ECJ limits EU competence for free trade agreements

In an opinion of 16 May 2017, the ECJ stated that the EU institutions could not conclude the Free Trade Agreement between the EU and Singapore in its current form. The member states must participate in this. Among other things, the agreement contains provisions on foreign portfolio investments and on the settlement of disputes between investors and states. Unlike all the other provisions contained in the agreement, the EU has no exclusive competence for them. This means that either all Member States ratify the agreement or those rules that do not need to be removed from the EU’s competence.

Nevertheless, far-reaching EU competences in trade policy

Although the EU cannot conclude the Free Trade Agreement in its current form on its own, the report shows that the EU has extensive exclusive competence in the area of international trade policy. The jurisdiction for the”common commercial policy” under Article 3(1)(e) TFEU is interpreted very broadly by the ECJ.

Significance for a future post-Brexite agreement

The ECJ’s opinion clarifies the framework of the EU’s exclusive competence for trade agreements. It is thus groundbreaking for a possible post-British trade agreement between the EU and the UK. It will be in the interest of the British Government to negotiate an agreement which does not have to be ratified by all Member States. This would require fewer voters to be satisfied and an agreement could be concluded in a shorter period of time.

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