The last tariff offensive of the Trump administration against China again shake the foundations of international trade. Given the closure of the US market, China explores to reinforce its commercial relations with the European Union, which could open new business spaces for Spanish companies. However, this strategic rebalancing is not exempt from legal challenges. The first one to take into account is that international commercial policy is the exclusive competence of the EU, which limits the bilateral action margin of the Member States. «Spain cannot sign commercial treaties with China and its exchanges are framed in the common agreements and norms adopted at the community level, as well as in the multilateral framework of the World Trade Organization (WTO),» warns Álvaro by Luis Andrés, partner of Net Craman lawyers. However, it points out that «this does not exclude the possibility of developing economic, institutional or sectoral relations provided that the community framework is respected.» In fact, Pedro Sánchez's recent visit to China has served to boost seven agreements, including two that favor the export of food products: pigs and cherries. Borja Martínez, a member of defense of the competition of Fieldfisher, explains that this exclusive EU competition includes tariff policy (there is only one common tariff applicable at the outer borders of the EU). Brussels also sends in the conclusion of commercial and investment agreements, the regulation of commercial aspects of intellectual and industrial property and direct foreign investments. In this context, the Integral Investment Agreement UE-China (CAI) that began to be negotiated in 2013 to improve the access of European companies to the Chinese market remains paralyzed since 2021 by the European Parliament. «As long as it is not ratified, it lacks binding legal effects,» says Luis Andrés. Meanwhile, Hermenegildo Altozano, partner Responsible for Energy and Infrastructure of Pint Masons Madrid, direct foreign or the control of foreign subsidies of 2022) reflect, in the opinion of Borja Martínez, a Europe «cautious and interested in the protection of its strategic autonomy in key sectors.» For the expert, «it is not enough to attract capital, but the states and the union themselves have a lot to say when assessing the origin of the investment, their purpose and the conditions in which it is invested.» This control, he adds, has translated into new authorization procedures that companies must take into account. In parallel, China also maintains significant restrictions on foreign investment, which requires European companies a thorough legal planning and knowing the local regulatory framework. Although China adopted in 2020 a new Foreign Investment Law to promote equal treatment and access to certain sectors, “formal and informal barriers persist that hinder the establishment and operation of foreign companies,” value Luis Andrés. Among other sticks in the wheel that make the Chinese wall impregnable, the lawyer lists «the requirement of sectoral licenses, legal insecurity or unclear or predictable national security criteria.»
Cape the storm
Experts agree that the imposition of tariffs by the US has generated legal insecurity and volatility in supply chains. «We are in a situation of prolonged uncertainty that anticipates an increase in litigation and contractual renegotiations in which legal advice must be seen as a fundamental pillar of the development of safe business opportunities,» says Mercè Ribatallada, associated with the Litigation Area of Fieldfisher. To reduce the hazards, recommend that the contracts be flexible and contain clauses that allow to adapt to changing scenarios such as force majeure, distribution of tariffs, renegotiation by legislative or hardship changes (excessive onerosity). «Those of pricing, validity, early resolution and compensation are also useful, as well as the correct choice of Incoterms (terms used in international contracts detailing the obligations of the parties when delivering the goods) and of the jurisdiction to reduce unexpected risks,» adds new commercial frictions to reformulate the contractual clauses in international operations. «The force majeure clause has become a key legal instrument,» Corrobora Álvaro by Luis Andrés corroborates, who also highlights the importance of including Compliance (compliance) clauses, international arbitration and intellectual property protection. Altozano underlines to include in guarantees contracts, the change in applicable law and legislation, mechanisms for resolving disputes and revision clauses for change of circumstances (recoming sic stantibus and hardship). And also carefully analyze the means of payment, exchange risks and the availability of export credit insurance in each agreement. Geopolitical tension is shooting the strategic consultations that reach the offices, especially on how to redesign contracts and comply with regulations by diversifying markets and suppliers. «Companies seek to mitigate risks adapting their supply chains, which requires multi -rural legal advice,» concludes Mercè Ribatallada.
WTO without referee
The blocking of the appeal body of the World Trade Organization (WTO), paralyzed since 2019 by decision of the United States, has left without resolution many international commercial disputes, which weakens confidence in the multilateral system and is forcing countries to seek bilateral solutions or even economic reprisals. Hermenegildo Altozano, by Pinscent Masons, predicts that «China's response can run outside the WTO channels.» The lawyer considers that this situation also opens the opportunity for multilateral trade countries to create resolution instruments.
