Chinese Taipei – Measure Relating to Investments in
Offshore Wind Installations
Request
for Consultations by the european union
The
following communication, dated 26 July 2024, from the delegation of the European Union to the delegation of the Separate
Customs Territory of Taiwan, Penghu, Kinmen and Matsu, is circulated to the
Dispute Settlement Body in accordance with Article 4.4 of the DSU.
_______________
My
authorities have instructed me to request consultations with the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu ("Chinese
Taipei") pursuant to Articles 1 and 4 of the Understanding on
Rules and Procedures Governing the Settlement of Disputes, Article XXII:1 of
the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), Article 8 of the Agreement on Trade‑Related Investment Measures
("TRIMs Agreement"), and Article XXII:1 of the General Agreement on
Trade in Services ("GATS"), with respect to Chinese Taipei's measure
relating to local content requirements in investments in off-shore wind
installations.
1._
THE MEASURE AT ISSUE
Chinese Taipei has put in place an energy transition plan to change its underlying
fuel mix into 20% of electricity generated by renewable sources, 30% from coal,
and 50% from natural gas by 2025. With this objective, it started in 2013 to
develop offshore wind generation capabilities via capacity allocation rounds.
In each round, investors are bidding to develop offshore windfarms up to the
maximum allocated generation capacity.
Three allocations rounds have been launched
so far. The third one, in the course of which Chinese Taipei intends to allocate 15 GW in
total through consecutive auctions (so called "phases") up to 2030, was
initiated on 24 July 2021. The
first auction under the third round – "phase 3.1" – took place in
2023, awarding a total of 3GW of capacity. On 23 November 2023, Chinese Taipei announced the selection
mechanism for the second auction under round 3 – "phase 3.2" –,
offering up to 3GW of capacity. The application window to participate in the
auction of phase 3.2 closed on 10 April 2024. The projects are envisaged
to be commissioned between 2028 and 2029.
The measure at issue, including its adoption,
maintenance, application and administration by Chinese Taipei, consists in the
localisation requirements included in the governance framework of phase 3.2 and
in particular:
-_
requiring
developers to commit, in their auction bids, to a minimum degree of "localisation"
(i.e. local content) to be eligible to participate in the auction;
-_
using the degree
of localisation committed by bidders as a tiebreaker in the award procedure,
meaning that out of two or more otherwise equivalent bids, the bid with the
highest degree of localisation is favoured; and
-_
contractually
binding successful bidders to achieving the committed degree of localisation
during the implementation and operation of their windfarm projects, and
subjecting them to contractual penalties if the committed degree of
localisation is not achieved.
2._
LEGAL AND OTHER INSTRUMENTS RELEVANT TO THE MEASURE AT
ISSUE
The measure at issue is put in place, evidenced by, implemented and
administered through, inter alia,
the following legal and other instruments, considered alone and in any
combination, as well as through their practical application by the relevant
authorities:
-_
Electricity Act[1],
-_
Registration
Rules for Electricity Industry[2],
-_
Renewable Energy
Development Act[3],
-_
Regulations
governing the Establishment of Renewable Energy Power Generation Facilities[4],
-_
Press note: Ministry of Economic Affairs ("MoEA") announces the selection mechanism for the second phase of zonal
development, inviting outstanding developers to move forward together[5],
-_
MoEA Order
No.11258025270: Directions for Allocating Installed Capacity of Offshore Wind
Potential Zones[6],
-_
MoEA
Announcement: Announcement of Industrial Relevance Policies for Offshore Wind
Power Zonal Development (Phase 2: Applicable to those Completed and Connected
in 2028‑2029)[7],
-_
Offshore Wind
Power Zonal Development (Phase II) Industrial Relevance Policy (Industrial
Development Administration, MoEA)[8],
-_
Offshore Wind
Power Zonal Development Phase II Capacity Allocation Plan (Industrial Relevance
Execution Plan) - Writing instructions[9],
-_
MoEA
Announcement: Offshore Wind Power Zonal Development Contract Template (Phase 2:
Completed and Connected in 2028-2029)[10],
-_
Offshore Wind
Power Zonal Development Contract (Phase 2: Completion of Grid Connection in
2028 to 2029) – Contract template (MoEA)[11],
-_
Any other
instruments through which Chinese Taipei implements and administers the measure
at issue, including letters, circulars or other documents whereby requests are
made, decisions are communicated and/or instructions are imparted; whether
between Chinese Taipei authorities or to individual or groups of companies
directly or indirectly involved in phase 3.2 for offshore wind energy
generation projects, as described above.
This Request also covers any annexes, appendixes, attachments or
schedules to the instruments listed above, as well as any amendments,
supplements, replacements, renewals, extensions, implementing measures or any
other related measures.
3._
LEGAL BASIS FOR THE COMPLAINT
The measure at issue appears to be
inconsistent with Chinese Taipei's obligations under GATT 1994, the TRIMs
Agreement, and GATS, in particular as regards:
-_
Article III:4
of GATT 1994, inasmuch as the measure at issue requires
and incentivises applicants to commit to using, and in case they are successful
in the auction, to effectively use, a significant level of Chinese Taipei
domestic products in their windfarm projects, thereby according less favourable
treatment to imported products than to like domestic products;
-_
Article 2.1 of the
TRIMs Agreement, inasmuch as the measure at issue requires and incentivises EU
investors to commit to using, and in case they are successful in the auction,
to effectively use, a significant level of Chinese Taipei domestic products in
their windfarm projects, thereby constituting a trade related investment
measure inconsistent with the national treatment obligation provided for in
Article III:4 of GATT 1994; and
-_
Article XVII of GATS,
inasmuch as the measure at issue requires and incentivises applicants to commit
to using, and in case they are successful in the auction, to effectively use, a
significant level of Chinese Taipei domestic content, including in the context
of the supply of certain services, thereby according less favourable treatment
to foreign services than to like domestic services.
The measure identified in this Request appears to nullify or impair the
benefits accruing to the European Union directly or indirectly under the
covered agreements. The European Union reserves the right to address
additional measures and claims, including under other provisions of the covered
agreements, regarding the above matters during the course of the consultations.
The
European Union looks forward to receiving Chinese Taipei's reply to this
request and expresses its readiness to consider a mutually convenient date and
place for the consultations.