Recently, several incidents pertaining to cruelty being inflicted on animals have come to light, questioning whether an amendment to the present Prevention of Cruelty to Animals Act, 1960 is indispensable. The Act, which was framed several decades prior, envisages a sentencing policy and penalties that were probably adequate during that period, but need to be re-examined now in terms of the adequacy and nature of liability imposed. This requires looking into whether the criminal penalty and the provisions for receiving bail as provided under §11 of the Act are sufficient in present times, in light of lack of proportionality between the offence and the punishment meted out. Further, we note that the imposition of criminal liability altogether may not be completely adequate, and thus civil liability needs to be considered. We suggest the imposition of civil liability along with criminal liability for offences against animals. Civil liability would grant the State the status of ‘guardians’ or ‘trustee’ of animals and the power to sue the offenders to receive remedies. Hence, a solution is suggested in the form of statutory amendments and better implementation mechanisms. We also enumerate hypothetical applications of these solutions with respect to the imposition of liability. to determine their potency. The paper shall conclude on the note that an amendment to the current sentencing provisions and penalties of the Act is imperative, along with imposition of civil liability, to prevent rampant occurrences of animal cruelty in the future.
Since the 1950s, mathematicians and scientists have theorised the concept of artificial intelligence and tried to understand the relationship it would have with humans. Although, originally viewed as the creation of human-esque machines, modern artificial intelligence tends to be applied to situations involving complex information and intelligent application of reasoning. Taking many different forms, the information technology industry has begun to actively invest in the creation of artificial intelligence systems at a never-seen-before scale. These systems have already begun to appear in common digital technology available today. The complexity of these systems offers both benefits and dangers to the community at large. A matter of particular concern is the obfuscated nature in which these systems work, creating a ‘black box’ over the internal functioning of the system, which, in extreme circumstances, could lead to a denial of legal and human rights. Currently, most artificial intelligence systems can be characterised as intelligent agents, as they take into consideration past knowledge, goals, values, and environmental observations to evaluate the situation and take actions appropriately. The conception of artificial intelligence systems as intelligent agents allows for a focused understanding of this novel legal problem, based upon which evaluations relating to accountability can be better framed. In this paper, I will focus on why it is important to hold artificial intelligence accountable and the most significant obstacles that prevent this goal from being achieved.
This article is written at a critical juncture, as we await the Supreme Court verdict on the triple talaq issue. The aim here is to trace the trajectory of this entire debate and analyse the various strands of the arguments presented before the Supreme Court. While it is anyone’s guess which way the verdict will go, this article focuses attention on the Supreme Court’s directive issued at the end of the hearing regarding the use of a conditional nikahnama to restrain husbands from pronouncing arbitrary and instant triple talaq. By placing legal developments against the political backdrop, the article attempts to comprehensively address the interplay between gender, community and law in the present with triple talaq as the context.
THE INDIA — SOLAR CELLS DISPUTE: RENEWABLE ENERGY SUBSIDIES UNDER WORLD TRADE LAW AND THE NEED FOR ENVIRONMENTAL EXCEPTIONS
Vivasvan Bansal & Chaitanya Deshpande*
In 2013 certain measures adopted by India under the Jawahar Lal Nehru National Solar Mission were challenged by the United States before the World Trade Organization in the India–Solar Cells dispute. One of the measures was the grant of long-term power purchase agreements to solar energy providers, based on domestic content requirements. Though the United States initially challenged this as violating the Agreement on Subsidies and Countervailing Measures, the Panel did not address this clam as it was subsequently withdrawn by the United States. The subsidisation of renewable energy restricts free trade, and potentially conflicts with the obligations of States under the Agreement on Subsidies and Countervailing Measures. This paper seeks to provide a justification for the potential violation of the Agreement on Subsidies and Countervailing Measures using the environmental exceptions provided under Article XX of the General Agreement on Tariffs and Trade, such that the essential balance between trade liberalisation and the right of regulation of States is maintained. For this purpose, the potential implications of the existing renewable energy subsidy policies in terms of conflicts with the Agreement on Subsidies and Countervailing Measures are examined, along with an analysis of the previous cases involving such conflicts. Thereafter, an analysis is done of the covered agreements under the WTO to which the exceptions under Article XX of the General Agreement on Tariffs and Trade are applicable, either directly or indirectly. Drawing from this analysis, it is argued that the exceptions under Article XX of the General Agreement on Tariffs and Trade should be applicable to the Agreement on Subsidies and Countervailing Measures potentially violated by renewable energy subsidies. Finally, the implications for the Indian renewable energy sector are discussed, in the event that the balance between free trade and the right of States to regulate in light of environmental concerns is maintained.
Climate change is considered to be the biggest market failure caused as a result of fossil fuel usage.1 As a result of climate change, the global average temperature has risen by 0.88 degrees Celsius due to which adverse environmental effects have been caused.2 Further, forty-two percent of carbon dioxide emissions are caused by electricity generation through fossil fuels.3 Thus, to combat climate change, the usage of renewable energy to substitute fossil fuels has become increasingly prominent.4 However, as a result of high capital cost and low levels of investment as compared to fossil fuels, it is difficult for renewable energy to compete with fossil fuels.5 To solve this problem, governments around the world have tried to formulate various policies towards the development of renewable energy.6
Governments, across the globe, are keen to develop their economies through the implementation of subsidy programs promoting renewable energy.7 Investment in renewable energy is a core strategy to combat climate change,8 and renewable energy subsidies are extremely important to address the problem of climate change. Renewable energy subsidies are one of the best ways to build a renewable energy sector that develops and implements the technologies necessary to reduce carbon emissions.9 One such renewable energy subsidy is based on domestic content requirements ('DCRs'). These requirements help in the fast and steady development of domestic industrial sectors, such as the renewable energy sector.10 For policy considerations, DCRs are effective tools to achieve both industrial and environmental objectives.11
Under the World Trade Organisation ('WTO') regime, the Agreement on Subsidies and Countervailing Measures ('ASCM') is the main agreement that regulates subsidies. However, the ASCM does not distinguish between renewable subsidies and other subsidies.12 The WTO strictly opposes subsidies that distort trade, such as the ones based on DCRs.13 The ASCM, as it exists today does not recognise environmental interests of countries and does not provide for exceptions with regard to the environment. This means that a violation of the ASCM is found, the subsidy program in question would have to be withdrawn irrespective of the environmental benefits it has.14 In this context, leading scholar on WTO law and jurisprudence, Robert Howse notes that, "[...] simply excluding subsidies from WTO compatibility because they have industrial policy as well as environmental goals in unrealistic, especially in the current economic and financial crisis, where support for climate measures may be inadequate unless such measures also serve economic recovery or reconstruction goals."15
An example of a country giving renewable energy subsidies to achieve both industrial and environmental objectives is India. In 2010, India had decided to give renewable energy subsidies which were contingent on the usage of domestic inputs of solar modules under the Jawaharlal Nehru National Solar Mission ('JNNSM').16 The United States of America ('USA') was aggrieved by this policy as it believed that such a policy would adversely affect its own manufacturers of solar modules. Thus, in 2013, USA challenged this policy under the ASCM and other agreements before the WTO.17 On the other hand, recently, India also challenged the subsidies of USA before the WTO on the ground that they were based on DCRs and were trade distortive.18 This demonstrates that renewable energy subsidies can come into conflict with the ASCM.
As the ASCM does not have its own environmental exceptions, a way in which this conflict can be resolved is through the application of Article XX of the General Agreement on Tariffs and Trade, 1994 ('GATT').19 Article XX of the GATT provides a list of exceptions to the trade obligations member states have.20 Article XX recognises concerns other than trade and allows for situations in which these might take precedence over trade liberalisation.21 Under GATT Article XX, there are two exceptions particularly important for protecting environmental concerns. First, GATT Article XX(b) which allows for trade-restrictive measures that are "necessary to protect human, animal or plant life or health". Second, GATT Article XX(g) which allows for measures "relating to the conservation of exhaustible natural resources". Hence, by invoking these exceptions, members can argue that even trade-distortive measures are complaint under the GATT as they fall within the ambit of Article XX.
In this paper, we argue that renewable energy subsidies based on DCRs potentially violating the ASCM should be allowed justification under the environmental exceptions of GATT Article XX. In Part II, we elaborately discuss the renewable energy subsidy policies based on DCRs adopted by India, and the wide range of benefits they have. In Part III, we discuss the treatment of subsidies under the ASCM, to understand how renewable energy subsidies based on DCRs can potentially violate the ASCM. Subsequently, we conduct an analysis of covered agreements22 and cases in Part IV, to ascertain the reasons and ways in which GATT Article XX exceptions have been made applicable outside the scope of the GATT. In Part V, we aim to build an argument to justify the application of Article XX exceptions to protect renewable energy subsidies based on DCRs that are otherwise incompatible with the ASCM. In Part VI, we analyse the implications of India's renewable energy subsidy policies and their conflict with the ASCM. The possible impact of allowing renewable energy subsidies on India's energy sector is also discussed. Part VII concludes.
RENEWABLE ENERGY SUBSIDY POLICIES BASED ON DOMESTIC CONTENT REQUIREMENTS
In this part, we will discuss important policies launched by the Government of India ('Government') to harness solar energy based on DCRs, along with the multiple benefits of DCRs. As solar energy is an extremely important source of renewable energy, it is essential to have concrete policies to harness the same. One such policy implemented by the Government is the JNNSM in 2010.23 The main aim of JNNSM is to ensure that solar power can be used on a large scale for the generation of electricity and eventually substitute fossil fuel based energy.24 The quantitative goal set by the Government was the production of 20,000 Mega Watt ('MW') energy which was increased to 100,000 MW in 2015.25
To ensure smooth implementation, JNNSM was divided into three phases. Phase I was scheduled from 2010-2013 and its target was the production of 1,000MW energy. In this phase, there was a DCR of thirty percent as far as solar modules were concerned.26 This meant that at least thirty percent of the solar modules used by Solar Power Developers ('SPDs') had to be sourced from India. However, this was only mandated for crystalline silicon modules and not thin film ones.27
Phase II is scheduled from 2013-2017 and is set to be completed in four parts.28 For Batch I of this Phase, the target was 750MW and till date, 718MW capacity has been commissioned.29 Additionally, the Government decided to open two separate bids, one for usage of indigenously manufactured modules and the other for imported modules.30 The first bid of375 MW mandated that crystalline technology modules as well as solar thin film technology modules must be sourced from India.31 In the other bid of 375 MW, companies could use imported modules.32 In addition to this, the Government set up a Viability Gap Fund ('VGF') which was a cash subsidy given to the SPDs to offset high costs of building solar plants.33
Subsequently, the targets were further increased in Batch II of Phase II (15,000 MW by the end of 2019)34 and Batch III (2,000 MW).35 Batch II is divided into three tranches. This is a state-specific scheme and individual states would be selected by the Government for the implementation of the same.36 The DCR capacity shall be intimated by the Government before announcing the state-specific bid.37 There is a DCR of 250 MW out of 1,000 MW for the first part of this scheme.38 In addition to this, there is a bundling mechanism.39 However, there is no provision for VGF.
Batch III on the other hand reserves 250 MW out of 2,000MW for bidding with DCRs (applicable to both crystalline as well as thin film modules).40 This is also a state-specific scheme and encourages development of solar projects in solar parks.41 In addition to this there is a VGF mechanism.42 However, SPDs in the DCR category are eligible to get a higher subsidy than those in the open category to offset the higher cost of procuring solar modules from India.43 Thus, the Government has formulated these policies with an objective to promote local manufacturing in India.
In addition to the JNNSM, the Government decided to launch the Grid Connected Rooftop Solar scheme in June, 2014- another scheme which could potentially come into conflict with existing WTO obligations.44 The main aim of this scheme is to promote Solar PV plants on rooftops of residential, educational, industrial and commercial buildings. In this scheme, there is a DCR.45 However only residential, educational and government buildings can avail this DCR facility.46 Thus, to offset the cost of using DCRs, the Central Financial Assistance ('CFA'), which is thirty percent of the total cost of the project will be provided to the project developers.47 The Power Purchase Agreement ('PPA')in this case will be between the owner of the particular buildings and the distribution companies ('Discoms') or the third party and the Discoms.48
The key feature of all these schemes under the JNNSM is the signing of a PPA, whose benefits will be enumerated in detail subsequently.49 The PPA has to be signed by the SPDs with the Solar Energy Corporation of India ('SECI'), which is the nodal implementing agency of the Government, for a period of twenty-five years (till Phase II, the same was signed with NTPC Limited).50 Under the PPA, SECI will purchase power at a fixed rate which shall depend on the bid amount quoted by the SPDs and sell it to the Discoms at a fixed rate which will depend on the particular scheme.51 For example, under Batch I of Phase II of the JNNSM, the rate is INR 5.50/KWh.52 The purpose of these PPAs is to encourage SPDs to bid for solar projects by generating a sense of security among them as the power will be bought regardless of the demand for the same.53
While the JNNSM has already been challenged on the ground of violation of WTO rules,54 it is possible that the solar rooftop programme as well as subsequent batches of the JNNSM may also be challenged on similar grounds. Thus, we believe that it is important to justify these schemes on the ground that they will further the objective of sustainable growth in the solar sector within the framework of the WTO legal framework. Additionally, the criteria for the success of these polices will be discussed along with its application in India.
BENEFITS OF DOMESTIC CONTENT REQUIREMENT POLICIES
The renewable energy sector is highly capital intensive and will not be able to compete with the fossil fuel sector without proper government support.55 Such support is even more important in light of the fact that fossil fuels are largely subsidised.56 For example, in 2014 global fossil fuels subsidies amounted to USD 490 billion.57 Thus, government intervention by way of DCRs along with PPAs and other financial incentives is one possible way of helping renewable energy resources to compete with fossil fuels.
DCR is a government policy whereby a certain percentage of inputs must be sourced locally.58 The objectives of such a policy in the field of solar energy is to promote sustainable development of the same.59 This goal can be achieved because DCRs in the long run facilitate the creation of a domestic industry, the reduction in prices of solar energy and the accumulation of technical skills in the concerned country.60 However at the same time, DCRs lead to initial short term costs due to SPDs being forced to procure relatively expensive domestic inputs.61 In the short term the government can provide subsidies, tax exemptions, infrastructure support, PPAs and other beneficial measures to mitigate the cost borne by SPDs.62 Among these measures PPAs are particularly important.63 In the PPA mechanism, a government or a government body promises to purchase power at a fixed rate.64 Such PPAs guarantee price stability and fixed demand for companies who produce renewable energy.65 This can vastly mitigate the risks associated with investing in renewable energy which can in turn enable further growth.66 PPAs are more successful when complemented by support measures such as tax deductions, soft loans and policies which support investment in renewable energy technologies.67
DCRs allow for the protection of domestic infant industries, i.e., industries which cannot compete with foreign industries.68 This eventually allows the concerned nation to reduce the costs as well as increase sustainability of renewable energy by which it would be able to achieve grid parity and replace fossil fuels.69 Since the country will not be solely dependent on imports, it will not be subject to the fluctuations in the global market which will assure a stable supply of components required for solar power.70 This will be beneficial for developing countries who will find it costly to finance imports of such inputs on a regular basis.71 Thus, manufacturing components locally will create a stable supply for developing countries which will potentially reduce costs as compared to imports.72
Another way in which DCRs reduce price is by way of competition.73 As a result of competition there is a further reduction in the cost of solar energy, which is essential for it to replace fossil fuels.74 Increased competition also promotes innovation which also drives prices down.75 Thus, having more sellers in the market is beneficial for the environment, and DCRs ensure that the same happens. Hence, decreased costs would bring sustainability to the solar energy sector and make solar power viable in the long run.76
Additionally, DCRs can be instrumental in building technical expertise which is essential to maintain and sustain the use of a particular technology.77 This will happen because DCRs will compel domestic companies to source a part of their inputs domestically. On the other hand, foreign firms will have to do the same or set up their own plants.78 The latter, which is foreign direct investment, will facilitate a transfer of technological know-how.79 This technical expertise will help a country tailor the technology to its local needs.80 For example, solar plants can be established in areas having different levels of humidity and irradiation patterns with the help of local manufacturing skills.81 Thus, these positive economic as well as non-economic effects of DCR will boost the use of solar energy in developing countries.
LIKELIHOOD OF SUCCESS OF THE DOMESTIC CONTENT REQUIREMENT POLICIES IN INDIA
After analysing the potential benefits of DCR, we will examine the conditions which increase the chance of a DCR policy's success, in the context of India. It is important to do so because if a DCR policy has a greater chance of success in a particular country, then it will be more viable to implement it.
Even today, the empirical evidence for the effectiveness of DCR in renewable energy is limited.82 However, the criteria laid down by Lewis and Weiser are accepted by many scholars.83 These are: market size and stability, market potential, and favourable government policies such as tax breaks, subsidies, and assistance in land acquisition.84
Having a large and a stable market encourages businesses to invest in production inputs for solar energy locally.85 Thus, it mitigates the risk of a relatively higher cost for businesses to invest in DCR. Similarly, it also offers more avenues for learning by doing.86 Learning by doing means that firms find more efficient ways of producing technology simply by experience rather than by using superior technology.87 It is applicable in the context of DCRs, because they encourage local firms to increase production.88 Thus, gradually, firms will produce solar modules more efficiently which will lead to a reduction in costs.89
With respect to the first criterion, it is clear that India has a large peak demand for power which is equivalent to 148,406 MW.90 On the other hand, market potential refers to the exploitable capacity of a particular resource.91 Due to its tropical location India has a significant amount of solar energy which can be utilized (amounting to 750 Giga Watt ('GW')).92 Thus, the market potential for solar energy in India is extremely high. As far as government support is concerned, there is no shortage of the same, as SPDs will get subsidies to offset their costs, long term PPAs and infrastructural support through solar parks.93 Solar power parks are essentially a concentrated zone for setting up solar power plants.94 The benefit of solar parks is that companies wanting to set up solar power plants do not have to go through the lengthy process of acquiring land.95 Instead, the state governments will lease such lands to the SPDs on which solar power plants can be built, thus speeding up the process.96 Thus, it is likely that India’s DCR policy will give an impetus to the manufacturing of technology necessary for solar power plants.
After having described the benefits of DCRs, we will discuss the case of China97 where the criteria mentioned above were met to demonstrate the effectiveness of DCR. China is estimated to have an extremely high amount of exploitable capacity of wind energy (1,000GW to 4,000GW).98 Further, at the time of the launch of its DCR program in 1997, it had a large demand for electricity.99 There was also substantial financial support from the government to offset the cost of DCR.100 These favourable factors ultimately helped China to increase its capacity from 56.6 MW in 1997 to 145.1 GW in 2015.101 This is primarily a result of DCRs which allowed China to build a strong manufacturing base for wind energy.102 It must be noted that this program was discontinued by China in 2009, after USA raised an objection.103 However, by that time, China had already built a strong domestic industry of wind turbine manufacturing.104 Therefore, since China fulfilled the conditions under which DCRs have a high chance to succeed, its DCR policy was successful.
Thus, after having discussed the benefits of DCR policies in the context of India, it is essential to analyse how the renewable energy subsidies based on DCRs would violate the ASCM.
SUBSIDIES UNDER THE AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES
After having analysed the renewable energy subsidy policies implemented by the Government, their benefits and the likelihood of success, we now examine the subsidy regime under world trade law, as laid out under the ASCM. This entails an analysis of the extent and scope of the ASCM, and the grounds on which India's policies may be challenged under the ASCM. Subsequently, we highlight the applicability of environmental exceptions to covered agreements other than the ASCM, based on which we build a case for the justification of renewable energy subsidies through the use of such exceptions.
The ASCM aims to prohibit subsidies which can have an adverse impact on international trade.105 For that purpose it has clearly defined the extent and scope of subsidies. For a subsidy to be disciplined by the ASCM it has to be a financial contribution,106 which confers a benefit107 and is specific.108 Under the ASCM, a subsidy involves a financial contribution given by a government or any public body within the territory of a member state with an aim to confer a benefit.109 An entity which performs the duties and functions of the government will be deemed to be a public body.110 Further, the definition of a financial contribution is given in the four subparagraphs of ASCM Article 1.1(a).111 This definition is exhaustive in nature.112 However, measures which are not explicitly listed can also be included provided that they fall within the criteria mentioned in the subparagraphs.113
Additionally, for a financial contribution to be a subsidy capable of being challenged under the ASCM, it has to confer a benefit.114 A financial contribution is said to confer a benefit if the beneficiary receives it on more favourable terms than others in the market.115 This benefit can be determined with respect to the benchmark rate, i.e., the rate prevailing in the market at which other competitors will get the same benefit.116 However, if market prices are distorted due to government regulation and intervention, it is possible to refer to a constructed benchmark or a foreign benchmark, provided appropriate adjustments are made to account for conditions in the concerned market.117
A further requirement under the ASCM is for the subsidy to be specific. Only subsidies which are specific in nature will be subject to the ASCM.118 A subsidy is said to be specific if it is given to particular enterprises by the public authority who has jurisdiction in the particular geographical region.119 However, it is not said to be specific if the criteria under which it is received is neutral and “[...] does not favour certain enterprises over others, and which are economic in nature and horizontal in application, such as number of employees or size of enterprise.”120 Thus, a financial contribution that confers a benefit, and which is specific, can be challenged as a subsidy potentially violating the ASCM. These subsidies can be further classified into actionable and prohibited subsidies.121
Under Part III of the ASCM, actionable subsidies are subsidies which cause adverse effects to other WTO members.122 Adverse effects are caused when the subsidies lead to serious prejudice or injury to another member123 or impair the benefits of concessions accrued under the GATT.124 Additionally, ASCM Article 6.1 lays down conditions whose presence will be sufficient to prove the existence of serious prejudice. Thus, if the subsidy purports to compensate a specific industry or an enterprise for operating losses sustained, such a subsidy will be deemed to cause serious prejudice.125 However, a one-time subsidy which is given for business development will be exempted.126 Further, complete ad valorem subsidisation of a product exceeding five percent will also be a sufficient ground for proving serious prejudice.127
Serious prejudice may also exist if one or more of the four grounds under ASCM Article 6 are proven. The first ground is that the subsidy has to cause a loss to the exports of a like product of another member in the market of the subsiding member.128 Under the second ground, the subsidy has to cause a similar effect to another member in the market of a third country.129 Under the third ground, a significant reduction in prices has to occur as a result of the subsidy due to which loss is caused to the member country in the same market.130 The fourth ground states that, as a result of the subsidy, the world market share of the product has to increase consistently as compared to the average share of the past three years.131
Under Part II of the ASCM, prohibited subsidies are per se invalid and no actual harm, such as serious prejudice under actionable subsidies, has to be demonstrated by the aggrieved party.132 There are two types of prohibited subsidies under this part. The first, under ASCM Article 3.1(a), is a subsidy which is contingent de jure or de facto upon export performance. The second one, under ASCM Article 3.1 (b), is a subsidy which is contingent on the usage of domestic goods over foreign ones. In Canada–Aircraft, the Appellate Body ('AB') held that ‘contingent’ means to be conditional or dependent on something else.133 However, under ASCM Article 3.1(b), this contingency is not just de jure but also a de facto one.134 This is because even if the drafters omitted to mention a ‘de facto contingency’ under ASCM Article 3.1(b), the same will not preclude it from being applied.135 Thus the AB held that the ‘de facto contingency’ mentioned in ASCM Article 3.1(a) should also apply to ASCM Article 3.1(b).136 The reason given was that governments would try to circumvent this provision and try to indirectly give such discriminatory subsidies.137 Further, if a subsidy falls under ASCM Article 3, it shall be deemed to be specific by virtue of ASCM Article 2.3.138 Therefore, for a measure to qualify as a 'subsidy', there has to be a specific financial contribution conferring a benefit. Once this is proved, it can either be challenged as an actionable or prohibited subsidy.
AGREEMENTS AND CASES TO DETERMINE THE REASONS FOR APPLICABILITY
In this Part, we will examine WTO covered agreements and instruments, and analyse disputes resolved to throw light on how GATT Article XX has been made directly applicable, such as the Agreement on Trade-Related Investment Measures ('TRIMs'), and China's Accession Protocol in China–Audiovisuals. Further, flexibilities and exceptions similar to GATT Article XX exist in the Agreement on Technical Barriers to Trade ('TBT') and the Agreement on the Application of Sanitary and Phytosanitary Measures ('SPS'). The reasons derived from this analysis will be used in the following Part to strengthen the argument for the provision of exceptions in the ASCM. Therefore, the aim of this analysis is to examine the applicability of GATT Article XX to the ASCM, such that India is able to avail the benefits of its renewable subsidy policies listed out under Part II of this paper.
AGREEMENT ON TRADE-RELATED INVESTMENT MEASURES
TRIMs prevents member countries from conditioning foreign direct investments and other financial resources on factors that favour domestic industry.139 TRIMs Article 2 reflects the principles set out in the GATT. According to TRIMs Article 2.1, " [...] no Member shall apply any TRIM that is inconsistent with the provisions of Article III or Article XI of GATT 1994", and TRIMs Article 2.2 refers to the Annex to TRIMs, which provides an illustrative list of measures that are inconsistent with TRIMs, by virtue of being inconsistent with GATT Article III:4 and Article XI:1. It is important to note that the exceptions under GATT Article XX are applicable to TRIMs by virtue of TRIMs Article 3, which states that “all exceptions under GATT 1994 shall apply, as appropriate, to the provisions of this Agreement”.140
To understand the reasons for the applicability of the exceptions under GATT Article XX to TRIMs, it is important to understand the relationship between them. The prohibited measures listed in the Annex to TRIMs highlight the close link between foreign investment and international trade.141 The negotiating history suggests that countries favoured the invocation of the GATT exceptions because of the close link of TRIMs to the GATT.142 The close link is clearly established. This is because TRIMs interprets and clarifies GATT Article III and Article XI, which makes "The application of GATT exceptions to the TRIMs [...] a logical extension of the function of TRIMs as a clarification of GATT articles."143 It can be said that TRIMs builds on GATT Article III, requiring member countries to provide national treatment to imported products, and GATT Article XI, prohibiting member countries from imposing quantitative restrictions on the importation or exportation of goods.144 Further, In Indonesia–Autos, the Panel noted that as both TRIMs and GATT Article III prohibit local content requirements, by forbidding the conditionality of benefits on domestic sourcing of input supplies, they can be said to cover the same subject matter.145 Therefore, TRIMs and GATT Article III are closely interconnected.146
The above analysis brings out the reasons for the applicability of GATT Article XX, which are: direct textual support, the close link between TRIMs and GATT, and the fact that TRIMs elaborates on GATT disciplines.
AGREEMENT ON THE APPLICATION OF SANITARY AND PHYTOSANITARY MEASURES
SPS establishes a framework of rules to guide the development, adoption, and enforcement of national measures to protect human, animal, or plant life or health.147 These measures are referred to as sanitary and phytosanitary measures. Countries can impose more stringent requirements on imports as compared to domestic goods for the purposes of protecting human, animal, or plant health.148 A sanitary and phytosanitary measure may fall within the scope of application of SPS, and at the same time be inconsistent with the GATT.149 In the case of a conflict between the applicable GATT rules and SPS, SPS prevails as it is lex specialis with respect to sanitary and phytosanitary measures.150 However, the chance of such a conflict is slim, as the relevant GATT rules are subsumed in SPS.151 This is because according to SPS Article 2.4, sanitary and phytosanitary measures conforming to the relevant provisions of SPS are presumed to be consistent with the relevant rules of the GATT.
The Preamble and some other articles of SPS indicate the relationship between SPS and GATT Article XX.152 As per the Preamble of SPS, it was established to "elaborate rules for the application of the provisions of GATT 1994 which relate to the use of sanitary or phytosanitary measures, in particular the provisions of Article XX(b)".153 This suggests that there are provisions of GATT Article XX(b) which are related to sanitary and phytosanitary measures, and that SPS elaborates these measures substantively.154 It has also been argued that the current legal position allows for the application of GATT Article XX(b) to justify a measure inconsistent with SPS.155
In EC–Hormones, commenting on the relationship between SPS and GATT Article XX(b), the Panel observed that the provisions of SPS impose substantive obligations, which are significantly beyond GATT Article XX(b).156 The Panel also noted that some provisions of SPS elaborate on GATT provisions, in particular GATT Article XX(b).157 Therefore, SPS does not only explain an exception to GATT disciplines, but also creates an extensive new set of affirmative obligations for the adoption and maintenance of sanitary and phytosanitary measures.158 Additionally, SPS Article 2.3 embodies certain GATT trade disciplines, such as the non-discrimination provisions of the GATT, and the chapeau159 of GATT Article XX.160 The national treatment requirement can be said to be at the centre of SPS obligations.161
Therefore, SPS elaborates upon and embodies GATT disciplines, and allows for a protection similar to GATT Article XX(b).
AGREEMENT ON TECHNICAL BARRIERS TO TRADE
TBT establishes a framework concerning technical regulations, and aims to ensure that these regulations do not create unnecessary obstacles to international trade, while recognising WTO members' right to implement measures to achieve legitimate policy objectives.162 Like SPS, TBT is lex specialis to the GATT, and acts as a specialised legal regime applying to a limited class of measures.163 However, this does not exclude the applicability of GATT, and both TBT and GATT operate apply cumulatively unless there is a conflict between them.164
TBT Articles 2.1 and 2.2 are important for understanding the relationship of TBT with the GATT. These provisions deal with non-discrimination in respect of technical regulations.165 TBT Article 2.1 incorporates the principle of national treatment, and according to TBT Article 2.2, technical regulations should not be more trade-restrictive than necessary to achieve a legitimate objective. TBT does not contain a provision, like GATT Article XX, to justify a violation of these non-discrimination provisions. However, TBT Articles 2.1 and 2.2 have been interpreted in terms similar to GATT Article XX.166
It has been argued that the GATT Article XX chapeau test has been used by the AB to examine a claim of discrimination under TBT Article 2.1.167 The AB has effectively added an exception to TBT by incorporating the chapeau-like test into an analysis under TBT Article 2.1.168 The use of the chapeau test can be said to be a sound legal principle because of the similar purposes of GATT Article XX and TBT.169 It is an effective way of striking a balance between trade liberalisation and regulatory protection, as it functions as an exception provision in TBT.170 Additionally, TBT Article 2.2 includes the necessity test, which is a part of GATT Article XX.171
The relationship between TBT and GATT Article XX can be better understood through disputes decided by the AB. In US–Clove Cigarettes, the AB while emphasising on the balance between trade liberalisation and domestic regulatory autonomy observed that the ordinary meaning of a provision that does not provide such a balance is absurd.172 As the Preamble of TBT mentions that the drafters desired to further the objective of the GATT, the AB regarded this as suggesting that TBT and the GATT have similar objectives and are of an overlapping nature. This is in addition to the fact that TBT is a development from the disciplines of the GATT.173 The Preamble of TBT suggests that TBT expands on pre-existing GATT disciplines and indicates that TBT and the GATT should be interpreted coherently and consistently.174 The AB further noted that there is a balance indicated by the Preamble of TBT between the desire to avoid obstacles to free trade, and the recognition of the right of countries to regulate.175 This balance is the same as the balance struck by the GATT, which qualifies obligations such as national treatment (GATT Article III) by general exceptions (GATT Article XX).176 Further, it was noted that the balance is found in TBT Article 2.1, read in light of its context, and the object and purpose of TBT.177 This eliminates the need to invoke GATT Article XX as a separate defence.178 Therefore, the jurisprudence under GATT Articles III and XX was adopted and applied to TBT non-discrimination obligations.179 The AB concluded that the object and purpose of TBT is to strike a balance between the objective of trade liberalisation and the right of countries to regulate.180
In a later dispute, the EC–Seals, the AB observed that the non-discrimination obligations in the GATT are balanced by the right of countries to regulate under GATT Article XX.181 As TBT does not have an exception provision like GATT Article XX, the 'legitimate regulatory distinction' test acts as the balancing factor in TBT.182 The AB incorporated the concept of 'legitimate regulatory distinction' in TBT Article 2.1 to offer the same regulatory space provided by GATT Article XX, thereby maintaining the balance between free trade and the right of countries to regulate.183 The incorporation of the 'legitimate regulatory distinction' test introduced the GATT Article XX analysis into TBT.184
Therefore, the AB has interpreted TBT in a manner that successfully balances the right of member countries to implement technical regulations, with the prevention of protectionism.185 Though GATT Article XX is not directly applicable to TBT, TBT allows for similar exceptions in its scheme by incorporating the chapeau test under GATT Article XX, thereby eliminating the need for the invocation of GATT Article XX.
CHINA–AUDIOVISUALS AND CHINA–RAW MATERIALS: THE TEXTUAL APPROACH
The disputes of China–Audiovisuals and China–Raw Materials are important for understanding how GATT Article XX can be used to justify violations of obligations arising out of instruments other than the GATT. The textual approach was the legal principle applied in these disputes to justify the invocation of GATT Article XX.
In China–Audiovisuals, China invoked GATT Article XX(a)186 to justify measures challenged as being inconsistent with paragraph 5.1 of its Accession Protocol.187 The question that arose for consideration was whether China could invoke GATT Article XX for a breach of its obligations under the Accession Protocol.188 The AB held that GATT Article XX was available outside the context of the GATT, and allowed for the application of GATT Article XX to justify the violation of paragraph 5.1 of China's Accession Protocol.189 The introductory clause of paragraph 5.1 stated, "without prejudice to China's right to regulate trade in a manner consistent with the WTO Agreement.", which the AB interpreted in a manner so as to apply GATT Article XX exceptions to China's Accession Protocol by way of incorporation.190 The applicability of GATT Article XX beyond the GATT framework was not excluded.191 A reason for this finding was the recognition by the AB of the policy consideration of respecting the inherent right of countries to regulate trade.192 The measures that China sought to justify were linked to its regulation of trade, and in light of this relationship between measures inconsistent with China's obligations and China's right to regulate trade, China could rely upon the introductory clause of paragraph 5.1 of its Accession Protocol to invoke GATT Article XX.193
In a later dispute, the China–Raw Materials, a claim was brought against China for violating paragraph 11.3 of its Accession Protocol.194 China invoked GATT Article XX to defend itself against the claim.195 The Panel held that GATT Article XX could only apply to violations of the GATT, unless it is specifically incorporated into a non-GATT discipline or instrument.196 The Panel observed that GATT Article XX exceptions could be used to justify violations of non-GATT obligations only if language to that effect is incorporated in the instrument in question by cross-reference.197 The legal basis for using GATT Article XX to justify a violation of obligations other than those arising out of the GATT can only be the text of incorporation.198 There was no text in paragraph 11.3 of the Accession Protocol which could provide a basis for the invocation of GATT Article XX, because of which China could not use it as a defence.199 Therefore, the Panel based its finding of non-application of GATT Article XX on a strict textual interpretation of paragraph 11.3 of China's Accession Protocol.200
Subsequently, the AB upheld the Panel's finding.201 As opposed to China–Audiovisuals, the AB did not allow for the application of GATT Article XX to justify the violation of paragraph 11.3 of China's Accession Protocol, due to the lack of specific reference to GATT Article XX, or a general reference to GATT or the WTO Agreement.202
On a cumulative reading of China–Audiovisuals and China–Raw Materials, it becomes clear that the textual interpretation was followed in these cases, as the application of GATT Article XX to instruments other than the GATT was made contingent on the incorporation of text to that effect.203 Though the finding in the two disputes was different, the strict textual interpretation approach was applied in both of them.204
APPLICABILITY OF EXCEPTIONS TO THE AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES
In this part, we argue that the environmental exceptions under GATT Article XX must be applicable to the ASCM. For this, we rely on the reasons derived from Part IV, such as the ASCM being an elaboration upon GATT disciplines, close link, and textual support. Additionally, the balance between free trade and the right to regulate of member states, and the expiry of Article 8 of the ASCM, strengthen this argument.
ELABORATION OF GATT DISCIPLINES, CLOSE LINK, AND TEXTUAL SUPPORT
Based on an analysis in Part IV of various covered agreements and decisions of the AB to determine the reasons for the applicability of GATT Article XX, it can be argued the GATT Article XX exceptions should apply to the ASCM.
Just like TRIMs and SPS elaborate upon GATT disciplines, the ASCM relates back to GATT Article XVI concerning subsidies.205 In the field of subsidies, GATT Article XVI together applies with the ASCM.206 As has been held by the AB on a number of occasions, the principal object and purpose of the ASCM is to augment and improve GATT disciplines regarding the use of subsidies.207 The ASCM can be seen an application or extension of GATT Article XVI, signifying the direct relationship between ASCM and GATT.208 Part III of the ASCM, which deals with 'actionable subsidies', elaborates upon GATT Article XVI:1, and ASCM Article 6 clearly defines 'serious prejudice'.209 This relationship is strengthened by footnote 13 to ASCM Article 5(c), which states that, "The term "serious prejudice to the interests of another Member" is used in this Agreement in the same sense as it is used in paragraph 1 of Article XVI of GATT 1994, and includes threat of serious prejudice.".210 Further, Part II of the ASCM, which deals with 'prohibited subsidies' also elaborates upon GATT Article XVI. On a combined reading of ASCM Articles 3.1(a) and 3.2, it becomes clear that member states cannot grant or maintain subsidies contingent upon export performance as they are prohibited. This is an elaboration of GATT Articles XVI:2, XVI:3 and XVI:4, which discourage export subsidisation. Additionally, ASCM Article 3.1(b), which prohibits the grant of subsidies which have a DCR, can be deemed to be an elaboration of GATT Article III:5.211 Therefore, there is a clear relationship between the ASCM and GATT Article XVI.212
Therefore, because a violation of GATT Article XVI could be justified under GATT Article XX, and as GATT Article XVI is linked to the ASCM and both deal with the same matters, the exceptions under GATT Article XX should also apply to the ASCM.213 It would be odd if that is not the case.214
Further, another argument supporting the claim that GATT Article XX exceptions should be applicable to the ASCM is built on the 'single undertaking' principle, which strengthens the close link between the GATT and the ASCM.215 According to the 'single undertaking' principle, the WTO Agreement is a 'single undertaking', with all the covered agreements under it being a part of an 'integrated' legal system.216 This implies all covered agreements are cumulative and apply simultaneously.217 Article II.2 of the WTO Agreement states that all covered agreements are an integral part of the WTO.218 The WTO is a 'single undertaking', and the GATT is clearly developed in multiple covered agreements, with the discipline of subsidies being developed in the ASCM.219 The fact that the WTO Agreement is a single treaty instrument, and has been accepted by the member states as a 'single undertaking', was affirmed by the AB in Brazil–Desiccated Coconut.220 Therefore, the 'single undertaking' principle further highlights the strong relationship the GATT shares with the ASCM.
Additionally, there is significant textual connection between the GATT and the ASCM.221 As discussed in Part IV, textual support in China–Audiovisuals allowed for the applicability of GATT Article XX exceptions to the China Accession Protocol. Similarly, there is also textual support for justifying the application of GATT Article XX exceptions to the ASCM. ASCM Article 32.1 provides the textual connection with GATT, stating that, "No specific action against a subsidy of another Member can be taken except in accordance with the provisions of GATT 1994, as interpreted by this Agreement." Additionally, footnote 56 to ASCM Article 32.1 states that, "This paragraph is not intended to preclude action under other relevant provisions of GATT 1994, where appropriate". This strengthens the claim that member states should be allowed to invoke GATT Article XX as a defence to the violation of the ASCM.
An issue that has been central to the WTO regime is the balancing of the WTO's objective of liberalisation of trade against the avoidance of prejudice to the autonomy of member states, by recognising their right to regulate in order to achieve legitimate objectives.222 In principle, there is a broad consensus that WTO law should not encroach on the right of member states to enact bona fide regulatory measures.223 The need for a balance is vital because trade rules because of their nature impinge on other policy objectives of member states, whereas policies with non-trade objectives inevitably result in trade restrictions.224 A regulatory measure aimed at environmental protection has the capacity to restrict international trade, and the pursuit of trade liberalisation can restrict the freedom of member states to regulate to achieve non-economic objectives.225 The recognition of the right to regulate under the WTO regime is evinced by covered agreements and decisions of the AB.
One such agreement is SPS, which recognises the discretion of a State to determine its own appropriate health policies by invoking the precautionary principle as an exception to risk assessment and international standards requirements.226 This is reflected in SPS Article 5.7, which allows countries to adopt precautionary measures in the absence of sufficient scientific evidence, instead of waiting for a time when the risk assessment is complete.227 The AB in EC–Hormones observed that SPS Article 5.7 is reflective of the precautionary principle,228 allowing the member states to determine their own optimal policies for protecting human health and environment.229 Similarly, TBT also seeks to strike a balance between the goal of international trade liberalisation and the right of member states to regulate.230 As discussed in Part IV, the AB on different occasions has interpreted TBT in a manner that allows for the same regulatory space as under GATT Article XX, by balancing free trade and the right of member states to regulate and pursue legitimate policy objectives.231
A sweeping recognition of the member states' power to regulate is found in China–Audiovisuals, where the AB held that the 'right to regulate' is an inherent right enjoyed by a member's government, and not a right bestowed by international treaties, like the WTO Agreement.232 This right must be exercised in a manner which is consistent with the WTO obligations assumed by the member state.233 The AB allowed the member state to exercise its right to regulate in a manner consistent with the WTO Agreement, by allowing it to invoke GATT Article XX exceptions. The Panel in China–Rare Earths, recognised the right of nations to regulate. It observed that:
"[...] an interpretation of the covered agreements that resulted in sovereign States being legally prevented from taking measures that are necessary to protect the environment or human, animal or plant life or health would likely be inconsistent with the object and purpose of the WTO Agreement. In the Panel's view, such a result could even rise to the level of being "manifestly absurd or unreasonable"."234
Further, in US–Gasoline, the AB recognised the regulatory autonomy of member states, and took into account the preamble to the WTO Agreement as demonstrating the importance of coordinating policies on trade and the environment. It observed that WTO Members have a large measure of autonomy to achieve environmental objectives and accordingly enact and implement environmental legislation. 235
Therefore, in light of the recognition of regulatory autonomy under the WTO regime, exceptions for environmental protection must be allowed under the ASCM, such that the balance between the right to regulate and free trade is maintained.
Further, we argue that subsidies best maintain the balance between the right to regulate and free trade, as they are less trade restrictive as compared to other measures adopted by countries. Subsidies are considered to be more efficient trade policy instruments.236 Measures such as total bans, tariffs, and quantitative restrictions such as quotas, are more trade distorting than domestic policy measures such as subsidies because they have an impact on both production and consumption directly.237 Subsidies are less trade distorting as they affect only production and not consumption.238 They allow for the change in production and consumption in response to world market conditions, as opposed to quantitative restrictions.239 It has been noted that a subsidy seems to the "first-best" solution which is less trade-restrictive than import prohibitions.240 Additionally, if subsidies are used well, they can correct market failures and promote behaviour that is environmentally sound.241
The measures covered by the GATT, such as total bans and quantitative restrictions, which are widely considered to be more restrictive and trade-distorting than subsidies, can be justified for environmental protection by virtue of GATT Article XX.242 Robert Howse is of the view that if GATT Article XX is not allowed as a defence against a claim of violation of the ASCM, it would lead to an illogical result of member states having " [...] more policy space to enact much more obviously and severely trade-distorting measures, such as import bans and quotas, than what are generally understood to be less distortive measures, namely domestic subsides.".243 If measures that are more trade-restrictive than subsidies get the protection of GATT Article XX, subsidies not getting the same protection would lead to unjustified policy inconsistencies.244 This is especially true because subsidies being less trade-restrictive, would maintain the balance between regulatory autonomy and free trade better than other measures such as total bans and quantitative restrictions.
ARTICLE 8 OF THE AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES
It is pertinent to note that until end of 1999, ASCM Article 8 was in force, which expired due to its non-renewal by member states.245 This provision dealt with non-actionable subsidies, and recognised that certain subsidies, including environmental subsidies could not be challenged as violating the ASCM as they were overall beneficial.246 According to commentators, in spite of the non-renewal of ASCM Article 8, there is a consensus among member states that some subsidies are better not challenged.247 It is often argued that the non-renewal of ASCM Article 8 implies that the member states decided that exceptions should not exist under the ASCM.248 However, according to Luca Rubini, the expiry of the provision on non-actionable subsidies only implies that the special exceptions under the ASCM have disappeared, which has made way for the applicability of the GATT Article XX general exceptions.249 Further, he argues that assuming that there was an overlap between ASCM Article 8 exceptions and GATT Article XX exceptions, it could be argued that the role of GATT Article XX was quite limited in the presence of non-actionable subsidies under ASCM Article 8.250 However, due to the expiry of the category of non-actionable subsidies, there now exists no conflict between the GATT and the ASCM, allowing for the application of the discipline on general exceptions in the field of subsidies.251
It is also argued that ASCM Article 8, an exception provision designed exclusively for the ASCM indicates that GATT Article XX should not apply to the ASCM.252 However, the negotiating history does not suggest that the category of non-actionable subsidies under ASCM Article 8 was supposed to be the only justification for certain subsidies, precluding the application of GATT Article XX to the ASCM.253 Additionally, the scope of ASCM Article 8 with respect to the environment was very narrow,254 because of which there was no common purpose and subject matter between the limited exceptions under ASCM Article 8, and the broad environmental exceptions under GATT Article XX.255 This leads to the conclusion that GATT Article XX could have been invoked to justify subsidies not permissible under the ASCM, even during the time ASCM Article 8 was in force.256 As a result, the non-renewal of ASCM Article 8 does not signify that the member states did not intend for the application of GATT Article XX, because of their subject matter being different. Therefore, the expiry of Article 8 reinforces the argument in favour of allowing for the application of GATT Article XX to the ASCM.257
IMPLICATION OF INDIA'S POLICIES
In this part, we discuss the Canada – Feed-In Tariff Program case, which dealt with a challenge to a feed-in tariff ('FIT') scheme as violating the ASCM. Further discussed is the India – Solar Cells dispute, in which though the USA initially challenged India's policies as violating the ASCM, it later withdrew its argument under the ASCM. The USA feared that India would also retaliate by filing a complaint against it under the ASCM for its alleged DCR programs.258 Thus, it restricted its arguments to the GATT and TRIMs. Subsequently, the policy impact on India's energy sector, in the event that it is allowed the exception under GATT Article XX, is discussed.
APPLICATION OF THE AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES TO FEED-IN TARIFF PROGRAM AND INDIA’S DOMETIC CONTENT REQUIREMENT POLICIES
Canada – Feed-In Tariff Program is an important case which deals with the ASCM. The FIT program was a scheme implemented by the Government of Ontario to enhance the production of renewable energy in Canada which would diversify its supply mix, i.e., the proportion in which various sources of energy available to the country are used.259 FIT schemes aim to offer fixed prices over a specific period of time for energy produced from renewable energy sources.260 They aim to incentivise people to invest more in the generation of solar energy.261 Thus, the objectives of this program were to increase the capacity of generating renewable energy resources, create new jobs and further the investment in the renewable energy sector.262 Anyone participating in this program would be required to operate and build his own power plant.263 For doing this, it would receive remuneration from the Government of Ontario which would be stipulated by the terms of the contract between them.264 However, the granting of these FIT schemes itself was contingent on the usage of certain percentage of DCRs in the construction of the power plant.265
Aggrieved by the DCR policy, in 2010, Japan and the European Union ('EU') challenged this policy at the WTO as violating TRIMS, the GATT and the ASCM. Their argument under the ASCM was that it violated ASCM Article 3.1(b). The WTO Panel decided this case in favour of Japan and the EU on claims related to the GATT and TRIMS, and it rejected their argument under the ASCM. The Panel held that the wholesale electricity market price in Ontario was heavily influenced by government intervention and hence distorted.266 It could thus not be regarded as constituting an appropriate benchmark. Further, the four alternative benchmarks proposed by Japan and the EU were not considered by the Panel because they themselves were distorted and could not accurately represent the market conditions in Ontario.267 Since the Panel could not find the appropriate benchmark, it dismissed the claim of the complainants under the ASCM. Canada appealed the decision of the Panel. The AB dismissed Canada’s appeal, but reversed the finding of the Panel with respect to the ASCM.
It held that the Panel should have considered the solar and wind energy markets as the relevant market for determining the benchmark rate and not the wholesale electricity market.268 This is because the solar and wind energy markets would not exist if it was not for the government intervention.269 Such government intervention, on its own, cannot be inferred to be a subsidy.270 Only if in that market a government provides a specific financial contribution which confers a benefit, could it be called a subsidy.271 Thus, to determine whether the FIT scheme conferred a benefit, the terms and conditions under the competitive solar and wind energy markets should be examined.272 However, due to insufficient evidence, the AB could not determine the appropriate benchmark rate with respect to the terms and conditions in the solar and wind energy market.273 Thus, it could not determine whether a benefit was received under the FIT program.
However, hypothetically, if the AB had completed its analysis and held that the FIT program confers a benefit, then the measure would have been declared to be a subsidy. As a result, it would have been deemed to be specific since it was contingent on the use of domestic inputs.274 Thus, by virtue of ASCM Article 3.1(b), such a subsidy would have been held to be a prohibited one and would have had to be withdrawn with immediate effect under ASCM Article 3.2.
With respect to India, we argue that there is a possibility that the DCR schemes under JNNSM and other solar policies would be challenged under the ASCM. While Phase I along with Batch I of Phase II have been declared to be violating the provisions of the GATT and TRIMS, subsequent batches as well as phases continue to exist. As mentioned in Part II, these policies also have a mandatory DCR upon which subsidies (VGF) are contingent. Additionally, the solar rooftop programme also has DCR provisions upon which the grant of the CFA is dependent. Thus, these policies may be challenged under ASCM Article 3.1(b).
To determine whether the financial contribution given by the Government would confer a benefit, the Panel would have to decide whether the beneficiaries are receiving this financial contribution at a better rate than the market rate. For that the Panel would have to identify an appropriate benchmark rate in the market. If the Panel is able to determine these questions affirmatively, the financial contribution of the Government would qualify as a subsidy. Consequently, under ASCM Article 2.3 it will be deemed to be a specific one as it falls under ASCM Article 3.1(b). As a result of this, the subsidy given by the Government under JNNSM will be deemed to be prohibited. Thus, India would have to withdraw its DCR policies.
Hence, there exists a distinct possibility that India’s DCR policies may be challenged successfully in front of the WTO Panel, under the ASCM. Since a complainant can challenge a measure based on multiple covered agreements, a challenge under the ASCM serves as an attractive option due to the non-existence of environmental exceptions under the ASCM, unlike other covered agreements such as the GATT and TRIMs. A successful challenge under the ASCM will hinder India’s objective of sustainable use and production of solar energy in the long term which will ultimately benefit the environment. Thus, it is important to justify these measures under the exceptions provided under GATT Article XX, such that India is allowed to develop a strong manufacturing base for solar modules, in light of environmental concerns.
POLICY IMPACT ON THE INDIAN ENERGY SECTOR
In this section of the paper, we discuss how availing GATT Article XX exceptions will help India meet its policy objective of reducing its dependence on coal imports, and satisfying its electricity requirements without increasing its greenhouse gas emissions. The Cabinet Committee of Economic Affairs of India has projected that India’s peak power demand will increase four-fold by 2035.275 However, India still heavily relies on coal to meet its electricity demand.276 As of 2017, coal power plants account for about sixty percent of India's installed electricity capacity.277 To meet the aforementioned power demand, India’s reliance on coal will continue as is if left unchecked. Additionally, India is the second largest importer of coal,278 despite being the third largest producer of coal in the world.279 This is due to the fact that Indian coal is poor in quality, and hence inefficient when compared to imported coal.280 While recently, imports of coal have fallen, they are projected to rise at a rapid rate in the future.281 This will not be favourable for India as it will be dependent on the volatility of the foreign market.282
As a result of its coal consumption, India is also the fourth largest emitter of carbon dioxide in the world after China, USA, and the EU.283 Thus, India’s emission of carbon dioxide will not be reduced if it continues to rely on thermal energy. In order to meet its power demand while trying to reduce carbon dioxide emissions simultaneously, India would necessarily have to rely more on renewable energy sources. To this effect, India has made certain international commitments. Under the Paris Agreement,284 which deals with the mitigation of greenhouse gases, India aims to produce forty percent of its electricity from renewable energy sources, out of which seventy percent should be from solar energy.285 However, as of 2016, renewable energy accounts for only about fifteen percent of the total electricity production in India.286 Out of this, solar energy accounts for only ten percent of the total renewable energy produced. Thus, the target of 2030 is clearly an ambitious one and requires a dramatic increase in the production of electricity from solar energy.
Hence, to limit greenhouse emissions while meeting the increased demand for power, a considerable increase in renewable energy capacity is needed. In Part II of this paper, we have clearly laid down the benefits a renewable energy subsidy based on DCR can have. These include a stable manufacturing base, technical expertise and reduced costs for solar power which can allow for sustainable generation of the same. Further, the problem of setting up domestic solar power plants, unique to India, can be solved more efficiently by the use of local knowledge and manufacturing skills. This argument is further strengthened by the fact that DCR policies have a high chance of success in India, due to the factors mentioned in Part II of this paper. However, for these benefits to materialise, it is imperative that the WTO allows India to avail of GATT Article XX benefits. By being able to avail the environmental exception, India would be able to reduce its reliance on coal and thereby reduce its carbon dioxide emission, and will be able to strengthen its electricity production simultaneously.
The role of renewable energy subsidies based on DCRs in achieving both industrial and environmental objectives cannot be overemphasised. Renewable energy subsidies can play a vital part in giving impetus to the renewable energy sector, in turn combating the globally recognised difficulty posed by the phenomenon of climate change. Such subsidies based on DCRs are particularly important for developing nations like India, looking to build a domestic renewable energy industry for the sustainable generation of green electricity, and reap the numerous benefits associated with it. We have elaborately discussed India's solar energy policies under the JNNSM, which are especially attractive because of their likelihood of success.
However, the ASCM, which contains the regulations governing subsidies, does not exempt measures that are beneficial for the environment, such as renewable energy subsidies. Therefore, it is likely that renewable energy subsidies based on DCRs such as those given by India under the JNNSM, are found by the WTO to be violative of the ASCM, and would have to be resultantly withdrawn. In the past, renewable energy subsidies have indeed been challenged before the WTO as violating the ASCM. To tackle this situation, the WTO must consider allowing the application of GATT Article XX to the ASCM, such that States are ensured regulatory autonomy. This argument becomes clear on an examination of various covered agreements and disputes decided by the WTO, along with the reasons derived therefrom.
As a consequence, if the argument does find favour with the WTO, a positive policy impact on India's energy sector can be expected. It will serve to be an immense aid in assisting India achieve its twin policy objective of satisfying its domestic electricity requirement, while minimising its carbon dioxide emission because of reduced dependence on coal. Therefore, in light of there being some kind of environmental exceptions in various regimes other than subsidies, the WTO must consider the provision of similar environmental exceptions in the ASCM. This is strengthened by the fact there is a significant overlap that exists between subsidies and the promotion of environmental concerns, and the increasing use of subsidies as a tool for the promotion of renewable energy. This will ensure that the ASCM is in line with the present times, where climate change is considered to pose a severe threat to the environment.
Intervention? 1 (World Trade Institute Working Paper Group, Paper No. 05, 2015), available athttp://seco.wti.org/media/filer_public/5b/dd/5bddb3d9-5ed8-448a-8d38-ff3325c4cd97/wti_seco_wp_05_2015.pdf (Last visited on May 21, 2017).
“The ‘covered agreements’ include the WTO Agreement, the Agreements in Annexes 1 and 2, as well as any Plurilateral Trade Agreement in Annex 4 where its Committee of signatories has taken a decision to apply the DSU. In a dispute brought to the DSB, a panel may deal with all the relevant provisions of the covered agreements cited by the parties to the dispute in one proceeding.")
(unpublished Ph. D. dissertation, Massachusetts Institute of Technology) (on file with author); See Joanna Lewis & Ryan Wiser, Fostering a Renewable Energy Technology Industry: An International Comparison of Wind Industry Policy Support Mechanisms, 35(3) Energy Policy (2007).
"[...] there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i.e. where:
(i) a government practice involves a direct transfer of funds (e.g. grants, loans, and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees);
(ii) government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits)
(iii) a government provides goods or services other than general infrastructure, or purchases goods;
(iv) a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments.").
Energy Investment, 38 Energy Policy 955(2010)..
Formalising Lobbying: A Necessity in a Democratic Setup
Lobbying is a complex phenomenon, generally used to refer to activities related to influencing policy-making, particularly to
There are many healthy forms of lobbying that thrive in democracies, such as policy advocacy done by think tanks, citizens’ groups, non-governmental organizations,
Colloquially and under most legal regimes, corporate lobbying refers to the communication with a legislator or bureaucrat with the motive of influencing decision-making on a policy matter.6
In practice, lobbying is resorted to by corporates in order to protect themselves from policies that could harm their interests and
Lobbying exists in some form or another in most countries; however, despite the ramifications it can have on the judiciousness of law-making, it is an unregulated activity in most jurisdictions.10
It is in this context that this note aims to discuss the changes required in the current legal framework to address the menace of lobbying.
LEGAL FRAMEWORK GOVERNING
In this Part, we will discuss the current legal framework relating to lobbying in India.
In March 2013, a bill to regulate
Absence of a regulatory regime in this area on one hand hurts the right to information of the citizens, and limits their power to critique a law due to asymmetric information. On the other, it is in conflict the goal of “ease of doing business”, which is so eulogised by the current government – this is because, while the practice is permissible in other developed jurisdictions after compliance with disclosures, it still brings connotations of corruption with itself in India, thereby making it difficult for companies from such countries to push for the requisite regulatory changes they need to establish themselves in the Indian market in a legal fashion.32
At the same time, there tends to be a very significant influence from interest groups that represent corporations.45
Voluntary Systems of
Generally, legal systems that have voluntary regulation of lobbying allow lobbyists to accept a code of conduct or to register themselves with an official body that records information pertaining to their activities.47
Though in principle,
Public Choice Theory
Lobbying is deeply intertwined with the affecting of policy by corporations to bring about reforms that would be financially beneficial to them.57
The public choice theory
A presumption made
Thus, scholars of this theory believe that lobbying is a legitimate form of stakeholder representation and is governed by simple rules of demand and supply, as policymakers are influenced to take decisions in the interest of lobbyists if it offers
In this process, the
Regulations of lobbyingare
Countering Lobbying: Giving the Power to the People
Often, the danger with lobbying is lack of transparency, resulting in a situation where each player is unaware of the interests of the other. This breakdown of information and communication can result in asymmetric information, were certain limited lobbyists have
In a system where there are three players, one of the most critical aspects
However, in terms of
In order to ensure equitable
The lack of any formal method to ensure access
The Power to Counter Lobby
Although it is desirable to allow
The need of the hour is
Interestingly, the EU does actively recognise the usage of lobbying.104However, in contrast,lobbying in the EU tends to
In both situations, the opportunity to counter-lobby exists, however,
With the vast majority of countries
It is in this background that the public choice theory
To do this information
Black’s Law Dictionary, 1022(9th ed., 2009).
OECD,Transparency and Integrity in Lobbying,3
KlemensJoos, Lobbying in the New Europe, 15-17 (2011).
Id.; Vincent R. Johnson,
See generallyDenizIgan, Prachi Mishra, & Thierry Tressel,
Financial Crisis(IMF Working Paper, WP/09/287, 2009)
XLIX Law (Hungary), 2006.
Lobbying Act, 2007 (Taiwan).
Act 169 of 2005 (Poland).
Integrity and Prevention of Corruption Act, 2010 (Slovenia).
The Disclosure of Lobbying Activities Bill, 2013, 14 of 2013.
Pankaj KP Shreyaskar,
First Amendment, Constitution of the United States of America:
Id., 2-3; Charles Borden,
Kenneth M. Goldstein, Interest Groups, Lobbying and Participation in America, 4-10 (1999).
Encyclopaedia of Public Theory, 16 (2004).
Steinar Strom, Measurement in Public Choice171 (2004).
Encyclopaedia of Public Theory
Encyclopaedia of Public Theory, 352-353 (2004).
Anthony J. Knowes, Total Lobbying, 84 – 85 (2006).
Encyclopaedia of Public Theory, 352-353 (2004).
Encyclopaedia of Public Theory, 352-353 (2004).
Encyclopaedia of Public Theory, 352-353 (2004).
Encyclopaedia of Public Theory, 352-353 (2004).
Mark Kober-Smith,Legal Lobbying: How to Make Your Voice Heard
Amy Handlin, Dirty Deals? An Encyclopedia of Lobbying, Political Influence, and Corruption, 885-886 (2014).
Smith & Wright,
SeeDenizIgan, Prachi Mishra, & Thierry Tressel,
Smith & Wright,
ROLE OF INDIAN REGULATORY AUTHORITIES IN integrating environmental justice into industrial siting decisions
In the wake of the horrors wrought during the Bhopal gas tragedy, the issue of environmental justice was catapulted to the forefront of public discourse in India. Numerous studies and surveys conducted thereafter shed light on the unequal distribution of environmental benefits and harms between middle-to-high income communities and the low-income communities. While certain regulatory initiatives have been undertaken thereafter to mitigate these harms, the concerns of the marginalised communities are yet to be fully integrated into every environmental decision that affects them. This is specifically true in the context of industrial siting, where the concerns of the poor are given superficial consideration. In this paper, I attempt to assess the Indian legal framework on industrial siting through the lens of environmental justice, and to justify the need for incorporating principles of environmental justice within the Indian legal and regulatory framework. I seek to examine the extent to which the current framework on industrial siting decisions incorporates these principles, and to explore the ways in which environmental justice concerns have been incorporated into the domestic law of the USA, and how they are relevant for India. This analysis enables in outlining the recommendations on the measures that Indian regulatory authorities should take, so as to accord greater emphasis on environmental justice under laws relating to industrial siting. The proposed measures could be implemented by regulatory authorities by virtue of their duties under Articles 21, 19(1)(a), 14 and 15(4) of the Constitution.
In 1984 the city of Bhopal in Madhya Pradesh, India woke up to one of the worst industrial disasters in Indian history, which had left over ten thousand people dead and more than two hundred thousand injured.1 The toxic methyl isocyanate (MIC) gas that had leaked from a chemical factory located nearby was found to have led to the tragedy.2 While the causes and consequences of the disaster have received considerable coverage in Indian and international literature, the issue of environmental justice, and its relevance to the incident, have continued to remain ancillary.
From the time the factory was established, the Union Carbide Corporation (‘UCC’) – its owner – had systematically adhered to a policy of discrimination in its design, construction and operation.3 Specifically, the low-income and marginalised communities around the factory had not been informed either by the UCC or by the regulatory authorities at the time, about the presence of hazardous substances on the factory premises.4 Furthermore, the regulatory authorities had made no efforts to ensure that the surrounding population was made aware of the safety procedures required to be complied with, in case of a leak.5 As a result, these communities were unprepared to withstand the environmental harm which resulted from the leak.
According to the United Nations Children’s Fund (UNICEF), out of the two hundred thousand people affected by the leak, approximately seventy-five per cent were found to have been slum-dwellers.6 Another survey conducted by the Centre for Social Medicine and Community Health of the Jawaharlal Nehru University, New Delhi, also found that more than half of the population affected by the gas-leak were from a low-income background.7 The results of these surveys shed light on the unequal distribution of environmental benefits and harms between middle-to-high income communities and the low-income communities –which is precisely the issue that the concept of environmental justice seeks to address.
Bearing out of the civil rights movement in the United States of America (‘the USA’), environmental justice seeks to eliminate the unequal distribution of environmental benefits and harms amongst the low-income and the middle-to-high income communities. It recommends the promotion of fair and equitable treatment of all persons, irrespective of their culture, race, colour, caste, gender or economic status, under environmental laws, regulations, policies and decisions.8 While scholars across the globe continue to expand its scope, the essence of environmental justice strikes at the disproportionate distribution of environmental benefits and harms amongst low-income communities, and middle to high-income communities.9
In India, the concept of environmental justice is yet to garner the significance it deserves. While the low-income communities in India have constantly struggled to get equal treatment in the context of environmental decisions, they have rarely succeeded. The resistance of the Indian poor against the disproportionate environmental burden imposed upon them has also been referred to as ‘environmentalism of the poor’. The term ‘environmentalism of the poor’ was coined by the renowned environmentalist Mr. Anil Agarwal, and bore out of the Chipko movement in North India, wherein several villagers hugged the trees that were ordered to be felled by Maharaja Abhay Singh, the erstwhile ruler of Jodhpur.10 Over the years, the environmentalism of the poor has highlighted the injustice meted out to them in environmental decision-making.11 These struggles have resulted in the enactment of landmark legislations such as the Panchayats (Extension to the Scheduled Areas) Act, 1996, the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, and the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, which strive to accord greater rights to the poor and low-income communities, including the tribal population. However, the concerns of these communities are yet to be fully integrated into every environmental decision that affects them. This is specifically true in the context of industrial siting, where the concerns of the poor are given consideration rather artificially in the preliminary phase of scoping and site selection – these tend to lose importance in the later phases of industrial development. An example of this could be gauged from the manner in which the environment impact assessment is conducted for industrial projects under the Environment Impact Notification, 2006, which will be discussed later in detail.
In light of the foregoing contextual background, this paper seeks to assess the Indian legal framework on industrial siting through the lens of environmental justice, and to justify the need for incorporating principles of environmental justice within the Indian legal and regulatory framework. In Part II of this paper, the concept of environmental justice is dismantled so as to highlight the key principles that must be assimilated into the legal and regulatory framework for securing environmental justice to the low-income and marginalised communities. In Part III, I outline the extent to which the current framework on industrial siting decisions incorporates these principles as outlined in Part II. In Part IV, I explore the ways in which environmental justice concerns have been incorporated into the domestic law of the USA, and how they are relevant for India. The USA’s unique history, in the backdrop of the civil rights movement and its emphasis on environmental justice, renders it a model jurisdiction for India to emulate. In Part V, I briefly delineate the conclusions, and outline the recommendations on the measures that regulatory authorities should take so as to accord greater emphasis on environmental justice under Indian environmental laws relating to industrial siting. The proposed measures could be implemented by regulatory authorities by virtue of their constitutional duties under Articles 21, 19(1)(a), 14 and 15(4) of the Constitution.
II. DELINEATING THE THEORETICAL FRAMEWORK OF ENVIRONMENTAL JUSTICE: EVOLVING KEY GUIDING PRINCIPLES FOR PUBLIC REGULATORS UNDER INDIAN ENVIRONMENTAL LAWS
There is extensive literature on the scope and meaning of environmental justice and the manner in which it can be attained. The earliest attempt at defining environmental justice was made at the First National People of Colour Environmental Leadership Summit (‘Summit’) held in Washington DC in 1991.12 While environmental justice as a concept originated much earlier in the United States, the Summit in 1991 imbued the concept with an international character. The delegates at the Summit adopted seventeen principles on environmental justice which, inter alia, affirmed substantive rights of all persons to be free from ecological destruction and to live in a healthy environment; demanded that public policy be based on mutual respect and justice for all peoples, free from any form of discrimination or bias; called for strict accountability of past and current producers for detoxification and containment at the point of production; demanded compensation and reparations for environmental injustices; and stressed on the need for participation at every level of decision-making.13 Together, these principles afforded a wide interpretation to environmental justice as a concept, and as a system for resolving environmental issues affecting vulnerable populations. However, within this paper, only those components of environmental justice that directly strike at the disproportionate distribution of environmental harms and benefits between the low-income and middle-to-high income communities have been covered. This is because, in its most basic form, environmental justice strives to equalise environmental benefits and harms among all classes of persons.
In the backdrop of the civil rights movement in the USA, which will be discussed in greater detail in Part IV, the early movement on environmental justice laid emphasis on equity and fairness in environmental decisions relating to industrial siting and the dumping of industrial waste.14 Various commentators have sought to outline these components by means of legal theory. In this regard, the work of John Rawls has proved to be immensely useful in dismantling the various elements of distributive justice that lay the foundation for equity and fairness in environmental decision-making.
In his famous work titled ‘A Theory of Justice’, John Rawls propounded the normative framework for distributive justice.15 One of the ways in which Rawls deconstructed the concept of distributive justice was by building upon the concept of social contract proposed by John Locke and Jean-Jacques Rousseau.16 According to Rawls, individuals who are bound by a social contract and are placed in an ‘original position’, where they know very little about themselves, make fair and rational decisions that benefit all.17 This is because when individuals are placed in the same position as others and are deprived of circumstances that set them apart – which allow prejudices to creep in –they make objective decisions that proportionately benefit all.
Through this ‘original position’, Rawls submits that rational individuals– who are also assumed to be self-interested – will arrive at key principles of justice, which are central to any individual’s existence.18 Under the first principle of justice, individuals would agree to a basic set of liberties that would be applicable to all.19 Among other things, these liberties would include equal protection under law and equality of opportunity.20 Under the second principle of justice, individuals in the ‘original position’ would recognise that social and economic inequalities could set them apart in the future, but would stress on equality of opportunities for all individuals to occupy offices and positions that create such inequalities.21 The individuals would also recognise the fact that no one can be better off without making another person worse off.22 Keeping in mind these principles, rational individuals who would be placed in the ‘original position’ would make decisions that would benefit all, from the least advantaged to the most advantaged, assuming that they may be placed under any of those circumstances in the future.
Rawls’ work is useful in extracting normative principles that form the basis for environmental justice, or a legal framework that is environmentally just. If regulatory authorities make all their environmental decisions, including the ones relating to the siting of industries, keeping in mind the principles of distributive justice identified by Rawls, they would, by default, ensure that there is equal mitigation of environmental harms and equal distribution of environmental benefits among all persons, from the ones who belong to the low-income group, to the ones who belong to the middle-income and high-income groups.
Assuming that protection from environmental harms and access to environmental benefits constitute essential liberties, all individuals would receive equal treatment under all environmental decisions in accordance with the first principle proposed by Rawls. Where some individuals are denied equal treatment, they would be entitled to receive adequate compensation for being put at a disadvantage by regulatory authorities vested with performing public functions. This would restore the disadvantaged individuals to their original position, where they would again be placed on an equal footing with those individuals who had initially benefitted. In accordance with the second principle proposed by Rawls, the regulatory authorities would also ensure that all persons are provided an equal opportunity to occupy advantageous positions, from where they can make environmental decisions that affect them.
Even though aspects of procedural justice have not been explicitly alluded to under Rawls’ theory, they are essential to the application of Rawls’s principles. The two main components of procedural justice entail that first, the State or its authorities allow adequate access to information to all citizens, to enable them to make informed environmental decisions; and second, that the State or its authorities make transparent and fair decisions that can be reviewed by citizens, and, if necessary, can be amended or changed. These components are crucial to the realisation of the right to information – which has been outlined in domestic as well as international instruments23– and are essential for securing equality of opportunity for all persons to make environmental decisions that affect them. By adhering to these components, the State and its authorities may be able to promote social justice by equalising the disparities among all people, and providing a level playing field for them. However, compliance with these components may not necessarily guarantee an environmentally just outcome in all environmental decisions. This is because there are other aspects of environmental justice, such as the geographic availability of environmental benefits and special vulnerability of groups and individuals to environmental harms, which also need to be assessed to ensure an environmentally just outcome. Regardless, compliance with procedural components of environmental justice by regulatory authorities is useful in affording all persons the right to have an equal say in the achievement of environmental outcomes. Without these, environmental justice may have been done, but may not be seen to have been done. The USA’s framework, discussed below, provides a good example of the manner in which all these aspects can be collectively addressed under the legal and regulatory framework on the environment.
The views of both Rawls and Shiva not only charge the State to promote a just and fair society that allows everyone equal access to environmental resources, but also recommends that the State and its authorities impartially mitigate environmental harm that affects any person or community. Keeping in mind their views, the authorities of the State, or simply the public authorities, must comply with the following obligations to secure environmental justice in its truest sense: first, they must provide equal opportunity to all persons to make environmental decisions that affect them. Second, they must allow all persons to access information which enables them to make informed environmental decisions. Third, they must ensure the equal distribution of environmental benefits among all persons, from the ones who belong to the low-income group, to the ones who belong to the middle to high-income groups. Fourth, they must implement measures for mitigating environmental harm for all persons. If all public authorities under Indian environmental laws and regulations comply with each of the components outlined above, they would be able to secure an environmentally just legal and regulatory framework that distributes environmental benefits equally among all persons, and that does not unfairly impose a disproportionate burden of environmental harm on low-income and marginalised communities.
The next Part of this paper discusses the extent to which Indian regulatory authorities adhere to principles of environmental justice, alluded to above, in making industrial siting decisions.
III. DUTIES OF REGULATORY AUTHORITIES UNDER THE EXISTING SYSTEM OF INDUSTRIAL SITING IN INDIA
While there are several Indian laws and regulations that govern the siting of industries, only a few address the environmental concerns of the poor and marginalised communities. The discussion below outlines the manner in which decisions on industrial siting are currently being made by regulatory authorities, and the extent to which the concerns of the poor and marginalised communities are being addressed under such decisions. In this regard, judicial pronouncements on the challenges to decisions on industrial siting have also been cited to provide a better insight into the way in which laws and regulations on industrial siting are applied in practice.
Within this paper, an industry and a factory have both been construed to mean an establishment, where the manufacturing of a product takes place. In the interest of brevity, the discussion below is limited to only those Central laws and regulations that have a direct bearing on industrial siting decisions – other Central and state laws that have an indirect bearing on industrial siting decisions have not been discussed.
It must be noted that there are several steps involved in the process of setting up an industry. Each step requires the prospective owners of the industry/factory to obtain prescribed approvals and clearances under the applicable Central and state laws.29 It must be noted that only those permissions and approvals that directly or indirectly impact the environment have been discussed below.
A. PERMISSION FROM LOCAL BODIES
One of the initial approvals required to be obtained by a prospective industry owner for siting his/her industry in a particular area is from the local bodies within the area.30 The proposal for setting up the industry can be approved only if it is in line with the guidelines and policies on planning and development for each city/area, issued by the state governments; if it is prepared in consultation with local bodies; and if these local bodies are certain of the feasibility of the industry in the area. The principles of environmental justice attain significant relevance in this context. Assessing the feasibility of an industrial project should ideally include gauging the impact that the project would have on communities, especially low-income and marginalised communities located in the vicinity of the project. It should also involve engagement with communities through public hearings and dissemination of information. However, except for the local bodies in forest areas and in Scheduled Areas, the urban and rural local bodies in other areas are not under an obligation to comply with any of these principles of environmental justice. Furthermore, the manner in which the urban local bodies function is markedly different from the way in which the rural local bodies function. These issues and dichotomies are discussed in detail below.
1. Urban local bodies
The local bodies in urban areas are mandated with the task of preparing master plans of urban localities which allocate spaces for various categories of public and private establishments. These plans are publicly available and can be accessed by any interested person, free of cost.31As a general practice, master plans stipulate that industries, especially large-scale industries be located at a considerable distance from residential complexes.32 Several master plans mention the exact distance that ought to be maintained between an industrial establishment and a residential establishment.33 Villages and shanties are included within the purview of residential establishments, and are accorded the same level of protection as other establishments falling under this category.34
In addition to master plans, the building bye-laws in urban areas also contain guidance on how and when local bodies should issue No Objection Certificates to buildings, including industries.35 Each prospective industry owner needs to get the building plan of the industry approved by the concerned urban local body prior to commencing construction. While granting approval, local bodies can issue directions to industry owners to comply with certain environmental safeguards.36
According to the Model Building Bye-Laws 2016 ('Model Bye-Laws'), which serve as the basis for local building bye-laws all over India and that contain guidance on the manner in which urban local bodies are to regulate the construction of buildings, builders are required to install equipment that reduces air and water pollution, to dispose of waste appropriately and to take other measures as specified under bye-laws for reducing pollution.37 However, the only instance where the Model Bye-Laws allow local bodies to give special consideration for the poor and marginalised communities is with reference to the design and construction of a building. According to the Model Bye-Laws, a builder ‘may’ take concerns of the poor and marginalised into account in the construction of the building.38 While the Model Bye-Laws refer to the need for formulating codes for slum clearance, and resettlement, they do not refer to any safeguards that urban local authorities should observe, while clearing slums, or resettling slum dwellers. These safeguards could have included considerations of environmental justice, such as consultation with slum dwellers, award of compensation for displacement, and availability of a safe and pollution-free space for resettlement.
As a general practice, Model Bye-Laws and master plans permit certain small-scale industries to operate in residential areas that are designated as ‘mixed use’ areas.39 Only those industries that do not adversely affect the environment, or the health of the population residing nearby, are permitted in mixed-use areas.40 Such industries include, among other things, industries for building material (timber, timber products, marble, iron and steel, and sand), firewood, coal and any hazardous and other bulky materials, repair shops, schools, nursing homes etc.41
It must be noted that master plans and building bye-laws are subjected to public consultations in the initial phases of drafting.42 In the later phases, the text of such laws may be amended for the benefit of the public, if and when urban local bodies or the Central/State government feel the need.43 In this regard, urban local bodies or other regulatory authorities are not legally obliged to consult residents within their jurisdiction, while formulating developmental plans and spatial rules.44 While the urban poor has representation in local bodies, the representatives are relatively fewer in number and do not possess adequate influence to effectuate changes in regulatory functioning.45 As a result, indigent residents are rarely able to express their concerns regarding the allocation of space in urban areas. In any event, the safeguards that do exist against the ill-treatment of the poor and marginalised communities under urban local laws are more often than not disregarded by local regulatory authorities as well as industries.
For instance, in the case of M.C. Mehta v. Union of India,46 a Committee set up by the Supreme Court found that 39,166 applicants out of the 43,045 applications, which were scrutinised, did not qualify for grant of necessary permission to operate in the residential areas of Delhi. In view of the Committee’s findings, the Court was compelled to direct public authorities such as the Ministry of Urban Development, the Delhi Development Authority, the Municipal Corporation of Delhi and the Government of the National Capital Territory of Delhi to initiate the closure of such industries.
In another case of R.K. Mittal v. State of U.P. ('R.K. Mittal'),47 the Supreme Court was asked to consider whether the New Okhla Industrial Development Authority could permit users other than residential users, to use areas that were specifically earmarked for ‘residential use’ in the Master Plan of the New Okhla Industrial Development Area. While ruling that such use could not be permitted without following the procedure prescribed under law, the Court went on to observe:
“The law imposes an obligation upon the Development Authority to strictly adhere to the plan, Regulations and the provisions of the Act. Thus, it cannot ignore its fundamental duty by doing acts impermissible in law. There is not even an iota of reason stated in the affidavits filed on behalf of the Development Authority as to why the public notice had been issued without amending the relevant provisions that too without following the procedure prescribed under law.
The concept of public accountability and performance of public duties in accordance with law and for the larger public good are applicable to statutory bodies as well as to the authorities functioning therein. We find no justification, whatsoever, for the Respondents to act arbitrarily in treating equals who are similarly placed as unequals […] A few officers of the Development Authority cannot collectively act in violation of the law and frustrate the very object and purpose of the Master Plan in force, Regulations and provisions of the Act.”48
These pronouncements highlight the weak enforcement of urban local laws by local bodies, which contributes to widespread violations of such laws by private entities. As evident from the pronouncements above, weak enforcement mechanisms lead industry owners to neglect their obligations under the law, and to disregard the concerns of the communities that may be residing near the industrial site. Among such communities, the poor and marginalised groups almost always appear to be the ones that bear the unfair consequences of the actions of private entities. Despite the existence of some safeguards under urban local laws, the public authorities also seem more inclined to uproot the poor and marginalised communities and to resettle them in any available area. There are no regulatory safeguards to ensure the land on which the communities are resettled is environmentally safe and viable. As evident from the decision in R.K. Mittal, regulatory authorities seem inclined to allow industry owners to occupy land near residential colonies, which on most instances are occupied by poor. This may be because the powerless communities residing in such areas pose little or no threat to the establishment of industries in their vicinity. Such communities may also be made to believe that the siting of industries nearby would actually benefit them economically. However, the environmental consequences that might flow out of such industrial siting decisions are rarely ever conveyed to such communities in as much as detail as might be necessary.
2. Rural local bodies
In rural areas, the local bodies are required to prepare developmental plans within their respective jurisdictions, in conjunction with the District Planning Committee set up under the Constitution.49 In addition to consolidating plans prepared by the Panchayats, the District Planning Committees prepare draft development plans for each district as a whole. 50 Such committees also exist in urban areas and prepare similar for the benefit of urban local bodies.51 While preparing such development plans, the District Planning Committees need to be mindful of matters of common interest between the Panchayats and the Municipalities, including spatial planning, sharing of water and other physical and natural resources and their availability, and the integrated development of infrastructure and environmental conservation.52 However, there are many municipalities and villages where such committees are yet to be set up.53
Furthermore, in rural areas particularly, local bodies, including such Committees lack the adequate expertise or funds to perform their functions effectively.54 Furthermore, the percolation of funds to local bodies in rural areas is low, as urban planning is almost always prioritised over rural planning.55 Due to these reasons, spatial planning in rural areas is undertaken in an unorganised manner, where there is little or no link between the developmental activities of the Panchayats with those of the Municipalities. In several cases, this leads to uneven sharing of resources and infrastructure between the Panchayats and the Municipalities, and to meting out unfair treatment to persons living in rural areas, as compared to those living in urban areas.
As a local body, the Panchayat is specifically endowed with the power to prepare a village-level plan for economic development, and to implement state-level and Centre-level schemes that promote social justice within the village.56 However, unlike urban areas, there appears to no guidance on how a Panchayat or any other rural local body should undertake spatial planning in a rural area. Rural local bodies also appear to be under no obligation to consult the residents within their jurisdiction in formulating spatial and developmental plans. While local bodies may be involved in assigning spaces for residential areas and for industries in rural areas, the conditions under which such bodies grant permissions for setting up industries are not publicly available, thus leaving room for discretion in spatial planning and for unfair treatment of the rural population.
The public hearing component under various environmental laws, which will be discussed below, requires local bodies to gauge the concerns of the rural population, and to present them before the prospective industry owners, the State Pollution Control Boards (‘SPCBs’) and the officials of the State government. However, rural local bodies do not have the expertise or the manpower to adequately determine the suitability of an industrial site, or the distance that ought to be observed between the siting of polluted industries and residential towns and villages. Furthermore, the focus of rural local bodies is on socio-economic planning and development, and not on spatial planning or industrial siting.57 Due to these reasons, rural local bodies are unable to effectively gauge the threat posed by the siting of industries near rural areas, to the residents of such areas. Hence, the consent given by rural local bodies, on behalf of persons residing in their jurisdiction, during public hearing processes, may sometimes be misleading and not fully informed.
3. Local bodies in special areas
In the context of special areas such as forest land and Scheduled Areas, the local bodies are expressly required to give due consideration to traditional and local practices followed by the indigenous and marginalised communities in such areas, whilst allocating natural resources. The acquisition of forest land for industrial development or otherwise, heavily affects the rights of forest dwellers and Scheduled Tribes, who reside in such forests. Consequently, local bodies need to ensure that these communities consent to such acquisition, that the acquisition has minimum impact on the life of such communities, and that such communities are adequately compensated for any adverse impact on their lives, irrespective of its magnitude.
The Panchayats (Extension to Scheduled Areas) Act, 1996 (‘PESA’) modifies the provisions of Part IX of the Constitution to provide better safeguards to the rights of persons residing in Scheduled Areas.58 In accordance with the PESA, rural local bodies in Scheduled Areas are required to conform to customary laws, social and religious practices and traditional management practices of community resources that prevail in the areas within their jurisdiction.59 The PESA also directs the setting up of a separate Gram Sabha for communities that live separately and prefer to manage their affairs according to their own traditions and customs.60 The Gram Sabhas under the PESA are not only vested with the responsibility of approving developmental activities, disseminating information regarding environmental activities, ensuring mandatory consultation of all persons in the acquisition of land in those areas that are occupied by the marginalised communities and guaranteeing resettlement and rehabilitation of communities that get displaced, but are also vested with ownership over minor forest produce.61
The Gram Sabhas in forest areas are charged with regulating access to, and to stop activities that adversely affect forest resources under the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 (‘Forest Rights Act’).62 For undertaking any industrial activity in forest areas under the Forest Rights Act, the industry owners need to obtain the free and informed consent of the Gram Sabhas.63 The Forest Rights Act recognises the rights of the forest dwelling Scheduled Tribes and other traditional forest dwellers that have resided in forests for generations and have faced decades of oppression.64 It provides a framework for vesting, restoring and recognising the rights of forest dwellers in a manner that is not only fair but also just. The beneficiaries of these rights have been granted ownership over minor forest produce, and the power to preserve and protect these resources.65 The rights guaranteed under the Forest Rights Act can only be taken away under exceptional circumstances, such as the setting up of schools, dispensaries, etc., which would, in any case, entail the payment of adequate compensation and rehabilitation and resettlement.66
Since both the PESA and the Forest Rights Act are applicable to only those persons who reside in Scheduled Areas and in forests, the poor and marginalised communities residing in the suburbs of cities or within cities are not guaranteed the same rights and privileges as the aforementioned communities. While it is admitted that the pattern of land ownership is different in urban areas from Scheduled Areas and forests, local bodies in other rural areas and in urban areas still ought to be granted the power to preserve and protect resources, and to guard the rights of communities residing within their jurisdiction. However, none of the other environmental laws recognise local bodies as the nodal point for enforcing environmental decisions, and for according rights to vulnerable communities in these areas.
In any event, the available literature on the PESA and the Forest Rights Act suggests that State governments, SPCBs and industry owners are unwilling to fully comply with the provisions of the PESA and Forest Rights Act, and that they usually look for ways to evade the process envisaged under both Acts.67 Besides imposing conditions on the right of forest dwellers to collect and sell minor forest produce, which is against the letter and spirit of the Forest Rights Act, State governments also attempt to trick the higher authorities into believing that a large number of community claims are cleared by them under the Act, when in reality, only a small number of claims that are settled by them actually give community rights.68 There has also been active resistance by State governments in implementing the provision of the PESA that accords ownership rights over minor forest produce to Scheduled Tribes.69 Several State government officials are also unaware of the provisions of the Forest Rights Act, and their duties mentioned thereunder.70 In some instances, such officials also lack adequate capacity and staff to implement the provisions of both Acts.71 Due to the lack of detail under the PESA, most States have not formulated rules to implement the provisions of the Act.72 While all laws that were in conflict with the PESA should have been repealed after its enactment, the repeal is yet to be effectuated till date.73 In view of these regulatory lapses, the PESA and the Forest Rights Act cannot be said to have been effectively implemented in their letter and spirit, thus leading to the denial of environmental rights to marginalised communities in forests and in Scheduled Areas.
B. ROLE OF REGULATORY AUTHORITIES IN THE ACQUISITION OF LAND
The acquisition of land is also fundamental to the setting up of an industry under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (‘the LARR Act’). The LARR Act came into effect on January 1, 2014, and replaced the Land Acquisition Act, 1894. Under the LARR Act, land belonging to private individuals can be acquired by the Central or State governments for a number of ‘public purposes’, such as infrastructural projects, military/navy/air force, or planned development.74 In addition to public sector industries, the LARR Act also permits public-private partnership industries to be established on the acquired land, subject to the consent of the majority of affected families who would be impacted by the acquisition.75
All those families who may be affected by the land acquisition under the LARR Act are entitled to compensation, rehabilitation and resettlement packages available under the Act.76 In this regard, the LARR Act requires the Central and state governments to consult all communities that may be affected or displaced due to the acquisition of land, in decisions around the acquisition of land, as well as the formulation of the resettlement and rehabilitation plan.77 The fairly broad definition of ‘affected families’ under the LARR Act ensures that all classes of persons, who may be affected by the acquisition, are covered within its scope.78
The Social Impact Assessment (‘SIA’), which is required to be conducted prior to the acquisition of land under the LARR Act, intends to assess the social effect that an industrial project would have on neighbouring communities (which may later become affected families) and the feasibility of the acquisition. The Central and state governments (as applicable) are charged with conducting the SIA in consultation with local bodies in the area surrounding the land.79 The SIA process also requires the Central and state governments to gauge the concerns communities residing in and around the land sought to be acquired, prior to the initiation of the acquisition process under the Act.80 It must also be noted that the SIA is different from environmental clearances, which is also an essential component of the acquisition process under the LARR Act.
Despite intending to promote social welfare, the LARR Act has not proved to be a successful framework for the acquisition of land. While the LARR Act allows public authorities to only displace persons, including the poor and marginalised communities from their land under limited circumstances and in public interest, there have been several instances where land has been acquired and families have been displaced (mostly the poor and marginalised communities), but the authorities have failed to utilise the land for any purpose at all.81 These actions reflect poorly on the functioning of regulatory authorities and the motivations that such authorities may have for acquiring such land.
While the LARR Act does not impose a duty upon regulatory authorities to continuously consult the affected population on all decisions that affect them, its provisions, as they presently exist, incorporate all the other principles of environmental justice outlined in Part II. However, amendments to dilute the provisions of the LARR Act continue to be debated in Parliament.82This is because one of the biggest criticisms of this Act from industry groups has been that the large number of steps involved in acquiring land has made the process of acquisition unduly long and time-consuming. To remedy this, the procedural as well as substantive safeguards under the LARR Act, including the one relating to the SIA, have been proposed to be diluted to pave the way for speedier acquisition.83 These developments point to the lack of consideration given by regulatory authorities to the plight of the vulnerable population for whom the procedural and substantive safeguards under the LARR Act were actually put in place. The dilution of the provisions of the LARR Act essentially implies the weakening of the regulatory framework under which the LARR Act operates. This ongoing dilution of the LARR Act heavily impacts its compliance with principles of environmental justice.
C. ENVIRONMENTAL CLEARANCES
For operating an industry, each industry owner needs to obtain environmental clearances under the Water (Prevention and Control of pollution) Act, 1974, (‘Water Act’), the Air (Prevention and Control of pollution) Act, 1981, (‘Air Act’), and the Environment Protection Act, 1986 (‘EPA’).84 While the regulatory framework of the Water Act and Air Act is the same, the regulatory framework under the EPA is noticeably distinct from the other two statutes.
1. Role of Central Pollution Control Board and the State Pollution Control Boards under the Water and Air Acts
Release of industrial emissions into water and air are controlled, and regulated under the Water Act and the Air Act respectively.85 The Central Pollution Control Board (‘CPCB’) and the SPCBs, established under the Water and Air Acts, set industry-specific standards on water and air pollution, as well as formulate Zoning Atlases for the siting of industries in different regions and areas.86 Zoning Atlases recognise villages and other, smaller residential colonies as human settlements and lay emphasis on siting industries at a considerable distance from such settlements.87 The CPCB and SPCBs are also mandated with collecting and disseminating information regarding air and water quality standards, and air and water pollution to the public at large.88 However, the Air and Water Acts do not outline the procedure through which such information is to be collected and disseminated.89
The Ministry of Environment, Forest and Climate Change (‘MOEFCC’), in conjunction with the CPCB has also categorised industries as “Red”, “Orange” and “Green” to facilitate industrial siting decisions under the Air and Water Acts.90 The CPCB has directed all SPCBs to maintain uniformity in the categorisation of industries in accordance with the industry list prepared by the CPCB.91 Within this list, a “Red Industry” has a Pollution Index Score (cumulative assessment of air and water pollution (maximum score of forty for each) and hazardous waste management (maximum score of twenty)) of sixty and above, an “Orange industry” has a Pollution Index Score of forty-one to fifty-nine, a “Green” industry has a Pollution Index Score of twenty-one to forty, and a “White industry” has a Pollution Index Score of up to twenty.92 Based on these categories, consent notices are issued to industries, depending upon the extent of pollution each industry emits. The CPCB has released guidance on the kinds of emissions generated by various different kinds of industries for assisting SPCBs in issuing clearances for the siting of industries.93 While the directions of the CPCB are comprehensive, there is no distinction made between the various categories of industries on the extent of impact that such industries have on public health in general, and more specifically, on the poor and marginalised sections of the population. The SPCBs have also not been directed to survey the industrial site for assessing the impact that a particular industry would have on the surrounding population. The only direction that has been made to SPCBs is to ensure that Red Industries are not located in eco-sensitive zones.94
Despite being two of the earliest laws for the protection of the environment, the Air Act and the Water Act have not been successful in deterring industries which have been granted clearances, from emitting air and water pollution.95 The criminal nature of penalties under both Acts has made the process for initiating action against defaulting industries long and arduous, involving complex issues of intent and causation. The CPCB and SPCBs have also not been vested with disciplinary or enforcement powers under the Air and Water Acts, due which they are unable to ensure compliance with environmental standards. This leads such entities to believe that they can escape the consequences of grave violations of environmental standards, which have adverse implications on the public health of the unsuspecting and largely poor and marginalised population.
There have also been accusations of political interference in appointments of personnel within the CPCB and the SPCBs, resulting in rent-seeking behaviour and corruption, which favours the interest of defaulting industries. This was pointed out by the Supreme Court, when it reprimanded both institutions for their complete failure in cleaning the Ganga.96 In addition to this, the CPCB and the SPCBs have also been found to be understaffed, and without adequate technical and financial resources.97 In view of these issues, the CPCB and SPCBs have proved to be ineffective in regulating not only air and water pollution, but also the impact such pollution has on the poor and marginalised groups.
2. Duties of authorities under the Environment Protection Act
§3 and §6 of the EPA vest the Central Government with the power to take appropriate measures that may be necessary or expedient to protect and improve the quality of the environment, and prevent and control environmental pollution.98 Among other things, these measures include prohibiting or restricting areas, within which industries may be sited, as well as carrying out and sponsoring investigations into environmental pollution. Rule 5(1)(ix) of the Environment (Protection) Rules, 1986 (‘the EP Rules’), builds upon the provisions under the EPA and specifically directs the Central Government to take ‘human settlements’ into account while prohibiting or restricting the location of industries.