Jakarta. Indonesia is bracing for the possibility of the European Union lodging an appeal against a recent World Trade Organization (WTO) ruling related to the bloc's biodiesel import curbs.

A WTO panel recently backed Indonesia on several key claims in its lawsuit against the EU’s countervailing duties on biodiesel. The group’s investigation alleged that Indonesia had been subsidizing its biodiesel exports, possibly putting the EU’s producers in jeopardy. As a result, Indonesia’s EU-bound biodiesel exports have been subject to countervailing duties of between 8 and 18 percent since late 2019.  

About three years later, Southeast Asia’s largest economy brought the dispute to the WTO, accusing the duties of violating international trade rules. A WTO panel ruled in favor of some of Indonesia’s claims.

The ball is now in the EU’s court on whether they would accept the ruling by lifting the anti-subsidy duties or file an appeal. The EU has time until October 22 to make a decision.

“We can’t stop the EU from appealing the panel ruling because they have the right to do so,” Djatmiko Bris Witjaksono, a senior official at the Trade Ministry, told a press conference on Thursday. 

If so, Europe has two options: whether to challenge the ruling at the WTO’s dysfunctional appellate body or via an ad hoc mechanism.

The first one involves a panel of judges that is in charge of hearing the appeals. This panel, however, has been in limbo for years after the US blocked the appointment of new judges. Indonesia has picked this route before in an EU lawsuit against its nickel ore export restrictions, but lost the case. The nickel appeal to this day remains in the queue.

Under the second option, the EU may propose setting up an alternative mechanism.

“But an ad hoc appellate body requires Indonesia’s approval. We also have to decide on the rules,” Djatmiko said.

Between 2020 and 2024, Indonesia’s EU-bound annual biodiesel exports averaged at around $319.7 million, the government reported. Data also indicated a 6.7 percent annual growth over the said period despite the countervailing duties.

Indonesia mainly uses palm oil to produce biodiesel, dedicated mostly to meet local demand amidst energy transition efforts.

Djatmiko told the press that communications between Indonesia and the EU remained “relatively well”.

“We can’t say the stance that the EU will take. But we do hope that they will just accept the ruling,” Djatmiko said.

The WTO only allows its members to impose countervailing duties if an investigation proves that the other country has been illegally subsidizing its commodities.

A European Commission investigation is behind the countervailing duties in question.

The commission alleged that Indonesia had granted its biodiesel producers subsidies, among others, through the price support provided by the export levy. The bloc claimed that the export levy had allowed Indonesian biodiesel producers to purchase crude palm oil at lower prices. They also alleged a threat of “material injury” to the EU’s industry, an accusation that the WTO panel later slammed as having lacked an “objective examination”.