On Friday 10 January, the World Trade Organization (WTO) Panel largely ruled in favour of the EU in its dispute with Indonesia over the implications of the ‘RED II’ Directive on Indonesian palm oil exports. This ruling is not surprising: the WTO had already taken this position, in March 2024, in an almost identical dispute between the EU and Malaysia (see EUROPE 13365/16).
Both Jakarta and Kuala Lumpur have filed suits with the WTO against the EU, arguing that the ‘RED II’ Directive, which excludes palm oil-based biofuel from the EU’s 2030 renewable energy targets, is a barrier to trade under WTO rules.
For the judges hearing the case, however, the ‘RED II’ Directive is not “more trade-restrictive than necessary”. They consider the decision to classify palm oil-based biofuels as high risk of Indirect Land Use Change to be “reasonable”.
The European law complies fully with the obligations arising from the WTO Agreement on Trade Barriers, as it falls within the exceptions applicable to the preservation of natural resources, according to the Panel.
However, the EU did not win 100% in this dispute: the WTO considers that the European Commission failed to fulfil its obligations in preparing ‘RED II’. In particular, it has not complied with certain transparency obligations.
As the measure appeared to be generally legal, the WTO Panel rejected Indonesia’s request to abolish ‘RED II’.
Jakarta will be able to appeal this decision, although the organisation’s Appellate Body is blocked.
See the judgment: https://aeur.eu/f/f07 (Original version in French by Léa Marchal)