Opinion procedure 2/15

49.The Commission’s request for an Opinion is clearly admissible, since the EUSFTA has not yet been concluded and is therefore an agreement that is ‘envisaged’ within the meaning of Article 218(11) TFEU. In essence, the request consists of two parts.

50.The first part concerns the question whether the European Union may sign and conclude the EUSFTA alone, that is to say, without the involvement of the Member States.

51.The second part asks what provisions of the EUSFTA fall within the European Union’s exclusive competence, the European Union’s shared competence and the Member States’ exclusive competence.

52.If the Court’s answer to the first part of the request is ‘yes’ because the whole of the EUSFTA falls within the European Union’s exclusive external competence (on the basis of either Article 3(1) TFEU or Article 3(2) TFEU), it is not necessary to address the second part. The EUSFTA must then be concluded by the European Union alone.

53.If the European Union does not have exclusive competence for the whole of the EUSFTA, the position is more complicated. Where the competence over the EUSFTA is in part exclusive to the European Union (by virtue of Article 3 TFEU) and in part shared (pursuant to Article 4 TFEU), who may (or should) sign that agreement?(15)

54.It is necessary at this stage for me to set out how I understand the system of internal and external competence to interrelate.

55.Articles 2 to 4 TFEU have to be read against the background of Articles 4 and 5 TEU. They also need to be read having regard to their place right at the beginning of the TFEU (‘Part One— Principles’; ‘Title I— Categories and areas of Union competence’) and against the background of what went before, in previous versions of the Treaties.

56.Here, it is important to recall the versions of what has become the TFEU as they stood after the Treaties of Maastricht (1992), Amsterdam (1997) and Nice (2001). In particular, Article 3b of the EC Treaty as amended by the Treaty on European Union at Maastricht (subsequently Article 5 EC (Amsterdam and then Nice)) contained, in its three constituent paragraphs, an analysis of competence that incorporated sequentially the principles of conferral, subsidiarity and proportionality.(16) Throughout that period there was, however, no detailed list of competences. The abortive Treaty establishing a Constitution for Europe would have introduced such a list; and the contents and essential elements of what is now to be found in Articles 2, 3 and 4 TFEU were taken more or less straight across from the draft constitution and inserted by the Treaty of Lisbon.(17)

57.Those previous versions make it clear that this opening section of what is now the TFEU is not about external relations as such. It is about the core constitutional issue of the division of power between the European Union and its constituent Member States— the principle of the conferral of powers. Competences are conferred on the European Union essentially for the purpose of enabling it to legislate in various areas of policy and economic activity within the territory of the European Union. It is an EU-centric view of the world (rather than a ‘Weltanschauung’). It is about striking the desired balance between the unifying (supra-national) central authority set up under the Treaties and the European Union’s constituent, still sovereign, Member States (the ‘Herren der Verträge’). It has to be clear, from the division of competences on which the whole European Union project is based, who has competence to act in specific fields. The primary focus is, ‘who is competent to act within the territory of the European Union: the European Union or the Member States?’ That said, the division of competences between the European Union and the Member States will necessarily also have implications for the exercise of external competence.

58.What was the effect of the changes introduced by the Treaty of Lisbon?

59.Competences in a short and exhaustive list of areas are irretrievably (barring Treaty change) assigned to the European Union (Article 3(1) TFEU). Most areas of competence, however, appear in the list of ‘principal areas’— that is, in a non-exhaustive list— of shared competences (Article 4(2) TFEU). A competence defined as ‘shared’ never metamorphoses into an a priori exclusive EU competence in the sense of Article 3(1) TFEU. It is true that if the European Union, by exercising its right of pre-emption under Article 2(2) TFEU (which I shall discuss in a moment) has effectively occupied the field, the field so occupied becomes an area where the European Union de facto enjoys exclusive competence. However, the difference between a priori exclusive EU competences under Article 3(1) TFEU, on the one hand, and competences that become de facto exclusive EU competences through the mechanism of Article 2(2) TFEU,(18) on the other hand, is this: an a priori exclusive EU competence can never (barring Treaty change) be turned into a non-exclusive EU competence. In contrast, it is in theory possible that an area currently occupied by EU legislation adopted in the exercise of the right of pre-emption under Article 2(2) could be returned to the Member States. The EU legislature would merely need to decide to stop legislating and to repeal existing EU legislation in that field.

60.Shared competences under Article 4 TFEU are, moreover, inextricably tied to the presence of a (separate) Treaty provision conferring on the European Union a competence that is neither an exclusive competence (Article 3 TFEU) nor a flanking competence (Article 6 TFEU: ‘competence to carry out actions to support, coordinate or supplement the actions of the Member States’). That is because Article 4(1) TFEU states that ‘the [European Union] shall share competence with the Member States where the Treaties confer on it a competence which does not relate to the areas referred to in Articles 3 and 6’.(19) Article 4 TFEU thus defines the existence of various competences that are shared between the European Union and the Member States.

61.Article 2 TFEU then deals with various aspects of the exercise of competence. In particular, the second sentence of Article 2(2) contains the European Union’s ‘right of pre-emption’. That provision gives the European Union the right to choose to start exercising one of the listed shared competences. To the extent that it does so (but only to that extent) the Member States can no longer exercise their shared competence in that specific respect. Thus, Protocol No25 expressly states that, ‘when the [European Union] has taken action in a certain area, the scope of this exercise of competence only covers those elements governed by the [EU] act in question and therefore does not cover the whole area’. Pre-emption under Article 2(2) TFEU is expressly stated to be reversible. If the European Union ceases to act in respect of a particular part of a particular shared competence, that competence reverts to the Member States. And the parts must always add up to a whole— every competence exercised in a shared area is either exercised by the European Union or exercised by the Member States. It cannot be in limbo between the two.

62.Much of the exercise of the European Union’s competence continues to be concerned with what happens ‘internally’— that is, within the territory of the European Union. Certain aspects of the division of competences continue necessarily to have implications for external action. That is true both of areas where the European Union enjoys exclusive competence and of areas of shared competence. As and when such external action is taken, it must respect the agreed division of competences as between the European Union and its constituent Member States. Those principles must be respected in all action taken by the European Union, whether internal or external.(20)

63.Competence for the customs union and competence for the common commercial policy (both of which are listed as exclusive competences of the European Union in Article 3(1) TFEU) finds detailed recognition and expression in Article 206 TFEU (the customs union) and Article 207 TFEU (the common commercial policy) in Part Five of the TFEU entitled ‘The Union’s external action’. The common commercial policy is one of the rare examples of a purely external EU competence. Whilst Article 207(2) TFEU empowers the European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure, to adopt the measures defining the framework for implementing the common commercial policy, such regulations are measures of external action (intended to regulate, through EU legislative acts, trade with third States). The equivalent internal competence is the competence for the approximation of laws in Articles 114 and 115 TFEU to regulate the internal market, which Article 4(2)(a) TFEU defines as a shared competence.

64.In contrast to Article 3(1) TFEU, which does not speak expressly of external competence, Article 3(2) TFEU refers to the circumstances in which the European Union ‘shall have exclusive competence to conclude an international agreement’. The four(21) grounds provided for by the Treaty draftsmen (‘when its conclusion is provided for in a legislative act of the [European Union]’, ‘[when its conclusion] is necessary to enable the [European Union] to exercise its internal competence’, ‘in so far as its conclusion may affect common rules or alter their scope’) reflect and mostly codify earlier case-law of the Court.(22) Article 216 TFEU (which contains the detailed provisions governing when the European Union ‘may conclude an agreement with one or more third countries or international organisations’) likewise reflects and codifies the Court’s case-law on the existence of EU external competence; it is directly tied to the division of competences operated by Articles 2 to 4 TFEU. Article 216(1) TFEU determines the existence of EU external competence but not its exclusive nature— the latter is determined by Article 3(1) and (2) TFEU.

65.Against that background, I turn to consider external competence in greater detail.

66.In relation to the common commercial policy, Article 3(1)(e) TFEU states that the European Union has exclusive competence in this area. Article 207 TFEU makes it clear that the common commercial policy ‘shall be based on … the conclusion of tariff and trade agreements relating to [various areas]’. The first ground under Article 216(1) indicates that the European Union may conclude an international agreement ‘where the Treaties so provide’. So, provided that a particular subject matter falls within the common commercial policy (a thorny question to which much of the analysis in the rest of this Opinion is devoted), the European Union will enjoy exclusive external competence to conclude an international agreement pertaining to that subject matter. Other exclusive competences listed in Article 3(1) TFEU may link across to other grounds under Article 216(1) TFEU, notably the second ground (‘where the conclusion of an agreement is necessary in order to achieve, within the framework of the [European Union’s] policies, one of the objectives referred to in the Treaties’).

67.If one of the grounds under Article 3(2) TFEU is satisfied and the European Union enjoys external competence in accordance with the detailed rules granting competence to conclude international agreements found in Article 216(1) TFEU, that external competence will be exclusive. Let us examine each ground briefly in turn.

68.First, can we identify a ‘legally binding [EU] act’ that provides for the European Union to conclude such an international agreement (the third ground under Article 216(1) TFEU)? If so, and if that act is a ‘legislative act of the [European Union]’ (the first ground under Article 3(2) TFEU),(23) the resulting external EU competence will be exclusive.(24)

69.Second, is the conclusion of an international agreement ‘necessary in order to achieve, within the framework of the [European Union’s] policies, one of the objectives referred to in the Treaties’ (the second ground under Article 216(1) TFEU)? If so, and if an internal competence of the European Union simply cannot in practice be exercised without there being also an external component (the second ground under Article 3(2) TFEU), the resulting external EU competence will likewise be exclusive. As the pre-Lisbon case-law shows, such situations are rare but possible.(25)

70.Finally, has there already been so much EU legislative activity that the European Union now has exclusive EU external competence through the codified ‘ERTA effect’?(26) Showing that the conclusion of an international agreement ‘may affect common rules or alter their scope’(27) automatically satisfies the conditions of the fourth ground under Article 216(1) TFEU and the third ground under Article 3(2) TFEU; and the European Union will accordingly have exclusive external competence.

71.If the European Union does not enjoy exclusive external competence by virtue of Article 3 TFEU, does it have shared external competence by virtue of Articles 2 and 4 TFEU (governing shared competence) and Article 216 TFEU (conferring external competence); or is there no EU external competence at all, other than perhaps flanking external competence?(28) Here, the situation is more complicated.

72.First, it is necessary to check that shared competence actually exists under Article 4 TFEU. Assuming that the answer to that question is ‘yes’, one then looks at Article 216(1) TFEU to see whether one of the grounds there listed giving the European Union competence to enter into an international agreement is satisfied. Since, on this hypothesis, there is no exclusive external competence under Article 3(2) TFEU, it is likely that it is the first, second and third grounds under that provision that will be relevant. The combination of Article 4 TFEU and Article 216(1) TFEU creates the conditions necessary for the existence of EU shared external competence. What, then, of its exercise?

73.Here, it is necessary to return to Article 2(2) TFEU and the European Union’s right of pre-emption. If the European Union does not choose to exercise that right, external competence— like internal competence— will remain with the Member States and it follows that they (and not the European Union) will be competent to negotiate, sign and conclude an international agreement whose subject matter falls within that area of shared competence. However, the text of Article 2(2) TFEU can be read as permitting the European Union to exercise its right of pre-emption in relation to both external and internal competence.

74.Accepting that proposition does not imply that the European Union enjoys an unfettered right to assert external competence over any area of shared competence listed in Article 4 irrespective of whether it has chosen to exercise that right internally. At the hearing, the Council emphasised that whether the European Union or the Member States exercise external competence to conclude a particular international agreement in an area of shared competence is ‘a political choice’. As I see it, the legal safeguards underpinning that political choice lie in the detailed procedures set out in Article 218 TFEU. Article 218(2) provides that ‘the Council shall authorise the opening of negotiations, adopt negotiating directives, authorise the signing of agreements and conclude them’. Subsequent paragraphs indicate that the opening of negotiations (Article 218(3) TFEU), the signing of the agreement (Article 218(5) TFEU) and its conclusion (Article 218(6) TFEU) each require separate Council decisions— that is, decisions of the Member States acting in their capacity as members of the Council which authorise the appropriate EU institution to act. Throughout the procedure, the Council acts by qualified majority save for certain areas where unanimity is required (Article 218(8) TFEU); and conclusion of the agreement in so far as it represents an exercise of EU external competence normally also requires the consent of, or at least consultation with, the European Parliament (Article 218(6)(a) and (b) TFEU, respectively).

75.It follows that an international agreement covering areas that fall within shared external competence that is eventually signed and concluded by the European Union alone is conceptually totally different from an international agreement that covers only areas falling within the European Union’s exclusive external competence. In the former case, the Member States together (acting in their capacity as members of the Council) have the power to agree that the European Union shall act or to insist that they will continue to exercise individual external competence. In the latter case, they have no such choice, because exclusive external competence already belongs to the European Union.

76.If an international agreement is signed by both the European Union and its constituent Member States, both the European Union and the Member States are, as a matter of international law, parties to that agreement. That will have consequences, in particular in terms of liability for a breach of the agreement and the right of action in respect of such a breach. For the sake of transparency within the European Union and in the interests of the third country (or countries) with which that international agreement is being concluded, it would therefore seem desirable for such decisions to indicate very clearly the precise aspects of shared competence which the Member States (acting in their capacity as members of the Council) have agreed shall be exercised by the European Union, on the one hand, and which are (still) being exercised by the Member States, on the other hand. A declaration of competences annexed to the agreement in question would, it seems to me, also not come amiss.

77.Finally, where an international agreement is signed by both the European Union and its Member States, each Member State remains free under international law to terminate that agreement in accordance with whatever is the appropriate termination procedure under the agreement. Its participation in the agreement is, after all, as a sovereign State Party, not as a mere appendage of the European Union (and the fact that the European Union may have played the leading role in negotiating the agreement is, for these purposes, irrelevant). If the Member State were to do so, however, the effect of Article 216(2) TFEU will be that— as a matter of EU law— it continues to be bound by the areas of the agreement concluded under EU competence (because it is an EU Member State) unless and until the European Union terminates the agreement.(29) The ability to act independently as an actor under international law reflects the continuing international competence of the Member State; the fact that the Member State remains partially bound by the agreement even if, acting under international law, it terminates it reflects not international law but EU law.

78.The position is different where the Member States enjoy exclusive competence for one or more part(s) of an international agreement (and the remainder of the agreement falls within the exclusive or shared competence of the European Union): there, both the Member States and the European Union must conclude the agreement.(30)

79.However, assuming always that it is necessary for the Court to answer the second part of the request, is it necessary for the Court to establish who has competence in relation to each and every provision of the EUSFTA?

80.In my view, it is not.

81.The Court made it clear in Opinion2/00 that, assuming that competence to conclude an international agreement is shared between the European Union and its Member States, the precise extent of both the European Union’s exclusive competences and the Member States’ shared (or exclusive) competences as regards a specific agreement cannot, as such, have any bearing on the competence of the European Union for concluding that agreement and, more generally, on the substantive or procedural validity of the European Union’s decision to conclude it.(31) The purpose of the procedure in Article 218(11) TFEU is specifically to forestall the complications which could arise, both at the international level and at the EU level, if the decision to conclude the agreement were found to be invalid.(32) It is not for the Court, in the context of that procedure, to provide specific guidance on who has competence in relation to each and every single provision of the agreement concerned and who should be responsible for performing the international obligation that it entails.(33)

82.Rather, in answering the second part of the Commission’s request, I shall examine for what parts of the EUSFTA the European Union enjoys exclusive competence (based on either Article 3(1) TFEU or Article 3(2) TFEU), whether there are parts in respect of which competence is shared with the Member States (on the basis of Article 4 TFEU); and whether there are still other parts for which the European Union enjoys no competence. The EUSFTA is a very heterogeneous agreement. That means that, of necessity, the analysis to establish competence and its (exclusive or shared) nature will need (depending on the context) to focus on an individual chapter or groups of chapters of the EUSFTA, on a part or parts of that agreement or, occasionally, on an individual provision.

83.Despite the fact that the request concerns only the allocation of competences between the European Union and the Member States, some written observations (especially those of the Council) suggest that there might also be an issue regarding the process through which the Commission negotiated the EUSFTA and now proposes to sign it. Whilst the negotiating directives provided for the negotiation of a mixed agreement, the Commission negotiated the EUSFTA as an agreement between the European Union and Singapore alone. Did the Commission thereby disregard Article 218(4) TFEU and the principle of mutual sincere cooperation laid down in Article 13(2) TEU?

84.In my view, it is neither necessary nor appropriate, in the context of the present proceedings, to take a position on that issue. The process through which the EUSFTA was negotiated does not, as such, affect the allocation of competences between the European Union and its Member States for concluding it. It is therefore outside the scope of the Commission’s request. Nor (in principle) could a failure to respect rules as to process under EU law affect the validity of the agreement as a matter of international law.(34) I shall therefore not address that issue further.

85.It is also important to bear in mind that the Commission’s request does not concern the material compatibility of (any part of) the EUSFTA with the Treaties. Thus, the Court is not asked to consider, for example, the compatibility of an ISDS mechanism with the Treaties. That type of dispute resolution appears not only in the EUSFTA but also in other trade and investment agreements currently negotiated or in the course of negotiation by the European Union. In the present proceedings, the issue as regards the ISDS mechanism (and other forms of dispute resolution for which the EUSFTA provides) is only the question ‘who may decide’. My analysis in this Opinion is therefore without prejudice to such issues (if any) as there may be concerning the material compatibility of the EUSFTA, including the provisions regarding the ISDS mechanism, with the Treaties.(35)

86.Finally (and perhaps self-evidently) my Opinion in the present proceedings is limited to the EUSFTA. It is thus without prejudice to the allocation of competences between the European Union and the Member States as regards other trade and investment agreements.

87.In the remainder of my Opinion, I shall first set out the basic principles governing the allocation of external competences between the European Union and the Member States and the legal basis of EU action. I shall then discuss the basic features of the European Union’s express exclusive competence over the common commercial policy (Article 207(1) TFEU), its implied exclusive competence (Article 3(2) TFEU) and its shared competence (Article 4 TFEU) over external action. Against that general background, I shall then turn to the allocation of competences as regards the matters covered by the EUSFTA.