In a ruling which is likely to have positive implications for a possible Brexit deal, the European Court of Justice (ECJ) on the 16 May 2017 opened up the ability of the EU institutions to negotiate free trade agreements without the approval of individual Member State legislatures.

The case, which involved a Singapore-EU trade deal agreed some years ago but not yet ratified, is being seen as a blueprint for a way to get a future Brexit deal through the EU without the threat of a rogue national Parliament blocking the deal.

The European Court ruling involved a power struggle between the EU Institutions of the EU Commission and EU Parliament on the one hand and the Member States (as represented in the Council of the European Union) on the other. The Council was arguing that the EU could not conclude the Singapore agreement without reference to the Member States because certain parts of the agreement fall within a competence shared between the EU and the Member States or within the exclusive competence of the Member States.

On 16 May the European Court ruled that the trade agreement would need the support of both the individual Member States and the EU itself because it contained provisions relating to areas where competence was shared with Member States, those areas being non-direct foreign investment and the regime governing dispute settlement between investors and States.

The above ruling sets out a demarcation of the rights and competences of the EU and those of the Member States. As a corollary therefore, the ruling is seen as a precedent which would allow the EU alone to negotiate and approve a foreign trade deals as long as it does not include Member State competencies.

The whole Brexit process is haunted by the way an aggrieved national Parliament could hold the trading block and the UK to ransom over a future trade deal. This happened recently with the EU’s agreement with Canada when a Belgium regional Parliament did precisely that. Therefore this development is being seized upon as a possible way to get a more limited Brexit agreement through the EU, avoiding such a situation.

As well as trade/tariff issues, the other areas of EU only competence mentioned by the Court included substantial areas such as provisions concerning IP, provisions targeting anti-competitive activity and access to the EU market for goods and services.

However others argue that a Brexit agreement done in stages (to stop it being held hostage by aggrieved national parliaments) is not likely to find favour. An agreement to address the issues thrown up by many decades of integration will probably require a wide ranging agreement which will inevitably involve the support and votes of the Member States.

Robert Bell, Head of EU & Competition Law at international law firm Bryan Cave, commented: “depending upon how the Brexit agreement is eventually structured this Court ruling could have a beneficial effect on the approval of a future trade deal between the UK and the EU”.

Nevertheless a note of caution serves to dampen down such optimism: given that the UK has been a member of the Community for nearly 45 years the issues which need to be addressed in any future EU /UK deal place it in a league of their own.

The ECJ press release can be found here.

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