Opinion procedure 2/15

Arguments

409.The Commission argues that all of Chapter Eleven falls within the scope of the common commercial policy because it concerns commercial aspects of intellectual property within the meaning of Article 207(1) TFEU. The European Union therefore enjoys, pursuant to Article 3(1) TFEU, exclusive competence with regard to that chapter.

410.The Commission finds support for its position in Daiichi,(304) where the Court held that only those rules adopted by the European Union in the field of intellectual property ‘with a specific link to international trade are capable of falling within the concept of “commercial aspects of intellectual property”’;(305) but that the TRIPS Agreement in its entirety is covered by that concept.(306) The same is true for international agreements relating to intellectual property concluded outside the WTO that show a specific link to international trade. The Commission relies here on Regione autonoma Friuli-Venezia Giulia and ERSA.(307)

411.First, the Commission submits that most of the provisions of Chapter Eleven are based on the TRIPS Agreement. Second, Article 11.2.1 states that that chapter ‘aims to complement the rights and obligations of the Parties under the TRIPS Agreement and other international treaties in the field of intellectual property to which they both are Parties’. Third, Chapter Eleven is part of a broader trade agreement between the European Union and Singapore. That is reflected in Article 11.1.1. The objectives there set out show that setting common standards to protect intellectual property is not, as such, the EUSFTA’s goal. Rather, the aims are to reduce trade distortions and increase access to the market for products protected by intellectual property rights. Moreover, in the same way as the TRIPS Agreement, Chapter Eleven is subject to the dispute settlement provisions in Chapters Fifteen and Sixteen of the EUSFTA. Breaches of obligations under Chapter Eleven can therefore lead to trade sanctions.

412.As regards the references in Chapter Eleven to other international agreements relating to intellectual property, the Commission argues that the use of that (common) drafting technique is reasonable and justified, given that the overall objective is progressively to abolish obstacles to international trade and investment. Furthermore, most of the references are merely declaratory or in the form of ‘best-endeavours commitments’, which do not produce any legal effects that might undermine the European Union’s competence as regards Chapter Eleven.

413.The Parliament’s position on Chapter Eleven corresponds with that of the Commission. It adds that there is no reference in Chapter Eleven to Article 61 of the TRIPS Agreement (which concerns criminal procedures and penalties).(308)

414.None of the Council’s arguments relate specifically to Chapter Eleven.

415.Many Member States submit that the European Union does not enjoy exclusive competence with respect to Chapter Eleven, which has no specific link to international trade and therefore cannot fall within the concept of ‘commercial aspects of intellectual property’. The judgment in Daiichi(309) essentially concerned Article 27 of the TRIPS Agreement, rather than the whole of that agreement. Therefore, Article 207 TFEU cannot be interpreted as conferring exclusive competence on the European Union to conclude agreements covering all provisions in the TRIPS Agreement. If, contrary to that submission, the Court’s judgment did concern all provisions of the TRIPS Agreement, the Court’s reasoning was based specifically on features of the WTO legal order that are absent from the EUSFTA. Even reading Daiichi(310) broadly, that judgment cannot extend to matters that are not directly regulated by the TRIPS Agreement.

416.Chapter Eleven of the EUSFTA and the TRIPS Agreement do not entirely overlap. In any event, the mere fact that a matter is governed by the WTO Agreement (of which the TRIPS Agreement is an integral part) does not mean that that matter is necessarily also covered by the common commercial policy. Article 207(1) TFEU should not be read as implying that all international agreements relating to intellectual property rights now fall within the common commercial policy.

417.Chapter Eleven incorporates both certain provisions of the TRIPS Agreement and provisions of other intellectual property agreements (negotiated outside the context of the WTO) for which the European Union cannot enjoy exclusive competence. Unlike the TRIPS Agreement, those agreements (primarily international agreements administered by the World Intellectual Property Organisation) were not concluded as part of trade agreements. Nor can they be classified as trade agreements within the meaning of Regione autonoma Friuli-Venezia Giulia and ERSA.(311) Any relationship between those agreements and international trade is only indirect. The European Union may not affirm international commitments that concern only the Member States. Nor may the European Union require the Member States to apply the international agreements which they have concluded.

418.Furthermore, provisions relating to the application of protected rights, such as Articles 42 to 50 of the TRIPS Agreement (that is to say, the provisions of Section 2 of Part III on ‘Civil and Administrative Procedures and Remedies’) are not part of the common commercial policy. Those provisions concern judicial organisation and civil procedure. They have no specific connection to international trade.

419.The European Union also cannot enjoy exclusive competence because Chapter Eleven incorporates Article 61 of the TRIPS Agreement, which concerns criminal penalties. Criminal matters do not form part of commercial aspects of intellectual property.

420.Nor is the European Union competent to accept the obligations laid down in Article 11.4 of the EUSFTA in so far as that provision incorporates the Berne Convention for the Protection of Literary and Artistic Works,(312) the WIPO Copyright Treaty,(313) and the WIPO Performances and Phonograms Treaty(314) which apply to moral rights. The European Union has no competence as regards moral rights; nor has there been any harmonisation in that area.

421.Articles 11.2 (which refers to the TRIPS Agreement and the Paris Convention for the Protection of Industrial Property(315)) and 11.29 of the EUSFTA (which invokes the Patent Cooperation Treaty(316) and requires the Parties, where appropriate, to make all reasonable efforts to comply with Articles 1 to 16 of the Patent Law Treaty(317)) will have effects on patents, which are a matter of shared competence (see, in particular, Article 118 TFEU and Regulations Nos 1257/2012 and 1260/2012).(318) Patent protection is a matter subject to enhanced cooperation between the Member States (with the exception of Spain, Italy and Croatia). Such a matter cannot be the subject of exclusive competence: the notion of enhanced cooperation is irreconcilable with the notion of exclusive competence. Another Member State also argues that the Commission has failed to explain how the European Union could comply with Article 11.29 of the EUSFTA(319) if the European Union were to be the sole signatory to the EUSFTA. Matters covered by the Patent Cooperation Treaty and the Patent Law Treaty are distinct from the substantive patent matters covered by the TRIPS Agreement.

422.Article 11.35 (on plant varieties) also does not fall within the common commercial policy. The International Convention for the Protection of New Varieties of Plants is not specifically linked to international trade. That convention provides for a sui generis form of intellectual property protection. The legal basis for the Council decision concluding that convention was Article 43 TFEU, which concerns agriculture.

423.Finally, there needs to be (near) uniformity between internal competence and external competence. Thus, because certain matters covered by Chapter Eleven are not harmonised, the European Union does not enjoy exclusive competence pursuant to Article 3(2) TFEU.

Analysis

The meaning of ‘commercial aspects of intellectual property’ in Article 207(1) TFEU

424.Following the entry into force of the Treaty of Lisbon, Article 207(1) TFEU now provides that the common commercial policy is to be based on uniform principles with regard also to ‘the commercial aspects of intellectual property’. The starting point for interpreting that expression is Daiichi.(320)

425.In its judgment in that case, the Court began by noting that, since EU primary law had evolved significantly, its past case-law on the TRIPS Agreement, including Opinion1/94,(321) was no longer relevant for determining to what extent the TRIPS Agreement fell within the common commercial policy.

426.First, the Court found that, although the TRIPS Agreement did not deal with the detailed operation of international trade as such, it was an integral part of the WTO system and was one of the principal multilateral agreements on which that system is based.(322)

427.Second, the Court held that the specific character of the link between the TRIPS Agreement and international trade was illustrated by the fact that, under the rules governing the WTO dispute settlement mechanism, it was possible for one Member to use cross-suspension of concessions between the TRIPS Agreement and the other principal multilateral agreements of which the WTO Agreement consisted.(323) In that regard, the Court relied on Article 22(3) of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes. That provision identifies what concessions or other obligations may be suspended.

428.Third, the Court reasoned that the Treaty draftsmen could not have been unaware, when they included the phrase ‘commercial aspects of intellectual property’ in Article 207(1) TFEU, that the terms used corresponded almost literally to the actual title of the TRIPS Agreement.(324)

429.Fourth, the Court emphasised that the primary objective of the TRIPS Agreement was to strengthen and harmonise the protection of intellectual property on a worldwide scale. Thus, the preamble states that the objective of the agreement is to reduce distortions of international trade by ensuring, in the territory of each WTO Member, the effective and adequate protection of intellectual property rights.(325) The context of the substantive rules is trade liberalisation, not harmonising the laws of the Member States.

430.I therefore consider that in Daiichi the Court held the entire TRIPS Agreement to fall within the common commercial policy. Its analysis was not limited to Article 27 of the TRIPS Agreement.

431.That said, I am not convinced that the reasoning in Daiichi can and should be transposed wholesale to the examination of the EUSFTA.

432.The fact that the terminology used in Article 207(1) TFEU (‘commercial aspects of intellectual property’) corresponds with the title of the TRIPS Agreement (‘trade-related aspects of intellectual property rights’) appears to be specific to that WTO agreement.

433.The inclusion of provisions on intellectual property in a particular trade agreement might indicate a specific connection between those provisions and international trade. However, the common commercial policy might also cover intellectual property provisions or agreements negotiated and concluded in a non-trade context.(326) If the mere inclusion of a matter in such an agreement were to suffice to bring it within the common commercial policy, however, Member States would indeed be at serious risk of losing existing competences.(327)

434.The scope of the common commercial policy should also not, in my view, be defined by reference to the type of remedy for which dispute settlement rules provide.(328)

435.In my opinion, what matters for the purposes of Article 207(1) TFEU is whether an agreement containing provisions on intellectual property protection relates specifically to international trade. That should be determined by examining whether the agreement is essentially intended to promote, facilitate or govern trade (rather than harmonising the laws of the Member States);(329) whether it has direct and immediate effects on such trade; and whether its objective is to reduce distortions of international trade by ensuring, in the territory of each Party, that the economic interests in the monopolies which intellectual property rights create are effectively and adequately protected. That is the essence of Daiichi.

436.Here, I agree with Advocate General Wahl that intellectual property rights are, by their nature, mostly trade-related in that they are in essence exclusive rights that create monopolies which may limit the free circulation of goods or services.(330) In a market economy, the primary relevance of those rights consists in their economic value. Where their exercise is essential to the commercial exploitation of the protected intellectual property in a cross-border market, such rights fall within the ‘commercial aspects of intellectual property’.(331) From that perspective, interests relating to the protection of those rights essentially become commercial interests.

437.That is not to say that all forms of protection of intellectual property rights are always and necessarily related to international trade. For example, the Court has described the specific subject matter of rights for the protection of literary and artistic property as being to ensure that both the moral and economic rights of the right holders are protected.(332) Moral rights complement economic rights in that they give an author ‘the right to claim authorship of the work and to object to any distortion, mutilation or other modification of, or other derogatory action in relation to, the said work, which would be prejudicial to his honour or reputation’.(333) They seek to protect the relationship of an author to his work. That relationship is essentially independent from the economic rights which the author may possess over that work. That also means that, where an agreement, such as the EUSFTA, covers the creation and protection of moral rights, the legal basis for concluding that agreement cannot be only Article 207(1) TFEU. Provisions on such rights are not ancillary to those regarding economic rights. To conclude otherwise would mean striking out the words ‘commercial aspects’ from Article 207(1) TFEU so that both commercial and non-commercial aspects of intellectual property fall within the common commercial policy.

438.A number of Member States ask the Court to limit its conclusion in Daiichi by excluding certain provisions of the TRIPS Agreement, such as Articles 42 to 50 and Article 61 of that agreement, from the scope of the common commercial policy. They argue that those provisions relate to judicial organisation, civil procedures and criminal matters. It would then follow that, since those provisions are nevertheless part of the EUSFTA, the European Union does not have exclusive competence over Chapter Eleven.

439.That argument, if right, would imply that each and every provision of an international agreement must satisfy the condition of a specific connection with international trade in order to be included in the common commercial policy. However, deciding whether the European Union has exclusive competence and thus identifying the proper legal basis for the action at issue must be based on objective factors, including the aim and the content of the action.(334) The legal basis of a decision to conclude an international agreement is not the sum of the legal bases for each and every provision of that agreement. Thus, for example, in Case C‑137/12,(335) the fact that the international agreement there at issue included provisions relating to seizure and confiscation measures did not alter the Court’s conclusion that the agreement fell within the scope of the common commercial policy. Those provisions were ‘… intended generally to ensure effective legal protection for conditional access services throughout the territories of ?the contracting? parties’ and accordingly ‘… help[ed] to achieve the primary objective of the contested decision, read in conjunction with the Convention …’.(336)

440.Finally, I do not consider that the European Union enjoys exclusive competence over the common commercial policy only where it has the corresponding competences in the internal market and has exercised those internal competences (resulting in harmonisation). That would imply reading a type of ERTA-based conditionality into Articles 3(1)(e) and 207(1) TFEU. However, the common commercial policy has both an internal and external component. Exercise of the European Union’s competence over the common commercial policy does not depend on whether the Union enjoys internal competence on some other basis and has exercised that competence. Under Article 3(1) TFEU, the European Union’s exclusive competence over that policy is not dependent on the conditions laid down in Article 3(2) TFEU.(337)

The European Union’s competence over Chapter Eleven of the EUSFTA

441.In my opinion, Chapter Eleven addresses both commercial and non-commercial aspects of intellectual property.

442.Examination of Article 11.1.1 and 11.1.2 of the EUSFTA shows that adequate and effective protection of intellectual property rights is seen as an instrument towards increasing the benefits of trade and investment. To that end, Chapter Eleven essentially sets out minimum standards for domestic regulation of intellectual property and obligations regarding the effective enforcement of those standards.

443.Thus, Chapter Eleven defines the scope of protection for each intellectual property right covered, lays down the term of protection and the means to obtain it, specifies forms of cooperation and sets out a range of obligations aimed at ensuring adequate legal protection for, and enforcement of, the rights covered by that chapter through appropriate remedies. In so doing, Chapter Eleven partly relies on the technique (also employed in the TRIPS Agreement(338)) of incorporating substantive intellectual property standards found in international agreements concluded outside the context of the EUSFTA.

444.As I see it, the fact that Chapter Eleven incorporates parts of the TRIPS Agreement as well as other international agreements concluded outside the context of the WTO subsequent to the entry into force of the TRIPS Agreement together with WTO decisions, instead of carrying over that language verbatim,(339) cannot affect the allocation of competences. Either way, the source of the rights and obligations for the Parties to the EUSFTA is the EUSFTA itself. Indeed, I note that the use of incorporation in the TRIPS Agreement did not prevent the Court in Daiichi concluding that the European Union was competent to conclude that agreement.

445.Unlike the Commission, I do not therefore distinguish between provisions of Chapter Eleven that incorporate other international agreements (or parts thereof) and those that refer to such agreements without making their provisions binding under the EUSFTA. The European Union’s competence under Article 207 TFEU is to define and implement the common commercial policy. The European Union may do so through the negotiation and conclusion of international agreements. The objectives of the common commercial policy and external action in general may be achieved through many means, not all of which necessarily result in legally binding obligations. As the Court put it in Case C‑660/13, in the context of a memorandum of understanding, ‘a decision concerning the signature of a non-binding agreement … is one of the measures by which the Union’s policy is made …’.(340)

446.In my opinion, the conclusions the Court reached in Daiichi(341) also apply to Chapter Eleven in so far as it incorporates the content of the TRIPS Agreement with respect to the intellectual property rights covered by that chapter (meaning copyright and related rights; patents; trademarks; designs; layout-designs of integrated circuits; geographical indications; and protection of undisclosed information).

447.I see in principle no reason for reaching a different conclusion in respect of the other provisions regarding the minimum level of protection of intellectual property provided that they relate to the protection and effective enforcement of economic interests resulting from an intellectual property right. The policy pursued uses minimum standards of protection for the economic interests embedded in intellectual property to promote investment, reduce trade barriers, facilitate international trade and guarantee some equality of competitive conditions. That all forms part of a commercial policy.

448.Whilst plant variety rights are not covered by the TRIPS Agreement, it seems to me that that sub-section of Chapter Eleven (Article 11.35 of the EUSFTA, reaffirming the Parties’ obligations under the International Convention for the Protection of New Varieties of Plants(342)) should be examined in the same manner. That is because plant variety rights are economic rights: rights for a breeder to authorise, as regards a protected variety, inter alia, production or reproduction, conditions for propagation, offering for sale, selling or other marketing, exporting, importing and stocking.(343)

449.I can understand the objections to the European Union’s exclusive competence as regards Article 61 of the TRIPS Agreement. However, it seems to me that Chapter Eleven does not in fact incorporate Article 61 of the TRIPS Agreement. The text of Chapter Eleven does not expressly refer to that provision. Nor does it contain a section on criminal measures. Where that chapter incorporates the TRIPS Agreement, as regards certain intellectual property rights, I understand that cross-reference to relate to the ‘Standards concerning the availability, scope and use of intellectual property rights’ in Part II of the TRIPS Agreement, rather than to the provisions on ‘Enforcement of intellectual property rights’ in Part III of the TRIPS Agreement. Indeed, Chapter Eleven contains its own separate section on (civil) enforcement of intellectual property rights.

450.Provisions regarding transparency, effective protection of the rights guaranteed and enforcement of obligations form an integral part of the European Union’s common commercial policy. For that reason, I consider that the parts of Chapter Eleven regarding the civil enforcement of intellectual property rights and border measures also fall within the common commercial policy.(344) The same applies with respect to provisions such as Article 11.52, which provides for forms of international cooperation.(345)

451.However, Chapter Eleven of the EUSFTA also appears to cover non-commercial aspects of intellectual property.

452.Unlike the TRIPS Agreement,(346) Article 11.4 of the EUSFTA (regarding the protection granted for copyright and related rights) incorporates all of the rights and obligations set out in the Berne Convention. It thus includes Article 6bis of that convention, which protects moral rights. Article 6bis itself distinguishes moral rights from an author’s economic rights.

453.Article 11.4 likewise incorporates into the EUSFTA the whole of the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. Article 3 of the former requires the Contracting Parties to apply the provisions of Articles 2 to 6 of the Berne Convention in respect of the protection provided for in the WIPO Copyright Treaty. Article 5(1) of the latter identifies certain moral rights that a performer enjoys.

454.I have already emphasised the separate, and important, role played by moral rights.(347) That role is clearly recognised in the EUSFTA. However, such rights are equally clearly non-commercial. I therefore conclude that, in so far as Chapter Eleven applies to non-commercial aspects of intellectual property, the competence of the European Union for concluding those parts of that chapter cannot be based on Article 207(1) TFEU.

455.The Commission has not sought to argue that the European Union nevertheless enjoys exclusive external competence on the basis of one of the grounds under Article 3(2) TFEU.

456.Since moral rights are independent from (and apply together with) economic intellectual property rights,(348) I consider that provisions such as those contained in Chapter Eleven of the EUSFTA, in so far as they apply to non-commercial aspects of intellectual property rights, can be regarded as necessary to achieve the objectives of the internal market. The fact that there might not (yet) be harmonisation of moral rights does not undermine that conclusion.(349) Those aspects of Chapter Eleven of the EUSFTA therefore fall within shared competence of the European Union and the Member States on the basis of Articles 4(2)(a), 26(1) and the second ground under Article 216(1) TFEU.