Comprehensive trade deals between the EU and other countries must be approved by all member states in the EU, judges at the European Court of Justice (ECJ) have ruled.
In a binding Opinion about who has the power to conclude the EU-Singapore Free Trade Agreement, the Court said that portfolio investment and the investor-state dispute settlement provisions in the investment chapter are shared competence between the EU and the Member States. Therefore, the agreement must be concluded jointly by the EU and the Member States.
ClientEarth trade lawyer Laurens Ankersmit said: “The Court’s Opinion reaffirms the critical role of Member States in the ratification process of vast trade agreements such as the EU-Canada trade deal, CETA.
“The Opinion clears the path for Slovenia and Belgium to get CETA legally checked by the ECJ. This is not just important for the rule of law in Europe, but might also put ratification of CETA in peril.”
Today’s EU trade agreements are more extensive and wide-ranging than ever before, going way beyond simply lowering tariffs.
The Opinion did not address the important issue of the legality of the controversial investment courts set up in these agreements, under EU law. The Court made clear that the opinion relates only to the issue of whether the European Union has exclusive competence and not to whether the content of the agreement is compatible with EU law.
Investment rules in trade deals like CETA create special courts that are only available to foreign investors. These courts – known as investor-state dispute settlement (ISDS) and the Investment Court System (ICS) – give those investors a powerful legal tool to attack public interest decision-making.
In a compromise deal last year between the Belgian region of Wallonia and the Belgian federal government over signing CETA, Belgium has committed to request an Opinion from the ECJ on this issue. Slovenia has also committed to making a similar request.
Now that the Court has made it clear that member states must be involved in the ratification of expansive trade deals, Wallonia’s demand to send CETA to the ECJ can no longer be ignored.
Including controversial investment rules in EU trade agreements may be illegal, as it sidelines domestic courts and doesn’t offer the same rights to people. This is a breach of the founding treaties of the EU. ClientEarth analysis shows this is not compatible with EU law.
By clarifying the areas in which member states have powers, the Court’s Opinion gives legal certainty about their involvement in other future trade deals, such as the EU-Canada deal CETA and a possible UK-EU agreement.