BRUSSELS -- The highest court of the European Union rendered a landmark judgment that sided with a Chinese firm Thursday, making it more difficult for the EU to reject Chinese State-owned enterprises' "market economy treatment" claims.

Excluding State-owned or State-controlled companies from MET solely because of the existence of State shareholding "would not be consistent with economic reality," according to Thursday's ruling by the Court of Justice of the EU.

The case originated from tariffs imposed by the EU in 1998 on imports of the herbicide glyphosate from China's producer, Zhejiang Xinan Chemical, which sought MET from the EU, but was refused because of the "Chinese government's minority stake in the company".

"The Chinese State's control over the general meeting of Xinanchem's shareholders does not automatically exclude that company from the benefit of market economy treatment," said the ECJ's ruling.

When a firm is believed to be subject to "State interference", it tended to face the threat of much higher tariffs in the EU when the European Commission probes if goods are being "dumped".

The granting of MET to certain producers subject to an anti-dumping investigation is a commercially-significant status. Producers granted MET are not subjected to the discriminatory non-market economy regime that applies to exporters from some countries, such as China, whose market-economy status isn't acknowledged.

In dismissing the appeal, the ECJ noted that "the General Court was fully entitled to hold ... that State control ... cannot be equated, as a matter of principle, to 'significant State interference'".

"The Court of Justice declares that the 'basic anti-dumping' regulation does not preclude all types of State interference in producer undertakings, but only significant interference in decisions regarding prices, costs and inputs," the ECJ added in its statement.

Landmark victory

Lawyers hailed the ECJ ruling as a "landmark victory" for China.

"It will become more difficult for the Commission to reject MET claims by Chinese SOEs since mere State-ownership or State-control can no longer in itself constitute a reason for rejecting such MET claims," said a statement of law firm Holman Fenwick Willan, which handled the case representing Zhejiang Xinanchem.

"The ECJ's ruling will require the Commission to reform its approach towards MET assessment in a way which should improve the future prospects of Chinese exporters to the EU," HFW's trade partners Konstantinos Adamantopoulos and Folkert Graafsma told Xinhua.

"The ECJ's decision will have a profound impact on the Commission's future anti-dumping proceedings vis-a-vis non-market economy countries," they added.

MET claims by State-owned and State-controlled companies can now no longer be rejected on the sole basis that such companies are State-owned and/or State-controlled, Adamantopoulos and Graafsma said.

Instead, the Commission will need to undertake a full and fair examination of all of the evidence presented by such companies to demonstrate that their business decisions reflect market signals and that they are not subject to significant State interference, they said.

"This should create better opportunities for exporters - from China, especially - to obtain MET," they added.