Court of Justice decides that EU-Singapore trade agreement cannot be concluded without the Member States

Opinion 2/15 (EU:C:2017:376)

The EU Court of Justice has delivered a lengthy Opinion on the power of the EU to sign and conclude a free trade agreement with Singapore without the involvement of the Member States.

While the Commission and European Parliament contended that the EU has exclusive competence to sign and conclude the proposed agreement with Singapore, the Council and Member States who intervened argued that the EU could not do so because parts of the agreement fall within areas of competence shared between the EU and Member States, or within the exclusive competence of the Member States.

In its Opinion, delivered by the Full Court and available here, the CJEU has found that most of the matters covered by the agreement fall within the exclusive competence of the EU, including:

•  access to the EU market and Singapore market for goods and services (including all maritime, rail and road transport services), public procurement and energy generation from sustainable non-fossil sources;
•  protection of direct foreign investments of Singapore nationals in the EU (and vice versa);
•  intellectual property;- competition and subsidies;
•  sustainable development; and
•  rules relating to exchange of information, notification, verification, cooperation, mediation, transparency and dispute settlement (except in connection with non-direct foreign investment).

However, the Court found there to be two areas covered by the agreement where the EU has shared competence with the Member States, meaning that the agreement in its current form cannot be concluded without the Member States’ involvement:

• non-direct foreign investment (portfolio investments made without any intention to influence the management and control of an undertaking); and
• investor-state dispute settlement.

The EU-Singapore agreement is representative of a number of bilateral trade and investment treaties that the EU is seeking to enter into. The Court’s Opinion confirms the broad scope of the EU’s exclusive competence to conclude such agreements, other than in a few areas where Member State involvement will continue to be necessary (including controversial investor-state dispute settlement arrangements). This may make it easier for the EU to negotiate and conclude trade deals in the future, including a potential post-Brexit deal with the UK, provided they do not cover investment matters.

The United Kingdom was represented by Daniel Beard QC and Gerry Facenna QC.

To read the Brexit blog post by Panos Koutrakos “Concluding Free Trade Agreements: the EU-Singapore Opinion and Brexit” please click here.