The European Court of Justice (ECJ) has ruled that the national and regional parliaments of EU Member States must sign off on specific areas in the EU-Singapore free trade agreement before it can fully take effect.

The ECJ held that the vast majority of trade provisions included in the deal fell under the exclusive competence of the EU, and therefore did not require Member State ratification, however it ruled that two aspects of the EU-Singapore agreement, namely portfolio investments and a dispute-settlement regime for investments, would require unanimous backing by all Member States (and their parliaments).

The judgment is likely to have an impact on any negotiations between the UK and the EU27 for a trade deal between the two parties following Brexit. The judgment makes it more likely that any UK-EU27 free trade deal will have to be ratified by national and regional parliaments in the EU27, which could delay the conclusion of any free trade deal during the Brexit negotiations, and makes it less likely that such an agreement will be reached in the two year Article 50 time period.

The judgment made clear that areas of policy which are intended to promote, facilitate or govern trade, and which have direct and immediate effects on it, will fall under the exclusive competence of the EU. However, given that the EU-Singapore agreement is an early example of a newer kind of trade agreement which aims to have far reaching impacts on trade barriers, product standards and regulation in the countries concerned, it is not yet clear which other areas may fall outside this definition.

Given the uncertainty around which areas will fall under the EU’s exclusive jurisdiction and the likelihood that the UK government will seek to implement an agreement as swiftly as possible, the EU and the UK may seek a narrower trade deal so as to secure agreement by qualified majority rather than unanimity, to prevent negotiations being stalled by individual Member States exercising a veto right.

The full text of the judgment of the ECJ can be found here.