EU Referendum


Brexit: the ECJ on Singapore


17/05/2017




We get a bizarre "take" from at least two newspapers on the ECJ's Singapore "opinion" – the Guardian and the Telegraph - an odd couple if ever there was one.

Both argue that, although it has found that the EU-Singapore trade deal is a mixed agreement and must therefore be ratified by all Member States, the Court has made it easier for the UK to conclude a trade agreement with the EU.

The logic is that, in delivering its opinion, the Court has reaffirmed the point that the Commission has exclusive competence when it comes to agreeing trade deals. This means that, if the UK concludes a post-Brexit trade deal with the EU, it will not require ratification by individual Member States.

But this was never in dispute. The only matter before the Court was whether it was valid for Commission to conclude the Singapore agreement. In the event, it was the opinion of the Court that this was a mixed agreement, so it would require ratification. The full opinion is here.

It was the Commission itself which, in 2013, had asked the Court for its opinion, and it is said to have hoped to avoid the potentially gruelling process of getting ratification from all Member States. This hope was effectively dashed in December 2016 when Advocate General Sharpston delivered her opinion, which has been largely confirmed by the final ruling.

Nevertheless, some take heart from the fact that the treaty was found to be "mixed" only on a very limited number of grounds – two to be precise – the field of non-direct foreign investment ("portfolio" investments made without any intention to influence the management and control of an undertaking) and the regime governing dispute settlement between investors and States.

But the other "take home" point is that even when only a very small part of a treaty is not exclusive competence, the whole treaty has to be ratified by Member States. This is, effectively, an all-or-nothing situation.

Another view comes from Euractiv, which suggests that, in terms of its effect on the Brexit negotiations, the opinion has not worsened the UK's chances of securing a trade deal once it has left the EU.

The European Council, it says, can provisionally apply FTAs with shared competences, which it has done with CETA. There is, theoretically, no legal limit on how long this interim period can go on for. The WTO's predecessor, the GATT, was applied this way for decades.

However, the site then goes on to point out that any eventual EU-UK deal could also be split into exclusive and shared competences, keeping the elements separate. This could speed up the process for the trade elements, leaving only the shared competences to be ratified by Member States.

That, though, is hardly a practical solution as it is very hard to see how there could be a workable trade agreement without a dispute settlement mechanism. And it is precisely that (one of two) that took the Singapore deal outside the competence of the Commission. As the ECJ affirms, any regime, which removes disputes from the jurisdiction of the courts of the Member States, cannot be established without Member State consent.

One way or another, therefore, the ECJ's opinion changes very little. There are work-arounds but, at some time, a complete deal is going to require Member State ratification for all or part of the provisions before the whole agreement can take effect.

In short, therefore, there is nothing particular to get excited about – especially as there is not going to be an immediate trade deal. Any question of ratification is way down the line. In the interim, we will be relying on an transitional agreement to keep trade going.

About this most of the pundits are entirely silent. Yet, in all probability, a transitional agreement will require modifications to the EU treaties, taking the form of a secession treaty. This will most definitely need the unanimous approval of all 27 Member States and the UK, and then ratification by all 28 countries. In the UK, there will have to be Parliamentary approval.

Since there has been next to no discussion about a secession treaty – it not yet having been "discovered" by bubble denizens – there is also no talk of the possibility of one or more Member States holding a referendum on it. But it would be hugely ironic if our own Government, having refused a referendum had to wait, say, for the results of a French poll before it could implement Brexit.

That aside, this episode is entirely typical of the way the Brexit debate is being skewed. We have the legacy media obsessing over this ECJ opinion, when the actual impact on Brexit will be minimal. Yet, on the other hand, it fails completely to appreciate that there are bigger, more immediate issues to deal with.

Basically, no one in government has yet publicly disclosed how a transitional agreement will apply, how long it will take to negotiate or even what precise form it will take. It is only a matter of surmise that a secession treaty will be needed. There may be other ways of achieving a stop-gap solution, not least a variation on the EEA Agreement.

But, for as long as the UK is looking for a bespoke trade deal and it is accepted that this cannot be concluded until Brexit has taken effect, some form of transitional agreement will have to be in place to coincide with our leaving the EU. It will be the only thing standing between us and chaos.