Judgment summary
The applicant, PT Indonesia Ruipu Nickel and Chrome Alloy (IRNC), sought annulment of Commission Implementing Regulation (EU) 2022/433, which imposed definitive countervailing duties of 21.4% on its exports of stainless steel cold-rolled flat products from Indonesia to the European Union (para 15).
The case arose from an anti-subsidy investigation initiated by the Commission on 17 February 2021 following a complaint by Eurofer, covering imports from India and Indonesia (paras 2, 5). The investigation examined, among other things, preferential financing provided by Chinese policy banks to IRNC and its related Chinese parent companies, and the provision of nickel ore and land by the Indonesian Government for less than adequate remuneration.
The Court rejected all three pleas raised by the applicant, concerning (i) the attribution of Chinese financial support to the Indonesian Government and the finding of regional specificity, (ii) the calculation of benefits under various subsidy schemes, and (iii) the allocation of subsidy amounts relating to nickel ore. The action was dismissed in its entirety (para 374).
Background
Following a complaint by Eurofer on behalf of the EU stainless steel industry, the Commission opened an anti-subsidy investigation on 17 February 2021 concerning imports from India and Indonesia (paras 2, 5). Pre-initiation consultations with the Indonesian Government on 15 February 2021 did not yield a mutually agreed solution (para 3). A separate anti-dumping investigation concerning the same product had already resulted in definitive anti-dumping duties imposed on 18 November 2021 (para 4).
The investigation period for subsidisation and injury ran from 1 July 2019 to 30 June 2020, with injury trends examined from 1 January 2017 (para 5). The Commission sampled exporting producers, including IRNC, representing 71% of estimated Indonesian export volumes to the EU (para 7).
A central factual issue concerned the Morowali Industrial Park in Central Sulawesi, Indonesia, managed by PT Indonesia Morowali Industrial Park (IMIP), established through bilateral cooperation between Indonesia and China, including under China's 'Belt and Road' initiative (paras 8, 68, 74). The Commission found that Indonesia had restricted nickel ore exports from 2014, requiring domestic processing, while cooperating closely with China to attract Chinese investment, financing, and know-how for its nickel and stainless steel industry (paras 54-81).
Due to non-cooperation by the Chinese Government, which refused to provide requested information on its financial sector and support mechanisms, the Commission applied Article 28 of the basic regulation and relied on facts available (paras 11, 12). The Commission adopted the contested regulation on 15 March 2022, imposing countervailing duties on IRNC's exports at 21.4% (paras 14, 15).
Core dispute
The applicant raised three pleas. The first alleged infringement of Article 2(a) and (b), Article 3(1)(a), Article 4(3) and (5) and Article 28 of the basic regulation (Regulation (EU) 2016/1037), disputing the Commission's attribution to the Indonesian Government of financial support granted by the Chinese Government to IRNC and its Chinese parent companies, the finding of regional specificity of the subsidies, and the use of facts available (paras 18, 22, 44).
The second plea alleged infringement of Article 3(2), Article 6(a), (b) and (d) and Article 15(1) and (2) of the basic regulation, challenging the benchmarks used to calculate benefits across five subsidy schemes: Chinese policy bank loans, credit line costs, capital investment support (equity injection by CAF and provision of capital in kind), provision of nickel ore for less than adequate remuneration, and provision of land for less than adequate remuneration (paras 162-164).
The third plea alleged infringement of Article 7(2) and Article 15(1) and (2) of the basic regulation, concerning the calculation of the pass-through of subsidies received in the form of nickel ore to the products under investigation (paras 347-349).
Court findings
On the first plea, the Court held that Article 2(b) and Article 3(1)(a)(i) of the basic regulation, interpreted in light of the SCM Agreement and relevant Court of Justice case-law (Hengshi Egypt, C-269/23 P and C-272/23 P), allowed the Commission to attribute to the Indonesian Government financial contributions originating from China where the Indonesian Government's own conduct played a decisive role in enabling the applicant to benefit from that financing (paras 50-86). The Court found the Commission had shown, through evidence of export restrictions on nickel ore, bilateral agreements, and the establishment of the Morowali Park, that Indonesia actively sought and in practice enabled Chinese preferential financing, satisfying the attribution test without needing to rely solely on Article 11 of the ILC articles (paras 53-86).
The Court rejected complaints that the Commission misapplied Article 28 (facts available), finding it permissible to draw adverse inferences from non-cooperation by the Chinese Government even though it was not the government of the country under investigation, given the close bilateral cooperation between Indonesia and China (paras 134-139). The Court also upheld the Commission's finding of regional specificity under Article 4(3) and (5), since the subsidies were shown to be limited to enterprises established in the Morowali Park (paras 142-155).
On the second plea, the Court upheld the Commission's use of Chinese interest rate benchmarks rather than Indonesian ones for loans, given risk factors specific to the IRNC Group and evidence that no private Indonesian lender would have provided comparable loans (paras 176-205). It upheld the credit line cost calculations, rejecting new evidence submitted only before the Court (paras 211-230). As to the CAF equity injection, the Court held that benefit must be assessed from an ex ante perspective, at the time of the investment decision, consistent with Article 14(a) of the SCM Agreement and WTO Appellate Body jurisprudence, but found the Commission had correctly done so (paras 239-258). On production equipment, the Court upheld the Commission's use of an international (EU/US) benchmark given the impossibility of establishing a reliable benchmark in Indonesia or China due to non-cooperation (paras 265-299). The Court also upheld use of Philippine prices as a benchmark for nickel ore, given pervasive distortion of the Indonesian domestic market (paras 302-319), and upheld the land valuation methodology using a comparable region's benchmark adjusted by the consumer price index (paras 326-346).
On the third plea, the Court held that no arm's length pass-through analysis was required between related companies in the IRNC Group, and upheld the Commission's calculation using the group's total turnover as the denominator for allocating the nickel ore subsidy benefit (paras 360-373).
Outcome
The General Court dismissed the action in its entirety (para 374). IRNC was ordered to bear its own costs and to pay those incurred by the European Commission (point 2 of the operative part). Eurofer, as intervener, was ordered to bear its own costs (point 3 of the operative part).
Tp method highlighted
The judgment addresses benefit calculation methodology under Article 6 of the basic regulation (corresponding to Article 14 of the SCM Agreement) in a transfer-pricing-adjacent context concerning intra-group and cross-border transactions. The Court held that, for loans (Article 6(b)), the benchmark must reflect what the recipient could actually obtain on a market to which it had access, not necessarily the market of the country granting the loan; Chinese benchmarks were used given the impossibility of establishing a reliable Indonesian benchmark for the IRNC Group's risk profile.
For provision of goods (Article 6(d)), concerning production equipment and nickel ore, the Court held that the 'country of provision' need not be the country of origin or export, and that an external (international) benchmark may be used where domestic prices are distorted or unreliable due to government intervention or non-cooperation, without an obligation to adjust that external benchmark to local conditions under the second alternative method in Article 6(d).
For equity investments (Article 6(a)), benefit must be assessed on an ex ante basis, from the perspective of the investment decision, by reference to what a private investor would have expected at the time, not by reference to how the investment subsequently performed, consistent with WTO Appellate Body guidance on Article 14(a) of the SCM Agreement.
On pass-through of input subsidies (relevant to the third plea), the Court held that an analysis of whether a benefit conferred on an input supplier passed through to a downstream producer is required only where the two entities operate at arm's length; no such analysis was required here because IRNC and its related input suppliers were both part of the same corporate group and did not transact at arm's length.
Major issues / areas of contention
- Whether financial contributions (preferential financing) provided by the Chinese Government to an Indonesian exporting producer and its Chinese parent companies could be attributed to the Indonesian Government as a 'subsidy' under Article 2(a) and (b) and Article 3(1)(a) of the basic regulation.
- Whether the Commission correctly applied Article 28 of the basic regulation (facts available) in circumstances involving non-cooperation by the Chinese Government, which was not the government of the country under investigation.
- Whether the subsidies arising from the bilateral Indonesia-China cooperation, including the Morowali Park, were correctly found to be regionally specific under Article 4(3) and (5) of the basic regulation.
- Whether the Commission used appropriate benchmarks under Article 6(b) of the basic regulation to calculate the benefit from loans granted by Chinese policy banks, including the use of Chinese rather than Indonesian interest rate benchmarks and the addition of a country risk premium.
- Whether the Commission correctly calculated the benefit from credit line arrangement and renewal fees under Article 6(d) of the basic regulation.
- Whether the benefit from the CAF equity injection should be assessed ex ante (at the time of the investment decision) or by reference to subsequent developments, and whether the Commission's benchmark for comparable share transactions was appropriate.
- Whether the Commission could use an international (EU/US) benchmark for production equipment provided as capital in kind, given the lack of cooperation from the Chinese parent companies and the Chinese Government.
- Whether the Commission could use Philippine nickel ore prices as a benchmark under Article 6(d) of the basic regulation given alleged distortion of those prices by Indonesian export restrictions.
- Whether the Commission's valuation of land provided to IMIP and the IRNC Group for less than adequate remuneration, including the use of a comparator region and CPI-based adjustment, was appropriate under Article 6(d) of the basic regulation.
- Whether a pass-through analysis was required for subsidised nickel ore inputs supplied between related companies within the IRNC Group for purposes of calculating the countervailable subsidy under Article 7(2) of the basic regulation.
- The extent to which provisions of the basic regulation must be interpreted consistently with the SCM Agreement and WTO Dispute Settlement Body jurisprudence, and the limits of direct effect of WTO law in EU law.