As summarized in our recent blog post, in response to recent threat of tariffs over the Greenland issue, the EU considered possible responses, including tariffs and triggering of the so-called Anti‑Coercion Instrument (“ACI”). Although these threats appear to have subsided for now, given trade volatility, usage of the ACI remains a live possibility and we wanted to provide a brief overview on the ACI and what companies can do to prepare in the event the ACI process is triggered.
Executive Summary
Established by Regulation (EU) 2023/2675 (“Regulation”; link), the ACI provides the European Union with a legal framework aimed at deterring, addressing and, if necessary, countering “economic coercion” by third countries. The ACI entered into force on 27 December 2023 but has not been invoked to date.
The ACI is designed primarily as a deterrence tool. However, where economic coercion occurs, it enables the EU to formally identify coercive measures, engage with the third country concerned, and (as a last resort) adopt proportionate countermeasures affecting trade, services, investment, public procurement and other economic activities in the EU.
For companies operating globally, the ACI is relevant both as a potential source of disruption (where EU countermeasures are imposed) and as a mechanism for protection, offering a structured route to raise concerns with the European Commission where coercive practices affect EU interests. Thus, companies should consider the exposure to countermeasures and engagement possibilities.
Background
The EU introduced the ACI to address a gap in its trade policy arsenal in light of increasing geopolitical tensions and the frequent use of economic measures (e.g., tariffs, import restrictions, and informal barriers) by third countries to exert political pressure on the EU or its Member States. The implementation of the ACI was informed by the view that traditional tools, like trade defence measures or the WTO dispute resolution process, were not swift enough or were inadequate for countering coercion that did not clearly breach international rules.
The ACI is a part of the EU’s broader strategy for “open strategic autonomy” and economic security, aiming primarily to deter economic coercion rather than retaliate. By establishing a structured, rules-based mechanism for identifying and, if necessary, responding collectively to coercion, the ACI aims to strengthen the EU’s ability to act independently, maintain unity among Member States, and protect the internal market from being undermined by targeted external pressure.
What is “Economic Coercion” under the ACI?
Under the ACI, economic coercion exists where a third country:
- Applies or threatens to apply measures affecting trade or investment
- With the aim of preventing or obtaining the cessation, modification or adoption of a particular act by the EU or a Member State
- Thereby interfering with legitimate sovereign choices of the EU or its Member States.
Whether a measure undertaken by a third country amounts to economic coercion is assessed on a case-by-case basis, taking into account factors such as intensity, duration, scope, economic impact, and whether the third country acted in good faith to resolve the issue through international channels.
Economic coercion may arise in any field and may take the form of formal legislation, administrative practices, informal actions, or omissions.
How the ACI Works: The Procedural Framework
The ACI establishes a sequenced and time‑bound process, with clear institutional roles for the European Commission (“Commission”) and the Council of the European Union (“Council”).
1. Triggering an Examination
An examination may be initiated:
- By the Commission on its own initiative, or
- Following a duly substantiated request from a Member State, business, industry association or other stakeholder.
The Commission may gather information from any reliable source and has established a single point of contact to facilitate submissions by affected stakeholders.
The examination phase should normally be completed within four months.
2. Determination of Economic Coercion
If the Commission concludes that the conditions for economic coercion are met, it submits a proposal to the Council, setting out the factual and legal basis for a determination that a third-country measure constitutes economic coercion. The Council then decides by qualified majority (15 of 27 Member States where such Member States represent at least 65% of the EU population) whether a third‑country measure constitutes economic coercion. If coercion is confirmed, the Commission formally requests the third country to cease the coercive conduct and, where appropriate, to repair the injury caused.
The Council should act “expeditiously”, and in any case within 8 weeks from submission of the proposal, unless a derogation allows it to extend this timeframe, which should not exceed 10 weeks from submission of the proposal.
3. Engagement and Dialogue
Following a positive determination, the Commission engages with the third country in good faith, seeking to resolve the issue through direct negotiations, mediation or conciliation, or else arbitration or international adjudication. Dialogue and international coordination are central to the ACI and reflect its deterrence‑first design.
4. Last Resort: Adoption of EU Response Measures
If engagement does not lead to cessation of the coercion or reparation of injury, the Commission may adopt response measures by an implementing act, subject to Member State oversight.
In this process the European Parliament’s role is merely informational, political and supervisory: its approval is not required.
Response measures must be proportionate, targeted, temporary, and in the EU’s interest. They may include, among others:
- Suspension of international obligations towards the coercing country
- Increased or new customs duties on goods
- Import or export restrictions
- Limitations on access to EU public procurement
- Measures affecting services, investment or intellectual property rights (i.e., not just goods).
Measures taken under the ACI would be general application measures aimed at impacting businesses connected or linked to the government of the coercing country, determined following the origin and nationality criteria defined in Annex II of the ACI.
A deferred application period applies (normally up to 3 months), providing a final opportunity for the third country to satisfactorily address the EU’s concerns.
In practice, the entire process from the Commission starting its examination to measures being applied can take up to 15 months, depending on the case.
Practical Guidance for Businesses
1. Identifying Potential Economic Coercion
Businesses should assess what activities the EU may deem to constitute economic coercion. Certainly tariffs have been highlighted as possible economic coercion, but the baseline would be measures that:
- Target EU or Member State policy choices
- Affect trade or investment flows
- Go beyond legitimate trade defence or regulatory measures.
Internal documentation of economic impact, trade disruption and causal links will be critical in case the EU invokes the ACI and seeks economic evidence of the consequences of the third country’s coercive measures.
2. Engagement with the Commission
Companies and industry groups may submit information to the Commission, either to request an examination, or in response to Commission calls for input during ongoing cases.
Submissions should, where possible, address:
- The nature of the third‑country measure
- Its legal or practical implementation
- Its impact on trade, investment or operations
- Evidence of intent to influence EU or Member State policy
- The injury suffered by EU operators
Confidential treatment is available upon request. EU headquartered groups impacted by possible economic coercion can consider planning for such engagement.
3. Preparing for Possible EU Countermeasures
Companies with exposure to jurisdictions potentially subject to ACI measures should:
- Map supply chains and market access dependencies
- Review procurement, licensing and investment structures
- Monitor the EU’s Official Journal notices and DG Trade communications, attachment or presentation materials for case study analogies
Early engagement and contingency planning are essential, particularly in sectors exposed to public procurement, services or investment restrictions.
Looking Ahead
The first formal review of the ACI is due by the earlier of December 2028 or three years after the first determination decision. While the instrument has not yet been used to impose countermeasures, recent geopolitical developments underline its growing strategic importance. For businesses, the ACI represents both a new risk factor and a new channel of protection in an increasingly fragmented global trade environment.
How We Can Help
Our Global Trade team stands ready to assist you with:
- Assessing your exposure to ACI‑related risks
- Preparing submissions to the Commission
- Managing compliance and mitigation strategies where EU response measures apply
- Integrating ACI considerations into broader geopolitical risk management.
Please contact one of our Global Trade group leaders below or your usual Baker McKenzie contact for further assistance.
Kerry Contini, Global Trade Group Lead
Jenny Revis, Global Customs Lead
Kana Itabashi, Asia Pacific Trade Group Lead
Paul Amberg, EMEA Trade Group Lead
Francisco Negrao, Latin America Trade Group Lead
Alison Stafford-Powell, North America Trade Group Lead
