CJEU opinion on EU-Singapore trade agreement – paving a rockier path for a post-Brexit deal?

1st Jun 2017

A recent decision from the Court of Justice of the European Union (“CJEU”) gave rise to conflicting views amongst commentators; has the road ahead for securing a post-Brexit deal become rockier or has the path been cleared?

The CJEU’s opinion 2/15

In its opinion 2/15 of 16 May 2017, the CJEU considered whether the EU alone could sign and conclude a proposed EU-Singapore trade deal, as it fell within its ‘exclusive competence’, or if approval from each Member State would also be needed.

Submissions from the Council and various Member States contended that certain parts of the proposed deal exceeded the EU’s remit. Many of the provisions were challenged on the basis that the envisaged agreement went beyond matters of common commercial policy for which the EU has exclusive competence, or were subject to a specific exceptions. The Commission’s view, supported by the European Parliament, was that the EU did have exclusive competence for the proposed deal in its entirety.

The CJEU declared that as in its current form, the proposed deal did extend to matters beyond the EU’s exclusive competence and therefore can only be concluded by the EU and Member States jointly.

What was special about the EU-Singapore deal?

In general terms, the nature of the proposed Singaporean deal goes beyond the classic provisions of a trade deal with its typical terms, such as reduced custom duties. Described as part of the ‘new generation’ of bilateral free trade agreements, it includes provisions on trade matters, investment property protection, investment, public procurement, competition, sustainable development and transport.

Many of the 17 chapters of the agreement were unchallenged, but the problem was that if any provision of the proposed agreement fell outside the EU’s endowment, then the deal required approval by each Member State. The CJEU had little difficulty in concluding that many of the proposed commitments challenged were within the EU’s exclusive competence. Particularly encouragingly for the UK, the CJEU took a generous approach in its analysis, including findings that were contrary to the non-binding opinion of Advocate General Eleanor Sharpston expressed in December 2016.

Notwithstanding the CJEU’s broader views on the EU’s exclusive competence, two areas were nonetheless found by the CJEU to fall outside it: non-direct foreign investment and dispute settlement between investors and Member States.

Potential implications for post-Brexit trade deal

Negotiations led by the European Commission on behalf of the EU actually commenced in March 2010. The considerable time taken for negotiators to agree terms, even in principle, does not bode well. Although substantial parts of the proposed deal were hammered out by December 2012, negotiations continued for nearly four and a half years before concluding on October 2014.

Whilst a trade deal with the EU may not be as pressing for Singapore as it is for the UK with its two year deadline looming, the Singaporean deal does provide a reminder that negotiating an international trade agreement is complex, time-consuming and has a timeframe of years, not months.

If the UK’s unalterable aim is to achieve a wide-ranging and comprehensive deal encompassing a range of both commercial and non-commercial matters, then it is difficult to see how the ruling will make a significant difference, since Member-State approval would almost inevitably be required. However, if negotiations weave their way around the complex provisions, cherry-picking the not inconsiderable areas in which the EU does have sole competency, then the ruling must be helpful since the CJEU’s opinion assists in both defining and enlarging the EU’s exclusive competencies.

That said, memories of the near-fatal torpedoing of the EU-Canada Comprehensive Economic and Trade Agreement (“CETA”) by the Wallonian regional parliament in Belgium remain strong. CETA was a broader deal than that proposed with Singapore and fell outside the EU’s exclusive competence. If the UK is to have any hope of reaching a deal within the time frame then any trade agreement may have to be restricted, not just to reduce the complexity and time required for negotiation, but also to avoid a need for approval by each Member State. Unless the UK is willing to stick to a deal within the four corners of the EU’s exclusive competencies, it too risks a drawn-out negotiation and ultimately being held to ransom by Member States.

Edmund Neuberger

Edmund specialises in commercial dispute work for a wide range of domestic and international clients, particularly in the construction, engineering and information technology fields. He regularly appears in the English High Court as well as conducting arbitrations. With a background in engineering, Edmund is particularly involved in the more detailed and technically complex areas of dispute.

Recent cases have involved disputes in relation to the construction of a coal fired power stations, a defective eco-school, a PFI project and the design and construction of the Rolls building, home of the TCC and other courts.

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