Malaysia has strong case against EU over palm oil ban

The Plantation Industries and Commodities Ministry will file a legal action through the WTO’s dispute settlement mechanism


THE preliminary assessment on the consequences of the European Union (EU) to restrict market access to palm oil has pushed Malaysia to join Indonesia in filing a lawsuit against the trade bloc at the World Trade Organisation (WTO).

Recently, Plantation Industries and Commodities Minister Datuk Dr Mohd Khairuddin Aman Razali said the ministry, with the cooperation of the Attorney General’s Chamber, Malaysia would file a legal action through the WTO’s dispute settlement mechanism.

The European Commission has adopted the delegated act proposal to implement the EU Renewable Energy Directive for 2021-2030, which will gradually limit and phase out biodiesel imports into the bloc until 2030.

The directive suggests that oil palm cultivation contributes to greenhouse emission, deforestation and indirect land-use change (ILUC), which then classifies it as a “high-risk” activity.

Malaysian Palm Oil Council CEO Datuk Dr Kalyana Sundram said Malaysia has been evaluating the significance of resolving the issue through the arbitration route while collating strong cases for the country.

“The next step for us, similar to Indonesia, is to wait for the official response from WTO and the EU as the bloc has been notified of the complaint.

“Prior to this, we internally evaluated the viability of whether we had grounds and opportunity to lodge a strong action against the EU at the WTO,” he told The Malaysian Reserve.

In the legal action, Malaysia is seeking an unbiased judgement over the EU’s delegated act, which excludes palm oil as part of its biofuel mix.

Malaysia is also calling the trade bloc to redefine oil palm cultivation activities, which have been classified as high-risk.

“We will pursue the complaint to the WTO against the delegated act that excludes palm oil as part of the biofuel mix, similar to what Indonesia has filed.

“The ILUC is only part of the whole issue. The core of the delegated act is that it prescribes the exclusion of palm oil in the biodiesel mix in Europe until 2030 while allowing the usage of other oils. It violates the principles of free trade under WTO,” Kalyana said.

While the top palm-producing countries are seeking justice through the arbitrator, the state of WTO’s Appellate Body has been a concern due to its limited panel members.

The Appellate Body ceased its functioning to rule new dispute cases last December when the US blocked the appointment of the body’s new judges after two of its three remaining judges — the minimum number needed to hear a case — met their terms’ expiration last year.

According to WTO, there are two main avenues to settle a dispute once a complaint has been filed, which are for the parties to find a mutually agreed solution during the bilateral consultations and through adjudication, which includes the intervention of the Appellate Body.

If both parties do not reach a settlement, the panel will proceed with the arbitration process that could involve the Appellate Body before making a ruling.

Previously, an industry expert has warned that the dispute settlement could drag on up to five years, costing millions of ringgit in legal expenses.

In a statement recently, Mohd Khairuddin said the EU’s delegated act restricts free trade practices and ignores the sustainability efforts taken by Malaysia.

“EU’s discrimination action will affect more than three million lives who are involved in the palm oil supply chain, including over half a million smallholders, he said.

He added that Malaysia would join Indonesia’s case, filed in December 2019, as a third party.