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Europe’s top court says EU Commission cannot ratify free trade agreement

The Court of Justice of the European Union said a free trade agreement between the EU and Singapore must be ratified by individual EU member states

In an opinion published on May 16, the Court of Justice of the European Union (ECJ) said a 2013 free trade agreement between the EU and Singapore can only be concluded with the individual ratifications of EU nations.

The ruling could make future trade deals  – including a post-Brexit deal with the UK – more difficult to finalise. Other deals with Japan, Mexico and Australia are also in the pipeline.

The EU-Singapore deal will now have to go through a complex ratification process. Alternatively, the Commission could split the deal in two, one that it can ratify alone, and a separate deal for elements that require ratifications from member states.

The European Commission asked the ECJ for an opinion to determine whether the EU has exclusive competence on the trade deal, enabling it to conclude the agreement, as both the Commission and the EU parliament contend.

The ECJ ruling said that parts of the deal do not fall under the exclusive powers of the EU.

“…the free trade agreement with Singapore cannot, in its current form, be concluded by the European Union alone, because some of the provisions envisaged fall within competences shared between the European Union and the Member States. It follows that the free trade agreement with Singapore can, as it stands, be concluded only by the European Union and the Member States acting together.”

Court of Justice of the European Union press release

Trade is an exclusive competence of the EU, which means that the Commission usually has the power to ratify trade deals with non-EU countries.

However, the ECJ opinion said that two provisions in the EU-Singapore deal concerning non-direct foreign investment and dispute settlement between investors and countries are not exclusive competences of the EU. This means that 38 national parliaments and regional assemblies in the EU also need to approve the deal before it is concluded.

Dispute settlement has been at the heart of opposition to EU free trade deals, including the recently ratified CETA deal with Canada and the negotiations around the TTIP deal with the USA. Opponents have long-contended that investor-State dispute settlements, often made in secret, are at odds with national sovereignty.

The ECJ said that the dispute settlement mechanism created by the deal removes disputes from the jurisdiction of member states’ courts and therefore requires the consent of member states. In some cases, this could mean that national referendums will be required.

The ECJ opinion did not go as far as Eleanor Sharpston, the court’s advocate general, who in December included transport services, intellectual property rights, and labour and environmental standards among shared competences.

The Court declared that the Commission has exclusive competence in:

  • access to the EU market in goods and services, including transport services
  • public procurement
  • energy generation from sustainable non-fossil sources
  • intellectual property rights
  • dealing with anti-competitive activity, monopolies and subsidies
  • protection of direct foreign investments
  • sustainable development, “subject to the condition that the parties comply with their international obligations concerning social protection of workers and environmental protection”
  • “the rules relating to exchange of information and to obligations governing notification, verification, cooperation, mediation, transparency and dispute settlement between the parties, unless those rules relate to the field of non-direct foreign investment”

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