Shares

One of the major fears of EU-critics is the tendency of EU institutions to slowly pull more and more responsibilities towards Brussels, where democratic legitimacy is weaker, and further removed from constituencies. One of the attempts to do just that, has today been torpedoed by the European Court of Justice (ECJ). According to the press release (PDF) and opinion published today, a free trade agreement with Singapore cannot, in its current form, be concluded by the European Union alone.

On 20 September 2013, the EU and Singapore initialled the text of a free trade agreement (EUSFTA). The first of a ‘new generation‘ of bilateral free trade agreements, in addition to the classical provisions (reduction of customs duties, non-tariff barriers etc.) it has provisions on matters related to trade, such as intellectual property protection, investment, public procurement, competition and sustainable development.

In December of 2016, the European Commission (EC), supported by the European Parliament (EP) sought an Opinion from the ECJ on the “allocation of competences between the European Union and the Member States as regards concluding the Free Trade Agreement envisaged between the European Union and the Republic of Singapore (‘the EUSFTA’).

Note that the agreement as concluded, already provided for the agreement to be concluded without the participation of the Member States and that “the Commission seeks guidance from the Court on whether that approach is correct.

The ECJ concludes in its Opinion, that the EU has exclusive competence over most of the areas covered by the EUSFTA, barring two. The first being the ”

The first being the “field of non-direct foreign investment“, the second the “the regime governing dispute settlement between investors and States.

The only way the EU could have exclusive competence in the field of non-direct foreign investment, would be if the conclusion of the agreement would be capable of affecting EU acts, or alters their scope. As this is not the case, the ECJ concludes that the EU does not have exclusive competence, but shares the competence with the Member States.

This conclusion also extends to the rules relating to the exchange of information and to the obligations regarding notification, verification, cooperation, mediation, transparency and dispute settlement, as regards non-direct foreign investment.

The same goes for the regime governing dispute settlements between investors and States, as such a regime, which removes disputes from the jurisdiction of the courts of the Member States, cannot be established without the Member States’ consent.

The ECJ’s Opinion means that future trade agreements will have to go through the same procedure as the recently CETA trade agreement and are required to pass National Parliaments and maybe face referendums.