Investor-State Provisions Mean EU Cannot Conclude Singapore Trade Deal Alone, EU Court Says

The European Union free trade agreement with Singapore cannot be concluded by the European Union alone, at least not in its current form, according to an opinion (2/2015, ECLI:EU:C:2016:992) handed down by the European Court of Justice in Luxembourg on May 16.

Market access, rules on direct investment, on anti-competitive market behavior, on sustainable development and even on issues like intellectual property protection could be decided by the EU alone, without going back to the legislator in member states. But the new system of investor-state dispute settlement (ISDS) and also provisions on non-direct foreign investment fall under a shared competence between the EU and national legislators, the Court stated its lengthy opinion.

The case has been laid before the EU judges by the Commission in an effort to test the waters and clarify their competencies in the evermore turbulent FTA negotiations. In 2012, the Anti-Counterfeiting Trade Agreement failed due to several EU member states rejection to sign and ratify. Last year, the Belgian region of Wallonia provided the EU negotiators a nail-biting experience over the signature of CETA, a free trade agreement with Canada.

To avoid similar experiences, the Commission wanted a confirmation of its legal interpretation that even the broader free trade agreements including ISDS are EU only. With the lengthy Court opinion today the Commission received a go for practically all areas, but not the much controversial ISDS.