House of Commons - Documents considered by the Committee on 15 October 2014

Documents considered by the Committee on 15 October 2014 - European Scrutiny Committee Contents

4 The EU-Ukraine Association Agreement

Committee's assessment	Legally and politically important
Committee's decision	Not cleared from scrutiny; for debate on the Floor of the House
Document details	Council Decision amending the Council Decision on the signature and provisional application of the EU-Ukraine Association Agreement
Legal base	Articles 217 and 218(5) and (8) TFEU; unanimity
Department	Foreign and Commonwealth Office
Document number	(36361), 13519/14, COM(14) 609

Summary and Committee's conclusions

4.1 The Association Agreement with Ukraine is intended to support and encourage reform in Ukraine to bring it closer to EU norms, as well as to give Ukraine gradual access to parts of the EU Internal Market. It includes a Deep and Comprehensive Free Trade Area (DCFTA). It is the first of its kind between the EU and one of its "near neighbours"; similar Agreements have been signed with Moldova and Georgia.

4.2 In November 2013, four decisions authorising the EU to sign and provisionally apply the Association Agreement between the EU and Ukraine, and subsequently to conclude (ratify) it, were cleared from scrutiny by debate in European Committee B on 11 November 2013, and by resolution of the House the following day. This was in anticipation of the Agreement being signed at the Vilnius summit later that month. In the event the Agreement was not signed as planned.

4.3 However, following the subsequent events in Ukraine, on 21 March 2014 the EU Council and the new Ukraine authorities signed certain core political chapters and the EU decided to apply them provisionally — although, in accordance with Article 486 of the Agreement, provisional application of any part of the Association Agreement only takes effect once the Ukraine has ratified the Agreement and the EU has notified that the necessary procedures have been completed.[22]

4.4 Following the election of President Poroshenko on 25 May 2014, both he and the Council pressed ahead with the signature and provisional application of the other elements of the Agreement: Title III — Freedom, Justice and Security; Title IV — Trade and Trade-related Matters; Title V — Economic and Sector Cooperation; Title VI — Financial Cooperation, with Anti-fraud Provisions; and Title VII — Institutional, General and Final Provisions. Council Decisions 2014/668 and 2014/669 of 23 June 2014 accordingly authorised the signature of the remainder of the Association Agreement subject to the conclusion of the said Agreement and in accordance with the Final Act.[23] The Agreement was signed at the European Council on 27 June 2014 by all 28 EU Member States, the President of the European Commission and the President of the European Council, and the President of Ukraine.

The further Council Decision

4.5 This further Council Decision amends Decision 2014/668/EU of 23 June 2014. Following consultations with the Ukrainian side and in the context of the overall efforts for the implementation of the peace process in Ukraine, the Commission has proposed to the Council to delay until 31 December 2015 the provisional application of the trade-related provisions of the Association Agreement and at the same time to continue the application of the Union's autonomous trade measures for the benefit of Ukraine. The provisional application of the relevant provisions of Titles III, IV, V, VI and VII, and the related Annexes and Protocols, of the Association Agreement is to take effect in stages.

4.6 In respect of Titles III, V, VI and VII, and the related Annexes and Protocols, the notification of provisional application provided in Article 486 of the Association Agreement is to be made without delay, in conjunction with the notification of provisions provided for in Article 4 of Council Decision 2014/295/EU.[24]

4.7 In respect of Title IV — Trade and Trade-related Matters — and the related Annexes and Protocols, the notification is to be made so that the provisional application takes effect on 1 January 2016.

4.8 The Commission's proposal reflects the outcome of trilateral consultations between the European Union, Ukraine and the Russian Federation on implementation of the Association Agreement, including the Deep and Comprehensive Free Trade Area (DCFTA), which forms Title IV of the Association Agreement — viz., the Joint Ministerial Statement of 12 September 2014 in which the EU proposed, as a contribution to a wider negotiation process aimed at de-escalating tensions on the ground in Ukraine, delaying the provisional application of the DCFTA so that provisional application takes effect on 1 January 2016, whilst continuing autonomous trade measures of the EU to the benefit of Ukraine for the same period.[25]

4.9 The Minister for Europe (Mr David Lidington) describes this proposal as offering "a pragmatic and flexible solution by delaying the provisional application of the DCFTA, whilst leaving the text of the Association Agreement unchanged". He notes that the Government judges that a closer relationship with the EU is the best way to encourage an independent and successful Ukraine. The Association Agreement, including the DCFTA, "is an essential milestone on this path". The reforms supported by the Agreement, "if implemented", offer "the best chance for Ukraine to address corruption and become a free-market economy underpinned by democracy and rule of law".

4.10 Ukraine has now ratified the Association Agreement (so, too, the European Parliament) — "a strong signal of continued commitment despite Russian pressure". The Government believes that the flexibility embodied in the draft Council Decision "allows Ukraine additional time to prepare for implementation of the DCFTA and also contributes to wider negotiations to de-escalate tensions in Ukraine and help the Government of Ukraine to deliver the stability, democracy and prosperity that the Ukraine's citizens deserve". The Minister goes on to explain that Article 486 of the Association Agreement provides that provisional application comes into force on the first day of the second month after Ukrainian ratification and notification by the EU of what it intends to apply.

4.11 He then says:

"Therefore, if the Council Decision is agreed by the 30 September we would remain on schedule for provisional application of the non DCFTA elements on 1 November as planned, whilst agreement in October means provisional application would slip to 1 December.

"After much consideration, I regret that I must override scrutiny in this instance in order to allow the Council Decision to be agreed and the non DCFTA elements of the Association Agreement to be implemented in the necessary timeframe. It is my strong view that we cannot delay provisional application of the non DCFTA elements of the Association Agreement. Russia has already sought to misinterpret the agreement and imply that the 12 September deal applies to the Association Agreement in its entirety, not just the DCFTA, it is politically important to remain on schedule.

"It remains the case that any amendments to the Association Agreement, including DCFTA, can only be at the request of one of the two Parties to the Agreement. Any amendment would require the unanimous agreement of EU member states and Ukraine, and changes to the Agreement itself would require further ratification procedures. The informal trilateral consultations between the EU, Ukraine and Russia on the possible impact of the DCFTA on Russia do not affect the autonomy of the decision of the EU and Ukraine as the two Parties to the Agreement, and does not impact on Ukraine's right to make its own sovereign decisions and determine its own future."

4.12 We note the Minister's explanation for over-riding scrutiny. However, as he himself says, this "is clearly a politically important decision on which I would have liked to have given you the opportunity to scrutinise".

4.13 Moreover, like the Decisions relating to the similar Georgia and Moldova Agreements,[26] the earlier Decisions give rise to concerns relating to EU competence. As noted in the "Background" section below, at this stage of the proceedings:

— it is clear that the UK has, contrary to usual practice, acquiesced in the exercise by the EU of shared competence in respect of the provisions of the Agreement on the basis of declarations that, not being legally binding, can only alleviate, not remove, competence concerns;

— this issue might cover a considerable area of the Agreement, given that the UK Statement provided by the Minister sought to avoid creating a precedent in respect of "[t]he provisional application of those areas of the previously unexercised shared competence within the trade elements of the Association Agreement";

— the "trade elements" form a very significant part of the Agreement (see paragraphs 4.14-4.17 below for full details).

4.14 Whilst the current proposal does not exacerbate them, these concerns remain. We think that now, therefore, the House should have an opportunity to debate the political context that has given rise to this further Council Decision, the wider economic questions which arise due to the situation in Ukraine, and for members to press the Minister to:

· identify more clearly than he has done thus far those elements of the Agreement where the EU is acting — either by signing and concluding the Agreement, or by provisionally applying it — for which its competence is not exclusive; and

· provide a clear explanation of the Government's position.

4.15 It is therefore of very considerable importance that this Council Decision is debated on the floor of the House at the earliest opportunity.

4.16 In the meantime, we shall retain the Council Decision under scrutiny.

Full details of the document: (36361), 13519/14, COM(14) 609: Proposal for a Council Decision amending the Council Decision on the signing, on behalf of the European Union, and provisional application of the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part, as regards Title III (with the exception of the provisions relating to the treatment of third-country nationals legally employed as workers in the territory of the other Party) and Titles IV, V, VI and VII thereof, as well as the related Annexes and Protocols.

Background

4.17 Earlier Council Decisions on the signature, provisional application and conclusion of the core political provisions of the Association Agreement were cleared from scrutiny by debate in European Committee B on 11 November 2013.[27]

4.18 The Committee then agreed to waive scrutiny clearance on the Council Decisions concerning the signing and provisional application of the rest of the Association Agreement, so that they could be agreed at the Foreign Affairs Council of 23 June (this being in line with the EU's political commitment so to do, following a proper presidential election).

4.19 Under the Agreement provisional application cannot take effect until the Ukraine has ratified the Agreement. The full background is set out in our earlier Reports of July and October 2013, and 18 June 2014.[28]

4.20 Although having agreed at the request of the Minister for Europe (Mr David Lidington) to waive scrutiny clearance for the purposes of agreeing the Decisions, in view of their political and legal importance the Committee asked the Minister to deposit the texts agreed at the June 23 Council and also those agreed in March with all associated statements and declarations, in order to provide a complete picture. Like the Decisions relating to the similar Georgia and Moldova Agreements,[29] these Decisions give rise to concerns relating to EU competence. We reminded the Minister that we remained concerned to identify clearly those provisions in respect of which the EU was acting — either by signing and concluding the Agreement, or by provisionally applying it — where its competence is not exclusive, and asked for the Minister to identify where this is not the case.

4.21 Although we did not receive this, it could be inferred from the Minister's Explanatory Memorandum of 2 July 2014 that the EU was only provisionally applying it to the extent that it has exclusive competence, save for provisions covered by declarations. Whilst acknowledging the extent to which the Government had sought to circumscribe the exercise of competence by the EU, we concluded that it was nevertheless clear that the UK had, contrary to usual practice, acquiesced in the exercise by the EU of shared competence in respect of the provisions of the Agreement where such declarations had been made — declarations that, not being legally binding, could only alleviate, not remove, competence concerns.

4.22 We noted:

— that this issue might cover a considerable area of the Agreement, given that the UK Statement provided by the Minister sought to avoid creating a precedent in respect of "[t]he provisional application of those areas of the previously unexercised shared competence within the trade elements of the Association Agreement";

— that the "trade elements" form a very significant part of the Agreement;

— that, having failed to secure a Title V legal basis for readmission, the Government had nevertheless sought to opt into the main Decision; and that

— in accordance with our consistent previously expressed view, which we maintain, we do not consider that the UK opt-in is engaged in these circumstances and the Decision applies automatically to the UK.

4.23 As these Decisions had now been adopted, we cleared them from scrutiny. In doing so, we drew the attention of the House to their legal and political importance and asked the Minister, in future such cases, to:

· identify clearly from the outset those elements of the international agreement in question where the EU has exclusive competence, and

· provide a clear explanation of areas where competence is shared and in which the EU is acting and a clear explanation of the Government's position.[30]

4.24 In his Explanatory Memorandum of 26 September 2014, the Minister for Europe (Mr David Lidington) explains that this new Council Decision amends Decision 2014/668/EU of 23 June 2014, which authorised the signature, on behalf of the European Union, of the Association Agreement as regards Titles III (with the exception of Article 17), IV, V and VI thereof, as well as the related Annexes and Protocols, subject to the conclusion of the said Agreement and in accordance with the Final Act.

4.25 The Minister notes that the Agreement was signed at the European Council on 27 June 2014 by all 28 EU Member States, the Presidents of the European Commission and the European Council, and the President of Ukraine.

4.26 He then continues as follows:

"Following trilateral consultations between the European Union, Ukraine and the Russian Federation on implementation of the Association Agreement, including the Deep and Comprehensive Free Trade Area (DCFTA), which forms Title IV of the Association Agreement, on 12 September 2014, the three parties agreed a Joint Ministerial Statement in which the EU proposed, as a contribution to a wider negotiation process aimed at de-escalating tensions on the ground in Ukraine, delaying the provisional application of the DCFTA so that provisional application takes effect on 1 January 2016 , whilst continuing autonomous trade measures of the EU to the benefit of Ukraine for the same period. The 12 September proposal offers a pragmatic and flexible solution by delaying the provisional application of the DCFTA, whilst leaving the text of the Association Agreement unchanged".

4.27 The Minister then recalls that:

— Council Decision 2014/295/EU of 17 March 2014 allowed signature and provisional application of the preamble and political chapters (Titles I, II and VII) of the Association Agreement on 21 March;

— Council Decision 2014/688/EU of 23 June allowed signature and provisional application of the remaining chapters, including the DCFTA;

— Member States had previously agreed that, pending entry into force of the Association Agreement, only a limited number of articles within these Titles would be applied provisionally following Ukraine's ratification of the Association Agreement.

4.28 The Minister also states that "the Council Decisions allowing signature and provisional application of the political chapters respected the deal reached in September 2013 following intensive UK Government negotiation to limit scope for provisional application to protect Member State competence".

4.29 He then says:

"According to the Commission's new proposal to the Council, the provisional application of the relevant provisions of Titles III, IV, V, VI and VII, and the related Annexes and Protocols, of the Association Agreement will take effect in different stages. Therefore, for Titles III, V, VI and VII, and the related Annexes and Protocols, the notification provided in Article 486 of the Agreement will be made without delay, in conjunction with the notification of provisions provided for in Article 4 of Council Decision 2014/295/EU of 17 March 2014, while for Title IV, the DCFTA, and related Annexes and Protocols, the notification will be made so that the provisional application takes effect on 1 January 2016. This requires an amendment to Council Decision 2014/668/EU.

"The Ukrainian Rada (Parliament) ratified the Association Agreement, including DCFTA, on 16 September 2014, and the European Parliament gave its consent to the Association Agreement in parallel. Given that Ukraine ratified the Agreement on 16 September 2014, provisional application would, if notification by the EU had immediately followed Ukraine's ratification, begin on 1 November 2014. The text of Article 486 of the Association Agreement provides that provisional application comes into force on the first day of the second month after Ukrainian ratification and notification by the EU of what it intends to apply.

"The trilateral consultations between the European Union, Ukraine and Russia will continue with full respect for Ukraine's territorial integrity and right to decide its own future

"The content of the Association Agreement, and DCFTA, remain as set out in my Explanatory Memoranda of 14 June 2013, 9 October 2013 and 2 July 2014. The Free Trade Area part of the Agreement covers a wide range of issues aimed at stimulating growth in Ukraine and creating business opportunities for all parties".

The Government's view

4.30 The Minister comments thus:

"Ukraine matters: its resource base, pre-eminently in energy and agriculture, has the potential to contribute powerfully to the development of a European region resilient to 21st century threats to its stability, prosperity and competitiveness. The Government judges that a closer relationship with the EU is the best way to encourage an independent and successful Ukraine. The Association Agreement, including the DCFTA, is an essential milestone on this path. The reforms supported by the Agreement, if implemented, offer the best chance for Ukraine to address corruption and become a free-market economy underpinned by democracy and rule of law.

"Ukraine has now ratified the Association Agreement, a strong signal of continued commitment despite Russian pressure. The agreement proposed on 12 September involves no change to the content of the Association Agreement or DCFTA, the texts of which previously cleared scrutiny, other than to delay provisional application of the DCFTA to 31 December 2015. The Government believes that this flexibility allows Ukraine additional time to prepare for implementation of the DCFTA and also contributes to wider negotiations to de-escalate tensions in Ukraine and help the Government of Ukraine to deliver the stability, democracy and prosperity that the Ukraine's citizens deserve. It is proposed that the Autonomous Trade Measures provided to Ukraine by the EU are extended for the same period".

The Minister's letter of 25 September 2014

4.31 The Minister's letter prefigured his Explanatory Memorandum, as follows:

"The situation in Ukraine continues to be of great concern. The Government remains committed to supporting a political settlement to the crisis. Although an agreement, including a ceasefire, was signed in Minsk on 5 September by representatives of Ukraine, Russia and the pro-Russian separatists, the ceasefire remains fragile, with violations reported on a daily basis. We continue to urge Russia to take action to withdraw its troops and equipment from the territory of Ukraine, to engage constructively with the Government of Ukraine, and to use its influence with the separatists to encourage them to do the same.

"On 12 September at the latest in a series of trilateral (EU-Ukraine-Russia) consultations, a deal was brokered in which the EU proposed to delay the provisional application of the Deep and Comprehensive Free Trade Area (DCFTA) of the Association Agreement to 31 December 2015. These consultations form part of a wider intense negotiation process aimed at deescalating tensions on the ground in Ukraine. The 12 September proposal offers a pragmatic and flexible solution by delaying its provisional application of the DCFTA, at Ukraine's request, whilst leaving the text unchanged.

"The Ukrainian Rada ratified the Association Agreement, including the DCFTA, on 16 September, and the European Parliament gave its assent to the Agreement in parallel. These actions demonstrated the continuing commitment by both parties to the Association Agreement and a closer EU-Ukraine relationship. Five Member States have already ratified the Agreement and we plan to begin the UK ratification process for the EU-Ukraine Association Agreements, alongside those with Georgia and Moldova, in the near future. Russia, which had previously hinted at retaliatory measures, has not responded to the ratification of the Association Agreement by Ukraine.

"Following the 12 September discussions the Commission has formally proposed the delay in the provisional application of the DCFTA, which forms Title IV of the Association Agreement, to Member States. Delay of the DCFTA until 31 December 2015 requires a new Council Decision and therefore is subject to scrutiny.

"The timetable for agreement of the new Council Decision is, however, extremely tight. Given that Ukraine has now ratified the Agreement, provisional application would, if notification by the EU had followed based on the original Council Decision, begin on 1 November 2014. The text of Article 486 of the Association Agreement provides that provisional application comes into force on the first day of the second month after Ukrainian ratification and notification by the EU of what it intends to apply. Therefore, if the Council Decision is agreed by the 30 September we would remain on schedule for provisional application of the non DCFTA elements on 1 November as planned, whilst agreement in October means provisional application would slip to 1 December.

"I regret that due to the political imperative I find myself in the position of having to agree to the adoption of this Council Decision before the House returns from recess and your Committee has had an opportunity to scrutinise the documents. This has been a particularly difficult decision, as I recognise that this is clearly a politically important decision on which I would have liked to have given you the opportunity to scrutinise. The Decision and a thorough Explanatory Memorandum will still be deposited for scrutiny as soon as possible. As you know, I take the responsibility to keep your Committee informed on issues of political importance seriously and the need for the override of scrutiny on this occasion is regrettably unavoidable.

4.32 After the General Affairs Council meeting of 29 September, the following statement was issued:

"The Council and the Commission

"1. Welcome the ratification of the EU-Ukraine Association Agreement, which constitutes a single instrument, by the Ukrainian Parliament and the consent given by the European Parliament on 16 September 2014, and look forward to a swift completion of the ratification by all Member States.

"2. Refer to the Joint Ministerial Statement of 12 September on the implementation of the EU-Ukraine Association Agreement/DCFTA, and underline the importance for all parties to strictly abide by their commitments therein. This statement is part and parcel of a comprehensive peace process in Ukraine, respecting Ukraine's territorial integrity and the right of Ukraine to decide on its destiny.

"3. Recall that the Association Agreement is a bilateral agreement and any adaptations to it can only be made at the request of one of the parties and with the agreement of the other, according to the mechanisms foreseen in the text and in compliance with international law and with the respective internal procedures of the parties.

"4. Encourage Ukraine, following the start of provisional application of the relevant provisions of Titles I-III and V-VII, to continue the process of envisaged reforms and economic modernisation, in accordance with its international commitments and with EU support and monitoring.

"5. Reaffirm the importance of adequate preparation for the implementation of Title IV of the Association Agreement, in line with the timeframe specified in the Council Decision, and taking into account Ukraine's international commitments."[31]

Previous Committee Reports

(35362-5) —: Eighth Report HC 219-viii (2014-15), chapter 13 (16 July 2014) and Third Report HC 219-iii (2014-15), chapter 10 (18 June 2014); see also Nineteenth Report HC 83-xviii (2013-14), chapter 5 (23 October 2013); (35880) — and (35881) —: Forty-fourth Report HC 83-xxxix (2013-14), chapter 3 (26 March 2014).

22 The EU procedures were completed in respect of the core political chapters of the Association Agreement by Decision 2014/295. Back

23 Decision 2014/669 dealt separately with Article 17 of Title III of the Association Agreement, which relates to the treatment of third-country nationals legally employed in the territory of a party and to which the UK opt-in applies in accordance with Protocol 21 to the Treaties. Back

24 Council Decision 2014/295/EU of 17 March 2014 on the signing, on behalf of the European Union, and provisional application of the Association Agreement between the European Union and the European Atomic Energy Community and their Member States, of the one part, and Ukraine, of the other part, as regards the Preamble, Article 1, and Titles I, II and VII thereof (OJ No. L 161, 29.5.2014, p.1). Back

25 The statement reads:

"Today's meeting has been a follow-up to the trilateral ministerial meeting on 11 July 2014 in Brussels and the meeting at the highest political level that took place in Minsk on 26 August 2014.

"EU Trade Commissioner De Gucht, Minister of Foreign Affairs of Ukraine Klimkin and Minister of Economic Development of the Russian Federation Ulyukayev agree on the importance of promoting trade liberalisation in support of growth and greater prosperity, in line with their WTO obligations. They concur on the necessity to ensure that the EU-Ukraine AA/DCFTA and the CIS FTA both contribute to a more integrated economic space in the region.

"To be able to fully support the stabilisation of Ukraine, the Commission is ready, in the event that Ukraine ratifies the Association Agreement with the EU, to propose additional flexibility. Such flexibility will consist in delaying until 31 December 2015 the provisional application of the DCFTA while continuing autonomous trade measures of the EU to the benefit of Ukraine during this period.

"Parties will continue to consult on how to address concerns raised by Russia. The progress of these consultations will be reviewed at Ministerial level trilateral meetings.

"This ongoing process needs to be part and parcel of a comprehensive peace process in Ukraine, respecting the right of Ukraine to decide on its destiny as well as its territorial integrity.

"On the basis of this understanding Russia and Ukraine confirm that they will continue to apply the CIS-FTA preferential regime": see http://europa.eu/rapid/press-release_STATEMENT-14-276_en.htm. Back

26 For the Committee's consideration of these Agreements, see our Eight Report of 16 July 2015, at http://www.publications.parliament.uk/pa/cm201415/cmselect/cmeuleg/219-viii/21915.htm. Back

27 The record of the European Committee debate is available at http://www.publications.parliament.uk/pa/cm201314/cmgeneral/euro/131111/131111s01.htm (Gen Co Deb, European Committee B, 11 November 2013, cols. 3-20). Back