Effects of free trade and non-free trade EU international agreements
What legal effect does an international agreement, that the EU is a party to, have internally within the Union? Do such international agreements establish rights for Union individuals? What happens if a member state measure or an EU measure is in conflict with such an international agreement?
This blog post deal with the legal effects of international agreements from a comparative perspective, looking at the approach by the Court on the direct effect/direct applicability to free trade agreements on goods, in comparison to the Court’s approach to non-free trade agreements.
Union competence on international agreements
The Union has the competence to conclude international agreements according to art. 216(1) TFEU. Agreements concluded by the Union are binding on the Union institutions and on the member states as stipulated in art. 216(2) TFEU. Furthermore, agreements concluded by the Union with third countries or international organizations are considered to be an integral part of Union law (see to that effect Haegeman). Consequently, a member state that does not fulfill obligations as stipulated by an international agreement, concluded by the Union, are in breach of Union law (see to that effect Commission v France).
If international agreements that the Union is party to, form an integral part of Union law, questions arises concerning the legal effect of such agreements. Do such agreements have direct effect, so as to confer rights to individuals that can be relied on directly before a national court? Can such agreements be directly applicable, so as to be relied on for challenging the validity of an EU legislation?
The CJEU has given answers, a fairly spreading regime, to the legal effects of international agreements where the absolute majority of them have been concerned with free trade agreements. It was not until 1998 that the Court actually dealt with the question on what legal effect a non-trade agreement, that the Union is a party to, brings to the fore (see to that effect CIWF). By using some of the Court’s landmark cases I will try to describe the Court’s approach to free-trade and non-free trade agreements.
Legal effects of free trade agreements
Starting of its regime in 1972 with International fruit, the Court were asked to answer in a preliminary ruling whether the GATT agreement could be invoked and relied upon before a national court in a challenge to the validity of three Commission regulations . The Court reasoned that such a validity challenge was possible if the provisions of the GATT agreement confer rights on individuals that they can invoke before a court. It was held that when determine if the provisions confer rights, the assessment must be made considering the spirit, purpose and the terms of the GATT agreement . The Court’s reference to the nature of the agreement has then been reiterated in all cases where the direct effect test has been applied, thus laying down the constitutional foundation for the legal effects of international agreements.
Considering the substantive assessment in International Fruit, the Court held that GATT is a result of negotiations with reciprocal and mutually advantageous arrangement, with flexible provisions and the possibility of derogations, wherefore the Agreement does not confer rights to individuals that they can invoke before a Court . That assessment would be of great importance, defining the relationship between WTO agreements and EU law, since it would be subject to numerous challenges where the Court has basically reiterated its stand from International Fruit.
In Kupferberg in 1982, a German wine importer challenged a national tax provision to the import of spirits, on the ground that the provision was in conflict with the EEC-PORTUGAL AGREEMENT OF 22 JULY 1972. The Court first applied the direct effect criteria as established in International Fruit but after concluding that the spirit and purpose of the agreement did not prevent it from being relied on directly the Court attached another condition to the assessment; the provision also needed to be unconditional and precise in relation to the context of the agreement of which the provision form a part . That meant that the provision needed to be assessed in light of the objective and purpose of the agreement, as well as assessed in light of the context of the provision.
Reading International Fruit in conjunction with Kupferberg, it is clear that a two-step direct effect/direct applicability test has emerged for free trade agreements; an international agreement can confer rights to individuals that can be invoked before a court if the nature and structure of the agreements does not prevent it, and if the specific provision is unconditional and precise enough. This two-step test has later been used in several cases such as Anastasiu, Chiquita Italia and Katsivardas.
Legal effects of non free-trade agreements
In the Intertanko case from 2008 the Court gave its ruling on the direct applicability of the United Nations Convention on the Law of the Sea (UNCLOS). The claimants, an association representing about 80% of the Shipping industry brought action against the validity of the EU Shipping Pollution Directive, claiming it was in breach of UNCLOS so as that the directive laid down a stricter regime than the Treaty.
The Court rejected the claimant’s submission on the ground that: “it must be found that UNCLOS does not establish rules intended to apply directly and immediately to individuals and to confer upon them rights or freedoms capable of being relied upon against States”.
The ground for rejection of the UNCLOS Treaty in was clearly a restrictive interpretation of the legal effect of the agreement and a change to the Court’s approach. Setting the condition that the provisions of the agreement must be intended to apply directly and be designed to confer rights on individuals is clearly excluding most of the international agreements that the Union is bound by.
Furthermore, notice how the test is applied, it is not a test to the relevant provision at hand but it is test concerned with the nature and structure of the agreement. The question on whether the agreements has direct effect is not based on whether the nature of the agreements prevent it, rather, according to the Court in Intertanko the precondition is that the nature of the agreement prevent it from being directly applicable if it is not intended and designed to confer rights on individuals.
This approach to the application of the direct effect test was later confirmed by the CJEU in ATA and others in 2011 where the court ruled in the direct applicability of the Kyoto Protocol and the Open skies agreement in a challenge to the validity of the Greenhouse gas emission Directive 2008/101.
Concerning the direct applicability of the Kyoto Protocol, however referring to the possibility of derogation and the establishment of a dispute settlement procedure between the parties on issues concerning implementation on the agreement, the Court finally rejected the direct applicability on the ground that the provision was not unconditional and precise enough.
Concerning the direct applicability of the Open Skies agreement, an agreement establishing provisions for airlines within the member states and which seeks to liberalize the air transport sector. The Court held that it does not matter that the agreement establishes a special framework for negotiations on how to implement the treaty, neither is it of relevance that the agreement establishes a special tribunal for disputes concerning the application or interpretation of the agreement. What did matter to the Court, was that the agreement establishes certain rights and obligations designed to apply directly and immediately to airlines, which according to the Court, confer rights to individuals that they can rely on before a court.
Conclusion
Considering the Courts application of the direct effect test in Intertanko and ATA and others, it is clear that the approach is less receptive when applied to non-free trade agreements than to free trade agreements. Intertanko dropped down like a bomb among legal scholars and ATA and others were very much awaited to give answer to whether an agreement actually needed to be designed to confer rights, to factually confer confers rights on individuals.
So why this difference in approach? It could be that the restrictive approach applied to non-free trade agreements will be the new lex lata applied to all international agreements, that is to say, that there is no difference. Considering the contextual differences to the agreements however, it indicates that the answers has a political angle rather than a judicial.
Firstly, the free trade agreements concerning goods tend to be bilateral agreements with a close relationship between the Union and the parties (see to that effect Pabst, Anastasiu and Bresciani). In Kupfenberg the agreement concerned was an association agreement between Portugal and the Union, whereas the non-free trade agreements tend to be multilateral agreements with lots of states, which consequently excludes a close relationship between the parties. Obviously the Union influence on bilateral negotiations is greater than the influence the Union might have on multilateral agreements. Thus, giving rise to a political motive for why the Court is more receptive to direct applicability of bilateral free trade agreements.
Secondly, decisions on free trade agreements has in general concerned challenges to domestic law, whereas the non-free trade agreements has mainly involved challenges to EU-legislation. That difference might be of great importance for explaining the differences in the Courts approach to the legal effects of the agreements. The conclusion that an international agreement should be interpreted directly in relation to domestic law does not stipulate any further obligation on the Union. By contrast, when the Court concludes that an EU-legislation is invalid due to its incompatibility with international agreements, it will lead to considerable consequences for the Union and the Union legislator. In such a case, the directive must be amended in coherence with the ordinary legislative procedure, thus subjecting the provisions to negotiation and derogation. It is likely that the Court wants to avoid such a situation as far as possible.
Finally, it is rare that international agreements are designed to be applied directly by individuals, wherefore the regime on free trade agreements that is receptive to de facto rights unconditional to the intention of the provision, offer a wider scope for direct applicability of international agreements but limits the Court’s own discretion. Consequently, a more restrictive approach increases the Court’s discretion and limits the Court’s dependence of international treaties. That might be of special importance to the CJEU considering the nature of multilateral agreements, in order to limit the Court’s dependency of geopolitical interests.
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