This blogpost concerns probably my favorite EU law topic: the scope of the Common Commercial Policy (CCP). The scope of the CCP as a source of litigation between the Council and the Commission goes way back and most likely will continue to be so for a considerable time. The reasons are quite simple: the Common Commercial Policy is an important foreign policy tool and exclusive EU competence. As such, Member States are not entitled to act within this politically sensitive field. This is different with respect to shared competences of course, which enable Member States – subject to the Treaties – to continue to make policy that is not in violation of existing secondary legislation. In the most recent edition of this feud between the Commission and the Council, the scope of the Common Commercial Policy was at issue vis-à-vis the scope of internal market competences. Litigation in the past has usually evolved around the relationship between trade (art. 207 TFEU) and environment (art. 192 TFEU), so this case is a welcome variant to that strand of case law already explored in the Daiichi Sankyo case (commented here). In this case the Commission won yet another victory against the Council.
The European Convention on the legal protection of services based on, or consisting of, conditional access
The case concerned the choice of the legal basis for the Council decision to sign the European Convention on the legal protection of services based on, or consisting of, conditional access. This convention seeks to protect media services for which you need to pay to get access to (think for example of watching certain football matches by paying a subscription fee). Within the EU there is already a Directive that protects these services: Directive 98/84/EC. That directive was adopted on the basis of the current article 114 TFEU. Among other things, the Directive requires the Member States to prohibit the manufacture, import, installation, maintenance and so forth of illicit devices (basically decoders which give you access to these media services without you having paid for the services). The Convention is basically a duplication of the Directive but extends the scope of protection to countries outside the EU. While the Council thought that article 114 TFEU was the appropriate legal basis, the Commission contended that the Convention was not aimed at improving the functioning of the internal market, but an instrument of commercial policy which regulated trade between the EU and other countries.
The legal test used by the Court to determine the choice of a legal basis (if there are multiple) for the signing and conclusion of international agreements is well known: the choice must rest on objective factors that are amenable to judicial review and these include the aim and content of that measure (the context also matters in relation to international agreements). If the international agreement pursues a twofold purpose or that it has a twofold component and if one of those is identifiable as the main or predominant purpose or component, whereas the other is merely incidental, that measure must be based on a single legal basis, namely that required by the main or predominant purpose or component. The question at issue was whether the Convention predominantly regulated international trade or improved the functioning of the EU internal market.
In relation to the common commercial policy the Court first reiterated what it had found in Daiichi Sankyo, that ‘the common commercial policy relates to trade with non-member countries, not to trade in the internal market’ (para 56) and that article 207 TFEU can only be used if ‘it relates specifically to international trade in that it is essentially intended to promote, facilitate or govern trade and has direct and immediate effects on trade’ (para 57). Mere implications for international trade are not enough.
That being said, the Court did find the Convention to fall within the scope of the Common Commercial Policy and this was mainly because the Convention extends the legal protection of these services beyond the borders of the EU and does not harmonize the protection of these services within the EU. The Court noted that the Convention established a legal framework that is almost identical to that of the Directive and that it seeks to ‘provide a valuable complement’ of that Directive. The Court referred to the explanatory memorandum accompanying the proposal of the Decision which stated that the signing of the Convention was necessary to extend the legal protection introduced by the Directive beyond the EU ‘because many European non-member countries may be bases for the manufacture, marketing and distribution, by a parallel ‘industry’, of devices which make it possible to gain unauthorised access to conditional access services, since legal protection in those countries against such acts of piracy is either ineffective or non-existent’ (para. 61). The aim of signing the Convention was thus undertaken ‘with a view to encouraging broader ratification of the Convention by Member States of the Council of Europe’ (para 62) and as a consequence ‘help extend the application of provisions similar to those of Directive 98/84 beyond the borders of the European Union and to establish a law on conditional access services which is applicable throughout the European continent’ (para 63). The Court subsequently drives its ‘extension’ point home by contrasting the Directive with the Convention:
‘While Directive 98/84 is intended to ensure adequate legal protection at EU level for the services concerned in order to promote trade in those services within the internal market, the contested decision, by authorising the signing of the Convention on behalf of the European Union, is intended to introduce similar protection in European non-member countries, in order to promote the supply of such services to those States by EU service providers.
That objective, which can be seen from the recitals to the contested decision, read in conjunction with the Convention, to be the primary objective of that decision, therefore has a specific connection with international trade in those services, by dint of which it can legitimately be linked to the common commercial policy.’
The Court proceeds to refute a number of arguments made by the Council and the intervening Member States why the decision should be based on article 114 TFEU. The Council had argued that the Convention also harmonized legal protection of these services within the EU. The Court first pointed out that the Convention contained a so-called ‘disconnection clause’. These clauses are commonly used by EU Member States (especially within the Council of Europe) in order to prevent EU Member States from singing international agreements among themselves that might conflict with EU law. The disconnection clause ensures that the Member States will apply EU rules and not the Convention among themselves. As a result, the Court found that
‘since the approximation of the legislation of Member States in the field concerned has already been largely achieved by Directive 98/84, the primary objective of the Convention is not to improve the functioning of the internal market, but to extend legal protection of the relevant services beyond the territory of the European Union and thereby to promote international trade in those services.’
The Court also refuted the argument that the prohibition on exporting and importing illicit devices to and from the EU ensures the proper functioning of the internal market. This is obviously right, as this would be tantamount to abandoning article 207 TFEU as a legal basis altogether. Such a ban, according to the Court, ‘concerns the defence of the European Union’s global interests and falls, by its very nature, within the ambit of the common commercial policy’ (para. 69).
A third point made by a number of Member States was that the Convention went beyond the protection offered by the Directive on a number of points (mainly related to seizure and confiscation measures and sanctions) and therefore improved the functioning of the internal market, but was also rejected by the Court. The Court held that the objective of improving the function of the internal market ‘is purely incidental to the primary objective of the contested decision’ (para 71). The Court also – in a bit of a formalistic reasoning – rejected the argument that the supposedly criminal law nature of these articles fell outside the scope of article 207 TFEU because ‘that argument does not explain why Article 114 TFEU would be the correct legal basis in the circumstances’ (para. 72).
Lastly, the Court quite rightly dismissed the farfetched argument that the protocols giving the UK, Ireland and Denmark a bit of a special position in relation to the area of freedom, justice and security were relevant in determining the scope of article 207 TFEU. As the Court explained ‘it is the legal basis for a measure […] which determines the protocols to be applied, and not vice versa’ (para. 74).
The Court’s analysis is correct in my opinion. In fact, I think this was a relatively easy case to decide for the Court. There was practically no harmonization internally because of the agreement and there were substantial implications for international trade in media services based on conditional access. In that respect, the Daiichi Sankyo case went further, because part of the TRIPs Agreement has not found its way in internal legislation yet although that agreement was concluded on a worldwide scale. It remains to be seen how the Court will deal with an agreement that does harmonize trade internally as well as externally. A story which is undoubtedly to be continued.