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Exceptions in the SADC-EU Economic Partnership Agreement


Exceptions in the SADC-EU Economic Partnership Agreement

Exceptions in the SADC-EU Economic Partnership Agreement

Part IV of the SADC-EU Economic Partnership Agreement contains certain General Exceptions to the non-discrimination principle in the MFN and national treatment rules. Exceptions are sometimes necessary and are standard in trade agreements. However, when the Parties derogate from basic rules, they must do so only under expressly stated exceptions and must comply with the applicable conditions.[1] These exceptions also confirm that a rules-based approach is favoured.

Art 97 provides for a General Exception clause, the language and design of which have, to a large extent, been borrowed from Art 20 GATT. It provides (in summarized form):

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the Parties where like conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by either Party of measures:

  • necessary to protect public morals;

  • necessary to protect human, animal or plant life or health;

  • relating to the importation or exportation of gold or silver;

  • necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, monopolies, the protection of patents, trademarks and copyrights, and the prevention of deceptive practices;

  • relating to the products of prison labour;

  • imposed for the protection of national treasures of artistic, historic or archaeological value; (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;

  • undertaken in pursuance of obligations under any intergovernmental commodity agreement which conforms to criteria submitted to the GATT Contracting Parties[2];

  • involving restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry during periods when the domestic price of such materials is held below the world price as part of a governmental stabilisation plan; Provided that such restrictions shall not operate to increase the exports of or the protection afforded to such domestic industry, and shall not depart from the provisions of this Agreement relating to non-discrimination; or

  • essential to the acquisition or distribution of products in general or local short supply; Provided that any such measures shall be consistent with the principle that the Parties and the SADC EPA States are entitled to an equitable share of the international supply of such products, and that any such measures, which are inconsistent with the other provisions of this Agreement shall be discontinued as soon as the conditions giving rise to them have ceased to exist.

Comments: The purpose of Art 97 is to ensure that commitments undertaken elsewhere in the Agreement do not hinder the pursuit of legitimate policy objectives, such as the protection of human, animal or plant life or health, or the conservation of exhaustible natural resources. Two of requirements must, therefore, be met in order to invoke this provision: Respect the requirements in the Chapeau of the Article (do not discriminate or implement a disguised restriction on international trade) and show that the national measure which has been taken, is necessary in order to realise the specific objective which is being invoked. WTO case law on Art XX GATT will be relevant for interpreting Art 97 of the SADC-EU EPA.

Art 98 Security Exceptions: The Parties are not obliged to disclose information which they consider contrary to their essential security interests. They may take action necessary for the protection of their essential security interests, including action relating to fissionable materials, or relating to traffic in arms. They may take actions necessary in time of war and emergencies. The Parties may also take actions in pursuance of their obligations under the United Nations Charter for the maintenance of international peace and security.[3] The Trade and Development Committee shall be informed of such measures and of their termination.

Comments: This provision is modelled on Art XXI GATT, of which the drafters have said: “Therefore, we thought it well to draft provisions which would take care of real security interests and, at the same time, so far as we could, to limit the exception so as to prevent the adoption of protection for maintaining industries under every conceivable circumstance”.[4] This provision has never been invoked to justify trade restrictions under the WTO, till President Trump invoked it in a very controversial step in 2018.[5] His measures have been challenged under the Dispute Settlement Understanding of the WTO.

Art 99 Taxation: 1. Nothing in this Agreement, or in any arrangement adopted under this Agreement, shall be construed to prevent either Party from distinguishing, in the application of the relevant provisions of their fiscal legislation, between taxpayers who are not in the same situation, in particular with regard to their place of residence or with regard to the place where their capital is invested. 2. Nothing in this Agreement, or in any arrangement adopted under this Agreement, shall be construed to prevent the adoption or enforcement of any measure aimed at preventing the avoidance or evasion of taxes pursuant to the tax provisions of agreements to avoid double taxation or other tax arrangements or domestic fiscal legislation. 3. Nothing in this Agreement shall affect the rights and obligations of either Party under any tax convention. In the event of any inconsistency between this Agreement and any such convention, that convention shall prevail to the extent of the inconsistency.

Comments: The emphasis here is on the primacy of the Parties’ fiscal laws and on their exclusive power to tax individuals and companies. The SADC EPA has no impact on national taxation matters, only international taxation agreements may do so.

[1] They are standard in new partnership agreements. The North American Free Trade Agreement (NAFTA) contains provisions on general exceptions (modelled on Art XX GATT), national security, taxation and balance of payments. The SADC EPA contains (in Art 70) a safeguard measure for balance of payments problems.

[2] The exception provided for in this sub-paragraph extends to any commodity agreement which conforms to the principles approved by the Economic and Social Council in its resolution 30 (IV) of 28 March 1947.

[3] Such as participating in UN Chapter 7 operations.

[4] https://www.wto.org/english/res_e/booksp_e/gatt_ai_e/art21_e.pdf

[5] See tralacBlog by the author of these Trump measures: https://www.tralac.org/blog/article/13196-trump-s-trade-war-are-the-brakes-failing.html

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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