Editor’s Note: This is part of a series of post on the Treaty of Lisbon. The first post in the series was by Laurent Pech and can be found here

Now that Ireland has voted yes in a referendum earlier this month – remarkable how democracy swings! – the European Union’s Treaty of Lisbon looks set to enter into force over the next couple of months.  Barring any further upheaval, such as a recalcitrant Czech President refusing to sign, or further delay allowing the UK Conservative Party (if they win the next general election in the UK) to set up their referendum, the curtain will fall over the European Union’s [EU] long constitutional episode which followed the Treaty of Nice.  It is by no means the end of the play though.  The curtain may fall for the general public, but behind the scenes much of the work remains to be done.  The entry into force of Lisbon will not close institutional reform.  Quite the contrary, it will set in motion an intense period of institutional adaptation, governed by often sketchy Treaty provisions which are indeterminate and riddled with opportunities for inter-institutional strife.  This is particularly the case for the conduct of the EU’s external relations – or external action, as the Treaties now call it.  The role and position of the High Representative for Foreign Affairs and Security Policy, who will also be a Commission Vice-President, will need to be clarified.  His or her relationship with both the Commission President and with the new European Council President will need to be developed.  The EU’s External Action Service will need to be set up.  These are just some examples.

The focus of this post is not on such institutional issues, but on other questions regarding the EU’s future as an international actor, subject to international law.  What are some of the main changes which may affect that future?  Here are some projections.

The International Legal Personality of the European Union

Readers probably know this by now, but it is still momentous: the European Community will be no more.  The difficult construction of a European Union, based on, and complementing the European Community, will be replaced by a single EU, which will have legal personality (Art 47 Treaty of the European Union [TEU]).  That will terminate the rather tedious academic discussions about whether the EU, as opposed to the EC, has international legal personality (it clearly had, at the latest from the moment it started concluding international agreements).  Instead of two international legal persons, the EU and the EC, there will be only one.  This also means that the various EU external policies will need to be further integrated.  The above institutional changes aim to contribute to that.  The single EU will be able to act under international law, mainly by concluding international agreements and through action in international organizations, in all the spheres of its activity.  There is a big but, though.  The Common Foreign and Security Policy [CFSP] continues to be subject to a specific and separate set of provisions, in the TEU, which are not very different from the old ones.  CFSP essentially retains its ‘pillar’ status.  One question which this raises is whether, under the new Treaties, the EU will be capable of concluding international agreements which contain provisions on, say, both foreign policy and trade policy.  At present such inter-pillar agreements appear excluded  – see the European Court of Justice’s decision in Case C-91/05 Commission v Council (Small Arms and Light Weapons) [2008] ECR I-3651, paras 76-77.  It is not clear whether Lisbon changes that.

EU Objectives on the International Scene

One way in which the new Treaties aim to unify external action is through a common set of provisions, which inter alia define the EU’s overall objectives on the international scene.  A short version can be found in Art 3(5) TEU, a longer one in Art 21 TEU.  There is no lack of ambition.  The EU ‘shall contribute to peace, security, the sustainable development of the Earth, solidarity and mutual respect among peoples, free and fair trade, eradication of poverty and the protection of human rights, in particular the rights of the child, as well as to strict observance and the development of international law, including respect for the principles of the United Nations Charter’ (Art 3(5) TEU).  Europeans continue to be from Venus, not Mars.  But do such provisions have any legal effect?  It is an interesting question.  The ECJ has so far not been minded to pay much attention to general Treaty objectives when interpreting or reviewing Community acts (Art 131 EC, for example, which speaks of ‘the progressive abolition of restrictions on international trade’, has never had any significance for the judicial review of trade policy measures).  But a new Treaty may lead to new case-law.

International lawyers will note the final phrase in Art 3(5) TEU: strict observance and development of international law, including respect for the principles of the UN Charter.  Could that provision become relevant for the EU Courts?  The Kadi judgment springs to mind, of course.  Many international lawyers are critical of the way in which the Court treated UN law in that judgment (see discussion of this criticism here).  Would the ECJ re-define the relationship between EU law and UN law, in the light of the above provision?  It is in any event not unlikely that there will be a sequel to Kadi before the ECJ (there is an action for the annulment of Mr Kadi’s re-listing, pending before the CFI, see discussion here), and by that time the new Treaty should have entered into force.

The EU is of course already a very active international player, in particular in terms of concluding international agreements.  Lisbon is remarkable, not only for what it regulates, but also for what it leaves untouched.  The EU’s treaty-making practice is dominated by its preference for concluding so-called mixed agreements, which have the EC and its Member States as contracting parties.  These mixed agreements raise a host of complex questions, under EU law, but also under international law.  The current Treaties do not address those questions – other than through the application of the principle of loyalty (Art 10 EC), which is translated into a duty of cooperation in external action.  Lisbon, notwithstanding its focus on external action, adds nothing as regards mixed agreements.  Indeed, an uninformed reader of the EU Treaties will find no references to mixed agreements, and will not even be aware that they exist.  Constitutional law evolves in written and in unwritten form.  It will continue to fall to the ECJ to put flesh to the duty of cooperation (see e.g. the recent Opinion by Advocate General Maduro in Case C-246/07 Commission v Sweden, see EJIL:Talk! Commentary on the case here).

Expansion of EU Common Commercial Policy to include Foreign Direct Investment

The EU’s external powers – its catalogue of competences – do not substantially expand when Lisbon enters into force, with one major exception.  The common commercial policy will include ‘foreign direct investment’ (Art 207 TFEU).  With a tick of the clock, an important area of international law will come within the EU’s exclusive powers.  That is a remarkable development, given that the EU has never displayed a very strong interest in this branch of international economic law.  EU Member States all operate a complex network of bilateral investment treaties, which are at the heart of international investment law.  The EU’s involvement has been limited to participation in the Energy Charter Treaty, and in GATS, which have investment dimensions, and in the negotiation of the ill-fated multilateral agreement on investment.  A momentous development, therefore, and it is at this stage unclear how the EU institutions intend to proceed in this area.  Of course, the many bilateral treaties cannot be immediately replaced by Europe-wide agreements, and the EU will therefore have to authorise their continued existence and operation.  But beyond that, there is at present no discernible policy direction.  International lawyers with an interest in this area will need to brush up on the law of EU external competences, EU trade policy, and treaty-making (including mixity).

Concluding Remarks

These are just some pointers to what kind of questions Lisbon may bring to the surface.  One final comment.  Notwithstanding the repeal of the Constitution for Europe, and the excision of constitutional symbols and concepts from its Lisbon twin, constitutionalism continues to be the EU law paradigm.  The excisions may make that a bit more difficult to notice, but have not fundamentally altered the nature of the exercise.  So Lisbon further strengthens the EU constitution, small caps; and it looks like it will be with us in the present form for quite some time.

 Related EJIL:Talk! Links

http://www.ejiltalk.org/the-european-unions-lisbon-treaty-some-thoughts-on-the-irish-legal-guarantees/

http://www.ejiltalk.org/kadi-and-al-barakaat-luxembourg-is-not-texas-or-washington-dc/

http://www.ejiltalk.org/a-house-of-kadis-recent-challenges-to-the-un-sanctions-regime-and-the-continuing-response-to-the-ecj-decision-in-kadi/

http://www.ejiltalk.org/investment-treaties-and-eu-law/

Piet Eeckhout is Professor of Law and Director of the Centre for European Law at King’s College London.

In two parallel decisions of March of this year (Case C-249/06 Commission v Sweden and Case C-205/06 Commission v Austria) the European Court of Justice ruled that Sweden and Austria are in breach of their EC Treaty obligations by maintaining bilateral investment treaties with third countries which may interfere with the EU’s powers to restrict capital movements.  This is the Court’s first venture into the booming international investment law field.  It should be seen in its broader setting. The Treaty of Lisbon purports to extend the scope of the EU’s common commercial policy to matters of “foreign direct investment”.  Perhaps in anticipation of this significant expansion of Community competence, the Commission is becoming active in this area.  It considers that bilateral investment treaties between Member States and third countries are incompatible with Community law, in so far as they contain a clause on the free transfer of payments connected with an investment.  Such a clause, whilst in principle compatible with the free movement of capital between the Community and third countries, could create problems were the Community to introduce restrictions pursuant to Articles 57(2), 59 and 60(1) of the EC Treaty.  There is as yet no relevant legislation under any of these Treaty provisions, but the Commission is concerned that the future exercise of Community competence could be hindered.

The Commission therefore brought proceedings against Sweden and Austria, referring to a series of investment treaties which they have concluded.  Those treaties come within the scope of Article 307 EC, pursuant to which (a) rights and obligations arising from agreements, concluded before accession, between Member States and third countries are not affected by the EC Treaty, and (b) Member States shall take all appropriate steps to eliminate any incompatibilities with the EC Treaty.  Sweden and Austria were alleged not to have removed the incompatibility between their investment treaties and EC law.  What the Commission would like to see is a so-called Regional Economic Integration Organisations clause in these agreements: a clause which allows and safeguards EC measures.

Advocate General Maduro was of the opinion that the investment treaties in issue were not incompatible with the relevant EC Treaty provisions as such. Those provisions do not establish an exclusive Community competence; competence to adopt measures on free movement of capital is shared with the Member States.  To hold that the investment treaties are incompatible with the shared or concurrent powers which the Community has in this field would amount to making those powers exclusive.

 The Advocate General nevertheless concluded that there was an incompatibility with EC law, namely with Article 10 EC, embodying the duty of loyal cooperation.  He drew an analogy with case law on directives whose period for transposition has not yet expired.  He proposed that the Court rule “that Member States are obliged to refrain from any measures liable seriously to compromise the exercise of Community competence”.  The Advocate General considered that this was the case, particularly since some of the relevant EC Treaty provisions allow the Community to adopt urgent measures.  To do so could be made more difficult because of the transfer clauses in bilateral investment treaties.

 The Court’s analysis is very brief.  It describes the powers of the Community to restrict, in certain specific circumstances, movements of capital and payments between the Member States and third countries.  It then establishes that such measures must be capable of being applied immediately – this is necessary to ensure their effectiveness.  Such immediate application may extend to States with which Sweden and Austria have concluded investment treaties.  The Court then concludes that there is an incompatibility between the Council’s powers to adopt unilateral restrictive measures and the investment treaties – at least in so far as those treaties do not allow the Member States to exercise their rights and to fulfil their obligations under Community law and in so far as there is no international-law mechanism to achieve the same result.  Arguments by Sweden and Austria concerning the scope for re-negotiation, suspension, or denunciation, are rejected as insufficient to remove the incompatibility.  The Court concludes by instructing the Commission and the Member States to adopt a common attitude – indeed the issue of transfer clauses is not limited to treaties concluded by Sweden and Austria – all Member States are bound by treaties containing such clauses.

 The judgments call for some comments.  First, I hope that the Court is not in these judgments establishing a broader principle that any international agreements concluded by the Member States which may make the exercise of shared Community competences more difficult are incompatible with Community law.  That would indeed turn shared competences into exclusive ones.  It cannot be right that the Member States are in breach of EC law whenever they conclude an international agreement in an area of shared competence, simply because at some later stage the Community may decide to adopt its own legislation, which may differ from the terms of the agreement.  The judgments in my opinion have to be read in the light of the particular legal context: the relevant EC Treaty provisions permit the Community to adopt urgent measures, and this may justify finding that any Member State agreements which would pose problems for the adoption and implementation of such measures are incompatible with the EC Treaty.

Second, the Court is very dismissive of the opportunities offered by treaty law to suspend or terminate the relevant treaties, if the need were to arise.  Those opportunities are “too uncertain in [their] effects”.  The Court’s position is that, if and when the Council decides to take restrictive measures, nothing should stand in its way.  International law obligations of the Member States should not form an obstacle of any kind.  It is questionable whether this is the right approach towards an area of international law in which all the EU Member States are active.  In another fairly recent decision, Intertanko (Case C-308/06, 3 June 2008), the Court suggested that, where all Member States are bound by an international agreement (in that case Marpol 73/78), Article 10 EC (loyalty principle) has consequences for EC acts: it is then incumbent upon the Court to interpret such acts taking account of the agreement.  Should not the EC Council equally take account of international investment treaties binding the Member States when considering to take measures restricting capital movement? 

Third, it must be noted that the EC is itself bound by a treaty, together with its Member States – the Energy Charter Treaty (ECT) – which includes free transfer provisions.  Is that treaty then not equally incompatible with the EC Treaty?  Can it make any difference whether the investment treaty was concluded by a Member State, or by the Community itself?  It may in this respect be noted that, under the ECT, there are arbitral proceedings pending which further test the relationship between the ECT and EC law.  One of the cases is AES v Hungary (ICSID).  In an expert opinion for the Tribunal I took the position that the EC must respect the rights of an investor, even when the ECT is invoked in an intra-Community context (in the case, the UK and Hungary).  I also analysed how the first paragraph of Article 307 EC allows a Member State (in this case Hungary) to respect its treaty obligations towards a private party, established in another Member State.  The Tribunal is to decide in coming months.

 Fourth, the effect of these judgments may be similar to that of the so-called Open Skies judgments, in which the Court found that bilateral aviation agreements between the Member States and third countries were in violation of the freedom of establishment.  Those judgments forced the Community – the Council in particular – to craft a common external air transport policy, and to replace bilateral agreements with Community agreements.  A comparable development in the field of investment treaties is not inconceivable.  It may therefore be that the entry into force of the Lisbon Treaty is not required for the shaping of an EU external investment policy.

Piet Eeckhout is Professor of Law and Director of the Centre for European Law at King’s College London. He was a member of the legal team for the applicant Yassin Kadi.

The European Court of Justice’s approach in the Kadi decision has already been described as sharply dualist (see,Professor Joseph Weiler’s EJIL editorial, posted here on this blog and Gráinne de Búrca, “The European Court of Justice and the International Legal Order after Kadi“, Jean Monnet Working Paper No. 01/09).  The Court emphasises the autonomy of the Community legal order. Judicial review in the light of fundamental rights is the expression of a constitutional guarantee stemming from the EC Treaty as an autonomous legal system, a guarantee which is not to be prejudiced by an international agreement. Not even the UN Charter is capable of interfering with that guarantee, notwithstanding the Charter’s primacy under international law, a primacy which the Court accepts.

The strong confirmation of the autonomy of Community law is undeniable. But there is of course nothing new in that autonomy: since Van Gend en Loos this is the very premise of the Community legal order. However, I find the notion of dualism much less helpful for the purpose of characterising the Court’s reasoning. The interactions between international law and municipal law in today’s world have too many different dimensions for blunt concepts such as monism and dualism to be helpful. This means that Kadi needs to be put in perspective. It is very tempting to argue that the judgment is ground-breaking, perhaps even revolutionary, the most important judgment handed down by the Court in decades. Alas, my academic assessment is that this is exaggerated. On a dispassionate reading the Court simply confirms established rules and principles concerning (a) judicial review, (b) the importance of fundamental rights, and (c) the relationship between international law and Community law. All acts of the institutions adopted under the EC Treaty are subject to judicial review (Les Verts) – undisputed to my knowledge. All such acts need to comply with general principles of Community law, including fundamental rights (Opinion 2/94) – undisputed. When the Community acts under international law, for example by concluding an international agreement, the EC Treaty needs to be respected (all the judgments on external competence) – undisputed. The norms of an international agreement which the EC concludes need to be compatible with the Treaty, as the Treaty itself clarifies in Art 300(6) (see also Commission v Germany) – again undisputed. It seems to me that the only point which the Kadi judgment adds is that those rules and principles extend to UN law, notwithstanding the primacy of the Charter under international law, notwithstanding Article 103 of the Charter.

Of course, that is an important point to add, and it needs to be looked at a little further. Most international lawyers are no doubt critical of the Court’s silence on Article 103. The only reference which the Court makes to that provision is a tacit one: “any judgment given by the Community judicature deciding that a Community measure intended to give effect to … a resolution is contrary to a higher rule of law in the Community legal order would not entail any challenge to the primacy of that resolution in international law”. There is no further analysis of the primacy rule. Nor is there in the Opinion of AG Maduro. Is this not an approach which is too cursory, sweeping Article 103 under the carpet, as it were? Well, as a matter of positive law, the answer is: no it is not. As I have argued before, it is difficult to see the relevance of Article 103 in the kind of proceedings leading to the judgment in Kadi. Article 103 addresses the obligations of the Members of the United Nations under the Charter (and the EU or the EC are not of course such members), and provides that, in the event of a conflict with obligations under any other international agreement, the Charter prevails. Article 103 therefore speaks to the obligations of the EU Member States, but not to those of the EC. If we are serious about the autonomous nature of international organizations as international legal persons – and I would argue that international law itself is most serious about that, see for example the ILC work on the responsibility of international organizations – then as a matter of positive law it is difficult to see what effect Article 103 can have for the EC. Moreover, in Kadi the Courts were not looking at measures adopted by the EU Member States, which are of course bound by Article 103. The Courts were looking at an EC measure, a measure adopted under the EC Treaty – and is it not the most basic principle of international law that a treaty, also the EC Treaty, needs to be respected? Can you expect a court such as the ECJ, which by the EC Treaty is instructed to ensure that acts of the institutions are in conformity with that Treaty, to disregard that instruction, on the basis of another treaty provision which, on its terms, does not apply? I don’t think so. I might change my view only if international lawyers convince me that the norm of Article 103 goes beyond its positive terms; that it binds all international legal persons, and is a kind of ius cogens norm, an absolute peremptory norm which is all-pervasive. That is a sincere invitation.

In Kadi the Court of Justice adopts a constitutional rather than an international perspective. That is undeniable. The Court uses the term “constitutional” in several paragraphs, when referring to the kind of judicial review and respect for fundamental rights which the EC Treaty mandates. The judgment is constitutional by characterising the EC Treaty as containing constitutional norms which cannot be derogated from. It is constitutional in its approach of allowing the penetration of international law only in compliance with the relevant rules and principles of Community law. Here is, in the Court’s conception, a kind of municipal legal system, with its own constitution (notwithstanding the rejection of the Constitution by voters in some Member States); EC law is not a mere branch of international law.

Three comments on that constitutional discourse. First, again, there is nothing new in it. All of the Court’s case-law on the protection of fundamental rights displays this strong constitutionalist perspective. And to those who do not like that: perhaps its origins lie more in the pressure exercised by Member States’ constitutional courts, than in an autonomous decision of the Court of Justice. Second, it is a discourse which, frankly, is well suited for addressing the issues which the Kadi case raises; better suited, I would argue, than an internationalist discourse. The case is about individuals subject to intrusive governmental action, making the argument that their fundamental rights are not protected. This is of course classic constitutional stuff. My third comment is a little more tentative. Let us for a moment imagine that in Kadi the Court of Justice had considered its function to be that of a standard international court or tribunal. An international court operating under one Treaty (the EC Treaty), and faced with a conflict with another treaty, the UN Charter. I don’t think it could simply be taken for granted that the Court would confirm that the Charter takes precedence. International lawyers worry about the fact that international law is fragmented, and that treaty regimes do not always display great openness to other such regimes. I am reminded of the debates in WTO law. There many commentators are of the opinion that a WTO panel cannot apply ‘external’ treaty norms. Whether that insulation extends to the UN Charter, may be a further point; but it is in any event clear that an international law approach does not automatically guarantee that a court applies norms external to its treaty system.

The Kadi judgment is compared to Medellin (see, for example Professor Joseph Weiler’s post here). To me there are very important differences. In Medellin international law conferred rights on individuals; in Kadi it was argued that international law precluded the protection of individual rights. In Medellin the Supreme Court was asked to give effect to a ruling of the highest international court; in Kadi the Court of Justice intervened against a form of executive action. In a purely domestic context such factors would make anyone distinguish the two cases. We should also do so in an international context.

My last comment on Kadi and the relationship between EC law and international law, concerns the actual review by the Court in the light of fundamental rights. One commentator has said that the Court chose “to express important parts of its reasoning in rather chauvinist and parochial tones” (Gráinne de Búrca, Jean Monnet Working Paper No. 01/09)  . But I do not see what is chauvinist and parochial about the Court applying fundamental rights norms which are shared between 27 European countries, Member States of the EC; norms which are largely derived from the ECHR, which has 47 Contracting Parties; norms, lastly, which are very similar to those which one finds in UN human rights instruments such as the International Covenant on Civil and Political Rights. In fact it might have been preferable for the Court to have pointed out that the human rights norms which it was applying are by no means alien to the UN legal system. Such a statement is absent from the judgment, which is perhaps deplorable. But the point remains that the Court applied norms which the UN itself promotes and seeks to enforce.

The main lesson which international law needs to draw from the Kadi judgment is that, since it increasingly affects, in ever more direct ways, the position of individuals, it needs to develop much better mechanisms for the protection of individual rights. If such better protection had been afforded in Kadi, I am convinced that the Court would have been much more inclined to defer to the Resolution. In fact, the Court intimated that a kind of Solange approach towards international law is not excluded. It devoted eight paragraphs to the Commission’s argument that the UN sanctions system allows for the individuals or entities concerned to be heard. The Court considered that the current re-examination procedure does not offer the guarantees of judicial protection. But it did expressly refer to the “so long as” terminology which the Commission put forward at the oral hearing (not in its written submissions). And there would have been no need to engage with the argument if no Solange approach were conceivable. If the Security Council puts its house in order, I expect the Court of Justice to defer to the UN sytem of protection. But for now, the Court’s position is akin to the first Solange judgment of the BVG: as long as the UN does not itself guarantee efffective judicial protection, the Court will enforce European human rights norms, as it does in all other circumstances. The Court’s judgment should be seen as an incentive for the further development and improvement of international law, and not as a retreat from international law.