Opinion 2/15 On The Orbit Of Eu External Merchandise Policy: Closed To Background Data Earlier Adjacent Week’S Hearing

Dr Andrés Delgado Casteleiro

Senior Research Fellow, Max Planck Institute Grand Duchy of Luxembourg for International, European in addition to Regulatory Procedural Law

Introduction

On September the 13th in addition to 14th the Court of Justice of the European Union (CJEU) volition handgrip its hearings for Opinion 2/15, which concerns the EU’s competence to conclude a new Free Trade Agreement (FTA) with Singapore, inwards a rare sitting of the Full Court of CJEU judges. This blogpost provides a brief overview of or thus of the relevant issues that volition most likely play a operate during the hearings. The get-go operate provides or thus context on the EU’s merchandise policy. The instant operate focuses on the principal issues concerning the EU´s competence to conclude FTAs. The final department discusses or thus broader implications that Opinion 2/15 mightiness conduct maintain – inwards item for EU/UK merchandise relations afterwards Brexit, in addition to the controversial proposed EU/US merchandise bargain (TTIP).

  

EU Trade Policy afterwards the Lisbon Treaty

One of the principal innovations introduced with Lisbon Treaty was the expansion of the reach of the EU´s competence over external (non-EU) merchandise policy, which is to a greater extent than oft than non known every bit the Common Commercial Policy (CCP). Article 207 TFEU extended the reach of the CCP every bit to comprehend non only merchandise inwards goods but every bit good merchandise inwards services, commercial aspects of intellectual belongings in addition to unusual direct investment.

This expansion of the CCP´s reach meant non only that those subject-matters were an European Union competence, but to a greater extent than importantly, next Article 3 (1) TFEU, they were all an exclusive competence of the European Union – apart from an exception for carry services. The exclusive nature of the CCP entails 2 interrelated aspects: first, only the European Union tin negotiate in addition to conclude merchandise agreements, in addition to second, European Union Member States cannot negotiate in addition to conclude agreements inwards that expanse without the prior say-so of the EU. Also, Article 207 provides that usually the European Union Council votes yesteryear qualified bulk on external merchandise laws in addition to treaties, thus Member States conduct maintain no veto. However, Article 207 does allow for a veto every bit regards or thus aspects of services trade, or where at that topographic point is a veto inwards or thus other área of European Union police describe (tax, for instance).

In practice, exclusive competence would brand things easier for the European Union inwards price of negotiating, concluding, in addition to ratifying its international agreements, every bit only the European Union would live legally entitled to negotiate those agreements. By contrast, whenever an international understanding concerns an expanse non covered only yesteryear European Union exclusive competence, the understanding volition live concluded yesteryear both the European Union in addition to its Member States.

Depending on whom you lot inquire these latter agreements, commonly known every bit ‘mixed agreements’, could live seen every bit an awful or a slap-up thing. On 1 hand, the whole procedure of final in addition to ratifying mixed agreements is to a greater extent than cumbersome, every bit the European Union in addition to its 28 Member States conduct maintain to conclude in addition to ratify the agreement. The ratification procedure of mixed agreements commonly takes years, every bit or thus Member States require that the understanding has to live approved yesteryear their national parliaments, although sometimes the European Union agrees to apply such treaties (or parts of them) provisionally inwards the meantime.  On the other hand, mixed agreements could live seen every bit enhancing the operate of the Member States during the negotiations, which tin outcome on a much smoother implementation of the agreement.

In realpolitik terms, the give-and-take on whether a certainly understanding should live mixed or non hides a battle for ability betwixt the European Union (mostly the European Commission) in addition to the Member States. As mixed agreements give to a greater extent than ability to the Member States (often to a greater extent than than they are constitutionally entitled to), it seems rather logical that the European Union Commission would similar to restrain their usage to the bare minimum. This is the underlying conflict inwards Opinion 2/15: if the Court decides that the EU-Singapore FTA falls inside the EU’s exclusive competence, the European Union would live able to conclude the understanding alone. If, on the contrary, the CJEU decides that the FTA does non only screen areas of European Union exclusive competence, but every bit good shared competence, or fifty-fifty Member States´ exclusive competence, the understanding volition live concluded jointly yesteryear the European Union in addition to its Member States.

The EU-Singapore FTA in addition to European Union competence

To what extent does the EU-Singapore FTA autumn inside the reach of the EU´s (exclusive) CCP?

The EU-Singapore FTA covers broadly speaking iv áreas: goods, services, intellectual belongings in addition to investment. In relation to merchandise inwards goods, at that topographic point is no dubiety that this operate of the FTA falls inside the reach of the EU’s exclusive merchandise powers. That the CCP encompasses merchandise inwards goods has been clear since fifty-fifty earlier Opinion 1/94 – the telephone substitution CJEU ruling on the reach of the EU’s merchandise policy powers before the Treaty of Lisbon. Likewise, merchandise inwards services, competition, world procurement in addition to intellectual belongings would every bit good live covered yesteryear exclusivity. While at that topographic point were or thus doubts almost to what extent they would live covered yesteryear article 207 TFEU, the Court seems to conduct maintain cleared those doubts inwards Daiichi Sankyo every bit regards intellectual property, in addition to Commission v Council, every bit regards services.

The principal operate of the hearings and, I would assume, the questions of the judges would concern the extent to which the EU´s CCP competence would screen the investment chapter of the agreement. As mentioned before, article 207 TFEU establishes that the European Union has competence over Foreign Direct Investment (FDI). Yet, what is FDI?

A get-go possible way to approach the concept of FDI every bit enshrined inwards the Treaties is to understand, that the framers conduct maintain coined a novel in addition to autonomous concept of Foreign Direct Investment. This novel Definition of FDI would screen all aspects linked to investment protection every bit enshrined inwards the EU-Singapore FTA, roofing FDI stricto sensu every bit good every bit portfolio investment (ie buying minority non-controlling shares inwards a business), dispute short town in addition to fifty-fifty protection against expropriation. This seat would homecoming the investment protection provisions of the EU-Singapore FTA an exclusive competence of the European Union since they would autumn inside the reach of the CCP.

The principal work with this expansive take in of the reach of the EU’s competence over FDI is that would contradict both the international in addition to European Union (internal) definitions of FDI. Therefore, it seems rather unlikely that the Court would money a novel understanding of FDI completely detached from the international concept in addition to irrespective of the Court’s representative police describe on direct investment. 

A instant possible Definition of FDI that the Court could give would follow the international Definition of FDI that excludes portfolio investments from its scope. This Definition of FDI tin live found inwards multiple OECD in addition to International Monetary Fund instruments. Moreover, it would every bit good live inwards consonance with the Definition of direct investment that the CJEU has developed inwards its internal marketplace seat representative police describe (see Angelos Dimopoulos, EU Foreign Investment Law (OUP, 2011)). Given that the EU-Singapore FTA defines investment inwards a really wide way every bit to include: “every form of asset which is owned, straight or indirectly or controlled, straight or indirectly yesteryear investors of 1 Party inwards the territory of the other Party, that has the characteristics of an investment, including such characteristics every bit the commitment of majuscule or other resources, the expectation of gain or profit, the supposition of risk, or a certainly duration”, this reading of the FDI competence would entail that non everything inwards the Investment Protection chapter would live covered yesteryear the CCP. Therefore, those parts non covered yesteryear the CCP would live covered either yesteryear other European Union implied powers, or yesteryear European Union Member States’ competences. I cry back that most likely this volition live Definition of FDI that the CJEU volition favour, since it is inwards line with its internal representative police describe in addition to the relevant international instruments.

The 3rd possible understanding of the reach of the FDI every bit enshrined inwards the CCP is the most restrictive 1 of all three. Based on a literal reading of Article 206 TFEU, it would combat that the EU’s exclusive competence does non screen all aspects related to FDI but instead it only covers the number of the initial admission of FDI. Article 206 TFEU provides that amidst the CCP objectives, the progressive abolition of restrictions on international merchandise in addition to on unusual direct investment is the aspect of FDI which has been entrusted to the European Union (Jan Asmus Bischoff, 'Just a little bit of “mixity”? The EU’s operate inwards the plain of international investment protection law' (2011) 48 Common Market Law Review, Issue 5, pp. 1527–1569). Consequently, post-admission measures would autumn exterior the reach of the CCP. This narrow reading of FDI nether the CCP would really much restrain the EU’s powers inwards the plain of FDI, in addition to it seems rather unlikely that the Court given its expansive take in of the CCP would adopt it.

Does the European Union conduct maintain whatever other exclusive competence roofing certainly aspects of the EU-Singapore FTA?

If the Court decided to select either the instant or 3rd possible Definition of the reach of the FDI competence, it would thus conduct maintain to flora whether at that topographic point are whatever other implied in addition to exclusive powers that would screen those aspects of the investment chapter of the EU-Singapore FTA non covered yesteryear the FDI exclusive competence. This inquiry is peculiarly interesting every bit regards portfolio investment in addition to whether at that topographic point mightiness live an implied  and exclusive ability stemming from Article 63 TFEU concerning the complimentary drive of majuscule from non-EU countries.

The Commission inwards its Communication “Towards a comprehensive European international investment policy” (COM (2010) 343 final) argues inwards this direction: “to the extent that international agreements on investment impact the reach of the mutual rules prepare yesteryear the Treaty's Chapter on capitals in addition to payments, the exclusive Union competence to conclude agreements inwards this expanse would live implied.” This would hateful that 1 way or or thus other both FDI in addition to portfolio investments would live covered yesteryear an European Union exclusive competence, thus inwards regulation at that topographic point would no involve for the participation of European Union Member States inwards the EU-Singapore FTA based on the inclusion of an Investment Protection chapter inwards it.

However, it is non really clear how that competence would live solely implied since complimentary drive of majuscule is a shared competence, in addition to the European Union has non exercised its competences nether Article 64 (2) in addition to 66 TFEU. Thus, it would live hard to combat that the implied powers doctrine would apply since at that topographic point is no internal legislation to live affected (P Eeckhout, EU External Relations Law (Oxford, OUP, 2011)). Yet, it would non live impossible, since the European Union has established a harmonized regulatory framework for portfolio investments inside the European Union that makes reference to relations with non-EU countries.

Therefore, it would appear that portfolio investments could live an expanse largely covered yesteryear Union rules (Angelos Dimopoulos, EU Foreign Investment Law (OUP, 2011), p 105), which is the threshold inwards the representative police describe for determining whether the doctrine of implied in addition to exclusive powers could live applied. Recent case-law on implied powers does non give much clue almost how the CJEU could encounter the issue. While the CJEU has been flexible inwards understanding whether a certainly expanse is largely covered yesteryear Union rules, the fact that these rules must live affected has started to figure prominently inwards the Court’s reasoning (see Opinion 1/03, Opinion 1/13 in addition to the broadcasting rights case), though non applied inwards a fully consistent fashion.

Implications of Opinion 2/15

Opinion 2/15 volition non only determine whether the EU-Singapore FTA falls inside European Union exclusive competence, but could conduct maintain the potential inwards setting musical note for the adjacent FTAs currently beingness negotiated or inwards the procedure or beingness signed. In other words, if the EU-Singapore FTA is found to autumn inside EU’s exclusive competence, the adjacent European Union FTAs could live concluded only yesteryear the EU. Conversely, if it is non inside the EU’s exclusive competence, futurity European Union FTAs volition probable live mixed agreements.

This is peculiarly relevant when 1 considers that the issues covered inwards the EU-Singapore FTA are the same form of issues currently beingness discussed inwards the controversial EU-US negotiations on the TTIP. An Opinion 2/15 ruling establishing a wide reach for the EU’s CCP could allow the European Union conclude the TTIP without its Member States alongside, making the ratification procedure far faster and, to a greater extent than importantly, less prone to surprises inside the national parliaments´ ratification processes. By establishing that the TTIP tin only live concluded yesteryear the EU, only the European Parliament would conduct maintain to consent to the agreement. While this is yesteryear no agency an tardily work (see the EP´s seat on the ACTA in addition to (at first) the SWIFT Agreements), it is a far easier work than getting the TTIP ratified yesteryear the European Union in addition to its 28 Member States. Given the opposition of most of the European left in addition to or thus parts of the correct to the TTIP, I dubiety that the TTIP would live its ratification procedure if it is deemed a mixed understanding next Opinion 2/15.

Furthermore, if, every bit it looks correct now, the U.K. authorities mightiness prefer to settle its novel human relationship with the European Union afterwards BREXIT with an FTA (Canada + type of agreement) the Court’s thought could potentially create upwards one's heed whether European Union Member States conduct maintain a veto inwards negotiating the novel merchandise human relationship with the UK. As Robert Peston has suggested, this may essay to live a telephone substitution political number inwards the UK/EU negotiations, every bit it volition live harder for the U.K. to accomplish its negotiating objectives if the remaining Member States all conduct maintain a veto.

However, it must live pointed out that regardless of whether the Opinion finds that the European Union has exclusive competence over the thing covered inwards the FTA, politics tin overrun these legal considerations, every bit the Commission sadly reminded us dorsum inwards June. Its determination to propose that CETA (the EU-Canada FTA) must live a mixed understanding regardless of the competences involved in addition to the Commission´s Legal Service thought marks a really worrying precedent that could undermine the effectiveness of the Lisbon Treaty reforms were Opinion 2/15 to conclude that the European Union has exclusive competence to conclude FTAs.

Barnard & Peers: chapter 25, chapter 27

Photo credit: cnn.com

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