## Facts

- Following the creation of the WTO and the transitional regime under the Agreement on Textiles and Clothing, the European Community negotiated two Memoranda of Understanding (MoUs) with India and Pakistan concerning market-access arrangements for textile products.
- On 26 February 1996 the Council adopted a decision approving those MoUs by qualified majority vote; Portugal, Spain, and Greece voted against.
- Portugal brought an action for annulment against the Council decision under Article 173 EC (now Article 230 EC), arguing that the MoUs and the approving decision conflicted with WTO rules, including GATT 1994 and the Agreement on Textiles and Clothing.
- Portugal also alleged procedural and general-law defects, including that publication of the decision in the Official Journal was late, that the Council breached a 1993 Council resolution on the quality of drafting of Community legislation, and that the decision infringed the principles of protection of legitimate expectations and non-discrimination/equal treatment.
- The Council disputed that WTO rules could be used as a legality benchmark in this type of action and denied the other alleged defects.

## Issues

1. Whether, having regard to their nature and structure, WTO agreements are in principle among the rules in light of which the Court reviews the legality of Community measures in an annulment action.
2. Whether the Court may review a Community measure by reference to WTO rules where (a) the Community intended to implement a particular WTO obligation, or (b) the measure expressly refers to precise WTO provisions.
3. Whether late publication in the Official Journal affects the validity of the contested Council decision.
4. Whether the 8 June 1993 Council resolution on the quality of drafting of Community legislation has binding legal effect capable of supporting annulment.
5. Whether the contested decision breached the principles of protection of legitimate expectations or equal treatment/non-discrimination.

## Decision

- The Court dismissed the action and upheld the contested Council decision approving the MoUs with India and Pakistan.
- WTO agreements, in principle, are not rules by reference to which the Court reviews the legality of Community acts, given the nature and structure of the WTO system and the scope for negotiated, reciprocal responses to non-compliance.
- The Court accepted only limited situations in which WTO rules may be used in legality review, but found that neither applied here: the contested decision neither implemented a specific WTO obligation in a way showing such intent, nor expressly referred to precise WTO provisions as governing standards.
- Late publication of the Council decision did not affect its validity (even if publication may matter for when a measure can be relied upon against individuals).
- The 1993 drafting-quality resolution was not legally binding and could not be treated as a standard for judicial review in annulment proceedings.
- The principle of protection of legitimate expectations could not prevent regulatory change in the area of textile imports from non-member countries, where adjustments are reasonably to be expected.
- Applying the equal treatment test, the Court found no unlawful difference in treatment because comparable situations were not treated differently without objective justification.

## Legal Principles

- Because of the nature and structure of the WTO agreements (reciprocity, negotiation, and the discretion left to political authorities in dispute settlement and countermeasures), WTO rules generally cannot be invoked to review the legality of EU/Community measures in annulment actions.
- WTO rules may serve as a legality benchmark only in limited cases: (1) where the Community measure is intended to implement a particular obligation assumed in the WTO context, or (2) where the measure expressly refers to precise WTO provisions.
- Belated publication of a Community measure in the Official Journal does not affect the validity of that measure.
- A Council resolution on drafting quality that is not adopted as binding law does not impose enforceable legal obligations and cannot by itself support annulment.
- The protection of legitimate expectations does not make a regulatory framework unchangeable, especially in sectors such as textile imports where frequent rule changes are foreseeable.
- Equal treatment/non-discrimination requires that comparable situations not be treated differently unless the difference is objectively justified; where objective differences justify different treatment, no breach is made out.

## Conclusion

The Court rejected Portugal’s attempt to annul the Council decision approving textile market-access MoUs with India and Pakistan, holding that WTO agreements are not, as a rule, standards for reviewing the legality of Community acts and that the narrow exceptions (implementation intent or express reference) were not met; it also ruled that late publication did not invalidate the measure, that the Council’s drafting-quality resolution was nonbinding, and that the decision did not infringe legitimate expectations or equal treatment.


Portuguese Republic v. Council, Case C-149/96, [1998] E.C.R. I-7379 (1998)