European Court of Justice: The Full Court has opined that the free trade agreement with Singapore could not, in its current form, be concluded by the EU alone, because the EU lacked exclusive competence as regards some of the provisions of the envisaged agreement. Hence, the agreement could, in its current form, be concluded only by the EU and the Member States acting together.
In 2013, the EU and Singapore had initialled the text of a free trade agreement. The agreement was one of the first ‘new generation’ bilateral free trade agreements, which contained, in addition to the classical provisions on the reduction of customs duties and of non-tariff barriers in the field of trade in goods and services, provisions on various matters related to trade, such as intellectual property protection, investment, public procurement, competition and sustainable development. The Commission had submitted a request to the Court of Justice for an opinion to determine whether the EU had exclusive competence enabling it to sign and conclude the envisaged agreement by itself.
The Court was of the opinion that the EU had exclusive competence as to the provisions concerning access to the EU and the Singapore markets for goods and 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 rights; anti-competitive activities; and sustainable development. The Court noted that the objective of sustainable development had become an integral part of the common commercial policy of the EU and that the envisaged agreement was intended to make liberalisation of trade between the EU and Singapore subject to the condition that the parties complied with their international obligations concerning social protection of workers and environmental protection.
However, the Court observed that the EU lacked exclusive competence as regards the field of non-direct foreign investment (‘portfolio’ investments made without any intention to influence the management and control of an undertaking) and the regime governing dispute settlement between investors and States. In order for the EU to have exclusive competence in the field of non-direct foreign investment, conclusion of the agreement would have to be capable of affecting EU acts or altering their scope. As that was not the case, the Court concluded that the EU did not have exclusive competence. That conclusion also extended to the rules relating to exchange of information, and to the obligations governing notification, verification, cooperation, mediation, transparency and dispute settlement, as regards non-direct foreign investment. The Court also noted that the regime governing dispute settlement between investors and States also fell within a competence shared between the EU and the Member States, since a regime which removed disputes from the jurisdiction of the courts of the Member States could not be established without the Member States’ consent. [Opinion pursuant to Article 218(11) TFEU, Opinion 2/15, EU:C:2017:376, decided on May 16, 2017]
