Opinion procedure 2/15

5.In December 2006, the Commission recommended that the Council of the European Union authorise it to negotiate a free trade agreement with countries of the Association of Southeast Asian Nations (‘ASEAN’) on behalf of the European Community and the Member States. In April 2007, the Council authorised the Commission to start negotiations. The negotiations relating to a region-to-region agreement proved to be difficult and were therefore suspended. The Commission then suggested pursuing bilateral free trade agreements with relevant ASEAN countries, starting with Singapore. In December 2009, the Council, relying on the negotiating directives it had issued for negotiations with ASEAN, authorised the Commission to negotiate a trade agreement with Singapore. Those negotiations commenced in March 2010. In September 2011, the Council modified the negotiating directives so as to add investment to the list of topics covered. In so doing, the Council stated that the objective was that the investment chapter of the agreement would cover areas of shared competence, such as portfolio investment,(6) dispute settlement and property and expropriation.

6.On 20 September 2013, the European Union (acting through the Commission) and Singapore initialled the text of the EUSFTA (meaning that they accepted it as definitive), with the exception of the chapter on investment. That text was made publicly available on the same day.

7.When it became clear that that text provided for signature and conclusion of the EUSFTA by the European Union without participation of the Member States, the Trade Policy Committee (a committee appointed by the Council under Article 207(3) TFEU) in February 2014 referred the matter to the Committee of Permanent Representatives (‘Coreper’). The Trade Policy Committee invited Coreper to confirm the procedure for signing and concluding the EUSFTA and asked it to invite the Commission, as negotiator on behalf of the European Union and the Member States, to adapt the text to the mixed character of that type of agreement. Coreper indicated that there was a clear sense of agreement among delegations that the EUSFTA should be signed and concluded as a mixed agreement, meaning that both the European Union and the Member States should be a party to it.

8.The negotiations on the investment chapter were concluded in October 2014. In June 2015, the Commission sent the Trade Policy Committee the consolidated text of the investment chapter and indicated that the entire agreement was now initialled.

9.The EUSFTA consists of a preamble, 17 chapters, a protocol and five understandings.

10.Chapter One (‘Objectives and General Definitions’) states that the objectives of the EUSFTA are to establish a free trade area consistent with Article XXIV of the GATT 1994(7) and Article V of the GATS(8) and to liberalise and facilitate trade and investment between the Parties in accordance with the EUSFTA.

11.Chapter Two (‘National Treatment and Market Access for Goods’) begins by reaffirming the obligation of the Parties to accord national treatment(9) pursuant to Article III of the GATT 1994 (which that chapter incorporates into the EUSFTA). It also sets out obligations regarding non-tariff measures. Separate provisions apply to the making available and sharing of information, notifications and enquiries and the administration of measures covered.

12.Chapter Three (‘Trade Remedies’) sets out obligations regarding, on the one hand, anti-dumping and countervailing measures and, on the other hand, two types of safeguards (global safeguard measures and bilateral safeguard measures).

13.Chapter Four (‘Technical Barriers to Trade’) aims to facilitate and increase trade in goods between the Parties by providing a framework to prevent, identify and eliminate unnecessary barriers to trade within the scope of the TBT Agreement (which is made part of the EUSFTA).

14.Chapter Five (‘Sanitary and Phytosanitary Measures’) aims to (a) protect human, animal and plant life and health in the respective territories of the Parties while facilitating trade between the Parties in the area of sanitary and phytosanitary measures (‘SPS measures’); (b) to collaborate on the further implementation of the Agreement on the Application of Sanitary and Phytosanitary Measures (‘the SPS Agreement’); and (c) to provide a means to improve communication, cooperation and resolution of issues related to the implementation of SPS measures affecting trade between the Parties.

15.Chapter Six (‘Customs and Trade Facilitation’) recognises the importance of customs and trade facilitation in the evolving global trading environment and of reinforcing cooperation in that area. It sets out the principles on which the customs provisions and procedures of the Parties are to be based.

16.The objectives of Chapter Seven (‘Non-Tariff Barriers to Trade and Investment in Renewable Energy Generation’) are to promote, develop and increase the generation of energy from renewable and sustainable non-fossil sources (‘green energy’), particularly through facilitating trade and investment. The chapter applies to measures which may affect trade and investment between the Parties concerning the generation of green energy but not to the products from which energy is generated.

17.In Chapter Eight (‘Services, Establishment and Electronic Commerce’), the Parties reaffirm their respective commitments under the WTO Agreement.(10) That chapter lays down the necessary arrangements for the progressive reciprocal liberalisation of trade in services, that is to say, the cross-border supply of services from the territory of a Party into the territory of the other Party and in the territory of a Party to a service consumer of the other Party, establishment, and the temporary presence of natural persons for business purposes. It addresses electronic commerce separately. It also contains provisions regarding domestic regulation of computer services, postal services, telecommunications services, financial services and international maritime transport services.

18.Chapter Nine (‘Investment’) consists of two parts.

19.Section A contains the substantive provisions on investment protection. For the purposes of that chapter, an ‘investment’ is ‘every kind of asset which has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, the assumption of risk, or a certain duration’. The main requirements concern national treatment, fair and equitable treatment and full protection and security as well as compensation for losses suffered owing to war or other armed conflict, revolution, a state of national emergency, revolt, insurrection or riot in the territory of the other Party. Section A also provides that neither Party is directly or indirectly to nationalise, expropriate or subject to measures having an effect equivalent to nationalisation or expropriation the investments of investors of the other Party covered by that section except when certain conditions are satisfied. Each Party must, in addition, allow all transfers relating to an investment covered by Chapter Nine to be made in a freely convertible currency without restriction or delay. Upon the entry into force of the EUSFTA, the bilateral agreements between Member States and Singapore listed in Annex 9-D are to cease to have effect and to be replaced and superseded by the EUSFTA.

20.Section B puts in place an ‘Investor-State Dispute Settlement’ (‘ISDS’) mechanism. That mechanism, which may involve arbitration, applies to a dispute between a claimant of one Party and the other Party concerning treatment (including failure to act) by the latter Party allegedly breaching the provisions of Section A and causing loss or damage to the claimant or its locally established company. A separate provision states that in principle neither Party shall give diplomatic protection, or bring an international claim, in respect of a dispute which one of its investors and the other Party have consented to submit or has submitted to arbitration under Section B of Chapter Nine.

21.Chapter Ten (‘Government Procurement’) applies to any measure regarding a form of procurement covered by the agreement, that is to say, procurement carried out by a listed entity and having a value which exceeds a given threshold.

22.Chapter Eleven (‘Intellectual Property’) sets out rights and obligations with respect to seven categories of intellectual property rights that are also covered by the TRIPS Agreement and one category that is not covered by that agreement, namely, plant variety rights. The structure of that section follows that of the TRIPS Agreement: each sub-section addresses an intellectual property right covered by the EUSFTA and also incorporates rights and obligations set out in other multilateral agreements (some of which are part of the TRIPS Agreement and others of which are not).

23.Chapter Twelve (‘Competition and Related Matters’) focuses on the importance of free and undistorted competition in the Parties’ trade relations. It sets out principles relating to antitrust and mergers, public undertakings, undertakings entrusted with special or exclusive rights and State monopolies and subsidies.

24.Chapter Thirteen (‘Trade and Sustainable Development’) concerns the Parties’ commitment to developing and promoting international trade and their bilateral trade and economic relationship in such a way as to contribute to sustainable development. The main obligations require each Party to establish its own levels of environmental and labour protection and to adopt or modify its relevant laws and policies accordingly, consistently with the principles of internationally recognised environmental and labour standards or agreements to which it is a party. The chapter also includes separate obligations regarding trade in timber and timber products and in fish products, as well as specific provisions governing dispute settlement.

25.Chapter Fourteen (‘Transparency’) contains obligations seeking to establish a transparent and predictable regulatory environment for economic operators and laying down clarifications and improved arrangements for transparency, consultation and better administration of measures of general application. Those obligations apply in principle together with more specific rules in other chapters of the EUSFTA.

26.Chapter Fifteen (‘Dispute Settlement’) sets out the generally applicable rules governing the avoidance and settlement of any difference between the Parties concerning the interpretation and application of the EUSFTA with a view, where possible, to reaching a mutually acceptable solution. The different stages in that dispute settlement procedure are: the request for consultations, (the request for) the establishing of an arbitration panel, the issuing of an interim report and the issuing of the final ruling. Separate provisions address implementation proceedings and remedies to induce compliance.

27.Chapter Sixteen (‘Mediation Mechanism’) establishes a mediation mechanism aimed at finding a mutually agreed solution through a comprehensive and expeditious procedure with the assistance of a mediator. It applies to any measure falling within the scope of the EUSFTA that adversely affects trade or investment between the Parties, except as otherwise provided.

28.Chapter Seventeen (‘Institutional, General and Final Provisions’) contains three categories of provisions. A first category lays down an institutional structure consisting of various committees in which the Parties are to meet in order to supervise and facilitate the implementation and application of the EUSFTA. A second category concerns decision-making, amendments, the entry into force, direct effect, accession, territorial application of the EUSFTA, the different annexes and other texts forming an integral part of the EUSFTA and the authentic versions of the text of the EUSFTA. A third category concerns substantive matters, including taxation, current account and capital movements, sovereign wealth funds, restrictions to safeguard the balance-of-payments and security exceptions.

29.Attached to the text of the chapters of the EUSFTA is a protocol on rules of origin, understandings concerning Article 17.6 (taxation), the remuneration of arbitrators, additional customs-related provisions, mutual recognition of authorised economic operator programmes and Singapore’s specific constraints of space or access to natural resources.

30.A more detailed summary of the EUSFTA is included in the Annex to my Opinion. The purpose of that annex is not to summarise every aspect of the EUSFTA but rather to provide a summary of the main points that are relevant to this Opinion. Both the description of the request, the Parties’ submissions and my analysis of the request should be read together with that annex.