Brexit Negotiations Series: 'The Impact of Brexit on the UK’s Trade with Non-EU Member States Under the EU’s Mixed Free Trade Agreements'

Brexit will have a direct impact on the United Kingdom’s ability to participate in the European Union’s external trade arrangements with third countries.  This does not only include free trade agreements (‘FTAs’) signed by the EU within its sphere of exclusive competence, but also ‘mixed’ FTAs signed both by the EU and its Member States in matters of shared competence and other preferential arrangements with third countries (such as Generalised Schemes of Preferences).  According to the House of Commons, the EU currently has 63 FTAs with third countries, either of mixed or exclusive competence, which account for as much as 20% of the UK’s export markets for goods.

According to one point of view, once the UK withdraws from the EU, mixed EU FTAs will automatically terminate with respect to the UK. This is because mixed EU FTAs are essentially ‘bilateral’ in nature, and the UK will no longer qualify as a formal ‘party’ to these FTAs particularly under EU law.  Others argue that even if the UK remains a ‘party’ to mixed EU FTAs, these will no longer ‘apply’ to the UK ratione personae and ratione loci because mixed EU FTAs restrict the scope of application only to EU Member States, despite them being listed as individual parties to the treaties, or solely to the territory where the EU treaties apply by virtue of an explicit territorial clause.

However, as a preliminary observation, it must always be recalled that mixed EU FTAs are international agreements concluded in writing between States. As such, they are treaties governed by the provisions of the Vienna Convention on the Law of Treaties (or the customary international law equivalent norms). They must be analysed with the understanding that, insofar as they relate to current or future parties, public international law governs their interpretation and application.  Accordingly, the determination of what constitutes the ‘parties’ to mixed EU FTAs must be done on the basis of public international law and not EU law.

As such, the UK will continue to qualify as a ‘party’ to most mixed EU FTAs after Brexit.  According to Article 2(1)(f)-(g) of the Vienna Convention on the Law of Treaties (‘VCLT’), a State constitutes a ‘party’ to an international treaty so long as it has consented to be bound by the provisions of that treaty, which continues to be in force with respect to it and which has not been terminated in conformity with its own terms, or the VCLT rules on the termination of treaties. Whilst most mixed EU FTAs contain specific provisions for the termination of their operation, they do not provide for a special termination clause in case of withdrawal of a State from the EU. Accordingly, since the UK has signed and ratified these FTAs together with the EU and has not (yet) formally terminated them, it has consented to be bound by the provisions of these FTAs. Those provisions will continue to be in force with respect to it, as the UK will continue to be a ‘party’ to them under public international law. 

The better view is that the UK’s withdrawal from the EU will not as such affect its capacity as a formal ‘party’ to mixed EU FTAs. Even if the EU and the UK manage to reach an agreement on the basis of Article 50 of the Treaty on the European Union (‘TEU’), this will not produce any effect vis-à-vis third party contracting States. This is because States cannot be bound by the provisions of an agreement between other States without their consent, pursuant to the pacta tertiis rule reflected in Article 34 of the VCLT.

This does not mean that mixed EU FTAs will ‘apply’ to the UK automatically either. Whilst the ‘entry into force’ and the ‘application’ of a treaty typically coincide, this does not necessarily have to be the case. While a treaty might be in force between two or more States, it might not be applicable with respect to a specific Party (ratione personae), a specific territory (ratione loci) or a set of events situated in time (ratione temporis). So the question becomes: will mixed FTAs continue to apply to the UK post-Brexit?

There is no ‘one-size-fits-it-all’ solution to this problem. Each mixed EU FTA must be considered on a case-by-case basis. Each is a separate agreement that needs to be interpreted in accordance with its own wording, taking into account its specific context, its object and purpose, as well as any special meaning that the parties might have intended, pursuant to Article 31 of the VCLT.

It must be emphasized that EU mixed FTAs define their scope ratione personae using different wordings. For example, some FTAs enumerate each Member State separately from the EU (of the one part), and the third country (of the other part), collectively referring to them as ‘the parties’. Other FTAs define the EU and its Member States together as ‘the EU, of the one part’.  Interestingly, Article 1.1 of CETA defines the parties as ‘the European Union or its Member States or the European Union and its Member States, within their respective areas of competence as derived from the [EU Treaties] (hereinafter referred to as the 'EU Party')’ (emphasis added). 

Different wordings might have different implications for the scope of an FTA’s ratione personae.  Where mixed agreements are framed as bilateral agreements between ‘the EU party’ and third States, the intention was presumably to grant benefits to the EU ‘as a whole’ rather than to individual Member States. Accordingly, the provisions of the FTA might not continue to apply automatically to the UK ratione personae post-Brexit. But, in different contexts, it might be argued that the Member States have expressed their consent to be bound by these agreements in their ‘full right’ as sovereigns, to the extent of some or all of the provisions of the agreement. Thus, the Court of Justice of the EU has held that the division of competences internally within the EU is only a ‘domestic question’ in which third party States have no need to intervene.

Finally, some FTAs contain a ‘territorial clause’, which limits their applicability only to the territories in which the EU treaties are applied. Such clauses might well result in the non-applicability of mixed EU FTAs to UK territories post-Brexit. It is unclear, however, whether the customary international law rule of ‘moving frontiers’ might be relevant, at least by analogy, to the territorial limitations of the UK’s rights and obligations under mixed EU FTAs with third party States.

The legal fate of mixed EU FTAs will have serious consequences for the progress of Brexit negotiations. The ‘trilateralisation’ of mixed EU FTAs could serve as the minimum floor for the negotiating parties and provide a means of dispute settlement in case of controversy. If the UK remains a ‘party’ to these treaties which continue to ‘apply’ to it, it will be able to rely on its provisions to maintain its trade relations with third countries. Much of this remains to be seen.  Regardless of the resolution of this interesting international law question, ultimately there are alternatives open to the UK and third party States to structure their affairs prior to Brexit that would enable them to achieve, in legal and practical terms, whatever outcome on which they mutually agree, in relation to the post-Brexit application of the provisions of mixed EU FTAs. There is nothing in the EU legal order or public international law that would prevent understandings in relation to such rollover agreements to be achieved prior to Brexit.

Robert G. Volterra is Visiting Professor of Law at University College London and partner at the public law international law firm Volterra Fietta. He is grateful for the assistance of his colleague Emmanuel Giakoumakis in preparing this post.

This post is part of the ‘Brexit Negotiations Series’, a series of posts based on contributions at the ‘Negotiating Brexit’ conference that took place in Oxford on 17 March 2017.