“Article 218(11) TFEU, Opinion 2/15” or “Herding European Cats” and Post-Brexit Negotiations? The European Commission and the Negotiation of Free Trade Agreements

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The following piece was written by City-REDI’s Prof. John Bryson.

Managing academics is often described as a process that is more akin to herding cats – in other words, academics are impossible to manage, or perhaps very difficult to manage and their management is perhaps more akin to a process of negotiation. The more parties to a negotiation process the more complex the process becomes. A couple of years ago, I attended a conference in Berlin. I joined a group of 14 academics from across Europe who had decided to go out for dinner. We left the conference hotel and headed in to the city and began a discussion about where to eat. This discussion included colleagues from Scotland, Wales, France, Germany, England, Denmark, Italy, Finland, Portugal, Spain and even the U.S. We looked and considered many different restaurants, but found it very difficult to come to an agreement. We discussed dividing in to two smaller groups. Time passed, it began to rain and still no decision was made, but evidently a compromise was reached and a restaurant selected. Like all compromises, very few of us were satisfied with that dinner, but all of us remember the negotiations and the rain. This simple story of meeting with friends to agree where and what to eat always makes me think of the times I have been involved with working with the European Commission – trade-offs have to be negotiated that reflect national interests.

I thought about my Berlin experience on Tuesday when I read about a decision made by the European Court of Justice.  On Tuesday 16 May 2017, this Court decided on a request for an opinion that was submitted by the European Commission pursuant to Article 218(11) TFEU. To understand this sentence, one needs to know about Article 2018(11). This states that:

“A Member State, the European Parliament, the Council or the Commission may obtain the opinion of the Court of Justice as to whether an agreement envisaged is compatible with the Treaties. Where the opinion of the Court is adverse, the agreement envisaged may not enter into force unless it is amended or the Treaties are revised”.

This article is used as the starting point for many requests to the Court. The Tuesday decision was especially important for both the on-going development of the EU and its relationships with non-EU countries and also for post-Brexit trade negotiations. Before this ruling, the Commission considered that it had the power to adopt some agreements without the formal backing of each member state, but this is no longer the case.

The Court’s Opinion 2/15 was a request made by the European Commission regarding a Free Trade Agreement (FTA) that the European Commission had negotiated with Singapore. The Commission and the European Parliament considered that they had broad powers to negotiate and sign free trade agreements with third parties without the agreement of member states. The Lisbon Treaty transferred powers from the member states to the EU, but this request to the Court sought clarification regarding the Commission’s precise powers in relation to FTAs. The Treaty granted the Commission negotiating powers, but the Court was requested to consider the following question:

Does the Union have the requisite competence to sign and conclude alone the Free Trade Agreement with Singapore? More specifically,

Which provisions of the agreement fall within the Union’s exclusive competence? ; Which provisions of the agreement fall within the Union’s shared competence? ; and Is there any provision of the agreement that falls within the exclusive competence of the Member States?

This ruling on this question was as follows: “The free trade agreement with Singapore cannot, in its current form, be concluded by the EU alone The provisions of the agreement relating to non-direct foreign investment and those relating to dispute settlement between investors and States do not fall within the exclusive competence of the EU, so that the agreement cannot, as it stands, be concluded without the participation of the Member States”.

The Court’s decision is important as it limits the power of the Commission and European Parliament and adds a further layer of complexity to European FTA negotiations. This complexity comes from the Court’s decision that the FTA between Singapore and the EU can only be ratified by the EU and the member states acting together. In December, an advisor to the Court had argued that EU members share some authority over labour, environmental standards, government procurement and trade and some aspects of intellectual property rights. The Court did not follow this advice and instead constrained EU members from disputing settlements and certain foreign investments. This implies that the Commission still has the power to ratify trade negotiations, but working to a defined remit. This ruling means that the Commission needs each member state to ratify every FTA involving non-direct foreign investment and dispute settlement procedures, but this may not be about negotiating with the 27 remaining members, but with the 38 national and regional parliaments that exist across the European Union. This means that the problems experienced with ratifying the EU Canadian FTA earlier this year will reoccur – Belgium’s Wallonia nearly blocked the Canadian – EU FTA. Thus, an area that is home to less than 1% of the EU’s population can block the ability of the EU to negotiate and sign further FTAs. The Tuesday Court ruling leaves any European FTA with an additional layer of negotiation as the ruling ensures that a balance must be agreed between national interests and sub-national interests – the regional parliaments – and the overarching interests of the European Union.

What does this mean for Brexit? Nothing changes as the Commission has already indicated that any future UK-EU trade agreement will need the support of all 27 members. Nevertheless, it is worth noting that this statement perhaps does not comply with the Lisbon agreement as the EU, according to this ruling, has exclusive competence relating to “access to the EU market and the Singapore market so far as concerns goods and services (including all transport services), and in the fields of public procurement and of energy generation from sustainable non-fossil sources”. For the EU there appears to be an element of reinterpretation of treaties, but it is still very early days in the on-going UK/EU negotiation process.  But, does this ruling now mean that the support of the regional parliaments will now be required, but only if an FTA includes elements that come under the remit of Opinion 2/15?  One can conclude that for Brexit this adds another layer of complexity and delay to any UK-EU trade negotiations. There is another way of thinking about this –post-Brexit the UK will be able to negotiate its own FTAs. Compared to the EU, such agreements will avoid the complexity that comes from having to herd 38 interested/disinterested parties. The UK FTA negotiation process will be simple compared to that of the EU. Perhaps trying to herd 27 or 38 groups is a bad idea, or perhaps the European Commission and Parliament should acquire complete authority to negotiate and sign FTAs.

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