Select Committee on European Union Seventeenth Report

Appendix 6 The Exclusive External Competence of the Community

This Note seeks to provide some clarification of the basic legal framework.

(a) Legal Personality

1.  The Community has legal personality by virtue of Article 281 of the 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

2.  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" (sometimes referred to as the AETR doctrine) or of unexercised Treaty powers to adopt such rules confers external competence to the Community.

(c) Competence - the legal implications

3.  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 is limited. They may not enter into agreements between themselves or with third States on the same subject matter. This is a consequence of the supremacy/primacy of Community law - Member States cannot prejudice the operation of Community law by entering into external obligations.

4.  Where the transfer of competence is partial, because the Treaty expressly preserves Member States' competence (e.g. Article 174 (4)) or the internal rules, as is the case in relation to civil aviation 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.

5.  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).

(d)  Transport Policy

6.  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 and, in particular, transport. The matter came before the Court of Justice prior to the conclusion of the Uruguay round and the Court state the law in its Opinion 1/94.

7.  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. 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. But the Court went on to reaffirm its jurisprudence on the sources of Community competence (see para (b) 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.

8.  Where the line presently lies between the Community's exclusive external competence and Member States' competence to conclude international agreements depends primarily on the identification of "internal rules" (ie the three liberalisation packages and other existing regulations in or affecting the sector). As the witnesses explained, any negotiation of matters within Member States' competence (eg traffic routes) may not in practice be separated from matters the Community's exclusive external competence (eg slots).

Dr Christopher Kerse

Second Counsel to the Chairman of Committees and Legal Adviser to the Select Committee on the European Union, House of Lords

21 January 2003

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