Mixed agreements?

There is going to be much talk of ‘mixed agreements’, as the future trade deal between the EU and the UK is likely to take such a form. The European Economic Area (EEA) Agreement, by which Norway, Liechtenstein and Iceland participate in the EU’s single market, is one. A mixed agreement is one which, on the European side, has been signed by the EU and by the individual member states.

The involvement of the latter is important because the individual member states may need to go through complex domestic processes to get the agreement passed. And this all takes time – with implications for the EU/UK future deal.

So how does this all happen and why?

What are mixed agreements?

International agreements are negotiated and signed by the EU, its member states, or both. International treaties which fall under the EU’s exclusive competence can be signed only by the EU; the member states have no role. ‘Exclusive competence’ means that in certain fields of activity – listed in Article 3(1) of the Treaty on the Functioning of the European Union (TFEU) – the EU alone has a decision-making power.

The list includes customs matters, competition rules, monetary policy for eurozone countries, the conservation of marine biological resources and common commercial policy (CCP). CCP is of special significance from an external perspective as it covers international trade relations with non-EU countries.

Often, however, international agreements govern questions which fall both under the EU’s exclusive competence and those where the member states have powers. The World Trade Organization (WTO) Agreements provide an example.

In its famous Opinion 1/94 the European Court of Justice ruled that while trade in goods is an exclusive competence of the EU, certain aspects of services and intellectual property rights are shared with member states.

In such situations the EU cannot sign an agreement alone, and member states’ consent is necessary. WTO Agreements are thus signed by both the EU and its member states.

A number of other highly significant international agreements are mixed, including the Energy Charter Treaty (ECT) which liberalizes energy markets and establishes an investment protection system in the field of energy.

These are not the only reasons behind mixed agreements – or ‘mixity’, as it is sometimes called. Member states can request mixity for political reasons, such as visibility and prestige.

Mixity can also result from the inclusion of the so-called ‘subordination clauses’ in international agreements. Subordination clauses require ratification by some, or all, member states before the agreement can be ratified by the EU itself. Thus, many environmental treaties include a subordination clause which obliges the EU to conclude these agreements as mixed.

For example, Annex IX Article 2 of the United Nations Convention on the Law of the Sea (UNCLOS) says that an international organization may sign the Convention if a majority of its member states are signatories to it.

Process

The process of concluding mixed agreements is complex and lengthy. Each member state must sign and ratify such agreements in accordance with its own constitutional requirements. Ratification procedures vary from member state to member state.

In federal countries consent of federal units may be necessary: for example, in Germany this means ratification by the Bundesrat (the chamber of the parliament which represents the sixteen regions), or in Belgium, the approval of the six regional and community parliaments. A failure to ensure ratification by any necessary unit may block an agreement altogether.

A recent example of complexities associated with mixed treaty-making was the refusal by the Belgian region Wallonia to ratify the EU-Canada Comprehensive Economic and Trade Agreement (CETA). The Walloon government, which represents 3.6 million people, rejected the agreement demanding stronger safeguards on labour, environmental and consumer standards than those provided under the CETA framework. Once additional safeguards were offered, the Walloon government consented to the agreement.

CETA took almost a decade to negotiate, and nearly failed due to rejection by a sub-government representing as little as 0.7 percent of the EU’s population. Even without outright rejection, ratification by all member states and their federal governments can take years to complete.

This is especially so in relation to free trade agreements which have significant social and economic implications, and are thus often subject to extensive debates and controversies.

The EU has recently finalized negotiations with several trading partners, including the CETA, the EU-Singapore Free Trade Agreement (EUSFTA), and the EU-Japan Economic Partnership Agreement (EPA).

These new FTAs will cover not only trade but also investment protection matters. The Treaty of Lisbon, which entered into force in 2009, transferred the competence (legal power) to conclude international investment protection agreements from member states to the EU.

Accordingly, the EU is adding investment protections to its recent FTAs. However, last year the European Court of Justice concluded, in Opinion 2/15, that the EU-Singapore FTA must be mixed because the EU does not have exclusive competence over matters relating to investment dispute settlement and portfolio (i.e. passive) investment of securities.

Given the breadth and ambition of the UK’s plans for its own FTA, it seems likely that the future UK-EU trade deal will be mixed, and thus require both agreement from the EU and the member states. The British Prime Minister Theresa May has emphasized on a number of occasions that the United Kingdom will seek to agree with the EU a bold and ambitious free trade agreement. Mixity will be required if the future agreement is at least as comprehensive as CETA.

Accordingly, consent of all member states (in some cases – even their federal/regional governments) will be required. While the European Commission would most probably be given a mandate to negotiate the agreement on behalf of all 27 member states, the process of ratification may take years to complete. The time gap until the ratification of the agreement could be filled by triggering the agreement’s provisional application.

A provisional application would allow the parties to benefit from the agreement upon approval by the member states (expressed in the Council) and the European Parliament pending ratification by the member states. CETA, which provisionally entered into force in September 2017 and will operate on this basis until national ratification processes are completed, serves as an example.

By Emilija Leinarte and Professor Catherine Barnard, University of Cambridge.

Disclaimer:
The views expressed in this explainer are those of the authors and not necessarily those of the UK in a Changing Europe initiative.

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