United States: Protective Orders In Trade Defence Investigations

Last Updated: July 7 2014
Article by Yves Melin

This issue of the Global Trade and Customs Journal presents eight articles discussing the merits of protective orders in trade defence investigations.

Protective orders1 are procedures, not required but specifically permitted by the WTO anti-dumping agreement, enabling the representatives of interested parties in trade defence investigations to have access to certain confidential information submitted by other interested parties.

This is the first of two issues of the journal that will focus on this topic. Our Issue 9&10 will offer the opportunity to further contribute to this discussion and comment on the articles already published here. The idea behind having two issues dedicated to protective orders is to initiate a debate as to whether such a system should be adopted by jurisdictions that do not have it currently, the biggest such jurisdiction being today the European Union: what are the pros and cons of the system, who opposes or favours it, what protective orders would bring to trade defence, and what they would take away.

The contributions in this issue are made by one official of the European Commission's Directorate General for Trade, Dr Wolfgang Müller, and by six trade law firms: Patrick J. Togni of King & Spalding for the United States; Darrel Pearson and Jessica B. Horwitz of Bennett Jones LLP for Canada; Adrián Vázquez of Vázquez Tercero & Zepeda and Luis Felipe Aguilar Rico and Patricia Arratíbel Siles of Aguilar, Loera & Martínez, co-writing with Juan Antonio Dorantes Sánche, General Director of International Trade Rules at the Mexican Secretariat of Economy, for Mexico; and for the European Union Folkert Graafsma of Holman Fenwick Willan and Renato Antonini of Jones Day, and Davide Rovetta and Maurizio Gambardella of Grayston & Company.

The US, Canada, and Mexico, all have implemented a protective order procedure. The European Union has not.

Dr Wolfgang Müller makes a very interesting and informative presentation of the state of the debate in the EU today. He recalls the evaluation study issued in February 2012, which recommended not adopting protective orders in the EU until the effectiveness of the new office of the hearing officer could be assessed. Müller further recalls that the current modernization exercise does not foresee the inclusion of protective orders, although some stakeholders who responded to the Commission's survey proposed it. He then proceeds to a review of the effectiveness of the current EU framework in ensuring proper access to information relied upon by EU investigators, and its compatibility with the WTO antidumping agreement. Overall, Dr Müller is of the opinion that there are more cons than pros, and that protective orders do not have their place in the EU's legal order: protective orders would increase the workload of the Commission and reduce its margin of discretion; they would be expensive because they would require the hiring of trade counsels which is not the case today; they would reduce the level of cooperation by interested parties who would be reluctant to share their confidential information; but, more importantly, the system would likely not work in the EU because risks of confidential data ending in the wrong hands are higher in the EU than in the countries that have a protective order system today. This latter objection, central to Dr Müller's objections, seems to be premised in part on the idea that the confidential data would be accessible to parties located in third countries where the legal profession does not work under the same high standards as in the EU, and that the Commission would not be able to impose effective sanctions on representative infringing the conditions under which they are granted access to confidential information.

By contrast, all the trade lawyers contributing to this issue strongly support protective orders where they have it, and the EU trade practitioners are calling for this system to be adopted in the EU. The trade law firms contributing to this issue represent primarily exporting producers, but not only. King & Spalding primarily represents complainants in both the EU and the US.

The hearing officer does not seem to be considered by the EU authors as an adequate forum for examining confidential data in trade defence investigations. This is probably not surprising, as the data to which trade practitioners wish to have access to is primarily complex dumping calculations and injury trends' assessments, including in the form of excel spreadsheets and calculations. They wish to have access to this data in order to control what the investigators have calculated, identify mistakes if any (this happens), and put the finger on disagreements on substance. The EU's hearing office is composed of a handful of people only, and there does not seem to be any intention within the Commission to change this. No matter how able or experienced these persons may be, they probably do not have the time and resources to review the detailed calculations made for multiple parties, in the multiple investigations that are ongoing simultaneously at any given time. And arguably, it is not desirable that a hearing officer, whose function is to ensure that the rights of the defence of interested parties are respected, should be required to examine this type of data as a matter of course. This is just not practical.

For the protective order countries: Pearson and Horwitz explain that although no perfect, the Canadian system for the protection of confidential information is robust and efficient. The word robust is used as well by Togni for describing the procedure in place in the United States. Vázquez for Mexico identifies some issues, linked essentially to a lack of modernization of the procedures to take into account new technologies. He criticizes in particular the fact that counsels cannot take away a copy of the electronic files and spreadsheets used to calculate the duties. It seems that the changes Vázquez is calling for would align the Mexican system to what exists today in Canada and the United States. None of these practitioners seem to envisage that not having protective order procedures would be better than having them.

For Europe, all practitioners agree that the current system often does not make it possible for parties to understand how findings are arrived at, and to effectively criticize analyses made by the Commission. They also all call for the introduction of a protective order system in the EU. Rovetta and Gambardella also raise a very interesting, and – at least to the author – novel argument for obtaining access to confidential data as part of litigations before national courts.

I would like in this brief editorial to point to a few interesting items raised by the authors, which in my view go a long way toward alleviating the concerns linked to the introduction of protective orders in jurisdictions that do not have them. I will then venture a couple of observations of my own.

First, it is interesting that protective order procedures do not provide for an access to all confidential information. The protective order mechanisms described in this issue all provide for the possibility to keep absolutely confidential certain type of information (such as business secrets or customer names) which if disclosed under the constraints and safeguards of the protective order procedure would harm the party disclosing it. Therefore, while in the EU there are two types of information: confidential, and non-confidential, in protective order countries there are three: confidential, confidential but discoverable under protective order, and non-confidential. In the same vain, it should be possible to put in place in the EU a procedure that grants access to certain confidential information, for instance the transaction and costs tables and dumping and subsidization calculation used to determine dumping/ subsidy and injury margins, and still guarantee that the rights of the parties submitting this confidential information are fully protected.

Second, the legal orders of Canada, Mexico and the United States cannot be described as Anglo-Saxon, or to be sharing similar legal traditions. Mexico is a civil law country, the United States a common law country, and Canada has a mixed tradition. What these three countries share is a respect for rights of investigated parties, and the ability to set up strong procedural safeguards under wellestablished legal traditions and principles. This is the case of the European Union's legal order and its Member States' as well. Furthermore, in NAFTA dispute settlements, interested parties of each of these countries are granted access to confidential data of other parties located in the other two NAFTA countries. For instance, the counsel of a Mexican firm could obtain under protective order the confidential data of an American or a Canadian company; the safeguards in place being sufficient to ensure that the protective order is not breached by the Mexican counsel. International enforcement of protective orders is therefore a fact of life in North America. What is possible between three countries in a free trade agreement should equally be possible between the twenty-eight Member States of the European Union, under the guidance and control of the European Commission. Concerns about the effective enforcement of a protective order procedure in the EU are therefore probably overblown.

Third, non-attorneys, members of non-regulated professions, and even certain members of the investigated companies, can be granted access to confidential information under protective order, when certain conditions are met. Hiring an expensive lawyer or consultant is therefore not a necessary condition to obtain access to confidential information under protective order. Of course, hiring an expert counsel is always recommended in trade defence investigations, which like tax or customs investigations involve complex assessments and strict deadlines. As a matter of fact, very few parties cooperating today in EU trade defence investigations do without the assistance of expert counsel. Furthermore, because representing parties before the European Commission is not limited to regulated professions, it is unclear what objections the authorities of such regulated professions could have to the setting up of a protective order procedure meant to increase the rights of their clients; and if such objections were raised whether they could prevent the adoption of such a procedure for the practitioners that they do not represent or regulate.

Then, concerning the sanctions applicable in cases of breaches of the terms of the protective orders granting access to the confidential information, it is remarkable that they are essentially administrative in nature: being prevented from having access to the confidential data is the main sanction, combined with direct consequences on the investigation itself (such as the rejection of submissions made by the party in breach of the order). It is only in cases of intentional breach of the protective order, something that appears to be extremely rare, that a matter would be referred to the public prosecution for criminal investigation. It would seem that the same thing could be easily implemented in the EU: the Commission could be given the right to grant access to certain confidential information to parties subjecting themselves to certain conditions, and to withdraw such access when the conditions are breached (possibly under the control of an external party, such as the hearing officer, Bar Authorities, etc.). Should a breach be intentional, the matter could be brought to the attention of the public prosecution of the country of residence of the practitioner, where such disclosure of confidential information would most likely be an offence (it is in Belgium). If there are some obstacles to this in the current texts regulating trade defence investigations, these could be adapted without it being a Copernican revolution.

Then, beyond the quality of the non-confidential summaries ending up in the open files, it seems to me that compliance with the WTO is not the main issue here. The WTO permits protective orders, but does not require them. In my view, what matters is whether not setting up at all any procedure enabling parties' representatives to have access to certain confidential information is compatible with the internal legal order, and in the case of the EU the fundamental rights and principles set out in the Charter of Fundamental rights. Is not disclosing any confidential information at all, even under a safe procedure demonstrated to work in multiple other jurisdictions with similar regard as the EU for the rights of the defence, really striking the right balance between the necessity to protect confidential information, and the equally necessary protection of the rights of investigated parties under the Charter?

The impact of the increased cost that a protective order procedure would necessarily create should also be put into perspective. First, it is not clear at all that granting access to confidential information would mean an increase in legal costs. In the EU, parties and their counsel dedicate today a significant amount of time sifting through a very cumbersome non-confidential file, where little useful information is available. This time could be dedicated to reviewing calculations that do have a huge impact on the duty. If legal representation in the US is more expensive than in the EU, this probably has more to do with legal costs in the US than APO. Furthermore, in order to be requested to actively cooperate in investigations, submit questionnaire responses and undergo on-spot verifications, companies have to be large; or else they would not be sampled. On the other end, domestic producers willing to lodge a complaint are required to represent a major proportion of the domestic industry, which forces small and medium-sized enterprises to regroup in associations before venturing in trade defence investigations. Even if there were any extra costs linked to the introduction of a prospective order procedure in the EU, they would therefore either be borne by large corporations, or would be shared by a large number of SMEs. In exchange for this extra cost, parties would be granted a much better ability to review the accuracy of the submissions made by third parties, and of the calculations made by the investigators.

As a last observation, it seems that the protective order procedure was extended to Canada and Mexico at the request of the United States, as a consequence of the entering into force of the NAFTA. Why not use the current TTIP negotiations to achieve the same result in the EU?


1 Or administrative protective orders (APO) as they are known in the United States.

Originally published in the Global Trade and Customs Journal, Volume 9, Issue 7&8

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