OPINION OF ADVOCATE GENERAL

SHARPSTON

delivered on 21 December 2016 ( 1 )

Opinion procedure 2/15

initiated following a request made by the European Commission

‛Request for an Opinion pursuant to Article 218(11) TFEU — Conclusion of the Free Trade Agreement between the European Union and the Republic of Singapore — Allocation of competences between the European Union and the Member States’

Table of contents

The EUSFTA EU law Treaty on European Union Treaty on the Functioning of the European Union The request for an Opinion of the Court The issues raised by the Commission’s request for an Opinion The allocation of competences between the European Union and the Member States and the legal basis for concluding the EUSFTA Article 207(1), (5) and (6) TFEU Article 3(2) TFEU Objectives of and general definitions relevant to the EUSFTA (Chapter One of the EUSFTA ) Arguments Analysis Trade in goods (Chapters Two to Six of the EUSFTA and Protocol 1 to the EUSFTA ) Arguments Analysis Services, Establishment and Electronic Commerce (Chapter Eight of the EUSFTA ) Arguments General arguments Arguments regarding transport Analysis Introduction Exclusive competence on the basis of Article 207(1) TFEU, read together with Article 3(1) TFEU Matters excluded from the scope of the common commercial policy as a result of Article 207(5) TFEU Exclusive competence on the basis of Article 3(2) TFEU – The first ground under Article 3(2) TFEU – The third ground under Article 3(2) TFEU Investment (Chapter Nine, Section A, of the EUSFTA ) Arguments Analysis Introduction Exclusive competence on the basis of Article 207(1) TFEU, read together with Article 3(1) TFEU – The meaning of ‘foreign direct investment’ in Article 207(1) TFEU – The regulation of ‘foreign direct investment’ as part of the common commercial policy – Conclusion in relation to the European Union’s competence under Article 207(1) TFEU The European Union’s competence on the basis of Article 63 TFEU, read together with Article 3(2) TFEU The European Union’s shared competences with the Member States Whether the EUSFTA may terminate bilateral agreements concluded between the Member States and Singapore Government Procurement (Chapter Ten of the EUSFTA ) Arguments Analysis Intellectual Property (Chapter Eleven of the EUSFTA ) Arguments Analysis The meaning of ‘commercial aspects of intellectual property’ in Article 207(1) TFEU The European Union’s competence over Chapter Eleven of the EUSFTA Competition and Related Matters (Chapter Twelve of the EUSFTA ) Arguments Analysis Non-tariff barriers to trade and investment in renewable energy generation (Chapter Seven of the EUSFTA ) and trade and sustainable development (Chapter Thirteen of the EUSFTA ) Arguments Non-tariff barriers to trade and investment in renewable energy generation Trade and sustainable development Analysis Trade and non-trade related objectives: general principles Non-tariff barriers to trade and investment in renewable energy generation Trade and sustainable development Transparency and administrative and judicial review of measures having general application (Chapter Fourteen of the EUSFTA and related provisions of other chapters ) Arguments Analysis Dispute settlement and mediation (Chapters Nine, Section B, and Chapters Thirteen, Fifteen and Sixteen of the EUSFTA ) Arguments Analysis Institutional, general and final provisions (Chapter Seventeen of the EUSFTA ) Arguments Analysis Assessment of the European Union’s external competence to conclude the EUSFTA Conclusion Annex — Summary description of the EUSFTA

1. The European Commission seeks an Opinion from the Court under Article 218(11) TFEU on the allocation of competences between the European Union and the Member States as regards concluding the Free Trade Agreement envisaged between the European Union and the Republic of Singapore (‘the EUSFTA’). ( 2 ) The text of the EUSFTA as negotiated by the Commission provides that it is to be concluded as an agreement between the European Union and the Republic of Singapore (‘Singapore’), without participation of the Member States. The Commission seeks guidance from the Court on whether that approach is correct.

2. The Commission argues that the European Union has exclusive competence to conclude the EUSFTA. It submits that most of that agreement comes within the European Union’s competence under Article 207 TFEU for the common commercial policy, which is an exclusive competence (Article 3(1)(e) TFEU), and that the European Union’s exclusive competence to conclude other parts of the agreement results from a legislative act giving it authority to do so (the first ground under Article 3(2) TFEU) or from the fact that conclusion of the EUSFTA may affect common rules or alter their scope (the third ground under Article 3(2) TFEU). The European Parliament generally agrees with the Commission. All the other parties having submitted observations contend that the European Union cannot conclude that agreement on its own, because certain parts of the EUSFTA fall within the shared competence of the European Union and the Member States and even the exclusive competence of the Member States. It follows that the Member States should also be a party to the EUSFTA.

3. The EUSFTA forms part of a new generation of trade and investment agreements negotiated or in the course of negotiation by the European Union and trade partners in other regions of the world. The agreement is not a ‘homogeneous agreement’: it does not cover one particular area or subject matter nor does it pursue a single objective. It seeks to achieve, in particular, liberalisation of trade and investment and guarantees certain standards of protection in a manner that reconciles economic and non-economic objectives. Whilst building on existing rules found in the World Trade Organisation (‘WTO’) agreements, ( 3 ) the EUSFTA also extends those rules and covers matters that are not (yet) part of those agreements.

4. In order to determine whether the European Union may conclude the EUSFTA without the Member States, it is first necessary to reach a clear understanding of the matters which that agreement covers and the objectives that it pursues. ( 4 ) That will then serve as a basis for applying the different Treaty rules on the allocation of competences to the European Union and the nature of those competences. In so doing, it is appropriate to apply the rules set out in Article 3(1) TFEU (on express exclusive competence) before applying those laid down in Article 3(2) TFEU (on implied exclusive competence ( 5 )) and, if necessary, in Article 4 TFEU (on shared competence).

The EUSFTA

5. In December 2006, the Commission recommended that the Council of the European Union authorise it to negotiate a free trade agreement with countries of the Association of Southeast Asian Nations (‘ASEAN’) on behalf of the European Community and the Member States. In April 2007, the Council authorised the Commission to start negotiations. The negotiations relating to a region-to-region agreement proved to be difficult and were therefore suspended. The Commission then suggested pursuing bilateral free trade agreements with relevant ASEAN countries, starting with Singapore. In December 2009, the Council, relying on the negotiating directives it had issued for negotiations with ASEAN, authorised the Commission to negotiate a trade agreement with Singapore. Those negotiations commenced in March 2010. In September 2011, the Council modified the negotiating directives so as to add investment to the list of topics covered. In so doing, the Council stated that the objective was that the investment chapter of the agreement would cover areas of shared competence, such as portfolio investment, ( 6 ) dispute settlement and property and expropriation.

6. On 20 September 2013, the European Union (acting through the Commission) and Singapore initialled the text of the EUSFTA (meaning that they accepted it as definitive), with the exception of the chapter on investment. That text was made publicly available on the same day.

7. When it became clear that that text provided for signature and conclusion of the EUSFTA by the European Union without participation of the Member States, the Trade Policy Committee (a committee appointed by the Council under Article 207(3) TFEU) in February 2014 referred the matter to the Committee of Permanent Representatives (‘Coreper’). The Trade Policy Committee invited Coreper to confirm the procedure for signing and concluding the EUSFTA and asked it to invite the Commission, as negotiator on behalf of the European Union and the Member States, to adapt the text to the mixed character of that type of agreement. Coreper indicated that there was a clear sense of agreement among delegations that the EUSFTA should be signed and concluded as a mixed agreement, meaning that both the European Union and the Member States should be a party to it.

8. The negotiations on the investment chapter were concluded in October 2014. In June 2015, the Commission sent the Trade Policy Committee the consolidated text of the investment chapter and indicated that the entire agreement was now initialled.

9. The EUSFTA consists of a preamble, 17 chapters, a protocol and five understandings.

10. Chapter One (‘Objectives and General Definitions’) states that the objectives of the EUSFTA are to establish a free trade area consistent with Article XXIV of the GATT 1994 ( 7 ) and Article V of the GATS ( 8 ) and to liberalise and facilitate trade and investment between the Parties in accordance with the EUSFTA.

11. Chapter Two (‘National Treatment and Market Access for Goods’) begins by reaffirming the obligation of the Parties to accord national treatment ( 9 ) pursuant to Article III of the GATT 1994 (which that chapter incorporates into the EUSFTA). It also sets out obligations regarding non-tariff measures. Separate provisions apply to the making available and sharing of information, notifications and enquiries and the administration of measures covered.

12. Chapter Three (‘Trade Remedies’) sets out obligations regarding, on the one hand, anti-dumping and countervailing measures and, on the other hand, two types of safeguards (global safeguard measures and bilateral safeguard measures).

13. Chapter Four (‘Technical Barriers to Trade’) aims to facilitate and increase trade in goods between the Parties by providing a framework to prevent, identify and eliminate unnecessary barriers to trade within the scope of the TBT Agreement (which is made part of the EUSFTA).

14. Chapter Five (‘Sanitary and Phytosanitary Measures’) aims to (a) protect human, animal and plant life and health in the respective territories of the Parties while facilitating trade between the Parties in the area of sanitary and phytosanitary measures (‘SPS measures’); (b) to collaborate on the further implementation of the Agreement on the Application of Sanitary and Phytosanitary Measures (‘the SPS Agreement’); and (c) to provide a means to improve communication, cooperation and resolution of issues related to the implementation of SPS measures affecting trade between the Parties.

15. Chapter Six (‘Customs and Trade Facilitation’) recognises the importance of customs and trade facilitation in the evolving global trading environment and of reinforcing cooperation in that area. It sets out the principles on which the customs provisions and procedures of the Parties are to be based.

16. The objectives of Chapter Seven (‘Non-Tariff Barriers to Trade and Investment in Renewable Energy Generation’) are to promote, develop and increase the generation of energy from renewable and sustainable non-fossil sources (‘green energy’), particularly through facilitating trade and investment. The chapter applies to measures which may affect trade and investment between the Parties concerning the generation of green energy but not to the products from which energy is generated.

17. In Chapter Eight (‘Services, Establishment and Electronic Commerce’), the Parties reaffirm their respective commitments under the WTO Agreement. ( 10 ) That chapter lays down the necessary arrangements for the progressive reciprocal liberalisation of trade in services, that is to say, the cross-border supply of services from the territory of a Party into the territory of the other Party and in the territory of a Party to a service consumer of the other Party, establishment, and the temporary presence of natural persons for business purposes. It addresses electronic commerce separately. It also contains provisions regarding domestic regulation of computer services, postal services, telecommunications services, financial services and international maritime transport services.

18. Chapter Nine (‘Investment’) consists of two parts.

19. Section A contains the substantive provisions on investment protection. For the purposes of that chapter, an ‘investment’ is ‘every kind of asset which has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, the assumption of risk, or a certain duration’. The main requirements concern national treatment, fair and equitable treatment and full protection and security as well as compensation for losses suffered owing to war or other armed conflict, revolution, a state of national emergency, revolt, insurrection or riot in the territory of the other Party. Section A also provides that neither Party is directly or indirectly to nationalise, expropriate or subject to measures having an effect equivalent to nationalisation or expropriation the investments of investors of the other Party covered by that section except when certain conditions are satisfied. Each Party must, in addition, allow all transfers relating to an investment covered by Chapter Nine to be made in a freely convertible currency without restriction or delay. Upon the entry into force of the EUSFTA, the bilateral agreements between Member States and Singapore listed in Annex 9-D are to cease to have effect and to be replaced and superseded by the EUSFTA.

20. Section B puts in place an ‘Investor-State Dispute Settlement’ (‘ISDS’) mechanism. That mechanism, which may involve arbitration, applies to a dispute between a claimant of one Party and the other Party concerning treatment (including failure to act) by the latter Party allegedly breaching the provisions of Section A and causing loss or damage to the claimant or its locally established company. A separate provision states that in principle neither Party shall give diplomatic protection, or bring an international claim, in respect of a dispute which one of its investors and the other Party have consented to submit or has submitted to arbitration under Section B of Chapter Nine.

21. Chapter Ten (‘Government Procurement’) applies to any measure regarding a form of procurement covered by the agreement, that is to say, procurement carried out by a listed entity and having a value which exceeds a given threshold.

22. Chapter Eleven (‘Intellectual Property’) sets out rights and obligations with respect to seven categories of intellectual property rights that are also covered by the TRIPS Agreement and one category that is not covered by that agreement, namely, plant variety rights. The structure of that section follows that of the TRIPS Agreement: each sub-section addresses an intellectual property right covered by the EUSFTA and also incorporates rights and obligations set out in other multilateral agreements (some of which are part of the TRIPS Agreement and others of which are not).

23. Chapter Twelve (‘Competition and Related Matters’) focuses on the importance of free and undistorted competition in the Parties’ trade relations. It sets out principles relating to antitrust and mergers, public undertakings, undertakings entrusted with special or exclusive rights and State monopolies and subsidies.

24. Chapter Thirteen (‘Trade and Sustainable Development’) concerns the Parties’ commitment to developing and promoting international trade and their bilateral trade and economic relationship in such a way as to contribute to sustainable development. The main obligations require each Party to establish its own levels of environmental and labour protection and to adopt or modify its relevant laws and policies accordingly, consistently with the principles of internationally recognised environmental and labour standards or agreements to which it is a party. The chapter also includes separate obligations regarding trade in timber and timber products and in fish products, as well as specific provisions governing dispute settlement.

25. Chapter Fourteen (‘Transparency’) contains obligations seeking to establish a transparent and predictable regulatory environment for economic operators and laying down clarifications and improved arrangements for transparency, consultation and better administration of measures of general application. Those obligations apply in principle together with more specific rules in other chapters of the EUSFTA.

26. Chapter Fifteen (‘Dispute Settlement’) sets out the generally applicable rules governing the avoidance and settlement of any difference between the Parties concerning the interpretation and application of the EUSFTA with a view, where possible, to reaching a mutually acceptable solution. The different stages in that dispute settlement procedure are: the request for consultations, (the request for) the establishing of an arbitration panel, the issuing of an interim report and the issuing of the final ruling. Separate provisions address implementation proceedings and remedies to induce compliance.

27. Chapter Sixteen (‘Mediation Mechanism’) establishes a mediation mechanism aimed at finding a mutually agreed solution through a comprehensive and expeditious procedure with the assistance of a mediator. It applies to any measure falling within the scope of the EUSFTA that adversely affects trade or investment between the Parties, except as otherwise provided.

28. Chapter Seventeen (‘Institutional, General and Final Provisions’) contains three categories of provisions. A first category lays down an institutional structure consisting of various committees in which the Parties are to meet in order to supervise and facilitate the implementation and application of the EUSFTA. A second category concerns decision-making, amendments, the entry into force, direct effect, accession, territorial application of the EUSFTA, the different annexes and other texts forming an integral part of the EUSFTA and the authentic versions of the text of the EUSFTA. A third category concerns substantive matters, including taxation, current account and capital movements, sovereign wealth funds, restrictions to safeguard the balance-of-payments and security exceptions.

29. Attached to the text of the chapters of the EUSFTA is a protocol on rules of origin, understandings concerning Article 17.6 (taxation), the remuneration of arbitrators, additional customs-related provisions, mutual recognition of authorised economic operator programmes and Singapore’s specific constraints of space or access to natural resources.

30. A more detailed summary of the EUSFTA is included in the Annex to my Opinion. The purpose of that annex is not to summarise every aspect of the EUSFTA but rather to provide a summary of the main points that are relevant to this Opinion. Both the description of the request, the Parties’ submissions and my analysis of the request should be read together with that annex.

EU law

Treaty on European Union

31. Article 5 TEU establishes the principle of conferral, according to which competences not conferred upon the European Union by the Treaties remain with the Member States. ( 11 ) Article 5(2) TEU provides that ‘… the Union shall act only within the limits of the competences conferred upon it by the Member States in the Treaties to attain the objectives set out therein’ and that ‘competences not conferred upon the Union in the Treaties remain with the Member States’.

32. Article 21(2) TEU refers to the principles to be respected and objectives to be pursued by the European Union in defining and pursuing common policies and actions. The same principles and objectives apply to the development and implementation of the European Union’s external action and the external aspects of its other policies (Article 21(3) TEU). Those objectives include ‘encourag[ing] the integration of all countries into the world economy, including through the progressive abolition of restrictions on international trade’ (Article 21(2)(e) TEU) and ‘help[ing] develop international measures to preserve and improve the quality of the environment and the sustainable development management of global natural resources, in order to ensure sustainable development’ (Article 21(2)(f) TEU).

Treaty on the Functioning of the European Union

33. Article 2 TFEU provides, in particular: ‘1. When the Treaties confer on the Union exclusive competence in a specific area, only the Union may legislate and adopt legally binding acts, the Member States being able to do so themselves only if so empowered by the Union or for the implementation of Union acts. 2. When the Treaties confer on the Union a competence shared with the Member States in a specific area, the Union and the Member States may legislate and adopt legally binding acts in that area. The Member States shall exercise their competence to the extent that the Union has not exercised its competence. [ ( 12 )] The Member States shall again exercise their competence to the extent that the Union has decided to cease exercising its competence. …’

34. The sole article in Protocol No 25 ( 13 ) on the exercise of shared competence states: ‘With reference to Article 2(2) [TFEU] on shared competence, when the Union has taken action in a certain area, the scope of this exercise of competence only covers those elements governed by the Union act in question and therefore does not cover the whole area.’

35. Article 3(1) TFEU describes the areas where the European Union has exclusive competence, including: ‘(a) customs union; … (d) the conservation of marine biological resources under the common fisheries policy; (e) common commercial policy’.

36. Pursuant to Article 3(2) TFEU, the European Union also enjoys exclusive competence to conclude an international agreement ‘… when its conclusion is provided for in a legislative act of the Union [first ground] or is necessary to enable the Union to exercise its internal competence [second ground], or in so far as its conclusion may affect common rules or alter their scope [third ground]’.

37. Article 4 TFEU concerns shared competences and states: ‘1. The Union shall share competence with the Member States where the Treaties confer on it a competence which does not relate to the areas referred to in Articles 3 and 6. [ ( 14 )] 2. Shared competence between the Union and the Member States applies in the following principal areas: (a) internal market; (b) social policy, for the aspects defined in this Treaty; … (d) agriculture and fisheries, excluding the conservation of marine biological resources; (e) environment; … (g) transport; … (i) energy; …’

38. According to Article 9 TFEU, which is part of the provisions having general application, in defining and implementing Union policies and activities, the European Union is to ‘… take into account requirements linked to the promotion of a high level of employment [and] the guarantee of adequate social protection …’.

39. Article 11 TFEU (also part of the provisions having general application) states that ‘environmental protection requirements must be integrated into the definition and implementation of the Union’s policies and activities, in particular with a view to promoting sustainable development’.

40. Part Five, Title I, of the TFEU, which comprises Articles 205 to 207 TFEU, contains the general provisions on the European Union’s external action.

41. Article 206 TFEU states that ‘by establishing a customs union in accordance with Articles 28 to 32, the Union shall contribute, in the common interest, to the harmonious development of world trade, the progressive abolition of restrictions in international trade and on foreign direct investment, and the lowering of customs and other barriers’.

42. Article 207(1) TFEU provides: ‘The common commercial policy shall be based on uniform principles, particularly with regard to changes in tariff rates, 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 common commercial policy shall be conducted in the context of the principles and objectives of the Union’s external action.’

43. According to Article 207(5) TFEU, ‘the negotiation and conclusion of international agreements in the field of transport shall be subject to Title VI of Part Three ?comprising the provisions regarding the common transport policy? and to Article 218’.

44. Article 207(6) TFEU states that ‘the exercise of the competences conferred by this Article in the field of the common commercial policy shall not affect the delimitation of competences between the Union and the Member States, and shall not lead to harmonisation of legislative or regulatory provisions of the Member States in so far as the Treaties exclude such harmonisation’.

45. Article 216 TFEU sets out when the European Union may conclude an international agreement with one or more third countries. In accordance with Article 216(1) TFEU, it may do so ‘… where the Treaties so provide [first ground] or where the conclusion of an agreement is necessary in order to achieve, within the framework of the Union’s policies, one of the objectives referred to in the Treaties [second ground], or is provided for in a legally binding Union act [third ground] or is likely to affect common rules or alter their scope [fourth ground]’. Article 216(2) TFEU provides that such agreements are binding upon the EU institutions and on the Member States.

46. Article 218 TFEU sets out the procedural rules governing, inter alia, the negotiation, signature and conclusion of international agreements: ‘1. Without prejudice to the specific provisions laid down in Article 207, agreements between the Union and third countries or international organisations shall be negotiated and concluded in accordance with the following procedure. 2. The Council shall authorise the opening of negotiations, adopt negotiating directives, authorise the signing of agreements and conclude them. 3. The Commission … shall submit recommendations to the Council, which shall adopt a decision authorising the opening of negotiations … 4. The Council may address directives to the negotiator and designate a special committee in consultation with which the negotiations must be conducted. 5. The Council, on a proposal by the negotiator, shall adopt a decision authorising the signing of the agreement and, if necessary, its provisional application before entry into force. 6. The Council, on a proposal by the negotiator, shall adopt a decision concluding the agreement. … 11. 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. 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 request for an Opinion of the Court

47. By application dated 10 July 2015, the Commission requested, pursuant to Article 218(11) TFEU, an Opinion from the Court on the following question: ‘Does the Union have the requisite competence to sign and conclude alone [the EUSFTA]? More specifically, — which provisions of the agreement fall within the Union’s exclusive competence?; — which provisions of the agreement fall within the Union’s shared competence?; and — is there any provision of the agreement that falls within the exclusive competence of the Member States?’

48. Written observations on the Commission’s request have been submitted by the Council, the Parliament and the Governments of all Member States apart from Belgium, Croatia, Estonia and Sweden. A hearing was held on 12 and 13 September 2016, at which the Commission, the Council, the Parliament, and the Austrian, Belgian, Czech, Danish, Finnish, French, German, Greek, Irish, Italian, Lithuanian, Netherlands, Polish, Romanian, Slovenian and Spanish Governments participated.

The issues raised by the Commission’s request for an Opinion

49. The Commission’s request for an Opinion is clearly admissible, since the EUSFTA has not yet been concluded and is therefore an agreement that is ‘envisaged’ within the meaning of Article 218(11) TFEU. In essence, the request consists of two parts.

50. The first part concerns the question whether the European Union may sign and conclude the EUSFTA alone, that is to say, without the involvement of the Member States.

51. The second part asks what provisions of the EUSFTA fall within the European Union’s exclusive competence, the European Union’s shared competence and the Member States’ exclusive competence.

52. If the Court’s answer to the first part of the request is ‘yes’ because the whole of the EUSFTA falls within the European Union’s exclusive external competence (on the basis of either Article 3(1) TFEU or Article 3(2) TFEU), it is not necessary to address the second part. The EUSFTA must then be concluded by the European Union alone.

53. If the European Union does not have exclusive competence for the whole of the EUSFTA, the position is more complicated. Where the competence over the EUSFTA is in part exclusive to the European Union (by virtue of Article 3 TFEU) and in part shared (pursuant to Article 4 TFEU), who may (or should) sign that agreement? ( 15 )

54. It is necessary at this stage for me to set out how I understand the system of internal and external competence to interrelate.

55. Articles 2 to 4 TFEU have to be read against the background of Articles 4 and 5 TEU. They also need to be read having regard to their place right at the beginning of the TFEU (‘Part One — Principles’; ‘Title I — Categories and areas of Union competence’) and against the background of what went before, in previous versions of the Treaties.

56. Here, it is important to recall the versions of what has become the TFEU as they stood after the Treaties of Maastricht (1992), Amsterdam (1997) and Nice (2001). In particular, Article 3b of the EC Treaty as amended by the Treaty on European Union at Maastricht (subsequently Article 5 EC (Amsterdam and then Nice)) contained, in its three constituent paragraphs, an analysis of competence that incorporated sequentially the principles of conferral, subsidiarity and proportionality. ( 16 ) Throughout that period there was, however, no detailed list of competences. The abortive Treaty establishing a Constitution for Europe would have introduced such a list; and the contents and essential elements of what is now to be found in Articles 2, 3 and 4 TFEU were taken more or less straight across from the draft constitution and inserted by the Treaty of Lisbon. ( 17 )

57. Those previous versions make it clear that this opening section of what is now the TFEU is not about external relations as such. It is about the core constitutional issue of the division of power between the European Union and its constituent Member States — the principle of the conferral of powers. Competences are conferred on the European Union essentially for the purpose of enabling it to legislate in various areas of policy and economic activity within the territory of the European Union. It is an EU-centric view of the world (rather than a ‘Weltanschauung’). It is about striking the desired balance between the unifying (supra-national) central authority set up under the Treaties and the European Union’s constituent, still sovereign, Member States (the ‘Herren der Verträge’). It has to be clear, from the division of competences on which the whole European Union project is based, who has competence to act in specific fields. The primary focus is, ‘who is competent to act within the territory of the European Union: the European Union or the Member States?’ That said, the division of competences between the European Union and the Member States will necessarily also have implications for the exercise of external competence.

58. What was the effect of the changes introduced by the Treaty of Lisbon?

59. Competences in a short and exhaustive list of areas are irretrievably (barring Treaty change) assigned to the European Union (Article 3(1) TFEU). Most areas of competence, however, appear in the list of ‘principal areas’ — that is, in a non-exhaustive list — of shared competences (Article 4(2) TFEU). A competence defined as ‘shared’ never metamorphoses into an a priori exclusive EU competence in the sense of Article 3(1) TFEU. It is true that if the European Union, by exercising its right of pre-emption under Article 2(2) TFEU (which I shall discuss in a moment) has effectively occupied the field, the field so occupied becomes an area where the European Union de facto enjoys exclusive competence. However, the difference between a priori exclusive EU competences under Article 3(1) TFEU, on the one hand, and competences that become de facto exclusive EU competences through the mechanism of Article 2(2) TFEU, ( 18 ) on the other hand, is this: an a priori exclusive EU competence can never (barring Treaty change) be turned into a non-exclusive EU competence. In contrast, it is in theory possible that an area currently occupied by EU legislation adopted in the exercise of the right of pre-emption under Article 2(2) could be returned to the Member States. The EU legislature would merely need to decide to stop legislating and to repeal existing EU legislation in that field.

60. Shared competences under Article 4 TFEU are, moreover, inextricably tied to the presence of a (separate) Treaty provision conferring on the European Union a competence that is neither an exclusive competence (Article 3 TFEU) nor a flanking competence (Article 6 TFEU: ‘competence to carry out actions to support, coordinate or supplement the actions of the Member States’). That is because Article 4(1) TFEU states that ‘the [European Union] shall share competence with the Member States where the Treaties confer on it a competence which does not relate to the areas referred to in Articles 3 and 6’. ( 19 ) Article 4 TFEU thus defines the existence of various competences that are shared between the European Union and the Member States.

61. Article 2 TFEU then deals with various aspects of the exercise of competence. In particular, the second sentence of Article 2(2) contains the European Union’s ‘right of pre-emption’. That provision gives the European Union the right to choose to start exercising one of the listed shared competences. To the extent that it does so (but only to that extent) the Member States can no longer exercise their shared competence in that specific respect. Thus, Protocol No 25 expressly states that, ‘when the [European Union] has taken action in a certain area, the scope of this exercise of competence only covers those elements governed by the [EU] act in question and therefore does not cover the whole area’. Pre-emption under Article 2(2) TFEU is expressly stated to be reversible. If the European Union ceases to act in respect of a particular part of a particular shared competence, that competence reverts to the Member States. And the parts must always add up to a whole — every competence exercised in a shared area is either exercised by the European Union or exercised by the Member States. It cannot be in limbo between the two.

62. Much of the exercise of the European Union’s competence continues to be concerned with what happens ‘internally’ — that is, within the territory of the European Union. Certain aspects of the division of competences continue necessarily to have implications for external action. That is true both of areas where the European Union enjoys exclusive competence and of areas of shared competence. As and when such external action is taken, it must respect the agreed division of competences as between the European Union and its constituent Member States. Those principles must be respected in all action taken by the European Union, whether internal or external. ( 20 )

63. Competence for the customs union and competence for the common commercial policy (both of which are listed as exclusive competences of the European Union in Article 3(1) TFEU) finds detailed recognition and expression in Article 206 TFEU (the customs union) and Article 207 TFEU (the common commercial policy) in Part Five of the TFEU entitled ‘The Union’s external action’. The common commercial policy is one of the rare examples of a purely external EU competence. Whilst Article 207(2) TFEU empowers the European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure, to adopt the measures defining the framework for implementing the common commercial policy, such regulations are measures of external action (intended to regulate, through EU legislative acts, trade with third States). The equivalent internal competence is the competence for the approximation of laws in Articles 114 and 115 TFEU to regulate the internal market, which Article 4(2)(a) TFEU defines as a shared competence.

64. In contrast to Article 3(1) TFEU, which does not speak expressly of external competence, Article 3(2) TFEU refers to the circumstances in which the European Union ‘shall have exclusive competence to conclude an international agreement’. The four ( 21 ) grounds provided for by the Treaty draftsmen (‘when its conclusion is provided for in a legislative act of the [European Union]’, ‘[when its conclusion] is necessary to enable the [European Union] to exercise its internal competence’, ‘in so far as its conclusion may affect common rules or alter their scope’) reflect and mostly codify earlier case-law of the Court. ( 22 ) Article 216 TFEU (which contains the detailed provisions governing when the European Union ‘may conclude an agreement with one or more third countries or international organisations’) likewise reflects and codifies the Court’s case-law on the existence of EU external competence; it is directly tied to the division of competences operated by Articles 2 to 4 TFEU. Article 216(1) TFEU determines the existence of EU external competence but not its exclusive nature — the latter is determined by Article 3(1) and (2) TFEU.

65. Against that background, I turn to consider external competence in greater detail.

66. In relation to the common commercial policy, Article 3(1)(e) TFEU states that the European Union has exclusive competence in this area. Article 207 TFEU makes it clear that the common commercial policy ‘shall be based on … the conclusion of tariff and trade agreements relating to [various areas]’. The first ground under Article 216(1) indicates that the European Union may conclude an international agreement ‘where the Treaties so provide’. So, provided that a particular subject matter falls within the common commercial policy (a thorny question to which much of the analysis in the rest of this Opinion is devoted), the European Union will enjoy exclusive external competence to conclude an international agreement pertaining to that subject matter. Other exclusive competences listed in Article 3(1) TFEU may link across to other grounds under Article 216(1) TFEU, notably the second ground (‘where the conclusion of an agreement is necessary in order to achieve, within the framework of the [European Union’s] policies, one of the objectives referred to in the Treaties’).

67. If one of the grounds under Article 3(2) TFEU is satisfied and the European Union enjoys external competence in accordance with the detailed rules granting competence to conclude international agreements found in Article 216(1) TFEU, that external competence will be exclusive. Let us examine each ground briefly in turn.

68. First, can we identify a ‘legally binding [EU] act’ that provides for the European Union to conclude such an international agreement (the third ground under Article 216(1) TFEU)? If so, and if that act is a ‘legislative act of the [European Union]’ (the first ground under Article 3(2) TFEU), ( 23 ) the resulting external EU competence will be exclusive. ( 24 )

69. Second, is the conclusion of an international agreement ‘necessary in order to achieve, within the framework of the [European Union’s] policies, one of the objectives referred to in the Treaties’ (the second ground under Article 216(1) TFEU)? If so, and if an internal competence of the European Union simply cannot in practice be exercised without there being also an external component (the second ground under Article 3(2) TFEU), the resulting external EU competence will likewise be exclusive. As the pre-Lisbon case-law shows, such situations are rare but possible. ( 25 )

70. Finally, has there already been so much EU legislative activity that the European Union now has exclusive EU external competence through the codified ‘ERTA effect’? ( 26 ) Showing that the conclusion of an international agreement ‘may affect common rules or alter their scope’ ( 27 ) automatically satisfies the conditions of the fourth ground under Article 216(1) TFEU and the third ground under Article 3(2) TFEU; and the European Union will accordingly have exclusive external competence.

71. If the European Union does not enjoy exclusive external competence by virtue of Article 3 TFEU, does it have shared external competence by virtue of Articles 2 and 4 TFEU (governing shared competence) and Article 216 TFEU (conferring external competence); or is there no EU external competence at all, other than perhaps flanking external competence? ( 28 ) Here, the situation is more complicated.

72. First, it is necessary to check that shared competence actually exists under Article 4 TFEU. Assuming that the answer to that question is ‘yes’, one then looks at Article 216(1) TFEU to see whether one of the grounds there listed giving the European Union competence to enter into an international agreement is satisfied. Since, on this hypothesis, there is no exclusive external competence under Article 3(2) TFEU, it is likely that it is the first, second and third grounds under that provision that will be relevant. The combination of Article 4 TFEU and Article 216(1) TFEU creates the conditions necessary for the existence of EU shared external competence. What, then, of its exercise?

73. Here, it is necessary to return to Article 2(2) TFEU and the European Union’s right of pre-emption. If the European Union does not choose to exercise that right, external competence — like internal competence — will remain with the Member States and it follows that they (and not the European Union) will be competent to negotiate, sign and conclude an international agreement whose subject matter falls within that area of shared competence. However, the text of Article 2(2) TFEU can be read as permitting the European Union to exercise its right of pre-emption in relation to both external and internal competence.

74. Accepting that proposition does not imply that the European Union enjoys an unfettered right to assert external competence over any area of shared competence listed in Article 4 irrespective of whether it has chosen to exercise that right internally. At the hearing, the Council emphasised that whether the European Union or the Member States exercise external competence to conclude a particular international agreement in an area of shared competence is ‘a political choice’. As I see it, the legal safeguards underpinning that political choice lie in the detailed procedures set out in Article 218 TFEU. Article 218(2) provides that ‘the Council shall authorise the opening of negotiations, adopt negotiating directives, authorise the signing of agreements and conclude them’. Subsequent paragraphs indicate that the opening of negotiations (Article 218(3) TFEU), the signing of the agreement (Article 218(5) TFEU) and its conclusion (Article 218(6) TFEU) each require separate Council decisions — that is, decisions of the Member States acting in their capacity as members of the Council which authorise the appropriate EU institution to act. Throughout the procedure, the Council acts by qualified majority save for certain areas where unanimity is required (Article 218(8) TFEU); and conclusion of the agreement in so far as it represents an exercise of EU external competence normally also requires the consent of, or at least consultation with, the European Parliament (Article 218(6)(a) and (b) TFEU, respectively).

75. It follows that an international agreement covering areas that fall within shared external competence that is eventually signed and concluded by the European Union alone is conceptually totally different from an international agreement that covers only areas falling within the European Union’s exclusive external competence. In the former case, the Member States together (acting in their capacity as members of the Council) have the power to agree that the European Union shall act or to insist that they will continue to exercise individual external competence. In the latter case, they have no such choice, because exclusive external competence already belongs to the European Union.

76. If an international agreement is signed by both the European Union and its constituent Member States, both the European Union and the Member States are, as a matter of international law, parties to that agreement. That will have consequences, in particular in terms of liability for a breach of the agreement and the right of action in respect of such a breach. For the sake of transparency within the European Union and in the interests of the third country (or countries) with which that international agreement is being concluded, it would therefore seem desirable for such decisions to indicate very clearly the precise aspects of shared competence which the Member States (acting in their capacity as members of the Council) have agreed shall be exercised by the European Union, on the one hand, and which are (still) being exercised by the Member States, on the other hand. A declaration of competences annexed to the agreement in question would, it seems to me, also not come amiss.

77. Finally, where an international agreement is signed by both the European Union and its Member States, each Member State remains free under international law to terminate that agreement in accordance with whatever is the appropriate termination procedure under the agreement. Its participation in the agreement is, after all, as a sovereign State Party, not as a mere appendage of the European Union (and the fact that the European Union may have played the leading role in negotiating the agreement is, for these purposes, irrelevant). If the Member State were to do so, however, the effect of Article 216(2) TFEU will be that — as a matter of EU law — it continues to be bound by the areas of the agreement concluded under EU competence (because it is an EU Member State) unless and until the European Union terminates the agreement. ( 29 ) The ability to act independently as an actor under international law reflects the continuing international competence of the Member State; the fact that the Member State remains partially bound by the agreement even if, acting under international law, it terminates it reflects not international law but EU law.

78. The position is different where the Member States enjoy exclusive competence for one or more part(s) of an international agreement (and the remainder of the agreement falls within the exclusive or shared competence of the European Union): there, both the Member States and the European Union must conclude the agreement. ( 30 )

79. However, assuming always that it is necessary for the Court to answer the second part of the request, is it necessary for the Court to establish who has competence in relation to each and every provision of the EUSFTA?

80. In my view, it is not.

81. The Court made it clear in Opinion 2/00 that, assuming that competence to conclude an international agreement is shared between the European Union and its Member States, the precise extent of both the European Union’s exclusive competences and the Member States’ shared (or exclusive) competences as regards a specific agreement cannot, as such, have any bearing on the competence of the European Union for concluding that agreement and, more generally, on the substantive or procedural validity of the European Union’s decision to conclude it. ( 31 ) The purpose of the procedure in Article 218(11) TFEU is specifically to forestall the complications which could arise, both at the international level and at the EU level, if the decision to conclude the agreement were found to be invalid. ( 32 ) It is not for the Court, in the context of that procedure, to provide specific guidance on who has competence in relation to each and every single provision of the agreement concerned and who should be responsible for performing the international obligation that it entails. ( 33 )

82. Rather, in answering the second part of the Commission’s request, I shall examine for what parts of the EUSFTA the European Union enjoys exclusive competence (based on either Article 3(1) TFEU or Article 3(2) TFEU), whether there are parts in respect of which competence is shared with the Member States (on the basis of Article 4 TFEU); and whether there are still other parts for which the European Union enjoys no competence. The EUSFTA is a very heterogeneous agreement. That means that, of necessity, the analysis to establish competence and its (exclusive or shared) nature will need (depending on the context) to focus on an individual chapter or groups of chapters of the EUSFTA, on a part or parts of that agreement or, occasionally, on an individual provision.

83. Despite the fact that the request concerns only the allocation of competences between the European Union and the Member States, some written observations (especially those of the Council) suggest that there might also be an issue regarding the process through which the Commission negotiated the EUSFTA and now proposes to sign it. Whilst the negotiating directives provided for the negotiation of a mixed agreement, the Commission negotiated the EUSFTA as an agreement between the European Union and Singapore alone. Did the Commission thereby disregard Article 218(4) TFEU and the principle of mutual sincere cooperation laid down in Article 13(2) TEU?

84. In my view, it is neither necessary nor appropriate, in the context of the present proceedings, to take a position on that issue. The process through which the EUSFTA was negotiated does not, as such, affect the allocation of competences between the European Union and its Member States for concluding it. It is therefore outside the scope of the Commission’s request. Nor (in principle) could a failure to respect rules as to process under EU law affect the validity of the agreement as a matter of international law. ( 34 ) I shall therefore not address that issue further.

85. It is also important to bear in mind that the Commission’s request does not concern the material compatibility of (any part of) the EUSFTA with the Treaties. Thus, the Court is not asked to consider, for example, the compatibility of an ISDS mechanism with the Treaties. That type of dispute resolution appears not only in the EUSFTA but also in other trade and investment agreements currently negotiated or in the course of negotiation by the European Union. In the present proceedings, the issue as regards the ISDS mechanism (and other forms of dispute resolution for which the EUSFTA provides) is only the question ‘who may decide’. My analysis in this Opinion is therefore without prejudice to such issues (if any) as there may be concerning the material compatibility of the EUSFTA, including the provisions regarding the ISDS mechanism, with the Treaties. ( 35 )

86. Finally (and perhaps self-evidently) my Opinion in the present proceedings is limited to the EUSFTA. It is thus without prejudice to the allocation of competences between the European Union and the Member States as regards other trade and investment agreements.

87. In the remainder of my Opinion, I shall first set out the basic principles governing the allocation of external competences between the European Union and the Member States and the legal basis of EU action. I shall then discuss the basic features of the European Union’s express exclusive competence over the common commercial policy (Article 207(1) TFEU), its implied exclusive competence (Article 3(2) TFEU) and its shared competence (Article 4 TFEU) over external action. Against that general background, I shall then turn to the allocation of competences as regards the matters covered by the EUSFTA.

The allocation of competences between the European Union and the Member States and the legal basis for concluding the EUSFTA

88. At the hearing, it became clear that the Council and a number of Member States consider that the allocation of competences between the European Union and the Member States as regards the EUSFTA must first be established before determining, as a subsequent step, the legal basis on which the European Union’s decision to sign and conclude the EUSFTA should rest.

89. Clearly, the Court is not being asked to determine that second issue here. However, in my view, the Council and a number of Member States misunderstand the relationship between the principles governing the allocation of (external) competences and those governing the choice of legal basis of EU action.

90. The European Union enjoys conferred powers only. ( 36 ) It must therefore link a measure which it adopts to a Treaty provision empowering it to approve that measure. ( 37 ) That legal basis must be established on the grounds of objective factors amenable to judicial review, which include the aim and content of the measure. ( 38 )

91. In Opinion 1/08, the Court explained that the character, whether exclusive or not, of the European Union’s competence to conclude agreements and the legal basis which is to be used for that purpose are two closely linked questions. ( 39 ) Indeed, whether the European Union alone has the competence to conclude an agreement or whether such competence is shared with the Member States depends, inter alia, on the scope of the provisions of EU law which are capable of empowering the EU institutions to participate in the agreement. ( 40 )

92. Establishing that the European Union has competence to act at all in a particular field (and thus identifying the legal basis for such action) is therefore a precondition to determining the allocation of competences between the European Union and the Member States, in accordance with Articles 3 and 4 TFEU, as regards a specific external action. ( 41 )

93. In identifying the legal basis, it follows from well-settled case-law that, where an agreement of the European Union pursues more than one purpose or comprises two or more components of which one is identifiable as the main or predominant purpose or component, whereas the other(s) is (or are) merely incidental or extremely limited in scope, the European Union has to conclude that agreement based on a single legal basis, namely that required by the main or predominant purpose or component. ( 42 ) Thus, if the predominant purpose of the EUSFTA is that of pursuing the common commercial policy and other aspects of it are properly to be regarded either as constituting a necessary adjunct to that main component or as being extremely limited in scope, the substantive legal basis for concluding that agreement would be Article 207(1) TFEU. ( 43 ) It would then follow from Article 3(1)(e) TFEU that the European Union has exclusive competence to conclude the EUSFTA. ( 44 )

94. On the other hand, if the Court were to establish that the EUSFTA simultaneously pursues a number of objectives, or has several components, which are inextricably linked without one being incidental to the other, such that various provisions of the Treaties are applicable, the European Union’s act concluding that agreement would need to be founded on the various legal bases corresponding to those components. ( 45 )

95. Against that background, I now turn to the scope of the common commercial policy within the meaning of Article 207 TFEU.

Article 207(1), (5) and (6) TFEU

96. The Court clarified the European Union’s exclusive competence over the common commercial policy long before the entry into force of Article 3(1)(e) TFEU, which now expressly confirms the European Union’s exclusive competence over that policy. Thus, in its very first Opinion delivered on the basis of (what is now) Article 218(11) TFEU, the Court held that exclusive competence over the common commercial policy was justified because permitting the Member States to exercise concurrent powers in that area ‘would amount to recognising that, in relations with third countries, Member States may adopt positions which differ from those which the [European Union] intends to adopt, and would thereby distort the institutional framework, call into question mutual trust within the [European Union] and prevent the latter from fulfilling its task in the defence of the common interest’. ( 46 ) That reasoning is consistent with the construction of the customs union set up by the Treaty of Rome. Internally, that union consists of an absolute prohibition on customs duties on imports and exports and charges having equivalent effect between the Member States. ( 47 ) At the same time, the Treaties entrust the European Union and its institutions with the task of defending the European Union’s commercial interests externally. Enabling the Member States to conduct their own commercial policies with the outside world (and indeed to pursue their own interests in that context) in parallel with the actions of the European Union would clearly risk jeopardising that essential function.

97. The Commission in the present proceedings invites the Court to revisit its past case-law concerning the scope of the common commercial policy. How far has the scope of that policy expanded as a result of changes introduced by Treaty of Lisbon (in particular, as regards commercial aspects of intellectual property, foreign direct investment, trade in services, the exception relating to the field of transport in Article 207(5) TFEU and the limits resulting from Article 207(6) TFEU)?

98. Certain Member States have suggested that, following the Court’s Opinion 1/94, it is no longer appropriate to regard the common commercial policy as ‘dynamic’.

99. I am not convinced that it is particularly useful to debate whether or not the common commercial policy is ‘dynamic’. What matters is that Article 207(1) TFEU should be interpreted in a manner that both respects the wording of that provision and guarantees that the European Union is able to conduct an effective common commercial policy in an international commercial environment that is permanently evolving.

100. I agree with the view expressed by Advocate General Wahl in the context of Opinion procedure 3/15 that, since trade practices, patterns and trends evolve over time, the subject matter of international trade can neither be determined in the abstract nor identified in a static and rigid manner. ( 48 ) However, what is to be regarded as ‘trade policy’ or ‘investment policy’ in international relations and what constitutes the common commercial policy, as a matter of EU law, is not necessarily the same.

101. The Court has also emphasised the need to guarantee the effectiveness of the European Union’s common commercial policy. In Opinion 1/78, the Court explained that it would no longer be possible to carry on any worthwhile common commercial policy if the European Union were not in a position also to avail itself of means of action going beyond instruments intended to have an effect only on the traditional aspects of external trade. A ‘commercial policy’ understood in that sense would be destined to become nugatory in the course of time, ( 49 ) and thus gradually preclude the European Union from fulfilling its role as a global trade partner, both through bilateral relations with non-member countries and through multilateral action. ( 50 ) The common commercial policy is therefore not limited to measures which pursue commercial objectives. It may encompass measures which pursue objectives that are not purely commercial such as development, ( 51 ) foreign and security policy, ( 52 ) or the protection of the environment or of human health, ( 53 )provided always that those measures have also direct and immediate effects on trade. The interaction between the common commercial policy and the (other) principles and objectives of the European Union’s external action is expressly recognised in the final sentence of Article 207(1) TFEU.

102. However, that does not mean that there are no limits to the scope of the common commercial policy. Nor is the fact that a matter is addressed in a trade (and investment) agreement sufficient for that matter to fall within the common commercial policy. Agreements or provisions which other actors in international law may frame as part of trade or commercial policy do not necessarily fall within the definition of ‘common commercial policy’ in the Treaties. In defining that policy, the Court is limited by the wording of Articles 206 and 207 TFEU.

103. What matters for the purposes of Article 207 TFEU is that the European Union’s (internal or external) action should specifically relate to international trade, meaning trade with non-member countries (not trade in the internal market), ( 54 ) in that it is essentially intended to promote, facilitate or govern trade and has direct and immediate effects on trade. ( 55 ) Thus, the mere fact that an act of the European Union is liable to have implications for international trade is not enough for it to fall within the common commercial policy.

104. In distinguishing between (international) commitments falling under the common commercial policy and those whose primary objective is to improve the functioning of the internal market, it is important to determine whether or not the purpose of the agreement is essentially to extend beyond the territory of the European Union the approximation of the laws of the Member States that has already been ‘largely achieved’ by EU secondary legislation relating to trade in the internal market. ( 56 ) If that is the case, that agreement may be presumed to seek to promote international trade and its conclusion therefore falls within the common commercial policy. Conversely, where that ‘internal’ approximation is precisely the object of the agreement, the predominant purpose of the agreement is to improve the functioning of the internal market and it therefore falls outside the common commercial policy, even if it has effects on international trade. ( 57 )

105. A number of parties are concerned, either in general or in the context of a specific chapter of the EUSFTA, that the Commission’s wide interpretation of the scope of the common commercial policy following the entry into force of the Treaty of Lisbon undermines Article 207(6) TFEU.

106. In my opinion, Article 207(6) TFEU concerns only the exercise of the competences which the European Union derives from Article 207(1) TFEU. It presupposes that that competence has been established. Thus, it cannot alter the European Union’s exclusive external competence under Article 207(1) TFEU. Article 207(6) TFEU imposes two limits, even if the second appears to be an application of the first.

107. First, the exercise of the competence over the common commercial policy cannot affect the delimitation of competences between the European Union and the Member States. In my view, that first limitation constitutes an expression of the principle of conferral laid down in Article 2(1) and (2) TFEU and further elaborated in Declaration No 18 in relation to the delimitation of competences. ( 58 ) In other words, the exercise of the European Union’s exclusive competence over the common commercial policy may not alter or otherwise affect the Treaty provisions on the allocation of competences in other areas falling outside the scope of that competence (such as, for example, trade in the internal market). I am fortified in that interpretation by Article 207(2) TFEU, which provides for a legal basis to adopt ‘… the measures defining the framework for implementing the common commercial policy’ rather than stating that the European Union has exclusive competence over all measures that may have to be adopted in order to perform obligations resulting from an agreement concluded by the European Union in the exercise of its exclusive competence over the common commercial policy.

108. Thus, for example, the exercise by the European Union of its exclusive competence under Article 207(1) TFEU as regards the entire TRIPS Agreement ( 59 ) does not mean that it is competent to regulate each and every matter covered by that agreement in the internal market. Nor can such exercise modify the allocation of external competences between the Member States and the European Union as regards intellectual property rights in general.

109. Conversely, I do not read the first limitation to mean that the exercise of the European Union’s competence over the common commercial policy depends on whether the European Union enjoys internal competence on some other basis or has exercised that competence. ( 60 ) In particular, insisting on parallelism between the external aspect of the common commercial policy and the internal aspect of other EU policies finds no support in other parts of Article 207 TFEU. Thus, Article 207(4) TFEU expressly confirms that the common commercial policy may include trade in cultural and audiovisual services and trade in social, education and health services. However, the European Union’s internal competences in the area of public health are limited, as they merely complement the actions of the Member States. ( 61 ) Moreover, EU action must respect the responsibilities of the Member States for defining their health policy and for organising and delivering health services and medical care. ( 62 )

110. The second limitation imposed by Article 207(6) TFEU is that the exercise of competences under the common commercial policy cannot lead to harmonisation of legislative or regulatory provisions of the Member States in so far as the Treaties exclude such harmonisation. As Article 207(4) TFEU expressly confirms, that limitation does not mean that the common commercial policy cannot cover trade in matters with respect to which other Treaty provisions preclude harmonisation (such as, for example, in matters of social policy, education, public health or culture). ( 63 ) Rather, it means that, through the exercise of its competences under Article 207 TFEU, the European Union cannot act so as circumvent the prohibition of harmonisation under the Treaties. That limitation is thus a particular application of the first limitation.

111. The present procedure for an Opinion also requires the Court to interpret Article 207(5) TFEU, especially in relation to the commitments regarding transport in Chapter Eight of the EUSFTA (‘Services, Establishment and Electronic Commerce’). ( 64 ) According to that provision, the negotiation and conclusion of international agreements in the field of transport are subject to Title VI of Part Three of the TFEU, that is to say, the Treaty provisions on the European Union’s transport policy. Such agreements therefore fall outside the scope of the common commercial policy.

112. That exception is not new. The Treaties have always kept transport policy outside the common commercial policy. In fact, it was that exception which led the Court to establish, in its judgment in ERTA, the principle of implied exclusive external competences, as opposed to the express exclusive competence over the common commercial policy. ( 65 )

113. Although the judgment in ERTA was concerned with an agreement establishing safety rules, the Court in Opinion 1/94 saw no reason to draw a different conclusion in relation to commercial agreements that also deal with transport, such as the GATS. ( 66 ) It confirmed ‘the idea underlying ?the judgment in ERTA? that international agreements in transport matters are not covered by ?the common commercial policy?’. ( 67 ) The position remained unchanged under the Treaty of Nice ( 68 ) and the Treaty of Lisbon. ( 69 ) As regards international trade in transport services, the Treaties therefore seek to ‘maintain … a fundamental parallelism between internal competence whereby [EU] rules are unilaterally adopted and external competence which operates through the conclusion of international agreements, each competence remaining … anchored in the title of the Treaty specifically relating to the common transport policy’. ( 70 )

114. For that reason, the application of Article 207(5) TFEU is not limited to international agreements exclusively or predominantly relating to trade in transport services. As the Court held in Opinion 1/08, to conclude otherwise would mean that provisions of an international agreement having strictly the same object would fall in some cases within transport policy and in some cases within commercial policy depending solely on whether the parties to the agreement decided to deal only with trade in transport services or whether they agreed to deal at the same time with that trade and with trade in some other type of services or in services as a whole. ( 71 )

115. Notwithstanding the broad scope of Article 207(5) TFEU, it seems to me that the expression ‘international agreements in the field of transport’ should not mean that every agreement applicable to transport (that is to say, in essence, the service of carrying goods or persons by one or more means of transport from one point to another) must be excluded from the common commercial policy. The fact that measures of general application may, in practice, also be applied to transport does not necessarily trigger the exception in Article 207(5) TFEU. Rather an international agreement ‘in the field of transport’ is an agreement that contains provisions specifically concerning transport. That explains why, in Opinion 1/08, the Court focused on the sector-specific commitments (and the horizontal commitments that applied in addition to those commitments) to conclude that the conditions for applying the exception in Article 207(5) TFEU were satisfied.

116. The present proceedings show that there remains uncertainty as to the scope of Article 207(5) TFEU. The issues concerning commitments relating to trade in transport services include that of whether the exception in Article 207(5) TFEU covers establishment (as defined in the EUSFTA) even if Title VI of Part Three of the TFEU does not govern it and whether services ‘auxiliary’ to transport services fall within the exception. I shall address those issues in my analysis of Chapter Eight of the EUSFTA. ( 72 )

Article 3(2) TFEU

117. Where the European Union does not have express exclusive competence pursuant to Article 3(1) TFEU to conclude an international agreement, it may nonetheless enjoy implied external exclusive competence on the basis of Article 3(2) TFEU. Both paragraphs of Article 3 TFEU specifically concern the allocation of competences between the European Union and the Member States. However, unlike Article 3(1) TFEU, Article 3(2) TFEU concerns external competence alone. The various grounds that it lays down all necessarily imply, however, some exercise of internal competence.

118. The Commission relies on two grounds under Article 3(2) TFEU to establish the European Union’s exclusive external competence.

119. For one part of Chapter Eight regarding services, establishment and electronic commerce, ( 73 ) the Commission relies on the first ground under Article 3(2) TFEU according to which the European Union shall have exclusive competence ‘… when its conclusion is provided for in a legislative act of the Union’. According to the Court’s case-law, the underlying rationale of that provision is that there may be situations where, although the Treaties themselves do not establish an external competence of the European Union, common rules laid down by the institutions establish such competence by providing for the conclusion of international agreements. ( 74 ) In such situations, the European Union acquires exclusive competence as a result of common rules, ( 75 ) because enabling the Member States to conclude their own international agreements would be liable to jeopardise concerted external action in the spheres covered by those EU rules. ( 76 )

120. For certain other parts of the EUSFTA, ( 77 ) the Commission relies on the third ground under Article 3(2) TFEU. According to that ground, the European Union enjoys exclusive competence to conclude an international agreement ‘… in so far as its conclusion may affect common rules or alter their scope’. That ground corresponds with the test laid down by the Court in the judgment in ERTA for defining ‘… the nature of the international commitments which Member States cannot enter into outside the framework of the EU institutions, where common EU rules have been promulgated for the attainment of the objectives of the Treaty’. ( 78 )

121. The so-called ‘ERTA principle’ offers a basis for the European Union to enjoy implied exclusive competence to conclude an international agreement. It was originally developed taking into account, on the one hand, the primary law requirement that the Member States take all appropriate measures to ensure fulfilment of their obligations arising out of the Treaties or resulting from action taken by the institutions and, on the other hand, the Member States’ duty to abstain from any measure capable of jeopardising the attainment of the objectives of the Treaties. ( 79 ) Thus, the European Union has exclusive external competence where there is a risk that the Member States, acting outside the framework of the EU institutions, might assume international obligations affecting common rules or altering their scope. That would circumvent the rules set out in the Treaties for implementing EU policies and would therefore be liable to call into question the very essence of the EU integration process.

122. The Court’s case-law offers some guidance on how to verify whether the conditions for applying the third ground are satisfied. There must be a specific analysis of the relationship between the proposed international agreement and EU law as it is in force at the material time. For the purposes of that analysis, and taking into account the principle of conferral, it is for the party asserting exclusive external competence to demonstrate it. ( 80 )

123. The first step of that analysis involves defining the area concerned by the international agreement so as to identify what common rules are relevant. The subject matter of the agreement may be determined by taking into account the content and purpose of the agreement. In that regard, whilst it might be possible, when analysing so-called homogenous agreements, to describe the entire agreement as covering ‘an area’ and then verify whether common rules fully harmonise that area or whether that area is largely covered by such common rules, ( 81 ) that approach cannot be transposed so easily to an agreement such as the EUSFTA, which regulates different ‘areas’ in different chapters or parts thereof.

124. The Commission’s arguments in the present proceedings raise a novel question. Does the third ground under Article 3(2) TFEU apply only where ‘common rules’ have already been adopted by the EU institutions in the exercise of the European Union’s legislative competences, or can Treaty provisions themselves also constitute, under certain conditions, ‘common rules’? The Commission argues that the European Union’s exclusive competence as regards provisions of the EUSFTA concerning types of investment other than foreign direct investment results from the ‘common rules’ contained in Article 63 TFEU itself. I shall address that question when analysing Section A of Chapter Nine of the EUSFTA. ( 82 )

125. The second step is to identify what common rules exist in the area. However, the scope of the international agreement and the common rules need not coincide fully. ( 83 ) It might be sufficient that the area within which the international agreement falls is largely covered by those common rules. ( 84 ) Relevant common rules may include not only legislation applicable to the specific area covered by the agreement but also legislation that has a broader scope of application. ( 85 ) Nor does it matter that such common rules are (not) found in one and the same EU legal instrument. ( 86 )

126. Common rules are not only those rules that regulate situations involving a non-EU element and thus having an external dimension. ( 87 ) In identifying the common rules, it is necessary to consider both EU law as currently in force and the future development of those rules in so far as that development is foreseeable at the time of the analysis. ( 88 )

127. The parties’ arguments regarding what common rules are relevant to the application of the ERTA principle to the areas of transport services and types of investment other than foreign direct investment suggest that there are various misunderstandings about ‘common rules’. The present proceedings offer an opportunity for the Court to provide the necessary clarification. ( 89 )

128. The third step involves examining the (possible) impact of the conclusion of the international agreement on the relevant common rules. It is not necessary to show that there is such an impact: the risk that common rules may be affected or that their scope may be altered is sufficient. ( 90 ) Such a risk exists where the commitments under the international agreement fall within the scope of the common rules. ( 91 ) It is not necessary to show a possible contradiction, that is to say, a conflict, between the international agreement and the common rules. ( 92 )

129. Where common rules fully harmonise the area governed by the international agreement, ( 93 ) exclusive competence to conclude that agreement is easy to establish. The harmonised rules are presumed to be affected by the international commitments resulting from concluding that agreement.

130. Where harmonisation is only partial, the fact that an international agreement (or part(s) thereof) concerns an area that is ‘largely covered’ by EU rules does not of itself automatically lead to the conclusion that the European Union has exclusive competence to negotiate that entire international agreement (or the relevant part) without examining whether the ERTA principle applies. Everything depends on the content of the commitments entered into and their possible connection with EU rules. ( 94 )

131. Protocol No 25 on the exercise of shared competence does not undermine the principles I have just set out. That protocol only concerns Article 2(2) TFEU. Its sole purpose is to define the scope of the European Union’s exercise of a competence that is shared with the Member States. It makes it clear that the scope of the exercise of that competence ‘only covers those elements governed by the ?European? Union act in question and therefore does not cover the whole area’. Protocol No 25 therefore cannot be construed as limiting the scope of the European Union’s exclusive external competence in the cases referred to in Article 3(2) TFEU, as clarified by the case-law. ( 95 )

132. Against that background, I now turn to examine the allocation of competences as between the European Union and the Member States as regards the EUSFTA.

Objectives of and general definitions relevant to the EUSFTA (Chapter One of the EUSFTA ( 96 ) )

Arguments

133. The Commission submits that Chapter One falls entirely within the common commercial policy. According to the Commission, the overall objectives set out in Articles 1.1 and 1.2 of the EUSFTA fall, to a large extent, within the scope of the objectives of the common commercial policy laid down in Article 206 TFEU. The objectives of the EUSFTA are only marginally broader than those of the common commercial policy. Where that is the case, those objectives nonetheless fall within the scope of the TFEU’s objectives (in particular Articles 63(1), 91 and 100 TFEU).

134. The other parties have made no specific arguments in relation to Chapter One.

Analysis

135. In my opinion, the European Union enjoys exclusive competence, on the basis of Article 207(1) TFEU, for deciding to establish a free trade area consistent with Article XXIV of the GATT 1994 and with Article V of the GATS ( 97 ) and for agreeing that the objectives of the EUSFTA are to liberalise and facilitate trade and investment. Such matters clearly fall within the common commercial policy.

136. Furthermore, the provisions listing generally applicable definitions are purely accessory. Those provisions are not such as to alter the allocation of competences between the European Union and the Member States as regards the other provisions of the EUSFTA.

137. I therefore conclude that Chapter One falls entirely within the European Union’s exclusive competence under Article 207 TFEU.

Trade in goods (Chapters Two to Six of the EUSFTA ( 98 )and Protocol 1 to the EUSFTA ( 99 ) )

Arguments

138. The Commission submits that Chapters Two to Six fall entirely within the common commercial policy.

139. The Commission argues that all the provisions of Chapter Two relate specifically to international trade in goods because they seek to liberalise trade in goods between the Parties and have a direct and immediate effect on that trade. That is so both as regards the provisions of that chapter on tariffs, to which reference is made in Article 207(1) TFEU, and as regards non-tariff provisions, which reproduce, incorporate by reference or elaborate upon existing provisions of the GATT 1994 and other multilateral agreements on trade in goods (and thus, as the Court held in Opinion 1/94, fall automatically within the common commercial policy).

140. The Commission puts forward similar arguments regarding Chapter Three (Article 207(1) TFEU covers ‘measures to protect trade such as those to be taken in the event of dumping and subsidies’); Chapter Four (because it facilitates trade in goods by providing a framework to prevent, identify and eliminate unnecessary barriers to trade within the scope of the TBT Agreement) and Chapter Five (because it seeks to minimise the negative effects of SPS measures on trade). The Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (‘the Anti-Dumping Agreement’), the Agreement on Subsidies and Countervailing Measures (‘the SCM Agreement’), the Agreement on Safeguards, the TBT Agreement and the SPS Agreement all form part of the multilateral agreements on trade in goods which, according to Opinion 1/94, fall within the scope of the common commercial policy.

141. Finally, Chapter Six is also specifically related to international trade because it seeks to facilitate trade in goods and ensure effective customs controls. The Commission adds that most of the provisions of that chapter correspond with more detailed provisions on the same subject matter in the WTO Agreement on Trade Facilitation, which has now been inserted in Annex 1A of the WTO Agreement. ( 100 ) According to the Commission, neither the Member States nor the other institutions contest the European Union’s exclusive competence with regard to that new WTO agreement.

142. The Parliament agrees in essence with the Commission’s position.

143. Whilst the Council and almost all of the Member States have made no specific argument in relation to Chapters Two to Six, one Member State submits that the European Union’s exclusive competence does not cover the customs cooperation for which the second sentence of Article 6.1.1 of the EUSFTA provides. Article 206 TFEU refers only to the establishment of a customs union in accordance with Articles 28 to 32 TFEU. It therefore does not cover Article 33 TFEU, which provides a legal basis for adopting ‘… measures in order to strengthen customs cooperation between Member States and between the latter and the Commission’. Furthermore, it follows from Article 6(g) TFEU as confirmed in Article 197(2) TFEU (the single provision of Title XXIV on ‘Administrative Cooperation’) that, as regards administrative cooperation, the European Union only has competence to support, coordinate or supplement actions of the Member States.

Analysis

144. Chapters Two to Six govern different aspects of the regulation of trade in goods. The matters covered by those chapters and the type of obligations for which they provide correspond to some extent to certain WTO agreements relating to trade in goods.

145. Prior to the entry into force of the Treaty of Lisbon, the common commercial policy already covered trade in goods. In Opinion 1/94, the Court concluded that (what was then) the European Community had, pursuant to Article 113 of the EC Treaty, exclusive competence to conclude ‘the Multilateral Agreements on Trade in Goods’, that is to say, the agreements included in Annex 1A to the WTO Agreement (‘the Annex 1A agreements’). ( 101 ) That encompasses the GATT 1994 but also 12 other agreements. The Court concluded that all of the agreements in Annex 1A fell within the common commercial policy without examining each individually. ( 102 ) Therefore, all were deemed to relate specifically to international trade in that they essentially intended to promote, facilitate or govern trade and had direct and immediate effects on trade. Most of the agreements in Annex 1A to the WTO Agreement encompass obligations regarding, inter alia, market access, national treatment and other forms of domestic regulation, transparency, judicial and administrative review and the balancing of trade objectives with non-trade objectives. The scope of application of some of those agreements is defined by reference to the type of goods (for example, the Agreement on Agriculture and the Agreement on Textiles and Clothing); others apply to specific types of trade instruments (for example, the TBT Agreement; the Agreement on Trade-Related Investment Measures; the Anti-Dumping Agreement; the SCM Agreement; and the Agreement on Safeguards); trade measures having a specific objective (for example, the SPS Agreement) or certain stages of the importation or exportation process (for example, the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (‘the Customs Valuation Agreement’); the Agreement on Preshipment Inspection; the Agreement on Rules of Origin; and the Agreement on Import Licensing Procedures).

146. It is therefore clear from Opinion 1/94 that the European Union enjoys exclusive competence regarding the matters covered by those agreements and the obligations assumed thereunder. ( 103 ) That position remains the same under the Treaty of Lisbon, which did not alter the description of the common commercial policy in so far as it relates to trade in goods.

147. Against that background, it is clear to me that Chapters Two to Five specifically concern trade in goods. Their subject matter corresponds in essence with the matters covered by certain agreements in Annex 1A to the WTO Agreement falling within the European Union’s exclusive competence over the common commercial policy. Thus, Chapter Two relates to the subject matters of Articles I, II, and XI of the GATT 1994, which contain the core market access obligations on trade in goods. The matters covered by Chapter Three relate to the GATT 1994 provisions on anti-dumping, subsidies and safeguards and the corresponding more specific agreements (the Anti-Dumping Agreement, the Agreement on Subsidies and Countervailing Measures and the Safeguards Agreement) in Annex 1A to the WTO Agreement. Chapters Four and Five concern non-tariff barriers covered by the disciplines in Article III of the GATT 1994 (‘national treatment’) and the more specific disciplines found in the TBT Agreement and the SPS Agreement, also included in Annex 1A to the WTO Agreement.

148. Those matters concern the process of moving goods across borders, releasing and clearing them and their treatment within a market. They are thus specifically related to international trade.

149. Furthermore, rules aimed at facilitating that process (essential to the importation and exportation of goods) and making that process and the rules governing the treatment of those goods within a market more transparent, predictable, efficient and cost-effective promote, facilitate or govern trade and have direct and immediate effects on trade. ( 104 )

150. That conclusion also applies to customs cooperation under Chapter Six and to the additional customs-related provisions found in Understanding 3 and the rules in Understanding 4 on mutual recognition of authorised economic operator programmes (both understandings are related to Chapter Six).

151. Chapter Six relates to customs procedures and valuation and trade facilitation (partly covered by the GATT 1994), the Customs Valuation Agreement, and the recent WTO Trade Facilitation Agreement. The forms of cooperation provided for in Chapter Six correspond to some extent with those applicable to customs matters under the GATT 1994 and the Customs Valuation Agreement. The latter agreements also provide, apart from general provisions on publication, ( 105 ) for consultation on matters relating to the administration of the customs valuation system. ( 106 ) Furthermore, at a more general level, the GATT 1994 and the Annex 1A agreements provide for many similar forms of cooperation on various matters regarding trade in goods. ( 107 ) Such provisions did not preclude the Court from concluding, in Opinion 1/94, that those agreements fall in their entirety within the common commercial policy. ( 108 )

152. I cannot subscribe to the formalistic argument based on a distinction, as regards the trade in goods within the internal market, between the Treaty provisions governing the customs union (Articles 30 to 32 TFEU) and customs cooperation (Article 33 TFEU). It is true that Article 206 TFEU, which sets out the objectives of the customs union, refers only to Articles 28 to 32 TFEU. However, that is because those are the provisions which establish the customs union. That is not the purpose of a provision such as Article 33 TFEU, which offers a legal basis for adopting legislation to strengthen customs cooperation within the European Union. No inference on the scope of the common commercial policy can therefore sensibly be drawn from the fact that Article 206 TFEU does not expressly refer to Article 33 TFEU. Nor do Articles 6(g) and 197 TFEU have any impact on the scope of that policy. Those provisions address in general terms administrative cooperation among the Member States and between them and the European Union. They are therefore without prejudice to the exclusive competence of the European Union to include within its common commercial policy measures aimed at improving administrative cooperation with third States as regards matters falling within that policy.

153. Finally, my analysis of Chapters Two to Six also applies to Protocol 1 concerning the definition of the concept of ‘originating products’ and methods of administrative cooperation. That protocol concerns rules of origin. It is clearly specifically related to international trade in goods.

154. I therefore conclude that Chapters Two to Six fall entirely within the European Union’s exclusive competence over the common commercial policy under Article 207 TFEU.

155. I now turn to Chapter Eight. Because Chapters Seven (Non-tariff barriers to trade and investment in renewable energy generation) and Thirteen (Trade and sustainable development) raise similar questions regarding the scope of the common commercial policy and the relationship between trade and non-trade related objectives, ( 109 ) I discuss Chapter Seven later in conjunction with Chapter Thirteen.

Services, establishment and electronic commerce (Chapter Eight of the EUSFTA ( 110 ) )

Arguments

General arguments

156. The Commission states that Section A sets out the objective and scope of Chapter Eight of the EUSFTA. Sections B to D of that chapter fall within the European Union’s exclusive competence because their scope corresponds with that of the commitments on modes 1, 2, 3 and 4 supplies of services under the GATS, which is covered by Article 207(1) TFEU. In accordance with Article I:2(a) to (d) of the GATS, those four modes cover the supply of a service: (a) from the territory of one (WTO) Member into the territory of any other (WTO) Member (‘mode 1’ or ‘cross-border supply’); (b) in the territory of one (WTO) Member to the service consumer of any other (WTO) Member (‘mode 2’ or ‘consumption abroad’); (c) by a service supplier of one (WTO) Member, through commercial presence in the territory of any other (WTO) Member (‘mode 3’ or ‘commercial presence’); and (d) by a service supplier of one (WTO) Member, through presence of natural persons of a (WTO) Member in the territory of any other (WTO) Member (‘mode 4’ or ‘presence of natural persons’).

157. For each sub-section of Section E of Chapter Eight (‘Regulatory Framework’), the Commission maintains that there is a sufficiently close connection with international trade.

158. As regards the provisions of general application (Sub-section 1), the Commission relies on a comparison with the provisions in the GATS and a number of non-binding instruments adopted by various WTO bodies. The Commission further argues that Article 8.16 of the EUSFTA on the mutual recognition of qualifications falls within the common commercial policy because it facilitates market access for foreign service suppliers and the Court has confirmed that such obligations in the GATS are part of the common commercial policy. Article 8.17 of the EUSFTA on transparency lays down obligations that are common in international trade agreements and similar to those resulting from Articles III:1 and III:4 of the GATS. Uncertainties regarding applicable measures regulating commercial actions may cause service suppliers to forego access to foreign markets.

159. As regards domestic regulation (Sub-section 2), the Commission argues in essence that that sub-section imposes conditions ensuring that licensing and qualification requirements and procedures do not hamper international trade. Their purpose is similar to that of Article VI:4 of the GATS, which aims to ensure that such standards and procedures, even if not discriminatory, do not constitute unnecessary barriers to trade in services. Furthermore, the obligation in Article 8.19.3 of the EUSFTA to maintain or institute judicial, arbitral or administrative tribunals or procedures which provide for review of decisions is similar to that found in Article VI:2(a) of the GATS.

160. Moreover, the specific provisions on computer services, postal services, telecommunication services and financial services (Sub-sections 3, 4, 5 and 6), some of which reaffirm or build upon commitments under the GATS, are likewise within the European Union’s competence under Article 207(1) TFEU.

161. Section F mostly contains declarations of intent. The sole substantive obligation (in Article 8.58 of the EUSFTA) prohibits the imposition of customs duties, which is a matter clearly falling within the common commercial policy.

162. The Parliament and the Council have not made specific arguments in relation to the provisions of Chapter Eight that do not concern transport. ( 111 )

163. The Member States focus in particular on specific provisions such as those relating to financial services and the mutual recognition of professional qualifications.

164. A number of Member States argue that Sub-section 6 on financial services does not fall fully within the European Union’s common commercial policy. Directive 2014/65/EU on markets in financial instruments (‘the MiFiD II Directive’), ( 112 ) which is to enter into effect in January 2017, harmonises only certain aspects of the supply of financial and investment services by third country nationals.

165. Rules governing the mutual recognition of professional qualifications also do not fall within the common commercial policy. First, contrary to the Commission’s contention, the mere fact that a matter has an impact on external commercial relations or is governed by international economic law is not sufficient to bring it within the common commercial policy. Second, Directive 2005/36/EC on the recognition of professional qualifications ( 113 ) is without prejudice to the Member States’ exclusive competence as regards the recognition of professional qualifications obtained outside the territory of the European Union. Likewise, in the area of maritime transport, the common rules adopted, in particular in Council Directive 96/50/EC (on the conditions for obtaining national boatmasters’ certificates) and Directive 2008/106/EC (on the minimum level of training of seafarers), ( 114 ) lay down only minimum rules which cannot be affected by Article 8.16 of the EUSFTA. Third, the Commission fails to take account of the fact that the GATS (in particular Article VII:1) does not require WTO Members to recognise professional qualifications of third countries or to conclude international agreements in that regard.

166. Furthermore, the manner in which liberalisation is to be achieved under the EUSFTA, in particular in the area of establishment, will or might affect health and social services for which Member States remain competent. That is incompatible with Article 207(6) TFEU. The Commission also wrongly argues that the provisions regarding electronic commerce contain only declarations of intent.

167. Finally, the Commission cannot rely on Article 216 TFEU to justify the existence of shared competence in areas falling outside the European Union’s exclusive competence. The Commission has not shown the need to conclude the EUSFTA in order to achieve one of the objectives referred to in the Treaties.

Arguments regarding transport

168. The Commission treats separately the obligations under Chapter Eight that specifically relate to transport (in the European Union’s Schedule of Specific Commitments in Annex 8-A and in Sub-section 7 of Section E concerning international maritime transport services).

169. The Commission argues that, whilst a very significant part of trade between Singapore and the European Union in the five transport sectors covered by the EUSFTA (air, rail, road, inland waterway, maritime) is supplied under mode 3 (establishment), the provisions relating to the establishment of transport service providers do not fall within the exception in Article 207(5) TFEU. That is because establishment wi