Taiwan and EU offshore wind dispute de-escalates

The EU complained to the World Trade Organization (WTO) earlier this year about so-called localisation requirements that Taiwan applied within the terms of a competitive auction it operated, which is designed to ramp up offshore wind generation in the country’s territorial waters. The auction provided investors with a chance to bid to be allocated a portion of the available generation capacity that Taiwan was making available as part of the allocation round.

According to the complaint, the EU had concerns about eligibility criteria bidders in Taiwan’s offshore wind auction would have to meet – they were required to specify and commit to minimum “local content” obligations that they would be expected to deliver if they were successful in the auction. Those obligations essentially related to the use of domestic components and services.

The complaint further cited how terms that Taiwan set would allow it to determine allocations in a “tiebreaker” scenario by reference to the degree of localisation committed to by bidders, with the bid with the highest degree of localisation being favoured, and how successful bidders would be liable for penalties if they were unable to meet their contractual obligations on localisation during the implementation and operation of their projects.

However, the EU has now said that it has reached “an understanding” with Taiwan over the issue. It said it will not take its complaint further, provided Taiwan implements the actions it has committed to taking.

“Taiwan has now committed to introducing greater flexibility in the way the winning projects from the latest auction are taken forward,” the European Commission said. “This added flexibility will effectively address past implementation difficulties faced by offshore wind developers, including those from Europe. Another important achievement is Taiwan’s commitment to no longer include localisation requirements in future allocation rounds, either as eligibility conditions or as award criteria.”

“Provided that Taiwan follows through with the outlined commitments, the EU does not intend to pursue this matter further within the WTO,” it said.

International trade law expert Totis Kotsonis of Pinsent Masons said the EU has been actively pursuing complaints against WTO members it considers do not afford a fair opportunity to EU suppliers by running competitions that incorporate discriminatory requirements. 

For example, in 2022, the EU initiated a similar consultation process, which is the first step in formal dispute settlement proceedings under WTO rules, with the UK. In that case, the EU raised concern over the UK’s decision to run a competition for the award of subsidies to offshore wind energy projects that incorporated criteria which appeared to favour those applicants who relied on UK domestic supply chains. Ultimately, the dispute was resolved by the UK agreeing, like Taiwan has done now, to amend the rules of the competition to ensure consistency with WTO law requirements.

Ultimately, the potential problem with WTO disputes is that the WTO dispute resolution system has not been fully functional since 2019, following the US decision not to approve the appointment of new judges to the appellate body, to which a party to a dispute may appeal the decisions of an adjudicating panel. That means that disputes may easily escalate unless, as in this case, the parties are able to resolve the matter bilaterally or agree to be bound by the rulings of the Multiparty Interim Appeal Arbitration Arrangement. 

Renewable energy expert Peter Jang of Pinsent Masons said the understanding reached between the EU and Taiwan will be welcomed by offshore wind developers in Taiwan, which he said have been struggling with strict local content requirements introduced in the round 3.1 and round 3.2 offshore wind auction. Jang said the changes pledged could help revive the Taiwanese offshore wind industry, which has been stagnant in 2024.