The European Court of Justice (ECJ) has found that EU member States must individually ratify any EU trade agreements that provide for investor-State dispute settlement.
In an Opinion dated 16 May 2017, the ECJ held that the EU does not have exclusive competence over matters relating to investor-State dispute settlement. The Opinion was provided following referral from the European Commission in the context of the EU-Singapore Free Trade Agreement (FTA), which was agreed in 2013 but has not yet been ratified.
The investor-State dispute settlement mechanism of the FTA would, if implemented, provide a Singaporean investor with the option of submitting a dispute with an EU Member State to international arbitration. Since this would result in the courts of Member States being unable to exercise jurisdiction over that dispute – a situation to which Member States could not subsequently object – the ECJ held that Member States’ consent was therefore required. Competence over this matter is thus shared between the EU and Member States.
The ECJ nevertheless found that other parts of the FTA fall within the exclusive competence of the EU (including provisions governing customs duties, non-tariff barriers, intellectual property and public procurement). Those parts may be provisionally applied pending agreement from all Member States on provisions over which competence is shared.
For the European Court of Justice’s Opinion, click here.