By Daniel Thym, Chair of Public, European and International Law, University of Konstanz
International trade agreements, particularly the proposed deals between the EU and the US (TTIP) and Canada (CETA), have garnered significant public interest. However, many legal professionals and students lack familiarity with this area of law and often apply domestic legal concepts to the international arena. For instance, there’s an assumption that national courts can enforce international trade rules and that companies can challenge state actions under these agreements in domestic courts. This post clarifies that this is not the case by focusing on Article 14.14 of the Draft CETA, a provision often overlooked in discussions. This article highlights that the impact of these trade agreements might be less significant than perceived.
Understanding CETA and TTIP as International EU Agreements
To grasp the significance of Article 14.14, it’s crucial to recognize that these trade agreements would largely bind EU Member States as part of EU law. Although some argue that these agreements overstep the EU’s authority, the treaties clearly indicate the EU’s competence in this domain, particularly in areas like foreign direct investment.
The Lisbon Treaty clarified and consolidated the EU’s authority in international trade after years of debate. This move was acknowledged by the German Federal Constitutional Court, which recognized the EU’s exclusive power in shaping international trade agreements. However, some uncertainties persist regarding the limits of the EU’s competence in related trade aspects. Therefore, many national governments propose that CETA and TTIP should be “mixed agreements,” requiring approval from both the EU and individual member states. Despite this, EU law would still govern matters falling under the Common Commercial Policy.
Domestic Application of EU Agreements
The dominance of EU law can obscure the distinct nature of international law. While EU law is directly applicable in domestic courts, the same cannot be assumed for international law, even for agreements concluded by the EU. Although the European Court of Justice (ECJ) asserts that international agreements can have direct effect within the EU legal framework, this is not automatic. A prime example is the ECJ’s ruling preventing Member States from mandating language proficiency for spouses of Turkish nationals, based on an interpretation of the Association Agreement with Turkey. This case exemplifies the potential impact of direct effect on non-tariff barriers to trade, a central concern in CETA and TTIP.
However, the ECJ might not automatically grant direct effect to these trade deals. The court considers factors like the agreement’s purpose, the intent of the parties involved, and reciprocity (whether the EU would be the only party recognizing direct effect). While reciprocity might have been less emphasized in agreements with neighboring countries, it plays a key role in evaluating trade liberalization agreements.
Article 14.14 of the CETA Draft Treaty
Given the potential implications of direct effect, Article 14.14 of the CETA Draft Agreement holds significant weight. This article explicitly states that CETA does not grant rights or impose obligations on individuals beyond those established under international law. Crucially, it prevents the agreement from being directly invoked in the domestic legal systems of the participating parties.
This effectively denies direct effect for CETA. Neither the ECJ nor national courts can enforce CETA rules in domestic cases or invalidate conflicting national legislation. CETA and TTIP would be treated similarly to WTO law, which lacks direct effect within the EU and its member states. This means that even if the WTO finds EU legislation incompatible with its rules, domestic courts cannot use this ruling directly.
This lack of direct effect presents challenges, especially for eliminating non-tariff barriers to trade, as the rules are often broadly defined. Without direct enforcement mechanisms, the effectiveness of vaguely worded provisions relies heavily on the continued commitment of the parties involved and the availability of control mechanisms.
Implications for Investor-State Dispute Settlement
Considering Article 14.14, the debate about investor-state dispute settlement mechanisms in CETA and TTIP requires reevaluation. Critics might view the absence of direct application as preferential treatment for investors, while supporters might argue that these mechanisms compensate for the lack of direct legal remedies in domestic courts.
Ultimately, the focus should be on whether special rules for investors are desirable. While these might be less critical in agreements with the US and Canada, abandoning them could complicate negotiations with countries where trust is lower.
The absence of direct effect highlights that CETA and TTIP do not signify EU-style integration through law. Domestic courts lack the authority to overturn national or EU legislation that contradicts these agreements, a power also explicitly denied to dispute settlement bodies. This aligns the dispute settlement mechanisms more with inter-state negotiations, mirroring the WTO framework.
The lack of direct application underscores that CETA and TTIP will not lead to direct enforcement of transatlantic trade rules within domestic legal systems. Importantly, this debate has sparked public discussion about governing economic globalization, a conversation that extends beyond these specific trade agreements.