Canada: WTO Appellate Body Releases Appeal Decision On Domestic Content Requirement Of Ontario’s FIT Program

Last Updated: May 20 2013
Article by Sven Walker

On May 6, 2013 the World Trade Organization's (WTO) Appellate Body, the highest court at the WTO, released its report with respect to Canada, Japan and the European Union's (EU) appeals against the decision made by the WTO Panel on the domestic content requirements of Ontario's Feed-in-Tariff (FIT) Program.

History of Proceedings

Ontario's domestic content requirements for the FIT Program were  challenged at the WTO by Japan and the EU on the basis that they are contrary to Canada's free trade obligations under the General Agreement on Tariffs and Trade, 1994 (GATT). The WTO Panel Report of December 19, 2012, which partially ruled that the FIT Program breaches Canada's international trade obligations, was appealed by Canada, Japan and EU.

For more information about the Panel's Report, please see my blog posting WTO Panel Releases Final Report Domestic Content Requirements and for more information about the WTO's appeal process, please see WTO Likely to Deem Domestic Content Requirements Illegal.

Summary of the Appeals

Canada appealed the findings of the Panel Report for two key reasons:

  • Canada argued that the resale of electricity purchased under the FIT Program is not commercial in nature and therefore the FIT Program is not covered by the terms of Article III:8(a) of GATT; and
  • Canada argued that Panel failed to find that the Government of Ontario does not purchase renewable electricity "with a view to use in the production of goods for commercial sale."

Japan and the EU counter appealed to seek a reversal of the Panel's findings that:

  • The FIT Program and FIT Contracts amount to a government purchasing goods within the meaning of Article 1.1(a) of the Subsidies and Countervailing Measures (SCM) Agreement; and
  • Japan and the EU failed to establish that domestic content requirements confer a 'benefit' within the meaning of Article 1.1(b) of the SCM Agreement to electricity generators who participate in the FIT Program.

Summary of Appellate Body Key Findings

The Appellate Body confirmed the main findings of the Panel's Report:

  • it supported the findings that the local content requirements of Ontario's FIT-Program are in violation of the TRIMs Agreement and therefore Canada breaches its national treatment obligations under Article III:4 of the GATT and Article II:1 of the TRIMs Agreement; and
  • that the Minimum Required Domestic Content Levels mandated in the FIT Program do not meet the conditions of Article III:8(a) of the GATT.

The Appellate Body reversed the Panel's findings that Japan and the EU failed to establish that domestic content requirements confer a 'benefit' within the meaning of Article 1.1(b) of the SCM Agreement to electricity generators who participated in the FIT Program but the Appellate Body did not complete the analysis and rule how this factor should have been decided.


Once the Appellate Body Report is adopted by the WTO's Dispute Settlement Body (DSB), it must be unconditionally accepted by the parties. Canada must present a plan for implementing the ruling within a month of the decision. Since only countries can be represented at the WTO, Canadian federal officials have confirmed that Canada will comply with the ruling. However, the Government of Ontario has yet to give a statement as to how this ruling will impact the FIT Program and the program participants.

Despite the WTO ruling, it is important to recognize that the Ontario Power Authority's FIT Program and the domestic content requirements have been in place since the fall of 2009 and a local industry has been established. While I do not have a crystal ball, it is likely that the province of Ontario will take less than the average 15 months to become compliant with the WTO Appellate Body decision. The primary reason is that 200 MW of small FIT projects (500 kW or less) are scheduled to be awarded this year and the large FIT window is also scheduled to open at some point in the near future. In light of the WTO decision, it is probable that all future FIT contracts awarded will no longer need to be domestic content compliant.

I also anticipate that it is unlikely that the WTO ruling will apply retroactively to existing OPA FIT Contracts as feed-in tariff rates were specifically established with a view to covering the higher than usual capital costs for domestic content compliant renewable energy generation equipment. In our experience, the cost of domestic content compliant renewable energy generation equipment is generally 25% to 50% more than the market price for such equipment in non-protectionist markets.

Finally, I anticipate that the elimination of domestic content will signal the slow decline of the renewable energy manufacturing sector in Ontario. There are two key reasons:

  1. All FIT contracts with a domestic content compliance requirement were awarded in 2010 and 2011. Most renewable energy projects are now scheduled for construction and commissioning in 2013, 2014 and perhaps early 2015 at the latest.  Given that there has been no awarding of FIT Contracts since July of 2011, there will be no need for a domestic content compliant supply chain beyond 2015; and
  2. equipment manufacturers are generally able to source their renewable energy equipment from outside of Ontario at a lower cost.

Lower equipment costs are necessary in order to make the renewable energy industry sustainable in Ontario. The domestic content requirements have actually proven to be an obstacle to reducing equipment costs and feed-in tariff rates to a level that is viewed as acceptable by the general public. As the cost to develop solar and wind power generation projects continues to fall, and the cost of retail electricity continues to increase, there is a real possibility that solar and wind grid parity will be achievable in the near future. With lower capital costs, solar pV has the potential of becoming a major viable alternative source of energy for owners of residential, commercial and industrial properties alike.

By the end of 2013, the province of Ontario will be almost entirely coal-free. 10 years ago, 25% of Ontario's power production originated from coal fired power plants. By shutting these down, Ontario is reducing greenhouse gas emissions and fighting climate change, protecting human health and filling the energy production void with renewable energy sources.  The renewable energy industry is here to stay with or without the domestic content requirements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions