When she triggered Article 50, the Prime Minister 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; Article 50 is confined to the withdrawal (ie the divorce). So other Treaty provisions will have to provide the basis of a future trade agreement – or agreements since the future deal might comprise one or more Treaties.
In essence, trade agreements with third countries, which is what the UK will become post Brexit, can either be agreed under Article 207 or Article 217 of the Treaty in the Functioning of the European Union (TFEU). The process for negotiating those agreements is largely laid down in Article 218 TFEU.
What follows is not a riveting read but it’s going to be important. It explains what’s next and why Spain – like any of the other 27 Member States – has the power to veto any future trade deal.
Article 207: Free trade Agreements
Article 207 TFEU concerns free trade agreements between the third country (ie non-Member State) and the EU, acting in the framework of its ‘common commercial policy.’ Article 207 provides:
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 titles of Agreements agreed under Article 207 TFEU can vary depending on what the partner wants. They may simply be called Free Trade Agreements (FTAs) (see for example the EU-Singapore FTA or the EU-South Korea FTA) or they might 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 between the EU and the third country. 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 on the basis of Article 217 TFEU. 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 maybe 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 AA agreements. In summary, it provides 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 in consultation with which the negotiations must be conducted (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 obtain the consent of the European Parliament in various cases including when the Council wishes to conclude an Association Agreement, an agreement with important budgetary implications for the Union; or an agreement covering fields to which either the ordinary legislative procedure applies (such as social policy).
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 that 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, can block the AA.
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. Any AA or FTA with the UK 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’. The EU-Singapore Free Trade Agreement is currently being considered by the Court of Justice under this provision.
To complicate matters still 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;
- the commercial aspects of intellectual property
- foreign direct investment
- 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, then it is possible to envisage that it could be adopted under Article 207 by QMV Under this model, 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 can 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 alongside the EU 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. Thus 27 national parliaments must agree and in a federated system like Belgium their 7 parliaments must agree, including Wallonia which nearly blocked the Canadian.
Any FTA or AA with the UK would also likely 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 (and the Court, if it follows its Advocate General in the Singapore FTA case, may support this) to ensure state control over the EU’s activities. This may now backfire in respect of the EU-UK’s own free trade agreement since having Member State agreement and ratification may hold up the whole process of concluding a final deal between the EU and the UK
The divorce agreement under Article 50 needs to be adopted by QMV of the remaining 27 states and agreed by the European Parliament. There will be a vote the UK parliament under the CRAG. 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, the most likely consequences are that it will be adopted under Article 217, using the procedure in Article 218. The scope may mean it requires unanimous voting 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 the six in Belgium. The future deal is going to take a while.
By Professor Catherine Barnard, senior fellow at The UK in a Changing Europe.