports from Egypt, India and Pakistan were still injuriously dumped on the Community, but it was not considered appropriate to continue to collect duties from Indian exports. This Regulation states that it has regard to Regulation 1514/2001 (in the second Recital) and there is no provision in the Regulation which permits the reimbursement of duties. The Preamble, para 76, indicates that all interested parties were given the opportunity, but did not alter the conclusions of the Regulation.

Given that there is no provision in either of Regulation 1644/2001 or Regulation 160/2002 which provides for the reimbursement of the ADD collected, pursuant to Council Regulation (EC) 1515/2001, the Commissioners claimed that they had properly refused the Appellant's request.

On the legality of the Regulations challenged by the Appellant, the Commissioners submitted that:

(a) in respect of Regulation (EC) 2398/97, the WTODSB found that five measures infringed the EC's obligations under the Agreement and requested that the EC bring these measures into conformity (WTODSB Panel Report, para 7.4 and 7.5 and Appellant Report para 86 and 87);

(b) WTO Reports have no retrospective effect in law and there is no requirement or recommendation in the Reports concerning the reimbursement of ADD;

(c) the question of whether the EC has to apply retroactively rates of duty adopted by its own motion after reopening the original dumping investigation (not as a result of a WCO Report) where it is found that there was no dumping, was considered by the ECJ, Court of First Instance, ("CFI") in Medici Grimm KG v Council of the European Union [2000] ECR 11-02671 (Case T-7/99) (Judgment);

(d) Medici was an application under the EC Treaty, Article 230 (ex Article 173) for annulment of a Regulation removing ADD and for the retrospective repayment of ADD already paid. The Court held that the Regulation reducing the rates of duty only had prospective effect (para 54) and that the applicant had a legal interest in the annulment in that the Council did not grant its request for retroactive application of the amended (lower) duty rate (para 55). Given that the applicant's resale prices were used in order to construct the export price, they were individually concerned (para 65 and 66) (therefore had a right of action under the EC Treaty, Article 230, to annul, but would have no later right of action under Article 241). The CFI ruled that where on carrying out a review under the Basic Regulation, Article 11, which was not on the basis of new facts or information, it was found that there had been no dumping for the original period, then that was not a review but a reopening of the original procedure and the EC was bound by the consequences and must give a finding of retroactive effect (para 86 and 87).

(e) in distinguishing Medici that:

(i) that case concerned a review by the Commission under the Basic Regulation, Article 11 of its own procedures and was not as a result of a WTO Report;

(ii) the whole factual situation was entirely different from that presented by the Appellant;

(iii) the review procedure as set out in the Basic Regulation, Article 11, provides that the European Commission may consider whether the circumstances with regard to anti-dumping have changed. In Medici the CFI found that there was no change in either the facts or the procedures and by reviewing the original investigation period the Commission had departed from the framework of the Basic Regulation in that it was not a 'review' in that case, but merely a reopening of the original procedure. That is not the position in respect of this appeal. The WTODSB Reports present a change in circumstances, which were taken on board by the EC and the dumping situation reviewed (Medici, para 84-86)'

(iv) the current appeal concerns action to be taken following a WTODSB Report, which was not the situation in Medici. Regulation 1515/2001, which specifies the action to be taken as a result of a WTODSB Report did not apply to the situation in Medici and, moreover, was not in force at the time of the CFI Medici Judgment;

(v) there was, and still is, no equivalent provision to Regulation 1515/2001, Article 3, prohibiting the reimbursement of ADD where ADD is reduced to nil as a result of an Article 11 review or a reopening of the original procedure which is not brought about by a WTODSB Report; and

(vi) in respect of imports from India, the EC maintains that despite the incompatibility of the pricing methodology, bed linen was still injuriously dumped on the EC.

(f) the fundamental principles of imposing ADD set out in the Basic Regulation, Articles 7(1) and 9(4), and the actions of the EC were not unlawful in respect of the principles therein. Interested parties were given sufficient notice of the proceedings and invited to submit information in compliance with Article 7(1) (see Regulation 2398/97, Preamble, para (2) and (3)) and the facts as finally established at the time indicated that there was dumping taking place in compliance with Article 9(4). The Commissioners submitted that the investigation of anti-dumping is not an exact science, but an assessment based on facts and procedures provided at any one time. Further, that as soon as the WTODSB Reports were published, the ADD was terminated and/or suspended;

(g) WTO Agreements and Recommendations are part of the negotiation process between WTO members. There is no legal basis for applying the WTODSB Reports retrospectively and the Appellant has not produced evidence of other WTO members applying such reports retrospectively;

(h) if the Tribunal is minded to conclude that the WTODSB Reports must be applied retrospectively, which the Respondents say it should not, then the same principle must apply to all WTO Agreements and Rulings back until the original GATT Agreement 1947. This would mean, for example, that any measures under the GATT 1994 Agreement must be applied retrospectively back until 1947 and duty reimbursed accordingly. The Commissioners submitted that this cannot be right;

(i) in respect of the claim of legitimate expectation, in their grounds of appeal (paras 37 to 40 above) the Appellant relied on the expectation created by the publishing of the press release by the Commission, dated 12 March 2001. The legal principles of legitimate expectation are set out in Administration des douanes v Société anonyme Gondrand Fréres Sociéte anonyme Garancini [1981] ECR1-1931 (Case C169/80), para 17, in which the ECJ held that the principle requires that rules imposing charges should be clear and precise and that if they are not then the court should find in the taxpayer's favour. The Commissioners contended that press releases do not constitute rules or legal instruments. Further, given that the Appellant had already paid the ADD in respect of their importations there could be no expectation in respect of an act already done. If the expectation was on the basis of the reimbursement of the ADD, founded purely on the case of Medici, then given that the facts and situation of that case are entirely different to the Appellant's appeal; that in any event, the ECJ Judgment does not constitute per se a rule imposing a charge; and ECJ Judgments are not bound by precedent, no expectation could have arisen;

(j) further, in Regulation 1515/2001, which entered into force on 23 July 2001, Recital 6 and Article 3 are clear and unambiguous in respect of prohibiting reimbursement of ADD. Regulation 1644/2001, which entered into force on 7 August 2001, and Regulation 160/2002, which entered into force on 28 January 2002, do not contain any provision permitting the reimbursement of the ADD (there is no dispute between the parties on this). Therefore, the position in respect of the legislation was clear – there would be no reimbursement of ADD already paid. Consequently, on the basis of the principle in Godrand Fréres there is no legitimate expectation;

(k) in respect of proportionality, the Appellant claimed on two bases:

(i) first, the Basic Regulation, Article 9, sets out that the amount of ADD may not exceed the dumping margin and the Appellant contends that the ADD was not proportionate (Appellant's grounds of appeal paras 41 and 42 above). The Commissioners submitted that at the time of the original investigation, the ADD was applied in a proportionate manner in response to the application made by EUROCOTON based on the situation and the results of the dumping investigation as it was known at the time; and

(ii) second, the Appellant contended that the subsequent Regulations breached proportionality. The Commissioners submitted that in respect of imports from Pakistan, when later reviewing the constructed normal value, but without applying zeroing, no dumping was found to exist. However, when the measure was terminated all interested parties were given the opportunity to make submissions, but no submissions were received in respect of retrospective application or reimbursement of duty (Regulation 160/2002, Preamble, paras 23-24). In respect of imports from India, although on review the EC found some evidence of dumping and suspended the ADD, no submissions were made on retrospective application or reimbursement of duty (Regulation 1644/2001, Preamble, paras 75-77), therefore it would appear that the proposed course of action was considered proportionate at the time of consultation. In the interests of legal certainty it is submitted that the steps taken to terminate and/or suspend the ADD were not disproportionate.

In respect of making a reference for a preliminary ruling under the EC Treaty, Article 234, Mr Timson-Hunt submitted that this can only be made if the Appellant has a right to challenge the Community act. If the Tribunal is minded to find that the Community acts may be unlawful and a reference to the ECJ is required to resolve the matter, then the Appellant must first show that they have the right to challenge that provision. To do this they are required to establish that they did not have sufficient locus standi in order to have challenged the Regulation in the CFI under the EC Treaty, Article 230.

Mr Timson-Hunt contended that:

(a) The Appellant was directly and individually concerned in that it:

(i) provided information as part of the European Commission's dumping investigation;

(ii) is a large importer of cotton-type bed linen from India and Pakistan;

(iii) the imposition of the ADD had a significant effect on their business in that they incurred significant costs in the sum of £300,203.83 and to avoid these costs would have had to source their goods from producers in other countries, which might have proved difficult;

and/or alternatively, if the test from Jégo-Quéré applies

(b) the introduction of the ADD immediately and definitely imposed an obligation on the Appellant to pay the ADD on importations of bed linen and/or restricted their right to import the same unless ADD was paid; and

(c) the suspension and/or termination of the ADD without permitting reimbursement immediately and definitely imposed a restriction on the Appellant's right to have the ADD repaid.

For these reasons, Mr Timson-Hunt claimed that the relevant Regulations are definitive as against the Appellant and consequently, no reference can be made to the ECJ on the question of their legality and the appeal should be dismissed.

Conclusions:

We find ourselves unable to conclude that the Community act is clear and would be interpreted as such by the Courts and other Member States (see para 58 above). Secondly, we consider that the Appellant clearly was directly and individually concerned with the Regulations in question and did not challenge the Regulations under Article 230 within the time limit. Therefore, the Regulations became definitive against them and could not subsequently be challenged in the ECJ or in the UK courts.

We have considered the Jégo-Quéré case which, we believe, strengthens the position adopted by Mr Timson-Hunt.

It follows from our conclusions as set out above that the appeal must be dismissed. We would like to express our gratitude to Mr Timson-Hunt for his clear explanations of the relevant Regulations and expert knowledge of current ECJ jurisprudence.

The Appellant must pay the Commissioners' reasonable costs of the appeal.

PETER H LAWSON

CHAIRMAN

RELEASED:

LON/02/7045