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ClientEarth Communications

6th September 2021

EUTR
EUTR Newsletter
Forests
Forests & trade

EUTR Newsletter June 2021 - August 2021

This issue of the quarterly EUTR News provides an update on the operation of EU law to address illegal logging and the EU Timber Regulation (EUTR) in the period of June 2021 to August 2021. The newsletter is divided in three sections addressing the following:

  1. Information on what both the European Commission and EU Member States are doing to ensure the proper application of the EUTR.
  2. Updates on similar international legislation.
  3. A short analysis by ClientEarth on the systems of penalties sanctioning breaches of the EUTR that Member States are required to adopt and apply in accordance with Article 19 of the EUTR.

If you have any updates to share that we could include in the next newsletter, any queries regarding the EUTR implementation or enforcement that you would like us to address in the next release, or if you would like to receive this newsletter by email, please contact us at:

forests-contact@clientearth.org

1. Recent developments – EU and Member States

Alleged illegal Azobe wood seized in the Port of Antwerp, Belgium

On the 21st of June 2021, the Dutch National Police reported seizing 820 cubic meters of Azobe wood that was meant to enter the EU through the Port of Antwerp in Belgium. The seizure was performed by Belgian Federal Police, in cooperation with the Dutch Police and Dutch and Belgian customs. The importer allegedly could not demonstrate that the timber had been legally harvested as required by the EUTR.

WWF submits complaints to the European Commission on the EUTR misapplication in Germany and Austria

On the 25th of June 2021, WWF submitted two complaints against Germany and Austria to the European Commission for inadequate implementation of the EUTR. According to WWF, both countries have failed to meet their requirements stemming from this regulation towards banning illegal timber from entering the EU. Click here to read the details.

EUTR: Union-wide overview for the year 2020

In July 2021, the European Commission published an overview of the information submitted by the Member States with regard to the application of the EUTR in 2020. The document reports statistics of, inter alia, the number of checks conducted by national authorities and consequent enforcement actions, such as penalties applied and cases brought to court. In a separate document , the European Commission summarises the key obligations and practical aspects of implementation and enforcement of the EUTR in 2020. For more information about the EUTR application at national level across the years, check out the European Comission’s official website.

Congolese Minister of the Forest Economy stands in support of the FLEGT initiative

On the 26th of July 2021, FLEGT Independent Market Monitoring disclosed a statement from a Congolese agronomist and Minister of the Forest Economy, Rosalie Matondo, in strong support of maintaining and developing the FLEGT initiative. The statement comes as a response to the preliminary findings from the European Commission’s Fitness Check of the EUTR and FLEGT Regulation, which raises concerns about the effectiveness of the FLEGT system and its future in its current shape.

The Dutch Council of State upholds the penalty for Myanmar teak imports

On the 4th of August 2021, the Council of State in the Netherlands confirmed that Royal Boogaerdt Timber failed to comply with the due diligence requirements of the EUTR when it imported Myanmar teak. The court upheld the penalty of of €20,000 per cubic meter of Myanmar teak placed on the EU market through Dutch entry points, imposed earlier in June by the Dutch Ministry of Agriculture, Nature and Food Quality (Nederlandse Voedsel en Warenautoriteit – NVWA). According to Environmental Investigation Agency (EIA), in the hearing, the court also ruled against another timber import company, whose name has not been disclosed due to confidential reasons.

2. Publications and resources

Research article on the EUTR application in regards to timber from Ukraine and Romania

On the 23rd of June 2021, The International Spectator published a research article on the enforcement of the EUTR in regards to timber harvested in Eastern Europe, written by Simona Davidescu and Aron Buzogány, entitled “Cutting Deals: Transnational Advocacy Networks and the European Union Timber Regulation at the Eastern Border”. The article examines the difficulties in the implementation of the EUTR in Romania and Ukraine.

EIA releases a report on illegal imports of tropical-faced plywood

On the 30th of June 2021, EIA released a new investigative report on the illegal imports of tropical-faced plywood, entitled “The lie behind the ply: How European and Chinese businesses traded 100,000 tons of problematic plywood”. According to the EIA, European companies appear to have imported massive volumes of tropical-faced plywood at high risk of containing illegally harvested wood – thus, in violation of the EUTR. Following a seven-year investigation, EIA examines a complex supply chain of plywood harvested in the tropical forests of Oceania, manufactured in China and placed on the EU market as falsely claimed certified by the Forest Stewardship Council.

Study on certification and verification schemes in the forest sector and for wood-based products

On the 10th August 2021, the European Commission published the results of a study on certification and verification schemes in the forest sector and for wood-based products. Drawn up by Preferred by Nature, the document gives a general overview of the concept of certification and its practical use, and examines its relevance and its functioning in the context of wood-based products. It formulates recommendations for EU operators and Competent Authorities to make sure they meet the EUTR requirements when dealing with certified timber products. If you are interested in reading more about certification, check out our previous EUTR newsletter where we analysed the role that certification can play in the EUTR enforcement.

Brochure on illegal timber in Western Balkans and Turkey

On the 25th of August 2021, the EU Environment Partnership Programme for Accession (EPPA) released a brochure summarizing its study on illegal logging and timber trade flows in Western Balkans and Turkey. The study provides national and regional analysis on the current state of play of the implementation of the EUTR and Forest Law Enforcement, Governance and Trade (FLEGT) Regulation, and identifies the related challenges.

Public consultation on DRC Timber Legality Risk Assessment and tools

On 25th of August 2021, Preferred by Nature has launched a public consultation on the Timber Legality Risk Assessment and tools covering the Democratic Republic of Congo. The assessment is being developed within the Sourcing Hub framework, which aims at providing stakeholders with a legislative and risk overview in forest harvesting and processing sectors. The consultation period ends on the 25th of October 2021. You can access the relevant documents and submit your contribution through this link.

Webinar on the EUTR and the German Supply Chain Act (German-friendly)

On the 17th  of September 2021, Reuschlaw Legal Consultats is organising a webinar on the EUTR and the German Supply Chain Act. It will provide the audience with basic information about those two acts and dive into practical details concerning their enforcement. The webinar will be held in German. You can register for the event through this link.

3. ClientEarth’s analysis: EUTR penalties- What makes them effective, proportionate and dissuasive?

In this section of our Newsletter, where we provide a ClientEarth analysis of an EUTR implementation issue, we delve deeper into the topic of EUTR penalties. More specifically, we aim to answer the question ‘What does it mean for a penalty to be effective, proportionate and dissuasive’ while looking at the systems of penalties sanctioning breaches of the EUTR that Member States have to adopt and apply in accordance with Article 19 of the EUTR.

Please note that the content of the following analysis represents the views of ClientEarth only and is its sole responsibility. It does not reflect the views of the European Commission, nor any other official entity or organisation mentioned therein.

 Enforcement of the EUTR in practice – penalties for breaching the EUTR

According to Article 19(1) of the EUTR, “Member States shall lay down the rules on penalties applicable to infringements of the provisions of this regulation and shall take all measures necessary to ensure that they are implemented”. While the choice of penalties remains within their discretion, Member States must ensure that those penalties are effective, proportionate and dissuasive (Article 19(2) of the EUTR). This requirement is the practical realisation of the principle of sincere cooperation enshrined in Article 4(3) of the Treaty on European Union, which obliges Member States to guarantee that EU law is applied and enforced effectively. This means that, although they apply and enforce EU law according to their national rules, penalties stemming from the enforcement of EU law must comply with the requirements set out in the Treaty on the European Union, secondary legislation and the case law of the Court of Justice of the European Union (“CJEU”). The design of national penalty schemes, national enforcement policies and related implementation practices must therefore meet the required legal standard of being “effective, proportionate and dissuasive” set out in the EUTR.


What is an effective, dissuasive and proportionate penalty?

The concepts of “effectiveness, dissuasiveness and proportionality” in regards to penalties have been elaborately defined in the case law of the CJEU:

  • ‘Effective’ means that a penalty ensures that the goal set by the legislator is reached, despite the infringement, and intends to prevent future harm from happening. In the context of the EUTR, the penalty scheme must be able to to prevent illegally harvested timber from being placed on the EU market and to disadvantage operators who are not willing to comply with the law.
  • Dissuasive’ means that a penalty is commensurate with the seriousness of the infringements and has a genuinely dissuasive effect. In other words, the threat of repressive action must generate sufficient pressure on regulated parties to ensure that the situation envisaged under EU law is realised in practice and non-compliance becomes economically unattractive.
  • ‘Proportionate’ means that a penalty does not go beyond what is necessary to achieve the desired objectives.

The CJEU has consistently ruled that the effectiveness of penalties for breaches of EU law can be ensured by penalising such breaches under conditions, both procedural and substantive, which are comparable in nature and importance to the conditions applicable to infringements of national law. It has been acknowledged that legislation such as that concerning theft and trafficking of stolen goods, money laundering or smuggling has the potential to also address illegal logging activities. Laws governing such issues fit well with the severe social and economic implications of the illegal timber market and shed light on how the penalty schemes adopted on the basis of the EUTR were intended to function.


EUTR penalty schemes across the European Union

Penalties between Member States across the EU differ significantly from several points of view. While certain Member States have chosen a penalty regime relying mainly on administrative sanctions (e.g. Poland), others rely mainly on criminal penalties (e.g. Denmark), and some have adopted a combination of these two systems (e.g. Italy). Differences emerge with regards to the level of penalties as well. This is especially apparent in case of maximum levels of financial penalties, which range between €50,000 (Malta) and €32,000,000 (Belgium) in the case of criminal penalties, and between €50 (Greece) and €1,600,000 (Belgium) in the case of administrative penalties. The fines imposed upon a finding of infringement, however, are often low compared to the maximum amounts available and extremely negligible compared to the gains that often result from illegal logging. Many Member States have not established minimum levels of fines or have made them very low, sometimes merely symbolic (starting at only tens or hundreds of euros).

These observed practices contradict the obligation of Member States to adopt penalties that are “effective, proportionate and dissuasive” in accordance with Article 19(2) of the EUTR and cause significant gaps in the overall enforcement of the EUTR, making Member States with weaker penalty regimes easy entry points for the import of illegal timber into the EU and thereby hindering and undermining the collective EU effort towards making the EUTR as functional as possible.

By way of example, in 2020, Member States reported to have found a total of 987 operators to be non-compliant with the EUTR obligations. In terms of the enforcement steps, Member States issued 534 notices of remedial action, 438 administrative financial penalties, 13 seizures (both temporary and permanent), 30 suspensions of the authority to trade/injunctions, 1 criminal penalty, and 68 other enforcement measures (including e.g. lifting of the suspensive effect of a complaint/appeal and other interim measures).

These statistics seem to clearly indicate that Member States remain in favour of the so-called “soft-approach” in enforcing the EUTR, issuing mostly notices of remedial action without a direct punitive effect. Unfortunately, the very low number of enforcement actions in 2020 that could actually cut off illegal timber flows, such as seizures and suspensions of the authority to trade, shows that the penalties schemes of many Member States remain in grave need of significant improvement if they are to comply with Article 19(2) of the EUTR and Article 4(3) of the Treaty on European Union.


Growing need for clear and harmonised penalty schemes

The EUTR requires Member States to take all measures necessary to ensure that penalties applicable to infringements of the Regulation are properly implemented. They should adopt clear and credible enforcement policies on penalties and ensure that the activities of all national enforcement authorities involved in the fight against illegal timber (competent authorities, police and customs officers, as well as prosecutors and judges) are well coordinated and appropriately funded. Aside from the need to enhance and improve the quality and implementation of existing national penalty schemes, it is increasingly clear that such schemes would also benefit from greater overall harmonisation of penalties between EU Member States. For example, this could be achieved by the Member States jointly considering an approach to calculate the level of a penalty according to a common criterion, such as the value of a given shipment of illegal timber. Inspiration could also be drawn from EU consumer protection law which has already paved the way for establishing the amount of a penalty on the basis of the infringer’s annual turnover.

Picture credits: Dima Kolesnyk via Unsplash

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