Bite the Bullet

• Published date: 01 May 2014
• Date: 01 May 2014
• Author: Petros C. Mavroidis,Bernard M. Hoekman
• DOI: http://doi.org/10.1111/eulj.12061

Bite the Bullet

Trade Retaliation, EU Jurisprudence and the Law and

Economics of ‘Taking One for the Team’

Bernard M. Hoekman* and Petros C. Mavroidis*

Abstract: This paper discusses the Fedon case-law of the European Court of Justice

(Court of Justice), which involved a claim for compensation by Fedon (an Italian

producer of eyeglass cases) from the EU for the imposition of World Trade Organization

(WTO)-authorised retaliatory trade barriers by the USA following the failure by the

EU to comply with an adverse ruling by the WTO regarding its import regime for

bananas. As a result of the EU non-compliance, European banana distributors and

some bananas producers benefited from WTO-illegal protection, at the expense of a

set of EU exporters, including Fedon, that were hit by US countermeasures. Fedon

contested the non-compliance by the EU before the Court of Justice and sought

compensation. This paper assesses the ruling of the Court of Justice against Fedon and

argues that the Court got it wrong, both in terms of legal principle and as a matter of legal

technicalities.

I Introduction

In 1998, as part of a long-running dispute between the USA (as well as several

banana producers in Latin America) and the EU, the Appellate Body (AB) of the

World Trade Organization (WTO) found that the EU policy regime for imports of

bananas was inconsistent with various provisions of the WTO dealing with trade

and goods and services (EC–Bananas III 1). After elapse of the reasonable period of

time for implementing the AB ruling, the USA requested authorisation to retaliate

* Bernard M. Hoekman, European University Institute (EUI), Global Governance Programme, Villa

Schifanoia, Via Boccaccio 121, 50133 Florence, Italy; and CEPR; Petros C. Mavroidis, European

University Institute, Global Governance Programme, Villa Schifanoia, Via Boccaccio 121, 50133 Flor-

ence, Italy. We are indebted to Jean-François Bellis, Jagdish Bhagwati, Chad Bown, Carlo Maria

Cantore, Claus-Dieter Ehlermann, Giuseppe Martinico, Andrea Mastromatteo, Luca ‘Rubentus’

Rubini, Kamal Saggi, André Sapir, Vassilis Tzevelekos and an anonymous referee for helpful discussions

and useful comments, as well as to participants at conferences and seminars at the European University

Institute, Maastricht University, Columbia Law School and Sciences Po where previous drafts of this

paper were presented.

1WTO Appellate Body Report, European Communities—Regime for the Importation, Sale and Distribution

of Bananas [EC-Bananas-III], DS27.

JEL Classification: F13, K41, K42

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European Law Journal, Vol. 20, No. 3, May 2014, pp. 317–331.

© 2013 John Wiley & Sons Ltd., 9600 Garsington Road, Oxford, OX4 2DQ, UK

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