You have to look no further than the EU-Canada accord, which was almost scuttled past year by a Belgian region, to see that "approval within each of the EU's member states can be a significant stumbling block in finalising mixed agreements", said Alice Darling, a lawyer in Clifford Chance's trade team in London.
A ruling by the EU's top court on Tuesday set an important precedent that trade agreements will have to be ratified by the bloc's 38 national and regional parliaments if they include clauses about investors' rights.
Alice Darling, a member of the trade team at London law firm Clifford Chance, said the judgment could make securing a U.K. -EU trade deal after Brexit a lengthy process. While the formal two-year countdown until the United Kingdom leaves the EU was triggered on March 29, European Commission President Jean-Claude Juncker said the real political negotiations on Article 50 would start after the United Kingdom holds parliamentary elections June 8.
The European Commission, the executive institution of the EU, completed its free trade deal negotiations with Singapore in October 2014.
British Prime Minister Theresa May formally triggered on March 29, 2017, Article 50 of the EU's Lisbon Treaty, which deals with exit from the European Union, initiating a two-year process of negotiations with Brussels, over 9 months after in their June 2016 referendum, the majority of the Brits voted in favor of Brexit (51.9% to 48.1%).
In a closely watched decision, the European Union court said that any trade deal that includes a non-court dispute settlement system would require ratification by the EU's 38 national and regional authorities.
It came about after the European Commission asked the ECJ to determine what its level of power is when striking complex trade agreements.
Traditionally, the commission is given a mandate for trade talks by EU members states, but the final agreement has to be approved by EU ministers and the European parliament before it comes into force.
Last year, the Belgian region of Wallonia nearly derailed the CETA free trade pact amid concern about exposing farmers to competition from Canada, only to back down after a compromise was reached. It confirms that the jurisdiction of national courts must be respected and that the Commission can not negotiate a parallel court system for investors without the approval of national parliaments.
"This may mean a separation between trade and investment in future agreements".
Market access, rules on direct investment, on anti-competitive market behavior, on sustainable development and even on issues like intellectual property protection could be decided by the European Union alone, without going back to the legislator in member states.
Such deals would still need clearance by the EU Council, the grouping of EU governments, and the European Parliament. Romania, for example, threatened previous year to block the accord with Ottawa over visa reciprocity.
"We call on parliamentarians to reject all deals that include unfair VIP rights for foreign investors", he said. This could also result in a split into EU-only competence and mixed competence agreements covering investment protection at a later stage, limiting the ambition to conclude deep and comprehensive deals.