Note from the Legal Adviser on competence
in the WTO
At its meeting on 22 February, Sub-Committee A (Economic
and Financial Affairs, Trade and External Relations) decided to
seek a note from the Legal Adviser "on the sources and extent
of Community competence in relation to WTO negotiations".
This Note seeks to provide a response to that request.
(a) Legal Personality
The Community has legal personality by virtue
of Article 281 of the EC Treaty and capacity, within its field
of competence, to enter into obligations binding in international
law. The Community is party to a wide variety of international
agreements. It is also a member of a number of international organisations.
However, the Treaties do not expressly confer legal personality
on the European Union and consequently, it is argued, the Union
has no power to contract obligations binding in international
law or to belong to international organisations.
(b) Sources of Community competence
The Community's competence to conclude international
agreements arises from two sources:
(i) Express provisions in the Treaty.
For example, Article 133 enables the Community to enter into tariff
and trade agreements within the scope of the Common Commercial
Policy. Other examples can be found in Article 111 (monetary and
foreign exchange agreements), Article 155 (TENs), Article 174
(Environment) and Article 181 (Development co-operation);
(ii) The jurisprudence of the European Court
of Justice. The Court has held that external competence may
flow from other provisions of the Treaty and measures adopted
within the framework of those provisions. Thus the existence of
"internal rules" or of unexercised Treaty powers to
adopt such rules confers external competence on the Community.
(c) Competence - the legal implications
The Community's ability to conduct external relations
is restricted, as a matter of law, to those areas where it has
competence. On the other hand, where and to the extent that the
Community has competence, Member States' freedom of action, for
example, to enter into agreements between themselves or with third
States is limited. This is a consequence of the supremacy/primacy
of Community lawMember States cannot prejudice the operation
of Community law inter alia by entering into external obligations.
Where the transfer of competence is partial,
because the Treaty expressly preserves Member States' competence
(for example, Article 174 (4)) or the internal rules do not occupy
the whole field, then the Community and the Member States share
competence. Both will be parties to the international agreement,
which is commonly referred to as a "mixed agreement".
Internal and external competence are therefore directly related.
The precise extent of Community competence in
relation to a particular subject or agreement is frequently a
matter of concern and debate between the Commission and the Member
States. (The external competence implications of a proposal may
therefore influence Member States' decisions on the adoption or
extension of internal rules.) History shows this to have been
the case in relation to the GATT/WTO.
(d) The Common Commercial Policy
It is clear that the Community has competence
in relation to external trade matters. Articles 131-134 enable
the Community to conduct a common commercial policy with third
States. The policy has facilitated the establishment of a customs
union between the Member States and is based on uniform principles
with regard to such matters as tariff rates, the conclusion of
tariff and trade agreements with third States, import and export
policy. It has been long recognised that the common commercial
policy is an area where the Community has exclusive competence.
But the precise scope of the common commercial policy has been
hotly debated. In particular, does it include services, transport
and intellectual property rights? The matter came before the Court
of Justice prior to the conclusion of the Uruguay Round (a political
compromise was reached between the Commission and the Member States
as regards the actual negotiation).
(e) The Court of Justice's Opinion 1/94
 ECR I-5267
In a lengthy, detailed and somewhat complex ruling
the Court held that the common commercial policy covered some,
but not all, modes of supplying services. Following the approach
of the General Agreement on Trade in Services (GATS), it distinguished
four different ways in which services were supplied: cross-border
supply, consumption abroad, commercial presence and movement of
persons. Only the first falls within the common commercial policy.
The Court also held that international agreements in the field
of transport were excluded from the scope of the common commercial
policy: transport was the subject of a separate and specific title
of the Treaty. Further, the Court held that those parts of the
Agreement on Trade-Related Aspects of Intellectual Property (TRIPs)
which dealt with intellectual property rights were outside the
scope of the common commercial policy. But the Court went on to
reaffirm its jurisprudence on the sources of Community competence
(see paragraph (c) above) and found, after a detailed examination
of the acquis, that the Community had, by virtue
of relevant existing "internal rules", (limited) competence
in relation to transport and intellectual property.
(f) The Community's participation in the WTO
and the agreements reached in the Uruguay Round
Both the Community and the Member States are
party to the WTO agreement and associated agreements. The formal
complexity of the legal position regarding the Community's competence
in relation to WTO matters can be seen from the legal base given
to the Council's decision approving Community membership. The
decision was based on (old numbering) Articles 43, 54, 57, 75,
84(2), 99, 100, 100a, 113 and 235, in conjunction with the second
subparagraph of Article 228(3) of the Treaty. Article 113 (now
133) provides, as explained in para (d) above, the legal basis
of the common commercial policy. The other Articles (or more precisely
one or more of them as the case may be) provide the legal base
for the relevant "internal rules" in the areas of services,
establishment, transport and intellectual property.
(g) The Amsterdam Treaty
The Amsterdam Treaty inserted a novel provision
(Article 133(5)) permitting the scope of the common commercial
policy, and therefore exclusive Community competence, to be extended
to cover services and intellectual property. This responds to
the Court of Justice's Opinion 1/94, dealing with the Community's
accession to the WTO agreements, described in paragraph (e) above.
The unanimous agreement of the Council is needed to effect such
a change. However, as will be appreciated, because of the logical
relationship between the exercise of internal competence and external
competence the Community's powers in these areas may increase
(gradually and sometimes by QMV) as more "internal rules"
(h) A wider agenda for the WTO
If the agenda of the WTO extends (further) into
matters less directly related to trade it will be necessary, as
at the time of the Uruguay Round, to see if and to what extent
those matters fall within the scope of the common commercial policy
or under other provisions of the Treaty giving the Community express
powers to enter into external agreements. If they fell outside
those provisions, an examination of internal competence, potential
or exercised, would be needed to ascertain the precise extent
of the respective competences of the Community and the Member
States. Finally it should be noted that even where a Member State
retains the ability to act unilaterally it may be constrained
by the duty of co-operation (in Article 10 of the EC Treaty) which
requires Member States to abstain from any measure which could
jeopardise the objectives of the Community.
1 March 2000