Opinion of Advocate General Ćapeta delivered on 16 May 2024

A. The application of the anti-subsidy instrument to ‘transnational subsidies’

27. The second and third grounds of appeal in Case C‑269/23 P and the first and second grounds of appeal in Case C‑272/23 P turn, in essence, on the question of whether the Commission could legitimately resort to the use of the anti-subsidy instrument, as regulated by the Basic Anti-Subsidy Regulation, to countervail the direct and indirect financial support received by the appellants from the Government of China for their manufacture of the product at issue in Egypt.⁽³⁴⁾

28. In the judgments under appeal, the General Court upheld that possibility. On the basis of a textual, contextual and teleological interpretation, that court concluded that ‘the basic anti-subsidy regulation does not rule out the possibility that, even if the financial contribution does not come directly from the government of the country of origin or export, that contribution may be attributed to it’.⁽³⁵⁾ It arrived at that finding on the basis of an interpretation of Article 3(1)(a) of the Basic Anti-Subsidy Regulation, which defines the concept of ‘subsidy’, read against recital 5 of that regulation.⁽³⁶⁾

29. I agree with the General Court’s conclusion. In what follows, I shall provide some additional reasoning.

30. At its heart, the legal question underlying the present appeals concerns the scope of the concept of ‘subsidy’, which is defined in Article 3 of the Basic Anti-Subsidy Regulation.

31. In its English language version, that provision lays down that a subsidy must be understood to mean ‘a financial contribution by a government inthe country of origin or export’,⁽³⁷⁾ by reason of which a benefit is conferred.⁽³⁸⁾

32. The Commission’s line of argument links directly to the highlighted parts of the wording of that provision in the English version. Its argument essentially concerns the differences between the use of the non-determinative ‘a’ and the determinative ‘the’ in Article 3(1)(a) of the Basic Anti-Subsidy Regulation and the resulting openness, of that instrument, to countervailing Chinese subsidies granted to undertakings established in Egypt.

33. However, as the appellants correctly highlight, a linguistic examination of the different language versions of Article 3(1)(a) of the Basic Anti-Subsidy Regulation reveals differences.

34. Some language versions of that provision may indeed be read, similarly to the English language version, to leave somewhat open the source of the financial contribution that benefits the product at issue in the country of origin or export.⁽³⁹⁾ Other language versions, however, are phrased in such a way as to suggest that the concept of subsidy is limited to financial contributions granted by the government of the country of origin or export of the product at issue.⁽⁴⁰⁾

35. For the purposes of ensuring a uniform application and interpretation of the Basic Anti-Subsidy Regulation, Article 3 thereof must therefore be interpreted by reference to the purpose and general scheme of the rules of which it forms part.⁽⁴¹⁾

36. The principles surrounding the scope and application of the anti-subsidy instrument are provided for in Article 1(1) of the Basic Anti-Subsidy Regulation. Pursuant to that provision, a countervailing duty may be imposed to offset ‘anysubsidygranted, directly or indirectly, for the manufacture, production, export or transport of any product whose release for free circulation in the Union causes injury’.⁽⁴²⁾

37. From that definition, it is clear that the Basic Anti-Subsidy Regulation seeks to apply in any scenario in which a countervailing duty may need to be imposed to offset the subsidisation of a foreign product through a wide array of transfers of value which have the consequence of injuring the EU industry of a like product.

38. Article 1(1) of the Basic Anti-Subsidy Regulation does not prescribe that the injurious subsidy must directly derive from the country from which the product at issue originates or is exported. On the contrary, the reference to such a subsidy being granted ‘indirectly’ implies that there need not necessarily be a territorial nexus to the country of origin or export, so long as that grant may be linked to the manufacture, production, export or transport of any product whose release to the internal market causes injury.

39. That reading is also supported by Article 2(a) of the Basic Anti-Subsidy Regulation, which, in the relevant part, lays down that a countervailable ‘subsidy may be granted by the government of the country of origin of the imported product, or by the government of an intermediate country from which the product is exported to the Union’.⁽⁴³⁾ In making use of the modal verb ‘may’, that provision therefore also leaves open the group of possible grantors of a countervailable subsidy, not limiting it to the country of origin or export of the product at issue.

40. Moreover, and contrary to what the appellants argue, that consideration is not undermined by the wording of Article 4(2) and (3) of the Basic Anti-Subsidy Regulation, which deals with the question of specificity of a countervailable subsidy and lays down that specificity is assessed by reference to ‘the jurisdiction of the granting authority’.

41. Indeed, that provision is silent as to the question of whether the granting authority must be in the country of export or origin of the product at issue.

42. Accordingly, as the General Court correctly established,⁽⁴⁴⁾ where, as in the underlying investigations, the Commission is able, on the basis of the evidence available to it, to attribute a financial contribution to the government of the country of origin or export of the product at issue, despite that contribution coming originally from the government or public body of a third country, Article 4(2) and (3) of the Basic Anti-Subsidy Regulation allows the Commission to treat that first government as the ‘granting authority’ of that particular financial contribution.⁽⁴⁵⁾

43. Finally, as the Commission correctly notes, such a reading is also supported by recital 5 of the Basic Anti-Subsidy Regulation, which, it appears, coherently across language versions,⁽⁴⁶⁾ explains that a subsidy is present where it is demonstrated that there is ‘a financial contribution by a government or a public body within the territory of a country’.⁽⁴⁷⁾

44. Read in that context, a product may be considered to be subsidised not only where a subsidy can be attributed to the country of origin or export of the product at issue, but also where another government or public entity may be identified, on the basis of the evidence available, to be the source of the injurious subsidisation.

45. That interpretation is also borne out by the objective of the Basic Anti-Subsidy Regulation, which, since its original form in 1968,⁽⁴⁸⁾ is principally aimed at assisting the EU industry to rebalance the conditions of competition on the internal market that are affected by prohibited subsidies granted abroad.⁽⁴⁹⁾

46. In conclusion, the Basic Anti-Subsidy Regulation is not limited to subsidies granted by the government of a State in its ‘own’ territory.

47. The appellants, however, assert that the scope of the anti-subsidy discipline thus understood is not compatible with the European Union’s obligations under the GATT and the SCM Agreement.⁽⁵⁰⁾

48. I agree that those international agreements must be had regard to since the European Union is a signatory party to the WTO agreements, which include the GATT and the SCM Agreement, and which therefore form part of the EU legal order and bind its institutions.⁽⁵¹⁾

49. While it is well established that those agreements generally do not have direct effect,⁽⁵²⁾ the European Union’s constitutional obligation to observe the commitments arising from its international commitments,⁽⁵³⁾ reflecting the general international law principle of compliance with treaty commitments (pacta sunt servanda),⁽⁵⁴⁾ requires it to interpret EU law, where necessary, in conformity with WTO law.⁽⁵⁵⁾

50. As per its recital 3, the Basic Anti-Subsidy Regulation seeks to implement into EU law ‘to the best extent possible’ the commitments entered into at the level of the SCM Agreement.

51. The Court has already explained that the same wording, albeit in the context of the basic anti-dumping regulation,⁽⁵⁶⁾ must not, in itself, be understood as an intention on the part of the EU legislature to transpose all of the rules contained in the SCM Agreement into EU law.⁽⁵⁷⁾

52. Accordingly, it is wrong to conclude, as the General Court did,⁽⁵⁸⁾ that the use of that wording is sufficient evidence to assume that the EU legislature intended to implement the particular obligations assumed under Article 1.1(a)(1) of the SCM Agreement.

53. That being said, the wording of Article 3(1)(a) of the Basic Anti-Subsidy Regulation does substantially reflect that of Article 1.1(a)(1) of the SCM Agreement. The former accordingly requires an interpretation in conformity with the latter.⁽⁵⁹⁾

54. Article 1.1(a)(1) of that agreement lays down that ‘a subsidy shall be deemed to exist if … there is a financial contribution by a government or any public body within the territory of a Member’.⁽⁶⁰⁾

55. Interpreting that provision in good faith and in accordance with the ordinary meaning given to its terms in their context, as required by Article 31(1) of the Vienna Convention on the Law of Treaties (United Nations Treaty Series, vol. 1155, p. 331), it transpires that the particular use of the indefinite article ‘a’ in the phrase ‘financial contribution by a government’ in the chapeau of Article 1.1(a)(1) of the SCM Agreement leaves open the geographical origin of the source of the financial contribution in question, so long as the subsidy in question originates from any WTO member.

56. I do not consider that reading to be affected by the qualifier ‘within the territory of a Member’ in Article 1.1(a)(1) of the SCM Agreement, since that phrase refers to the concept ‘government or any public body’, and not the term ‘financial contribution’.

57. That conclusion is also compatible with the SCM Agreement, which interprets and applies Article VI of the GATT 1994, and whose ‘main object and purpose … is to increase and improve GATT disciplines relating to the use of both subsidies and countervailing measures’.⁽⁶¹⁾

58. In that respect, I refer in particular to Article VI(3) of the GATT 1994, which defines a countervailing duty as a special duty applied to offset any ‘bounty or subsidy … on the manufacture, production or export of such product’, without specifying who provides such bounty or subsidy and without territorially limiting the entity providing it.

59. Accordingly, Article VI of the GATT 1994 principally⁽⁶²⁾ covers all subsidies regardless of their origin.⁽⁶³⁾

60. Viewed also from that angle, not only would a different interpretation run counter to the ordinary meaning of the terms used in the SCM Agreement and Article VI of the GATT 1994, it would also frustrate the object and purpose of those provisions if the European Union were not able to offset financial contributions, such as those at issue in the present case, purely by reason of their territorial source.

61. Given that no other reading can be distilled from the negotiating history of Article 1.1(a)(1) of the SCM Agreement,⁽⁶⁴⁾ the use of which may act as a supplementary means of interpretation of that agreement, within the meaning of Article 32 of the Vienna Convention on the Law of Treaties, it appears clear to me that Article 1.1(a)(1) of the SCM Agreement does not territorially limit the geographical scope of the source of a financial contribution to the WTO member in whose territory the production of the product at issue occurs.⁽⁶⁵⁾

62. Consequently, I consider that Article 1.1(1)(a) of the SCM Agreement does not preclude treating as a subsidy an arrangement whereby one WTO member provides a financial contribution to a product manufactured in the territory of another WTO member.

63. It follows that, for all of the above reasons, I consider that the General Court did not err in concluding that the scope of application of the Basic Anti-Subsidy Regulation, as expressed particularly in Article 1(1) and Article 3(1)(a) thereof, also extends to the situation whereby the Commission is able, on the basis of sufficient evidence, to attribute the financial support received from one government of a third country to the government of another third country.

64. I therefore propose to the Court that it reject the second and third grounds of appeal in Case C‑269/23 P and the first and second grounds of appeal in Case C‑272/23 P.

B. Determining the comparator for the purposes of countervailing the Egyptian import tariff rebates scheme for imported materials

65. In their fourth ground of appeal in Case C‑269/23 P and in their third ground of appeal in Case C‑272/23 P, the appellants, in essence, argue that the General Court erred when it upheld the Commission’s approach of comparing their situation with that of an undertaking similarly located in the SETC-Zone but which sells to the Egyptian market for the purposes of countervailing the appellants’ benefit arising from the import tariff rebates scheme.⁽⁶⁶⁾ Furthermore, the appellants maintain that their situation should have been compared with a theoretical scenario whereby they would be established outside the SETC-Zone but still exported the products at issue to the European Union. In that kind of situation, the appellants argue, the Government of Egypt would not have foregone revenue by means of the import tariff rebates scheme since it would never had sought to collect import tariffs for imported input materials for the production of the products at issue.

66. At the heart of the appellants’ argument is, therefore the question of what the comparable situation in the present case should be.⁽⁶⁷⁾

67. However, the only legal provision that the appellants cite in the text of their appeals in support of their argument is Article 5 of the Basic Anti-Subsidy Regulation. That provision, which relates to the quantification of the amount of the countervailable subsidy, does not govern the comparator for the purposes of establishing whether the Government of Egypt chose to forego certain revenue that is otherwise due, within the meaning of Article 3(1)(a)(ii) of the Basic Anti-Subsidy Regulation (since the quantification of that foregone revenue logically comes after the point of establishing its existence).⁽⁶⁸⁾

68. Nor do the appellants further explain how the General Court erred in its interpretation or application of the applicable legal framework.

69. And yet, that explanation is vital to the admissibility of the appellants’ line of argument, since Article 3(1)(a)(ii) of the Basic Anti-Subsidy Regulation, even if that had been the provision that the appellants had sought to rely on (quod non), does not provide for a method of setting the appropriate comparator in determining whether government revenue, that is otherwise due, is foregone or not collected.

70. The Commission accordingly holds a certain discretion to choose among the different parameters and scenarios that underlie its task of establishing whether the Government of Egypt chose to forego revenue otherwise due.⁽⁶⁹⁾

71. In the absence of any other arguments to the contrary, the General Court cannot be faulted for upholding the Commission’s choice of the appropriate comparator in the anti-subsidy investigations underlying the present appeals.⁽⁷⁰⁾

72. I therefore propose that the Court find the fourth ground of appeal in Case C‑269/23 P and the third ground of appeal in Case C‑272/23 P inadmissible.

C. Countervailing the tax treatment of foreign exchange losses resulting from the devaluation of the Egyptian pound in 2016

73. In the fifth ground of appeal in Case C‑269/23 P and the fourth ground of appeal in Case C‑272/23 P, the appellants, in essence, argue that the General Court failed to assess whether the Commission had identified the correct subsidy scheme in the contested regulations. According to them, the Commission wrongly considered that it was the tax treatment of foreign exchange losses, introduced in the wake of the 2016 devaluation of the Egyptian Pound,⁽⁷¹⁾ that constituted the subsidy scheme which conferred a benefit that is de facto specific, within the meaning of Article 3(2) and Article 4(2)(c) of the Basic Anti-Subsidy Regulation. According to the appellants, that treatment was open to all Egyptian companies, such that, in theory, every Egyptian company was able to deduct losses caused by the effects of the 2016 devaluation of the Egyptian Pound from their taxable income. For that reason, the Commission wrongly attributed the benefit resulting from the 2016 devaluation to the tax treatment of foreign exchange losses.

74. While the appeals are not beacons of clarity, contrary to what the Commission argues, it is my understanding that those grounds of appeal do not seek to re-litigate the facts. Instead, a generous reading of the arguments appears to suggest that the appellants seek to request that the Court of Justice review the General Court’s conclusion that a joint consideration of the tax treatment and the special accounting rules was capable of conferring a de facto specific benefit.

75. That type of argument falls within the scope of the Court of Justice’s jurisdiction.⁽⁷²⁾

76. In that regard, I observe that Article 4(2)(c) of the Basic Anti-Subsidy Regulation is designed precisely to capture those types of scenarios where, on face value, a measure may appear to be non-specific, but, in practice, and on the basis of objective criteria or conditions, that measure has the effect of establishing a specific arrangement designed to grant a subsidy to certain enterprises.

77. For the purposes of that assessment, in determining whether a subsidy is de facto specific, the Court must focus not on the national rules as such, but on the degree of impact that those rules have for certain enterprises,⁽⁷³⁾ viewed in the context within which they were introduced.⁽⁷⁴⁾

78. In the judgments under appeal, the General Court did precisely that.

79. First, it considered that the appellants’ argumentation was based on an incorrect premiss, namely that ‘the Commission did not consider that the tax treatment in itself constituted a subsidy capable of being the subject of a countervailing measure’.⁽⁷⁵⁾

80. Second, that court explained that the Commission, treating the tax treatment and the special accounting rules together, had concluded that, while capable of benefiting all Egyptian companies, in practice, those rules were meant to allow offsetting of the negative effects of the 2016 devaluation of the Egyptian Pound, with the effect that a particular category of companies,⁽⁷⁶⁾ such as the appellants,⁽⁷⁷⁾ were accorded a substantial benefit.⁽⁷⁸⁾

81. Finally, the General Court explained that the appellants had produced no evidence to contest those factual determinations.⁽⁷⁹⁾

82. I therefore propose to the Court that it also reject the fifth ground of appeal in Case C‑269/23 P and the fourth ground of appeal in Case C‑272/23 P as unfounded.

D. Determining the level of the countervailable subsidy for group entities

83. In their first ground of appeal in Case C‑269/23 P, the appellants, in essence, take issue with the General Court’s decision to uphold the Commission’s methodology for calculating the amount of the countervailable subsidy received by the appellants on the basis of their combined turnover.⁽⁸⁰⁾

84. That ground of appeal accordingly requires an interpretation of Articles 5 and 6 of the Basic Anti-Subsidy Regulation.

85. Article 5 of that regulation, titled ‘Calculation of the amount of the countervailable subsidy’, provides that it is the benefit conferred ‘on the recipient’ which is found to exist during the investigation period for subsidisation that must act as the basis for calculating the amount of the countervailable subsidy. Similarly, Article 6 of that regulation, titled ‘Calculation of benefit to the recipient’, lays down certain guidelines for the calculation of the amount of benefit, and thus of subsidy, ‘to the recipient’.

86. According to the appellants, the use of the singular ‘recipient’ in those provisions would mean, as the General Court concluded in its judgment in Jindal Saw and Jindal Saw Italia v Commission,⁽⁸¹⁾ that ‘the benefit must be established and calculated for each recipient according to the recipient’s situation’.⁽⁸²⁾ Only where a subsidy would be granted jointly to both entities together could the amount of the countervailable subsidy also be established for those entities collectively. The result would be that the Commission should have separately calculated the benefit as a percentage for Jushi Egypt and Hengshi Egypt, applied that benefit as a percentage to their respective turnover of the product at issue, and computed a single overall weighted average subsidy margin for the appellants collectively.⁽⁸³⁾

87. At the same time, the appellants do not dispute – in fact, they expressly agree in their written submissions – that, in spite of the use of the singular ‘recipient’ in Articles 5 and 6 of the Basic Anti-Subsidy Regulation, the concept of ‘recipient’ may be interpreted so as to also include a group of companies.⁽⁸⁴⁾

88. I do not consider it logical to follow the appellants’ proposed distinction.

89. First, their line of argument is not supported by any references or case-law.⁽⁸⁵⁾ Nor do Articles 5 and 6 of that regulation contain any qualifiers that would allow the concept of ‘recipient’ to be given a restrictive reading.

90. Second, a broad interpretation of that concept is not only in line with the interpretation that the Court has given to similar concepts of State aid and competition law, that is to say, the concepts of ‘economic unit’ or ‘undertaking’,⁽⁸⁶⁾ but it is also the reading which the WTO Appellate Body has attributed to the concept of ‘recipient’, as used in the SCM Agreement.⁽⁸⁷⁾

91. Third, the approach to treating entities forming part of an indivisible whole, from an industrial and economic point of view, as related aligns itself with the economic reality on the ground of ensuring that intra-group capital transfers may not escape the anti-subsidy instrument.⁽⁸⁸⁾

92. The resulting broad reading of the concept of ‘recipient’ therefore serves the objective of the Basic Anti-Subsidy Regulation, to ‘offset any subsidy granted, directly or indirectly, for the manufacture, production, export or transport of any product whose release for free circulation in the Union causes injury’.⁽⁸⁹⁾

93. Accordingly, I do not consider that the Court should find the General Court to have erred in adopting the above line of interpretation and upholding the Commission’s calculation of the appellants’ countervailable subsidy.

94. It follows that I propose that the Court should reject the first ground of appeal in Case C‑269/23 P.