Congratulations on your new job as foreign international law consultant. You have been seconded to the law department of the Indonesian Ministry of Trade (MOT). In conjunction with the Indonesian Ministry of Agriculture (MOA), the MOT is concerned about developments in the agribusiness industry, particularly concerning environmental issues affecting crude palm oil (CPO) as major Indonesian export product. The problems arise from continuing issues with burning being used to clear forest land in Sumatra (which land is then converted to plantation use by planting it with new oil palm trees to be grown for the production of CPO). Meanwhile, clearing forest land through burning is more than just a haze problem involving Singapore.

The CPO produced from these trees grown on land cleared by burning arguably could be used as bio-diesel fuel, which the MOT hopes will receive special trade treatment as an environmentally friendly “green fuel.” Additionally, such CPO may be sold to major European consumer products companies for their use in producing consumer products like soap and cookies. However, the European Union and major European companies like Nestle and Unilever have expressed concern about the negative environmental impacts that land-clearing activities like burning to clear plantation areas may have in ASEAN. The EU therefore has announced a preliminary prohibition on the import of biofuels that have been produced in such a way that it damages the rainforest and biodiversity (including presumably clearing land by burning), and the European companies have established a “sustainable CPO supplier” program that all their CPO suppliers will be required to qualify under, if they wish to continue to sell their CPO to such companies for use in their products. It seems unlikely that any company selling CPO produced on lands cleared by burning could ever qualify as a “sustainable CPO supplier.”

Such an EU biofuels import prohibition might seemingly discriminate against Indonesian biofuels in violation of general GATT/WTO prohibitions on discriminatory treatment. The question is whether it may be lawful on the basis of the exception rules in article XX of GATT/WTO, which provides in relevant part:

“Article XX

General Exceptions

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

…

(b) necessary to protect human, animal or plant life or health;

…

(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption….”

The European companies acting to establish their “sustainable CPO supplier” programs are not acting pursuant to any government regulations, but rather in response to consumer pressure. So there is no government regulation that establishes any obligation on the European companies’ part, they are simply acting on their perception that European consumers will not buy their products unless they can establish that their ingredients are sustainably sourced.

You have been asked to advise the MOT and MOA ministers concerning international legal aspects of the above problems. Please write a memorandum for them addressing the problems from a legal perspective of the EU barring imports of Indonesian bio-diesel produced on former forest land cleared by burning, and the issue of European companies refusing to buy CPO from any companies which do not qualify as “sustainable CPO suppliers.” What should the ministers do, what are their options and why?

Should you wonder, as indicated by the geography this is another one of those questions originally written for Indonesian law students. I want to see if you and they understand the law, and the advisability of any proposals the same way. The interesting thing is that one of the Jakarta-based LLM students, doing their equivalent of “working downtown” on the side, formerly had worked for one of the largest CPO suppliers with definite forest clearing concerns, meanwhile he was then working in an independent non-profit effort to figure out how to respond to the European companies’ “sustainable CPO suppliers” initiative, because that threatened a not insubstantial share of Indonesia’s existing CPO exports.

Copyright 2020–21 © David Linnan.