Canada lost its bid to overturn Europe's ban on imported seal products Thursday but seized on World Trade Organization findings that aspects of the embargo breach international obligations.
A WTO appeal decision released in Geneva upheld a previous ruling that the European Union ban is "necessary to protect public morals" regarding animal welfare.
But the three-member panel agreed with the prior dispute settlement finding that exemptions to the ban have not been fairly applied.
It says the embargo "constitutes a means of arbitrary or unjustifiable discrimination," particularly because of how exemptions for seal products from Inuit or indigenous communities are handled.
It finds the EU has not sufficiently shown how its treatment of indigenous versus commercial hunts "can be reconciled with the objective of addressing EU public moral concerns regarding seal welfare."
It also found "considerable ambiguity" in how terms such as "subsistence" are used for Inuit harvests. And it raises concerns that vague criteria could allow seal products from commercial hunts to enter EU markets under indigenous exemptions.
Canada appealed a November ruling that said while the EU seal ban undermines fair trade, those restrictions can be justified on "public moral concerns" for animal welfare.
At issue was a challenge by Canada and Norway of the 28-member EU's 2010 ban on the import and sale of seal fur, meat and other products.
The WTO appeal panel agreed with the November ruling that exemptions do not give the same market access to Canadian and Norwegian seal products as those from Greenland.
Terry Audla, president of the Inuit Tapiriit Kanatami representing about 55,000 Canadian Inuit, said his people were never consulted and never agreed with the embargo or its uneven exceptions.
"I am morally outraged at the self-righteousness and sanctimoniousness of the EU's claim to protect the morals of its citizens," he said in a statement.
Inuit hunters are trying to feed their families and make a living in the modern economy, he added.
"It is morally reprehensible for anyone to impede those goals, which are the basic rights of any citizen of the world."
The federal government said in a statement the appeal decision confirms the ban is "arbitrarily and unjustifiably applied."
"Canada's position has been that the eastern and northern seal harvests are humane, sustainable and well-regulated activities that provide an important source of food and income for coastal and Inuit communities," it said.
The commercial seal hunt off Newfoundland last spring landed about 91,000 harp seals, up from 69,000 the year before but far short of the federal quota of 400,000.
About 900,000 seals are hunted globally each year, says the European Commission. Countries that commercially hunt seals include Canada, Norway, Greenland and Namibia.
Other countries that ban imported seal products include the U.S., Mexico, Russia and Taiwan.