On 31 July 2024, the World Trade Organization (WTO) informed that the European Union (EU) had requested WTO dispute consultations with Chinese Taipei regarding measures in Chinese Taipei relating to investments in offshore wind installations. The request was circulated to WTO members on the day.
The EU claims that the measures in question contain domestic content requirements inconsistent with provisions under the WTO’s General Agreement on Tariffs and Trade (GATT), the Agreement on Trade-Related Investment Measures (TRIMS) and the General Agreement on Trade in Services.
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 wind farms up to the maximum allocated generation capacity.
Three allocation 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 of 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.
What is a request for consultations?
The request for consultations formally initiates a dispute in the WTO. Consultations give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation. After 60 days, if consultations have failed to resolve the dispute, the complainant may request adjudication by a panel.