Bite the bullet : trade retaliation, EU jurisprudence and the law and economics of 'taking one for the team'

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.