When she triggered Article 50, the Prime Minster said in her letter to Donald Tusk, the President of the European Council, that:
The United Kingdom wants to agree with the European Union a deep and special partnership that takes in both economic and security cooperation. To achieve this, we believe it is necessary to agree the terms of our future partnership alongside those of our withdrawal from the EU.
Negotiating this partnership cannot be done under Article 50, which is confined to the withdrawal itself. Other Treaty provisions will provide the basis of a future trade agreement – or agreements as the deal might comprise one or more Treaties. In essence, trade agreements with third countries (that, is, non EU member states), can either be agreed under Article 207 or Article 217 of the Treaty on the Functioning of the European Union (TFEU). And we cannot conclude the future trade agreement until we have left the EU and become a third country – a point the Prime Mininster Theresa May herself made in her Florence speech.
The process for negotiating such agreements is largely laid down in Article 218 TFEU.Article 218 will become the new Article 50. It’s what everyone will need to be familiar with in order to understand why, among other things, all 27 Member States may have the power to veto any future trade deal.
Article 207: free trade agreements
Article 207 TFEU concerns free trade agreements between a third country (ie non-Member State) and the EU, acting in the framework of its ‘common commercial policy’:
The common commercial policy shall be based on … the conclusion of tariff and trade agreements relating to trade in goods and services, and the commercial aspects of intellectual property, foreign direct investment, the achievement of uniformity in measures of liberalisation, export policy and measures to protect trade such as those to be taken in the event of dumping or subsidies.
The names of the agreements negotiated under Article 207 TFEU can vary depending on what the partner wants. They may simply be called Free Trade Agreements (FTAs), such as the EU-Singapore FTA or the EU-South Korea FTA. Alternatively, they may be called Comprehensive Economic Trade Agreements (CETAs) or Economic Partnership Agreements. The recent free trade agreement with Canada was a CETA.
Article 217 Association Agreements
Article 217 TFEU also concerns agreements with third countries, but usually in the context of deeper and closer arrangements. These are called Association Agreements (AAs). Article 217 TFEU provides:
The Union may conclude with one or more third countries or international organisations agreements establishing an association involving reciprocal rights and obligations, common action and special procedure.
Association Agreements were signed with Ukraine, Georgia and Moldova in 2014. According to the Commission, these three AAs represent ‘the most extensive form of co-operation offered by the EU to its non-candidate neighbours to date. [They] foresee far reaching political and economic integration with the EU by significantly deepening political and economic ties.’
The political and cooperation provisions of the Association Agreement (AA) with Ukraine have been provisionally applied since November 2014. The AA also contains a Deep and Comprehensive Free Trade Agreement (DCFTA) which the EU and Ukraine have provisionally applied since 1 January 2016. Such agreements often involve the partner country accepting most of the EU’s acquis communautaire, i.e. most rules concerning the single market and other parts of the EU legal order.
It will ultimately be a political decision whether the future deal the UK wishes to adopt will be under Article 207 as a free trade deal (which as the Canadian CETA shows can be broad in scope) or as an Association Agreement (deeper but suggests ever closer cooperation with the EU) or possibly both. It may be that Article 217 will be the favoured option given the depth of the partnership called for by the Prime Minister.
Article 218 TFEU: the process
Article 218 lays down the process for negotiating and concluding these association agreements. In summary, it states that the Council of Ministers (ie ministers of the Member States):
- must authorise the opening of negotiations, following a recommendation from the Commission and, depending on the subject of the agreement envisaged, nominate the Union negotiator, normally the Commission, or the head of the Union’s negotiating team (Art 218(3));
- may adopt negotiating directives ie instructions to the negotiator, normally the Commission. It can also designate a special committee which the Commission must consult with as the negotiations proceed (Art 218(4));
- must authorise the signing of agreements, on a proposal from the negotiator, and, if necessary, the provisional application of the agreement before its entry into force (Art 218(5)); and must conclude the agreements, following a proposal by the negotiator ((Art 218(6)).
Prior to adopting the decision concluding the agreement, the Council must, in various circumstances, obtain the consent of the European Parliament. In these cases, the European Parliament must deliver its opinion within a time-limit which the Council sets depending on the urgency of the matter. In the absence of an opinion within that time-limit, the Council may act. Consent (ie agreement) of the Parliament should not be overlooked; it is by no means a foregone conclusion.
The European Parliament must also be ‘immediately and fully informed at all stages of the procedure’ (Article 218(10)). Article 218 TFEU doesn’t prescribe how the Parliament must be kept informed. A separate ‘Framework Agreement’ between the Commission and the Parliament gives further detail on how the two institutions should work together, including sharing negotiating Directives and allowing Members of the European Parliament (MEP) to participate as observers during negotiations.
The Council must act by a qualified majority vote (QMV) throughout the procedure (Art 218(8)). This means agreement is needed from 72% of the 27 member states (representing at least 65% of the total population of the 27 Member States). However, the Council must act unanimously when the agreement covers a field for which unanimity is required for the adoption of a Union act, as well as for association agreements. So given the breadth of any possible AA with the UK, it may be subject to unanimous voting. This means that any Member State, including Spain, Poland or Hungary can block the AA, possibly for internal political reasons.
Finally, Article 218 provides that a Member State, the European Parliament, the Council or the Commission may obtain the Opinion of the Court of Justice as to whether an agreement envisaged is compatible with the Treaties. This is important because the Court is the ultimate arbiter of what can be done under which provision of the Treaty and how. So, for example, the EU-Singapore Free Trade Agreement was considered by the Court of Justice under this provision.
The Court has been asked to consider questions about the compatibility of aspects of the Canadian CETA, specifically its provisions on investor protection, with EU law. Any AA or FTA with the UK therefore must comply with the technicalities of the Treaty: ‘Where the opinion of the Court is adverse, the agreement envisaged may not enter into force unless it is amended or the Treaties are revised’.
To complicate matters further, if the agreement is an FTA under Article 207, Article 218 will also apply but subject to the special provisions of Article 207(3) TFEU. This provides that, as with Article 218, the Commission must make recommendations to the Council, which must authorise it to open the necessary negotiations, but that both the Council and the Commission are responsible for ensuring that the agreements negotiated are compatible with internal Union policies and rules.
The Commission must conduct those negotiations in consultation with a special committee appointed by the Council to assist the Commission in this task and within the framework of such directives as the Council may issue to it, and that the Commission must report regularly to the special committee and to the European Parliament on the progress of negotiations.
In terms of voting on the negotiation and conclusion of the agreements under Article 207(3), the Council must act by a qualified majority. However, unanimity is required for the negotiation and conclusion of agreements in, for example, the fields of:
- trade in services (Considered crucial by many in the UK);
- the commercial aspects of intellectual property
- foreign direct investment
where such agreements include provisions for which unanimity is required for the adoption of internal rules (this is rare). Unanimity is also required in respect of agreements in
- trade in cultural and audio-visual services, where these agreements risk prejudicing the Union’s cultural and linguistic diversity;
- trade in social, education and health services, where these agreements risk seriously disturbing the national organisation of such services and prejudicing the responsibility of Member States to deliver them.
Were the EU-UK to adopt a number of agreements, one of which focuses on narrow trade issues only, such as tariff-free movement of goods between the EU and the UK, then it is possible to envisage that this narrow agreement could be adopted under Article 207 by QMV. However, the more ambitious aspects of a ‘deep trade agreement’ would have to be adopted by unanimous voting. Therefore any one of the 27 Member States could block the deal in Council.
But that’s not the end of it. Where the agreement, whether under Article 207 or 217, contains provisions that fall under Member State responsibility (‘competence’), individual Member States also have to ratify the agreement according to their national ratification procedures. These are known as mixed agreements; the EU-Canada CETA was adopted as a mixed agreement as was the EU-Ukraine Association Agreement. The Court has ruled that the EU-Singapore agreement could not, in its current form, be concluded by the EU alone, because some of the provisions (on investment) envisaged fell within competences shared between the EU and the Member States.
Thus 27 national parliaments must agree and in a federated system like Belgium, 7 parliaments have a say. Any FTA or AA with the UK would probably be a mixed agreement. There is power to bring it into force provisionally pending its ratification. In the past, the UK has pushed for as many of these international agreements as possible to be concluded as mixed agreements to ensure state control over the EU’s activities. The irony is that the UK may now find itself a victim of the very member state control it once lobbied for.
The need for national ratification of any future trade deal was recognised by Theresa May in her Florence speech: ‘And such an agreement on the future partnership will require the appropriate legal ratification, which would take time’. This is one of the reasons why there will be a need for a period of transition – or implementation, as Theresa May prefers to call it, to bridge the gap between the divorce and the future trade deal.
Most people, including the Prime Minister, think that the transition can be done under the powers in Article 50, provided the transition arrangements are time limited. If transition were to become indefinite, Article 50 would not be an adequate legal basis; an indefinite transition arrangement would de facto become an agreement on the future deal which would need to be adopted under Article 207 or Article 217.
The Article 50 (divorce) agreement must be adopted by a qualified majority of the 27 and agreed by the European Parliament. There will be a vote in the UK parliament under the Constitutional Reform and Governance Act (CRAG) 2010. The withdrawal agreement is ‘self-executing’ under Article 216 TFEU; the Member States do not need to ratify it.
By contrast, in respect of the future deal between the EU and the UK, it is more likely to be adopted under Article 217, using the procedure in Article 218. The scope may mean it requires a unanimous vote in Council; the breadth may include areas of Member State competence and so it will be a mixed agreement. It will therefore require the agreement of the 27 parliaments and any federal parliaments such as those in Belgium. This deal, then, is going to take a while.
 Part 2 of this Act puts ‘Parliamentary scrutiny of treaty ratification on a statutory footing and gives legal effect to a resolution of the House of Commons or Lords that a treaty should not be ratified. This means that should the House of Commons take the view that the Government should not proceed to ratify a treaty, it can resolve against ratification and thus make it unlawful for the Government to ratify the treaty.
The House of Lords will not be able to prevent the Government from ratifying a treaty, but if they resolve against ratification the Government will have to produce a further explanatory statement explaining its belief that the agreement should be ratified. Part 2 concerns scrutiny of the ratification of agreements entered into by the Government under international law. It does not change the current position that an Act of Parliament would be required if it were intended to give effect in domestic law to matters embodied in such an agreement.
By Professor Catherine Barnard, senior fellow at The UK in a Changing Europe.
The views expressed in this explainer are those of the authors and not necessarily those of the UK in a Changing Europe initiative.