SINGAPORE: In a landmark ruling, the European Court of Justice (ECJ) has ruled that the European Union’s free trade agreement (FTA) with Singapore, which was initialed in 2013, cannot be ratified at EU level and needs individual member state approval.
The judgement has ruled that the consent of all EU-27 governments and parliaments is required for the bloc’s international trade deals, a move which is likely to create further stumbling blocks for other trade deals that are already struggling to be pushed through.
The court ruled that the EU does not have exclusive competence in two areas: non-direct foreign investment, and the regime governing dispute settlement between investors and states.
“It follows that the free trade agreement can, as it stands, only be concluded by the EU and the member states jointly,” said the court in its ruling.
On the plus side, the court ruled that EU officials have exclusive powers to negotiate in all other areas of the agreement.
The Singapore deal is a ‘new generation’ bilateral trade agreement that, in addition to reducing customs duties and tariffs, also touches on matters relating to intellectual property, protection, investment, public procurement, competition and sustainable development.
“The entire FTA needs to be ratified although refusal to ratify for reasons other than those elements, ISDS and portfolio investment, that the court found to be mixed competence, could in principle amount to a violation of EU law by that country,” Iain MacVay, partner at King and Spalding’s international trade practice, tells GTR.
“Despite that technical legal point, the political process is likely to result in any and all issues of political impact, especially ISDS, being raised by parliamentarians in member states. Singapore has already called for consideration of splitting the FTA to take the investment provisions out into a separate agreement and proceed with ratification of the rest of the agreement. I don’t think it will be so easy to do that but it is bound to be an attractive idea.”
