Malaysia’s palm oil litigation stands a fair trial

Malaysia has an equal chance to be fairly evaluated due to the progressive state of the country’s palm oil industry, says expert


MALAYSIA stands a chance to be fairly judged on its intended lawsuit against the European Union’s (EU) biofuel policies at the World Trade Organisation (WTO) after the dispute body agreed to proceed with Indonesia’s similar legal action.

The positive development followed WTO’s dispute settlement body’s agreement to Indonesia’s request in July to establish a panel to examine its objection which argues that the bloc’s restrictions on palm oil-based biofuels are unfair and violate trade agreements.

In December last year, Indonesia requested consultations with the EU regarding the measures adopted by the trade bloc and its member states in the renewable energy (RE) sector relating to biofuels.

The consultations, which were held on Feb 19, 2020, failed to settle the dispute, which led to the panel establishment to further scrutinise the matter.

Malaysia is also expected to join Indonesia in filing a legal action against the trade bloc through the WTO’s dispute settlement mechanism.

Industry expert MR Chandran said Malaysia has an equal chance, if not more, to be fairly evaluated by the dispute body due to the progressive state of the country’s palm oil industry.

“The important question is that do we want to differentiate ourselves from Indonesia in our complaint, as Malaysia has its unique strength in terms of environmental and social aspects, which allow the country to stand much better at winning.

“For example, the latest fiasco is that employers from the manufacturing and construction services are not providing proper housing for the foreign workforce, while Malaysia’s plantation industry has complied to it since 1974,” he told The Malaysian Reserve.

The local palm oil industry has been complying with the Workers’ Minimum Standards of Housing and Amenities Act 1990 (Act 446) which requires the companies to provide living quarters for foreign workers.

Besides, Malaysia also limits the country’s total planted area of oil palm at 6.5 million hectares by 2023 to support its pledge against deforestation.

Malaysia is currently observing as a third party in Indonesia’s case against the EU, along with other palm oil-producing countries such as Colombia, Ecuador, Guatemala, Thailand, Australia, Brazil, the US, Costa Rica and India, as well as non-producers such as China, Canada, Singapore, Korea, Turkey, Norway, Russia, Argentina and Japan.

“Now that the government is regulating the working environment for foreign labour, the plantation industry is viewed as having a higher standard.

“Thus, we need to capitalise on the social and environmental benefits and I think the Malaysian government should bring our case to WTO,” Chandran said.

Malaysian Palm Oil Council (MPOC) CEO Datuk Dr Kalyana Sundram said the government is still forming Malaysia’s arguments against the trade bloc on the biofuel policy, while indicating that no timeline was set for the submission.

“The government has indicated that Malaysia will ultimately file a separate action to WTO to defend Malaysian palm oil and we are in the process of looking at it.

“Ultimately, Malaysia is looking at the possibility of filing two actions, both as a third party and on its own,” he said.

MPOC has been assisting the Plantation Industries and Commodities Ministry to file the complaint against the EU to the dispute settlement body.

Kalyana added that the palm oil agency will continue the series of engagement sessions with European companies through its regional office in Brussels to dispel the negative claim on palm oil and promote sustainable vegetable oil.

The EU has adopted a delegated act proposal that implements the Renewable Energy Directive II (REDII), the trade bloc’s main RE policy legislation.

Through REDII, the trade bloc and its member states are expected to raise the share of the renewable sources in their energy consumption mix to 32% out of the total energy consumption by 2030, which indicates phasing out the usage of biofuels.

Malaysia and Indonesia are the world’s top producers of palm oil, supplying about 85% of the demand worldwide.

The EU countries are the second-largest buyers for both countries after India, as Europe currently consumes 7.5 million tonnes of palm oil a year — about 10% to 15% of the global palm oil demand.