Opinion 2/15 (EU–Singapore Free Trade Agreement)

• Jurisdiction: European Union
• Judge: Regan,Arabadjiev,Silva de Lapuerta,Lenaerts,da Cruz Vilaça,Šváby,Prechal,Bonichot,Sharpston,von Danwitz,Lycourgos,Malenovský,Ilešič,Jürimäe,Tizzano,Rosas,Fernlund,Vajda,Toader,Vilaras,Jarašiūnas,Borg Barthet,Biltgen,Bay Larsen,Berger,Juhász
• Court: Court of Justice of the European Union
• Date: 16 May 2017

Court of Justice of the European Union (Full Court)

(Lenaerts, President; Tizzano, Vice-President; Silva de Lapuerta, Ilešič (Rapporteur), Bay Larsen, von Danwitz, da Cruz Vilaça, Juhász, Berger, Prechal, Vilaras and Regan, Presidents of Chambers; Rosas, Borg Barthet, Malenovský, Bonichot, Arabadjiev, Toader, Šváby, Jarašiūnas, Fernlund, Vajda, Biltgen, Jürimäe and Lycourgos, Judges; Sharpston, Advocate General)

Opinion 2/15 (EU–Singapore Free Trade Agreement)1

Treaties — Capacity to conclude — Free trade agreements — “New generation” free trade agreements — Free Trade Agreement between European Union and Singapore (“EUSFTA”) — Competence to conclude agreement — Allocation of competences between European Union and Member States — Treaty on the Functioning of the European Union, 2007 (“TFEU”), Article 3(1)(e) — Express exclusive competence of European Union in field of European Union common commercial policy — Whether commitments under EUSFTA falling within scope of European Union common commercial policy — Provisions falling within exclusive competence of European Union — Provisions falling within shared competence of European Union and Member States — Provisions concerning non-direct foreign investment — Provisions concerning investor–State dispute settlement mechanism — Whether European Union having exclusive competence to sign and conclude EUSFTA

Economics, trade and finance — Free trade agreements — International investment — “New generation” free trade agreements — EUSFTA — Competence to conclude agreement — Provisions concerning non-direct foreign investment — Provisions concerning investor–State dispute settlement mechanism — Whether falling within shared competence of European Union and Member States — Whether European Union having exclusive competence to sign and conclude EUSFTA

International organizations — European Union — EUSFTA — Competence to conclude agreement — Provisions concerning non-direct foreign investment — Provisions concerning investor–State dispute settlement mechanism — Whether falling within shared competence of European Union and Member States — Whether European Union having exclusive competence to sign and conclude EUSFTA — The law of the European Union

Summary:2The facts:—The European Commission sought an Opinion from the Court on whether the European Union could sign and conclude a “new-generation”3 Free Trade Agreement with Singapore (“EUSFTA”) without the involvement of the European Union Member States.4

The European Commission and the European Parliament contended that all the provisions of the EUSFTA, with the exception of those concerning cross-border transport services and non-direct foreign investment, fell within the scope of the European Union common commercial policy (“CCP”), and hence within its exclusive competence, pursuant to Article 3(1)(e) of the Treaty on the Functioning of the European Union, 2007 (“TFEU”).5 In respect of cross-border transport services and non-direct foreign investment, they argued that the European Union had exclusive competence pursuant to Article 3(2) of the TFEU6 because the commitments entered into in that regard could affect or alter the scope of common rules of the European Union.

The Council of the European Union and the Governments of various Member States, however, submitted that certain provisions of the EUSFTA, such as those relating to environmental, social and intellectual property protections as well as the field of transport, fell within a competence shared by the European Union and its Member States. They further argued that certain provisions, such as those relating to non-direct foreign investments, fell within the exclusive competence of Member States.

Opinion of the Advocate General

Held:—The European Union did not have exclusive competence to conclude the EUSFTA. It had exclusive external competence over the parts of the EUSFTA that fell within the common commercial policy, such as trade in goods, trade and investment in renewable energy generation, trade in certain services and government procurement (with the exception of transport services), foreign direct investment, commercial aspects of intellectual property rights, competition, trade and sustainable development (in so far as it related to the CCP), conservation of marine and biological resources, and trade in rail and road transport services. However, it did not have exclusive competence over aspects concerning maritime, inland waterway and air transport, non-foreign direct investment, non-commercial intellectual property rights, and fundamental labour/social policy and environmental standards.

(1) Article 3(1)(e) of the TFEU expressly provided for the European Union's exclusive competence over the CCP. The CCP covered not only measures that pursued commercial objectives but also measures that pursued non-commercial objectives, such as development and the protection of the

environment, as long as those measures had direct and immediate effects on trade with non-European Union member countries7 (paras. 96, 101 and 103).

(2) Article 207(5) of the TFEU excluded international agreements in the field of transport from the purview of the CCP. International agreements “in the field of transport” referred to agreements that contained provisions specifically concerning transport. Measures of general application that were potentially applicable to transport did not necessarily trigger Article 207(5) (paras. 111–15).

(3) Where the European Union did not have express exclusive competence by virtue of the CCP, it could still have implied exclusive competence pursuant to Article 3(2) of the TFEU if there was a risk that Member States, acting outside the framework of the European Union institutions, might assume international obligations affecting or altering the scope of common rules (i.e. European Union secondary legislation) in force at the time. Primary European Union law, such as treaty provisions, did not constitute “common rules” within the meaning of Article 3(2) (paras. 117–21 and 350–9).

(4) The allocation of competences between the European Union and Member States in relation to the EUSFTA was as follows:

(a) Chapters 2–5 related specifically to the trade in goods between the European Union and Singapore, and Chapter 6 related to customs procedures, valuation and trade facilitation. These were areas that, according to the Court's prior case law,8 fell squarely within the scope of the CCP, and thus, the European Union's exclusive competence (paras. 144–7 and 151).

(b) Chapter 7, on non-tariff barriers to trade and investment in renewable energies, only included non-trade objectives in so far as those objectives had direct and immediate effects on trade between the parties, and thus fell within the scope of the CCP (paras. 484–8).

(c) Under Chapter 8 of the EUSFTA:

• (i) Sections B-D of Chapter 8 of the EUSFTA, which related to crossborder supply, consumption abroad, establishment and temporary presence of national persons for business purposes, corresponded to the four modes of supply in the General Agreement on Trade in Services (GATS) that were all covered under the CCP. Sections E-G, relating to the recognition of professional qualifications and electronic commerce, had a direct and immediate effect on trade and thus also fell within the CCP (paras. 195–7 and 201–7).

• (ii) The services supplied in relation to the transport sector under the EUSFTA were specifically connected to and conditional upon transport services, and thus fell within the ambit of Article 207(5) of the TFEU, which excluded international agreements relating to transport from the purview of the CCP. However, the European Union had exclusive competence over rail and road transport services pursuant to Article 3(2) of the TFEU, as those services were already largely covered by the European Union common rules. The Commission had failed to demonstrate that the liberalization ofmaritime transport services, and air/inland waterway transport services, were areas that were largely covered under the common rules. Accordingly, the European Union had exclusive competence to enter into commitments relating to road and rail transport, but a shared competence with Member States in respect of maritime, inland waterway and air transport services (paras. 208, 230–51 and 254–67).

(5) Section A of Chapter 9 on investment protection was covered under the CCP only in so far as it concerned foreign direct investments and the availability of that protection had a direct and immediate effect on whether to carry out the foreign direct investment and on the enjoyment of the benefits of that investment. Portfolio investments, i.e. investments other than foreign direct investments, were not covered by the CCP and fell within a competence shared by the European Union and the Member States. Section B of Chapter 9, which related to investor–State dispute settlement, was only covered by the CCP where it was ancillary to the foreign direct investment (paras. 323–37, 346 and 535).

(6) The conclusion that trade in goods and services was covered by the CCP was not affected by the fact that those goods and services were purchased by public authorities rather than private entities. Chapter 10 on public procurement, therefore, fell under the CCP—with the exception of the provisions in the Chapter relating to transport services and services inherently linked to transport (paras. 401–8).

(7) With regard to Chapter 11 on intellectual property, a distinction had to be drawn between commercial and non-commercial aspects of intellectual property. The CCP covered intellectual property rights in so far as their exercise was essential to the commercial exploitation of the protected intellectual property in a cross-border market. As such, all aspects covered by the Trade-Related Aspects of Intellectual Property Agreement, 1994 fell under the CCP and, hence, the exclusive competence of the European Union. However, moral intellectual...