Europe’s top court has ruled that a key EU-Singapore agreement requires backing by all EU member states — but only for a narrow set of issues — in a decision that could chart the way for a post-Brexit trade accord with the UK.
The European Court of Justice ruled that EU member states must sign off on specific areas related to investment in the Singapore trade deal. However, it added that the remainder of the agreement was the exclusive competence of the EU, a finding that could make it easier to push through trade deals with Brussels.
The Institute of Directors, one of Britain’s leading business organisations, welcomed the decision. “This ruling will probably make it easier for the EU to conclude trade deals without fear of as many hold-ups from national and sub-national legislatures,” said Allie Renison, head of EU and trade policy.
Linklaters, the UK law firm, hailed “the most significant ECJ case on EU trade policy for 20 years” and added that Britain would now want to consider whether to moderate its ambitions for a future UK-EU trade deal so as to secure agreement by qualified majority voting rather than unanimity.
In its widely awaited decision, the ECJ ruled that the EU had exclusive competence in all but two aspects of the Singapore agreement. Only for issues in those two areas — portfolio investments and a dispute-settlement regime for investments — would a deal require unanimous backing by member states.
One trade expert suggested that provisions on investment might have to be left out of a future UK-EU trade agreement to avoid political pitfalls.
“There will need to be reflection on whether to maintain the current structure of deep and comprehensive free-trade agreement that includes an element of investment,” said John Clancy, senior adviser at FTI consulting and a former EU trade spokesman.
“It simply suggests that the EU and the member states will probably be forced to carve out investment in any future EU-UK trade deal going forward.”
But Theresa May, UK prime minister, has set out a goal of reaching a comprehensive deal with the EU. Many analysts argue that the sheer range of issues to be addressed in negotiations between Britain and the bloc mean that a requirement for unanimity may be unavoidable.
“If you only want to have an EU exclusive competence deal it’s more likely that you will not be able to have this bold and ambitious trade agreement with UK,” said Lourdes Catrain, a partner in Brussels at law firm Hogan Lovells.
Ms Catrain said the anticipated EU-UK deal would be much broader in scope than the Singapore pact given the extent and depth of the trading links forged in the 44 years since Britain joined the bloc.
“If it is a mixed agreement, the ratification is going to be a lengthy process but that should not prevent that a majority of the agreement can be provisionally applied,” she said.
The ECJ ruling on Singapore contrasted with a non-binding opinion on the case by a senior EU judge in December. That opinion held that the EU shared competences with member states on issues such as transport, some intellectual property rights and labour and environmental standards. A similar view in Tuesday’s ruling could have made trade agreements considerably more arduous to agree.
The endorsement of trade deals by member states on a country-by-country basis is highly sensitive after political resistance to a showpiece EU-Canada deal from a regional Belgian parliament nearly caused the agreement’s collapse last year.
At a time of rising anti-establishment sentiment in Europe, there is anxiety in Brussels that future trade deals could be hobbled if they too are sent for approval to national parliaments and meet similar resistance.
The commission had earlier sought the opinion of the Luxembourg court on the Singapore deal in the light of uncertainty over whether it could be concluded only by EU institutions or jointly with member states.
A spokesman for Jean-Claude Juncker, EU Commission president, tweeted that he “welcomed” the ruling. “We shall carefully analyse with the European Parliament and member states,” he said.