The European Union will have to secure approval from national parliaments in order to finalise a free trade deal with Singapore. The bloc’s top court ruled that the agreement in “its current form” cannot be handled by the Commission acting alone.
The European Court of Justice (ECJ) today (16 May) said that the European Commission cannot finalise a free trade agreement (FTA) with Singapore, after the EU executive had asked for clarity on whether it has exclusive competence to handle the talks.
Today’s decision follows a December opinion issued by the Court’s Advocate-General, Eleanor Sharpston, who also decided that the agreement covered a number of issues that are shared competence between the member states and the EU.
It was the Commission itself that asked the ECJ to clarify if it alone can conclude the agreement. The executive chose the Singapore deal because of how similar it is in structure to a whole host of other agreements the EU has in the pipeline.
The Luxembourg court did acknowledge that a large part of the agreement does fall under exclusive EU competence, as provided by the Common Commercial Policy (CCP). But it highlighted that portfolio investment and dispute settlement between investors and the state cannot be established without member state consent.
While the Court’s final decision did not differ from the Advocate-General’s in its conclusions, it did disagree on a few issues. The AG’s opinion said that sustainable development and transport services, particularly maritime, were a shared competence while the Court ruled they are EU exclusive.
About the ECJ opinion on the Singapore trade agreement: This gives us very welcome & much-needed clarity about how to interpret EU Treaties.
— Cecilia Malmström (@MalmstromEU) May 16, 2017
The Commission will now need time to process the decision, as it has significant implications on its trade policy as a whole.
Now that the ECJ has ruled that the agreement is a shared or mixed deal, it opens the door to a repeat of the delay encountered when the EU needed 38 national and regional parliaments to ratify its Canada FTA (CETA).
The deal was only salvaged when Wallonia withdrew its opposition but the EU still suffered a major embarrassment.
Brussels previously risked a similar setback during the final stages of its Korea FTA, when the Italian parliament considered blocking the deal due to concerns about its car industry.
The executive will now have to decide whether to run the same gauntlet again and hope that the lower profile Singapore agreement can pass through unscathed.
Another option could be splitting the agreement into two halves, one of which would contain all the aspects over which Brussels has exclusive competence, while the other would need to be approved at national and regional level.
This decision by no means jeopardises the EU’s trade policy; it clarifies the increased powers granted to the Commission by the Lisbon Treaty.
The EU executive would no doubt have preferred the court to have ruled in favour of totally exclusive competence but it at least now has a blueprint as it moves forward with other FTAs like Mexico, Mercosur and, perhaps, TTIP.
In terms of its effect on the Brexit negotiations, the ECJ opinion has not worsened the UK’s chances of securing a trade deal once it has left the bloc.
The European Council can provisionally apply FTAs with shared competences, which it has done with CETA, and there is, theoretically, no legal limit on how long this interim period can go on for. The WTO’s predecessor, the GATT, was applied this way for decades.
Depending on what the Commission does next, any eventual EU-UK deal could also be split into exclusive and shared competences in order to speed up the ratification process. The two parties could even negotiate an FTA that only deals in exclusive competences.
The ECJ today ruled that only two aspects of the Singapore FTA are of shared competence. The EU and UK could therefore decide to omit portfolio investment and dispute settlement altogether, if the Brexit negotiations get that far, of course.
This ECJ’s full ruling is available here.