19 May, 2017
A proposed free trade deal between the European Union and Singapore cannot be concluded without approval from all member states, the Court of Justice of the European Union has said.
In a legal opinion on the issue, the CJEU, Europe's highest court, said that two provisions of the agreement do not fall within the exclusive competence of the EU. The agreement therefore cannot be concluded without the participation of member states, it said.
While it will slow the Singapore / EU deal, the opinion is promising in terms of the UK's future negotiations on a trade deal with the EU because it only identifies two problem provisions, said EU expert Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com.
"The court’s decision is potentially helpful for the prospects of a UK / EU trade deal, given that a limited number of subjects were held to require approval from all member states. If the judgment had gone the other way, and ruled that all of the content of the Singapore trade deal needed member state approval, that could have been a significant obstacle to concluding and getting ratified a UK / EU deal."
The proposed Singapore / EU deal contains provisions that go beyond those in a standard trade agreement, the CJEU said. As well as covering the reduction of customs duties and non-tariff barriers, the proposal includes provisions on intellectual property protection, investment, public procurement, competition, and sustainable development.
The Commission and Parliament contend that the EU has the competence needed to sign and conclude the deal, while the Council and member states argued that some parts of the agreement fall within a competence shared between the EU and member states, and some within the exclusive competence of the member states.
In response to a European Commission request for an opinion, the CJEU said that the EU lacks exclusive competence in two aspects of the agreement: the field of non-direct foreign investment, where 'portfolio' investments are made without any intention of influencing the management or control of an undertaking, and the regime governing dispute settlement between investors and member states.
Both aspects of the agreement fall within a competence shared between the EU and its member states and require the states' consent, the CJEU said.
For further information, please contact:
Ian Laing, Partner, Pinsent Masons
ian.laing@pinsentmasons.com
