After the adoption of the International Procurement Instrument, the Foreign Subsidies Regulation and the Carbon Border Adjustment Mechanism, the EU recently added a new instrument to its arsenal of legislations aimed at protecting Union and Member States interests. Regulation 2023/2675, the so-called anti-coercion instrument ("ACI"), is another brick in the European economic security strategy and aims to arm the Union with tools to specifically counter coercion on part of third countries. The ACI entered into effect on 27 December 2023.

Key elements of the ACI

• Coercion is defined as  the ‘’application, or threat of application by a third country of a measure affecting trade or investment in order to prevent or obtain the cessation, modification or adoption of a particular act by the Union or a Member State, thereby interfering in the legitimate sovereign choices of the Union or a Member State.’’ In other words, trying to influence actions or policies of the EU through economic blackmail.

Two recent examples of such behaviour are the Chinese measures taken against Australia and Lithuania to put pressure on these countries to abandon actions which China opposed. A variety of situations may, however, present themselves, some of which may not be so easy to classify. For example, could the initiation of Chinese AD and AS investigations targeting the European wine in 2013 have been considered to constitute coercion at a time when, for one, there was clearly no injury caused to the Chinese industry by imports of European wine, but also, Europe wanted to launch similar actions against imports of Chinese telecommunications equipment?

• Examination by the Commission on own its initiative or upon a duly substantiated request from any reliable source – including economic operators : to determine whether the measure in question amounts to economic coercion.

• Possibilities for action by businesses: the ACI provides for two specific instances in which private economic players can be involved in the instrument's application.

• First, a 'single point of contact' has been established by the Commission which allows businesses to (confidentially) submit information with respect to economic coercion they witness or are being subjected to.

This means that businesses can lodge a kind of complaint. Submissions of the kind should include all relevant information, such as the third country measures identified, how the coercive action manifests itself, the manner in which such actions affect trade and investment and how the Union and Member States are/can be affected, identification of injury sustained by reason of the third country's actions, the manner in which such actions are expected to influence decision-making at EU/Member State level, as well as any other relevant information such as identification of legitimate grounds which could justify the third country's actions under international law.

• Second, the Commission will take input from stakeholders into account when assessing the appropriate response to identified instances of coercion on part of a third country, including in the proposed countermeasures.

Again, and as in other areas of trade such as trade defence, businesses' involvement and input will be key in determining the actual outcome of the countermeasures adopted (or not).

• Consultations with the third country: When, on proposal of the Commission, the Council adopts an implementing act establishing the existence of coercion, the Commission must provide the third country concerned with the opportunity to engage in consultations. This may entail negotiations, mediation, good offices, or adjudication, all with a view to reaching an "early and just settlement of the matter". Like the Trade Barrier Regulation, it is key for the proper functioning of this new instrument to avoid dilatory delays by the third country concerned.

• Response measures: If the EU's request does not result in cessation of the coercive actions identified, the Commission must adopt countermeasures. Such will occur by means of an implementing act.

An indicative list of countermeasures, and the conditions they must meet − in first instance that they are in the Union's interest −, are provided in the Regulation. Among these are border measures (e.g. tariffs, quotas, rules on transit), restrictions on public procurement participation, restrictions on the provision of services, of foreign direct investment, intellectual property rights and their commercial exploitation as well as on banking, insurance and access to financial services and capital markets, or market access restrictions on chemicals and (phyto)sanitary products.

The implementing act shall be adopted in accordance with the so-called 'examination procedure' in which Member States have the final say. If the Committee of Member States delivers a positive opinion on the Commission's proposed implementing act by a qualified majority, the Commission shall adopt the implementing act. If it delivers a negative opinion by a qualified majority the Commission shall not adopt it. Member States can thus vote the proposed package down, but would need a qualified majority to do so.

Preliminary assessment

The ACI's primary objective is to deter coercion or to obtain its cessation. Countermeasures only constitute a means of last resort. As ever, the capacity to effectively deter coercion is directly dependent on the credibility of the threat of countermeasures.

To what extent will the new Regulation address this challenge? Certainly, the first phases of the procedure should not raise too serious difficulties − although the large discretion left to the Commission will require close involvement from Member States to ensure that cases, even when they are deemed sensitive, are duly processed. Also, decisions on countermeasures will only come after a formal determination of coercion and unsuccessful consultations with the country concerned and that such decisions will be taken on the basis of a decision making procedure in which Member States can only reject the Commission proposal for measures by a qualified majority. As the determination of the existence of coercion remains with the Council, concerns around safeguarding Member States' sovereign attributes are also mitigated.

While the ACI undoubtedly contributes to further equip the EU to act in the face of coercion, it remains to be seen how the EU as a whole will act to adopt effective and deterrent countermeasures if/when faced with the threat of a serious conflict and the possibility of escalation. On the other hand, recent instances (e.g. Russia's aggression of Ukraine) showed overall solidarity across Member States in the face of a major threat. The need for strong political determination remains intact to effectively discourage third countries to use coercive practices against the EU, its Member States and businesses.

Nevertheless, it seems that it is ultimately private economic players that will 'make or break' the ACI. As is the case with other international trade instruments such as anti-dumping/subsidy or market access issues, it belongs to the companies affected by harmful trading practices to raise the issue with the authorities in a sufficiently substantiated manner to constitute a compelling complaint, which will drive the Commission and Member States to push through with effective measures. Conversely, and seemingly more than with other trade instruments, the ACI leaves a wide margin for mitigating a contemplated countermeasure in case businesses may be targeted by retaliatory measures. Businesses are thus in a position to exert significant influence over the decision to adopt countermeasures, if any.

Either way, the ACI takes stock of a new international situation marked by multi-faceted tensions at the interstices of which are the companies. With businesses on the front lines, they are in the driver's seat. To a large extent, it is businesses who will determine the ACI's effectiveness, and success.