The Futurity Of Eu External Merchandise Policy - Thought 2/15: Written Report From The Hearing
November 23, 2018
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David Kleimann as well as Gesa Kübek*
On September thirteen as well as 14, the Court of Justice of the European Union (CJEU) held its hearings for Opinion 2/15, which concerns the EU’s competence to conclude the lately negotiated EU-Singapore Free Trade Agreement (EUSFTA). The CJEU convened inwards a rare sitting of the Full Court of CJEU judges. It was presided past times Judge Lenaerts as well as Vice-President Tizzano, alongside Judge Ilešič fulfilling the business office of the Court’s Rapporteur. Mrs. Sharpston serves every bit Advocate General.
This banknote offers a first-hand study on the hearing as well as summarizes the telephone commutation of arguments betwixt the Commission, on the 1 side, as well as the Council as well as the fellow member states, on the other side. The foremost department sets the stage past times providing relevant contextual data to the proceeding as well as highlights the systemic importance of the coming judgment. Section II foremost outlines the principal as well as full general lines of reasoning that the parties presented during the hearing. Secondly, nosotros highlight a selection of policy specific, novel, or fifty-fifty ‘curious’ legal arguments that were advanced past times the representatives of the Council as well as the Commission on the one, as well as the members of the Court, on the other hand. Section III concludes this banknote alongside 1 of many soundless unanswered, yet systemically highly important legal questions that surfaced inwards the class of the oral stage of the proceedings. There's to a greater extent than or less farther background to the instance inwards an earlier post on this blog.
I. The Crux of Opinion 2/15
“Does the European Union conduct maintain the ‘requisite competence’ to conclude the European Union – Singapore Free Trade Agreement [EUSFTA] alone?” More specifically, the Commission, inwards Oct 2014, had asked the Court to clarify whether as well as which areas of the EUSFTA autumn nether EU-exclusive, shared, or fellow member states’ exclusive competences respectively.
The crux of the affair brought before the Court lies just inwards this precise delineation of European Union external competences: If the content of the EUSFTA falls nether European Union exclusive powers inwards its entirety, its conclusion every bit ‘EU-only’ would locomote mandatory. If surely treaty provisions are regarded every bit exclusive national competences, the understanding ought to locomote concluded every bit a ‘mixed’ agreement, including all European Union fellow member states every bit independent contracting parties. If only European Union exclusive every bit good every bit shared competences were touched upon past times the FTA, the determination to suggest the conclusion (on behalf of the Commission) as well as to conclude the understanding (on behalf of the Council) every bit either ‘EU only’ or ‘mixed’ is legally optional as well as referred to the political discretion of the European Union institutions involved inwards the applicable procedures laid out inwards Article 218 TFEU (the full general rules on European Union negotiation as well as conclusion of treaties) inwards conjunction alongside Article 207 TFEU (the provision on the EU’s Common Commercial Policy).
The importance of the Court’s judgment for the governance of European Union commercial relations alongside tertiary countries – inwards special the controversial EU/US merchandise bargain (‘TTIP’) as well as EU/UK merchandise relations after Brexit – tin flame hardly locomote underestimated. Given the broad as well as deep cloth coverage of the EUSFTA, the judgment volition serve every bit a precedent for the conclusion of the vast bulk of futurity European Union merchandise as well as investment agreements. As such, the Court judgment inwards Opinion 2/15 could perhaps grade the get-go of the era of ‘EU-only’ merchandise as well as investment agreements and, conversely, the terminate of the European Union fellow member states lengthy parallel ratification procedures required past times ‘mixity’. As mirrored past times the inter-institutional political debate on the legal status of the European Union Canada Comprehensive Economic Trade Agreement (CETA), the eventual result of Opinion 2/15 has of import implications on both the efficiency, reliability as well as credibility of European Union merchandise as well as investment policy formulation, on the 1 hand, as well as the de jure legitimacy of multi-level economical governance inwards the European Union, on the other.
II. Commission vs. Council as well as the Member States: The Arguments
Throughout the class of the hearing, the arguments of the parties focused on iv contentious policy areas covered past times the EUSFTA, notably disciplines on transport, investment, intellectual belongings rights, every bit good every bit sustainable evolution (labor rights & environmental protection). In the following, nosotros volition foremost outline a number of full general legal arguments advanced past times the parties that recurred during the hearing inwards application to all or close number areas as well as discernably built on established CJEU instance law. Subsequently, nosotros highlight a selection of specific legal constructions that the parties lay forrad inwards honour of EUSFTA carry as well as investment rules.
1. General Arguments of the Parties
a. The Commission
As a foremost as well as predominant describe of defense, the Commission representatives articulated a number of full general arguments that aim at plumbing fixtures the content of the EUSFTA, inwards its entirety, inside the reach of the EU’s exclusive Common Commercial Policy (CCP) competence – Article 207 TFEU – every bit good every bit inside the ambit other exclusive European Union competences that tin flame locomote implied inwards accordance alongside Article 3 (2) TFEU.
As such, the Commission proposed the broadest possible conceptual interpretation of the ordinary damage of Article 207, seeking to attribute maximum important to the expansion of CCP powers past times the Lisbon reform of 2009, which saw the improver of services, unusual straight investment, as well as merchandise related intellectual belongings rights to the reach of CCP exclusive external powers.
Secondly, the Commission relied on a broad application of the ‘centre of gravity’ theory, which the Court had developed inwards its instance law. The theory’s ‘predominance-test’ requires the exercise of a unmarried legal footing where 1 of the aims as well as components of a mensurate “is identifiable every bit the principal [one], whereas the other is simply incidental” (COM representative inwards reference to Case C-377/12, concerning the legal base of operations of the European Union partnership understanding alongside the Philippines). In this way, the Commission defended EUSFTA rules every bit measures falling nether Article 207 where they “specifically [relate] to international merchandise inwards that [they are] essentially intended to promote, facilitate or regulation merchandise as well as [have] straight as well as immediate effects on trade” (COM representative inwards reference to Case C-414/11 - Daiichi Sankyo).
Third, the Commission representatives made frequent exercise of the provisions of Article 3 (2) to advocate for implied exclusivity of otherwise shared competences. In codification of settled ERTA instance law, Article 3 (2) TFEU prescribes European Union exclusivity inwards instance “the reach of European Union rules may locomote affected or altered past times international [member state] commitments where such commitments are concerned alongside an expanse which is already covered to a large extent past times such rules” (Opinion 1/13, on the Hague Convention on shaver abduction, inwards reference to Article 3 (2) TFEU, 3rd situation). Otherwise, European Union exclusive competence may locomote implied where the “attainment of the Community objective [is] inextricably linked to the conclusion of the international agreement” (Opinion 1/03 on the Lugano Convention on civil jurisdiction, codified inwards Article 3 (2) TFEU, 2nd situation).
Building on these 3 principal lines of argumentation, the Commission developed a number of specific arguments inwards back upwards of European Union exclusivity inwards regard of unusual straight investment (FDI) protection as well as intellectual belongings rights (first, second, as well as tertiary argument), sustainable evolution disciplines (second argument), as well as areas otherwise covered past times European Union rules to a large extent, such every bit maritime carry (second as well as tertiary argument).
Yet, the Commission found it necessary to depict a 2nd describe of defense: inwards the alternative to total European Union exclusivity, it held that the EUSFTA concerned European Union exclusive as well as shared competences only. As such, the conclusion of the EUSFTA every bit ‘EU-only’ or ‘mixed’ would rest optional – or facultative - inwards accordance alongside the procedural rules of Article 218 TFEU inwards conjunction alongside Article 207 TFEU.
b. The Council as well as the Member States
Living upwards to observers’ expectations, the Council as well as the fellow member states’ representatives attacked the Commission presumption of European Union exclusivity on diverse full general as well as number specific grounds, alongside an ubiquitous reference to the regulation of conferral, which is laid out inwards Article five (2) TEU. The EUSFTA concerned, inwards improver to the European Union exclusive competence nether Article 207 TFEU, both shared every bit good every bit exclusive fellow member states’ competences. In consequence, “mixity is a must” for both the Council as well as the fellow member states.
In particular, the Council as well as the fellow member states demanded a narrow text based interpretation of Article 207 TFEU. Secondly, both Council as well as fellow member states advocated for a restrictive job of the ‘center of gravity’ theory that, inwards its application, needed to residue upon “objective factors amenable to judicial review” (member states representatives inwards reference to Case C—411/06, Shipments of Waste). More than once, the representatives of diverse parties referred to Opinion 2/00, on the Cartagena Protocol, in which the Court decided that “[w]hatever their scale, the practical difficulties associated alongside the implementation of mixed agreements (..) cannot locomote accepted every bit relevant when selecting the legal footing for a [Union] measure”. Instead, the Council as well as the fellow member states advocated on several occasions that the selection of the legal footing should convey occupation concern human relationship of the Court’s reasoning inwards Case C-411/06, where it was held that “[e]xceptionally, if (…) it is established that the human activity simultaneously pursues a number of objectives or has several components that are indissociably linked, without 1 beingness secondary as well as indirect inwards relation to the other, such an human activity volition conduct maintain to locomote founded on the diverse corresponding legal bases”.
Third, the parties argued inwards favor of restrictive reading of implied exclusive competences nether Article 3 (2), 3rd situation, inwards that respective conclusions required a “comprehensive as well as detailed analysis of the human relationship betwixt the envisaged international understanding as well as the European Union constabulary inwards force” (Council as well as fellow member states representatives inwards reference to Opinion 1/13).
Following these to a greater extent than restrictive of the possible realm of interpretative approaches, the Council as well as the fellow member states concluded that fellow member states remained alone competent for maritime transport, FDI protection, portfolio liberalization as well as protection as well as (alleged) non-commercial aspects of intellectual belongings rights protection. Moreover, the parties held that the EUSFTA’s disciplines on project rights as well as environmental protection established diverse independent as well as non-incidental aims as well as objectives that required reference to multiple legal bases inwards the TFEU.
2. Policy-specific Arguments of the Parties
Up to until this point, arguably, the Commission, on the 1 side, as well as the Council as well as the fellow member states, on the other, walked on trodden paths of European Union primary constabulary interpretation as well as established instance law, inwards application to an economical treaty of unprecedented reach as well as depth as well as a constantly evolving European Union internal legislative status quo. In the next few paragraphs, nosotros highlight a selection of rather unconventional as well as fifty-fifty curious policy-specific arguments inwards the areas of carry as well as investment that may yet displace the needle on the evolution of European Union external exclusive competences.
a. Transport
In the expanse of transport, the Commission notably questioned the reach of the carve-out Article 207(5), which exempts “the negotiation as well as conclusion of international agreements inwards the champaign of transport” from the TFEU provisions of the CCP. In a remarkable construction, the Commission argued that the improver of unusual straight investment to the damage of Article 207(1) via the Lisbon Treaty reform of 2009 had moved mode 3 of carry services provision every bit defined past times WTO law, i.e. establishment as well as FDI, dorsum into the reach of the CCP. Mode 1, 2, as well as 4 (movement of the service itself, drive of service recipients as well as providers) remained exterior of the CCP’s legal footing every bit regards transport. The EU, however, was straight off alone competent for the negotiation as well as conclusion of agreements liberalizing as well as protecting unusual straight investment inwards all sectors, including transport. The Council as well as fellow member states cried foul inwards reference to Opinion 1/08, inwards which the CJEU ruled that carry was fully exempted from the CCP, as well as which remained “good law” fifty-fifty after the Lisbon reforms as well as protected the total integrity of the 207(5) carry carve-out from the CCP. The Commission, inwards catch of the parties, was victim of its ain faulty logic reasoning. Any exemptions from Article 207 (5) would deprive the provision of its effectiveness.
In the expanse of maritime carry services, the Commission advocated for implied ERTA exclusivity (Article 3 (2), 3rd province of affairs TFEU) based on Regulation 4055/86. The Regulation prescribes broad trend 1 liberalization betwixt European Union fellow member province nationals established inwards European Union fellow member states as well as tertiary countries but does obviously non afford whatever liberalization commitment to nationals of tertiary countries. The Council as well as fellow member states hence pointed at the missing pieces for a comprehensive European Union internal legal framework for carry services that could otherwise confer implied Union exclusivity. The parties farther argued that the wide-ranging EUSFTA disciplines as well as objectives inwards this champaign were non incidental or subordinate to the commercial treaty objectives. Maritime carry services, inwards the catch of the parties, remained a shared competence inwards accordance alongside Article 4 (2) (g) TFEU. Moreover, fellow member states remained alone competent inwards regard of the regulation of tertiary Earth vessels operators.
Inspired past times this telephone commutation of arguments, Advocate General Sharpston addressed the Council alongside a query of systemic relevance: What is, at the end, the decisive standard or the threshold for the conclusion of an European Union understanding inwards a champaign that is internally only partly covered past times mutual rules, such every bit maritime transport? How many “hoops”, Sharpston asked, does the Commission conduct maintain to “jump through” to bear witness European Union exclusivity to the Council? Mrs. Sharpston farther questioned whether internal exclusivity was a necessary status for external exclusivity of competences. The Council, inwards response, denied that internal exclusivity was a conditio sine qua non but insisted on “strict conditions” for the conferral of implied exclusivity that were laid out inwards Article 3 (2) TFEU. Moreover, the Council advocated for an application of the gravity theory that advanced “clear dividing lines”.
b. Portfolio Investment
In a truly new describe of reasoning, the Commission advanced a treaty interpretation that would justify the implied exclusivity of Union competence over portfolio investment (ie, the buy of non-controlling shares inwards companies), which is non included inwards the ordinary important of the term ‘foreign straight investment’ inwards Article 207 (1) TFEU. In doing so, the Commission departed from the otherwise currently uncontested notion that existing secondary European Union legislation is the only contingency that tin flame trigger an ‘ERTA effect’. The ‘ERTA effect’ confers exclusive competence inwards areas where fellow member states exercise of external competence would otherwise touching on already existing or fifty-fifty prospective ‘common rules’ (Art. 3 (2) 3rd province of affairs TFEU). Such ‘common rules’, according to the Commission, however, could also convey the shape of European Union primary law. With reference to Article 63 (1) TFEU, the Commission representatives voiced the sentiment that the treaty-prescribed liberty of upper-case alphabetic lineament drive betwixt fellow member states (as good every bit fellow member states as well as tertiary countries) sufficed to constitute ‘common rules’ inside the important of Article 3 (2) TFEU. The possibility of fellow member states terminal international agreements that affected the prohibition of restrictions on upper-case alphabetic lineament movements every bit codified inwards Article 63 (1) implied European Union exclusive external powers inwards this area. The Union was thence alone competent for the negotiation as well as conclusion of agreements roofing rules on portfolio investment liberalization as well as the protection of such investments.
In the alternative, according to the Commission, portfolio investment liberalization falls nether the Union’s shared competences.
The Council as well as the fellow member states took pains to counter the Commission’s describe of reasoning alongside a larger number of sometimes diverging arguments. First as well as foremost, the parties noted the fact that that Article 63 (1), past times itself, only codifies a prohibition of restrictions, but falls curt of conferring legislative powers upon the Union. Using Article 63 (1) TFEU every bit a legal footing for external activity was simply a “legal fix” that constituted an instance of “legal imagination” on behalf of the Commission. To the Council, it appeared inconceivable that a provision, which did non suffice every bit a footing for internal legislation could imply an (exclusive) external competence. Only the exercise of an internal competence may pre-empt external fellow member province action. Kingdom of Belgium as well as Germany, secondly, took the opinion that such a broad interpretation of Article 3 (2) 3rd province of affairs TFEU facilitated an undue circumvention of the deliberate selection of the treaty makers to exclude portfolio investment from the reach of Article 207 TFEU as well as Article 64 TFEU. The ii parties insisted on exclusive fellow member province competence for portfolio investment. The representatives of Republic of Finland as well as Slovenia, on the other hand, appeared to suggest that the fellow member states may part external powers alongside the Union inwards this area.
Countering the Council’s attack, the Commission, inwards response to an oral query asked past times the Court, held that in that location was a “simple but real expert reason” for the fact that the treaties did non codify a legal footing for the internal liberalization of portfolio investment: Article 63 (1) TFEU itself prescribed a comprehensive prohibition of restrictions to that end.
In to a greater extent than or less other unprecedented interpretation of the treaties, the Commission cited Article 216 (1) inwards conjunction alongside Article 63 (1) TFEU every bit the right legal bases for external Union acts that covered portfolio investment liberalization. The Council as well as several fellow member states, inwards contrast, insisted that Article 216 (1) TFEU only conferred full general treaty-making powers upon the Union as well as was unsuitable to serve every bit a legal footing for the conclusion of international agreements past times the EU.
Upon research of Judge Rapporteur Ilešič, the Commission as well as Council representatives found themselves inwards a rare minute of agreement to the extent that Article 64 TFEU could non serve every bit a legal footing for the internal liberalization of portfolio investment. According to the Commission, the harmonization of European Union internal rules on portfolio investment could, however, “maybe” locomote based on Article 114 or 352 TFEU – a declaration that inspired the Court’s President Lenaerts to remind the Commission of the fact that the selection of the right legal footing for a Union human activity was non “à la carte”.
In lite of the circumstance that the Commission partly relied on a legal footing for an external competence, which allegedly did non require its internal exercise ex ante, Advocate General Sharpston questioned the Commission on the precise divergence betwixt the tertiary province of affairs governed past times Article 3 (2) TFEU (as referred to past times the Commission) as well as the 2nd province of affairs provided for past times the same rule. Mrs. Sharpston’s enquiry, however, remained unanswered.
Secondly, the Advocate General questioned the Commission’s perception of the endangerment that fellow member province agreements could ‘alter the reach of mutual rules’, whereas the mutual rules that the Commission referred to were inwards fact European Union treaty provisions. The only agency to alter the reach of primary law, Sharpston stated, was a treaty reform via the applicable constitutional provisions. In response, the Commission, inwards reference to the damage of Article 3 (2) TFEU, clarified that its declaration did non extend to the alteration of the reach of treaty rules, but to the probability that the primary legal norm of Article 63 (1) could locomote affected past times independent international fellow member province agreements.
c. Termination of Member States’ Bilateral Investment Treaties
Another betoken of legal debate that prominently featured inwards the hearing concerned the supersession, suspension, as well as termination of existing fellow member states’ bilateral investment treaties alongside Singapore 1 time the investment protection provisions of the EUSFTA volition locomote provisionally applied or displace into into forcefulness when the treaty is concluded. Article 9.10 EUSFTA provides that fellow member states bilateral investment treaties “shall cease to conduct maintain effect as well as shall locomote replaced as well as superseded past times this Agreement”. H5N1 footnote to this provision stipulates that “the agreements betwixt Member States of the Union as well as Singapore […] shall locomote considered every bit terminated past times this Agreement, inside the important of subparagraph 1(a) of Article 59 of the Vienna Convention on the Law of Treaties.” Yet, article 59 (1) VCLT prescribes that “a treaty shall locomote considered every bit terminated if all the parties to it conclude a afterward treaty relating to the same dependent affair and: (a) It appears from the afterward treaty or is otherwise established that the parties intended that the affair should locomote governed past times that treaty”.
While the Commission argued that past times European Union exercise entailed an array of precedents for the supersession of fellow member province treaties past times European Union external agreements, Judge Rapporteur Ilešič as well as Advocate General Sharpston questioned the appropriateness of the chosen legal modality every bit good every bit the European Union competence for the termination of fellow member states’ bilateral investment treaties (BITs) alongside Singapore via Article 9.10 of the EUSFTA. Both the Judge Rapporteur as well as the Advocate General, advanced a, however, unanswered asking for a clarification every bit to whether the Commission wanted to debate inwards favour of the termination of the BITs via the duty of sincere cooperation enshrined inwards Article 4 (3) of the TEU. Otherwise, how would the Commission debate that it tin flame include a provision inwards an ‘EU-only’ understanding that effectuated non only the succession but also the termination of fellow member province bilateral agreements alongside Singapore nether international law, given that the European Union is non a contracting political party to these agreements?
III. Concluding Remarks
Opinion 2/15 raises a vast amount of full general every bit good every bit policy expanse specific legal issues that are – inwards aggregate as well as inwards to a greater extent than or less instances individually - of tremendous importance for the delineation of European Union competences vis-à-vis the Union’s fellow member states. The significance of the Court’s judgment real much transcends the query of whether the EUSFTA is characterized every bit an ‘EU-only’ or a ‘mixed’ understanding inwards its entirety. Rather, the Court’s much awaited clarifications volition conduct maintain both systemic horizontal every bit good every bit policy expanse specific vertical implications for the performance of the EU’s legal arrangement as well as its external relations. Moreover, the judgment volition probable clarify as well as may redefine the purpose as well as gain of the fellow member states’ presence inwards the Union’s external economical relations inwards adaptation to the primary constabulary reforms of the Lisbon Treaty, constantly evolving European Union internal secondary legislation, as well as the expanding reach as well as depth of 21st century merchandise as well as investment agreements.
We conclude this banknote alongside a query posed past times the British Advocate General Mrs. Sharpston, at the real terminate of the hearing, to all parties. The question, however, remained unanswered.
If the Court, inwards Opinion 2/15, held that the EU-Singapore FTA is a mixed agreement, what would locomote the effect for the conclusion of the treaty? Given the extensive reach of European Union exclusive powers nether the CCP, could a unmarried fellow member province veto the entire agreement?
David Kleimann as well as Gesa Kübek
Passau, Oct 4th, 2016
Barnard & Peers: chapter 24
Photo credit: www.cnaint.com
* David Kleimann is a Researcher at the Law Department of the European University Institute (EUI) inwards Florence (david.kleimann@eui.eu). Gesa Kübek is a Research Assistant at the Law Faculty of the University of Passau (gesa.kuebek@uni-passau.de). This study is based on hand-written notes that the authors prepared during the hearing. All potential errors are attributable to the authors alone.
