Council of the EU Adopts New Approach on Negotiating and Concluding EU Trade and Investment Agreements
The adoption of this new approach is a direct consequence of Opinion 2/15 of the Court of Justice of the European Union (the CJEU) on the division of competences between the EU and its Member States. In its Opinion 2/15 handed down on 16 May 2017 in the context of the EU-Singapore Free Trade Agreement, the CJEU ruled that the provisions relating to non-direct foreign investment and the investor-State dispute resolution (ISDS) were “shared competence“. Consequently, the CJEU held that the European Union was not entitled to include ISDS mechanisms provisions in its future trade agreements without requesting the involvement of its Member States.
The new approach adopted yesterday by the Council of the EU (and which is backed by the EU Commission) follows this path and recommends to split between separate agreements the provisions relating to investment, which would require the approval by the EU and its Member States (at least to the extent that they concern ISDS measures) and other trade provisions which fall under the exclusive competence of the EU.
The conclusions also confirm that FTAs that are currently being negotiated (such as with Mexico, Mercosur and Chile) will remain mixed agreements.