October 28, 2016
The Canadian Minister of International Trade, Christya Freeland, made a classic dramatic exit from the CETA negotiations on Friday 21 October. Many international trade negotiators over the years have made such somewhat staged exits in order to bring the opposite side to its senses. However, she motivated her departure in a way that has made students of the common commercial policy of the Union pay a lot of attention and rightly so. She pointed out that this had been a long negotiation, but nevertheless one between two trading nations that had a lot in common. Moreover she noted that the Canadian delegation had been very forthcoming in many ways (which was entirely true, in particular in respect of the rewriting of the ISDS procedures), even in order to accommodate last-minute requests from the European side (which was also true in respect of the interpretative declarations that were demanded by various Member States, sometimes at the instigation of their national parliaments or national supreme courts, and the Romanian and Bulgarian blackmail on visa matters). However, she had come to the conclusion that the EU had become fundamentally incapable of delivering a comprehensive economic and trade agreement (hence CETA). Her assessment seems to be widely shared, also in European media. It is a very damning conclusion for an organization that was always held in awe by third States and other international organizations for its prowess in the field of trade negotiations and trade law. An organization, moreover, that, with the Lisbon Treaty, hoped to have equipped itself with new powers in the field of trade and international relations generally in order to be able to project a more efficacious and more unified external presence in the world. Even if CETA is still snatched away from the jaws of oblivion, as the Belgians seem to have achieved, it remains important to ask the questions: “What happened to bring this demise about?” and “what can be done to stop a repetition?”
How did the EU get to this point?
On 28 June, during the post-Brexit European Council, the President of the Commission, Jean-Claude Juncker, advised the other members of the Council, the Heads of State and Government, that CETA would be submitted to the approval of the Council as a Union only agreement, falling under the EU’s exclusive competence. He also said that national parliaments were welcome to discuss the agreement, but could have no decisive say in it, given the Union’s exclusive competence in the field of trade. (And presumably also exclusive power under Article 3(2) TFEU, insofar as aviation and maritime transport services were concerned).
In the following days many Member States, some of them egged on by their Parliaments’ wish to have a say in the agreement, developed strong objections against this approach. In the post-Brexit panic, these Member States ostensibly believed that they could only convince Euro-skeptic opinion by turning the agreement into a mixed one and let their Parliaments decide the fate of CETA. No matter that this might constitute a breach of the European constitutional order that had been newly minted in Lisbon, notably with a right of approval of the European Parliament for trade agreements. A press campaign was waged against the Commission and personal attacks were launched against the President of the Commission. In such situations, the Commission is always painted as arrogant, high-handed and tone-deaf because it wants to apply the Treaty as it now is. And Mr. Juncker had allegedly wholly fallen out of favour with Berlin and Paris and would soon be on his way out. Rumours, which were then copiously denied in the respective capitals in order to make them all the more effective.
Under this pressure – wisely or unfortunately, history will judge – the Commission on 5 July went so far as to propose itself that CETA should be concluded as a mixed agreement. In this way it obviated the need for the Council to over-rule a Commission proposal for the conclusion of CETA by the Union alone, for which unanimity would have been required. Although the Council has achieved such unanimity in the past, it was far from certain that it would have worked this time, since there were quite some Members that saw the risks in this procedure and/or were convinced by the Commission’s arguments.
Since the Commission, the Member States and Canada hung on to the date of the yearly EU-Canada summit on 27 October for signature and provisional entry into force of the agreement, the unsatisfactory character of the national approval procedures was fore-ordained. Three months and a half (minus one month in most Member States for summer recess) for the parliamentary approval of an agreement of over 200 pages of text and many annexes could only lead to rubber stamp proceedings in the national parliaments. Hence, the complaints of Walloon Prime Minister Magnette about this aspect of the procedure and about his Parliament being put under too much pressure sound quite credible.
On the other hand this action by the Member States, and in particular by the big ones, reluctantly condoned by the Commission, should be seen for what it really is. It is a frontal attack by the Member States and their parliaments on the newly acquired powers of the European Parliament in the field of trade, and thereby a frontal attack on the constitutional order of the Union and its autonomy vis-à-vis the Member States. Whatever one may say about CETA, when one reads it, there is no doubt that this is a trade agreement, a broad one, but a trade agreement. There are two somewhat serious reasons why it might not fall entirely under the exclusive power over trade agreements of the EU: one is the well-known special character of transport in the TFEU; the other is the long-standing controversy over whether portfolio investment is included under the words “foreign direct investment.” The Council could in principle simply decide to utilize the shared powers that cover these two subjects in the framework of CETA and conclude the agreement as an agreement of the Union, but the Member States have never let the Council do that (unless the ERTA doctrine and later Article 3(2) TFEU forced them to) and will not now.
The present situation and its implications.
It is interesting to note that neither the Commission’s proposals for conclusion and for provisional application of CETA nor the Member States’ parliamentary acts of approval (insofar as the author has seen them) limit the scope of their approval of CETA to what falls under the competence of the EU or of the Member State in question. Both the Union and the Member States thus pretend (in law) that they have the power to conclude all of the agreement. Thus the national parliaments and governments pretend that they can approve the 95% (let me be charitable) of the agreement that falls incontestably under exclusive Union powers and the Union’s institutions pretend that they can approve the 5% under Member State powers. How can this be justified?
This approach is based on what Pascal Lamy once felicitously called the “pastis approach” to mixed agreements. Just like one drop of pastis makes the water with which it is being mixed completely milky, one sliver of national competence makes a whole Union agreement mixed in such a way that the two components of the drink or agreement can no longer be distinguished. The question is if that theory was ever fully justified. However, before Lisbon it was at least a genuine compromise between Commission and Council, in which the Council gave away its own exclusive power to conclude a “mixed” trade agreement in part to the Member States. After Lisbon, the Commission and the Council, in agreeing by way of compromise that a trade agreement contains elements that make it mixed and by applying the “pastis” approach to that mixed agreement, implicitly bargain away the Parliament’s right to grant consent on its own to the incontestable trade aspects of that agreement. Even if an agreement were presented as a mixed agreement to Parliament, it is questionable whether the Parliament can implicitly give away part of its power to the national parliaments. As we all know, even one national parliament can nullify the approval of the European Parliament over the incontestable trade aspects of an international agreement. That may well be contrary to the standing case law of the Court that says that trade policy powers can only be exercised by national authorities, if there is an explicit delegation back to the Member State(s) in question Case 41/76 (Donckerwolcke, EU:C:1976:182). And it was certainly not what the drafters of the Lisbon Treaty intended, when they decided to follow the trend of “democratization” in foreign affairs, which had been palpable in the Member States for quite some time already, and to give to the EP the right of consent to trade agreements (Art. 218(6)(a)(v) jo. 207(2)).
After Lisbon, therefore, mixity in relation to what are essentially trade agreements is no longer what it once was, in particular “sloppy mixity” of the “pastis” kind. There are real risks here. If an individual or company will be directly negatively affected by an implementing measure that is based on CETA, it might well attack that measure, while raising the plea of illegality (Art. 277 TFEU), arguing that the whole agreement was null and void because of the way in which it had been adopted by the Union and the Member States, in breach of the autonomy of the EU legal order. The chance that the Court might accept such an exception is not negligible and the embarrassment in the relations with Canada might be even worse than it is already now.
What can be done about it?
The Commission immediately can take the simple precaution that in its proposals for the act of approval of mixed agreements it is made clear that the EU institutions approve the agreement only insofar as it falls within EU powers. In doing so, it can point out to the Council and the Parliament, that this was the formula used by the Council, on the instigation of its Legal Service, in the act of approval of the WTO Agreement and its Annexes, taking into account the Court’s Opinion 1/94 on the mixed character of that Agreement. As a counterpart the Commission should urge the Member States to use the same formula, when they submit mixed agreements to their Parliaments and in the somewhat longer run it should not hesitate to start infringement procedures against Member States that are not inclined to do so.
What is the use of such a vague phrase? Precisely that it leaves room for some difference of judgment about where the frontier between exclusive EU trade policy power and Member State power exactly lies, while nevertheless indicating to other EU institutions (notably the Court), to the Member States, and to Union citizens that the intention to respect this border is there. There was a good reason for adopting this formula after the high-running differences of opinion and hard-fought Court battle of 1994. Moreover, the Commission’s precise questions in its request for Opinion 2/15 (on the division of competences in the FTA with Singapore), will hopefully inspire the Court to give the political institutions much more precise indications on which matters fall under the common commercial policy and hence under exclusive EU competence or not On the external side, the consequences of an abiding failure of one or two Members to ratify would be much less dramatic, since the partner State would know that nearly all of the agreement would have to be implemented by all of the Union, as long as the Union had concluded the agreement. It could choose to ignore the formal gap in the agreement for quite some time and thus a solution to the problem would probably grow easier.
In principle it would be much better to avoid mixed competence altogether, especially in the field of trade policy. It would avoid a regional parliament or national referendum or a construed case before a national supreme court torpedoing Union trade agreements, thus undercutting the constitutional decision-making procedures of the Union, delegitimizing the European Parliament and thereby undermining the good standing of the Union in international relations. It would force the opposition to trade agreements to organize itself at the European level and to convince the Council or the European Parliament that a proposed agreement should not be concluded by the EU. As we have seen, the Parliament is quite capable of reacting positively to such campaigns (PNR; ACTA). That would be the royal road to defeat a proposed agreement.
The recommendations that the Commission addresses to the Council asking the latter to authorize it to open negotiations and to equip it with guidelines for such negotiations, are not formal proposals. Hence they do not benefit from the protection that the Council needs unanimity or the cooperation of the Commission in order to amend them (Art. 293(1) TFEU). They can be changed by qualified majority (Art. 218(8) TFEU). The Council has used this possibility often to force the Commission to include matters of shared or national competence in treaty negotiations, which the Commission intended to base on the Union’s exclusive trade powers.
It may well be difficult for the Commission to change anything to this practice, especially as the Council has great autonomy in addressing directives for negotiation under Article 218(4) TFEU to the Commission, even without the latter’s prompting. On the other hand the Council cannot authorize the opening of negotiations without a recommendation from the Commission. Therefore, the Commission may have recourse to the weapon of the withdrawal of the recommendation to open negotiations, just as this right was recognized by the Court for a Commission proposal to the Council (Case C-409/13, Council v Commission, EU:C:2015:217). The Commission would need to motivate strongly in its recommendation to the Council why the prospective agreement needed to be based on exclusive Union powers alone, why this was in the best interest of the Union’s constitutional system and restrict the scope of the agreement accordingly. If then the Council were to stand the Commission’s motivated intentions on their head by introducing elements of mixed competence in the negotiation directives, the Commission could withdraw its recommendation altogether and defend itself in Court, if necessary, as it successfully did in C-409/13.
This may seem a rather confrontational approach, so early in the EU procedure leading up to a negotiation of an agreement. However, the alternative is even more unattractive. The Commission would have to accept initially the elements of mixity favoured by the Council. Later, using its margin of manoeuver recently reconfirmed by the Court in Case C-425/13 (Commission v. Council, EU:C:2015:174), the Commission would come to the conclusion during the negotiations that mixity was not in the best interests of the Union. Its formal proposal for the conclusion of an agreement would be based only on exclusive powers of the Union. If the Council then unanimously overruled such proposed agreement, The Commission would be forced to withdraw its proposal. Thus it would have engaged a third country “needlessly” in negotiations, which would be extremely damaging to the reputation of the Union on the international scene.
It is hoped that these few lines contribute to a better understanding of a EU constitutional view of the present CETA crisis and help discard the facile feeling, even among the informed public, that national parliaments are somehow naturally bestowed with authority and legitimacy to approve EU international agreements, even if these fall largely within exclusive Union competence. The tragic aspect of the situation is that actions by a national or regional parliament, a national referendum or the recourse to a national supreme court seem totally natural and legitimate from those who are within the national legal system (even if there are pranksters and mischief makers among those taking such actions), but are not perceived as such by others outside and even inside the Union, and are even fundamentally flawed from the point of view of the EU constitutional system.
Pieter Jan Kuijper is Professor of the Law of International (Economic) Organizations at the Faculty of Law of the University of Amsterdam. He is also former principal Legal Advisor and Director of the ‘External Relations and International Trade’ team of the Legal Service of the European Commission and former Director of the Legal Affairs Division of the Secretariat of the World Trade Organization.