Constitutional complaints and Organstreit application directed against the provisional application of the EU-Canada Comprehensive Economic and Trade Agreement (CETA) are unsuccessful

Press Release No. 22/2022 of 15 March 2022

Order of 9 February 2022
2 BvR 1368/16, 2 BvE 3/16, 2 BvR 1823/16, 2 BvR 1482/16, 2 BvR 1444/16

In an order published today, the Second Senate of the Federal Constitutional Court rejected as unfounded several constitutional complaints and an application in Organstreit proceedings (dispute between constitutional organs) directed against the provisional application of the free trade agreement between the European Union and its Member States of the one part and Canada of the other part (Comprehensive Economic and Trade Agreement – CETA). To the extent that the proceedings were also directed against the signing and conclusion of CETA, the constitutional complaints and the Organstreit application were dismissed as inadmissible.

It is not ascertainable that Council Decision (EU) 2017/38 of 28 October 2016 on the provisional application of CETA amounts to an ultra vires act, nor that it encroaches upon the basic tenets of the principle of democracy within the meaning of Art. 20(1) and (2) of the Basic Law (Grundgesetz – GG). To the extent that it is disputed whether the European Union (EU) has the requisite competence for certain matters governed by CETA, the relevant provisions are exempt from provisional application, including the provisions that could potentially allow a further transfer of sovereign powers to the system of tribunals and committees established under CETA. While it is doubtful whether a further transfer of sovereign powers would ultimately be covered by Art. 23(1) GG, as the constitutional basis authorising European integration, the exceptions to provisional application and the declarations entered into the Council minutes regarding the CETA Joint Committee effectively guard against this risk materialising. Moreover, it may appear doubtful whether the level of democratic legitimation and oversight required under Art. 20(1) and (2) GG is met regarding decisions of the CETA Joint Committee. However, to the extent that CETA is rendered provisionally applicable, encroachments upon the Basic Law’s constitutional identity (Art. 79(3) GG) can be ruled out.

The opinion of 16 May 2017 on the EU-Singapore Free Trade Agreement (EUSFTA), delivered by the Court of Justice of the European Union (CJEU) after the present proceedings were initiated, does not merit a different conclusion. As regards the competences of the Member States, it is true that the CJEU deviates in several respects from the findings in the judgment of the Second Senate of 13 October 2016 on applications for preliminary injunction directed against CETA. However, this has no bearing on the appraisal of the Council Decision at issue here. The constitutional review conducted in the present proceedings must be based on the substantive meaning of the Council Decision of 28 October 2016 as reasonably interpreted at the time that decision was adopted.

Facts of the case:

In 2009, the European Union and Canada began negotiations for an economic and trade agreement (CETA) with the aim of further strengthening their close economic relationship and creating an expanded and secure market for their goods and services through the reduction or elimination of barriers to trade and investment. In July 2016, upon conclusion of the negotiations, the European Commission submitted proposals for the Council to authorise the signing of CETA, to declare it provisionally applicable until the procedures required for its conclusion are completed, and to conclude the Agreement.

By judgment of 13 October 2016, the Second Senate of the Federal Constitutional Court rejected applications for preliminary injunction lodged in the present proceedings. The applicants had sought to prevent the signing, provisional application and conclusion of CETA. In its reasoning, the Court held that it could neither be ruled out that the Council Decision on provisional application would be qualified as an ultra vires act in the principal proceedings nor that it would be found to encroach upon the constitutional identity enshrined in Art. 79(3) GG, given that the EU lacked competence to conclude a treaty with regard to portfolio investment, investment protection, international maritime transport services, the mutual recognition of professional qualifications and labour protection among other matters. However, the Court also held that the risk of an ultra vires act could be avoided by providing for exceptions to the provisional application of CETA. According to that judgment, it had to be ensured that Germany could unilaterally terminate the provisional application in question.

CETA was ultimately treated as a mixed agreement – not least because the majority of Member States expressed doubts as to whether the EU had the requisite competence regarding various matters to be governed by it. On 28 October 2016, the Council adopted the decision on the signing and provisional application of CETA, with parts of the agreement being exempted from provisional application. The Federal Government communicated its consent on the same day. On 21 September 2017, CETA provisionally entered into force. The procedure of ratification has yet to be completed in 12 Members States, including the Federal Republic of Germany. Similarly, both Canada and the EU have yet to ratify the Agreement.

In its opinion on the EUSFTA, delivered in May 2017, the CJEU found that all matters to be governed by the prospective EU-Singapore free trade agreement fall within the exclusive competence of the EU with the exception of the provisions relating to non-direct investment and to investor-state dispute settlement in cases where claims are brought against Member States.

The complainants in proceedings I. to IV. assert a violation of their fundamental right derived from Art. 38(1) first sentence in conjunction with Art. 20(1) and (2) in conjunction with Art. 79(3) GG. The parliamentary group DIE LINKE, as applicant in proceedings V., asserts rights of the Bundestag by way of vicarious standing. It claims that the Federal Government’s failure to reject the proposed Council decisions on CETA violates decision-making rights of the Bundestag under Art. 23(1) second sentence in conjunction with Art. 59(2) GG.

Key considerations of the Senate:

The constitutional complaints and the Organstreit proceedings are unsuccessful.

A. The constitutional complaints lodged in proceedings I. to IV. and the Organstreit application lodged in proceedings V. are only partially admissible.

I. The constitutional complaints are admissible to the extent that they are directed against the participation of Germany’s representative in the Council in adopting the Council Decision on provisional application.

II. To the extent that the constitutional complaints are directed against the signing of CETA, they are inadmissible because the signing does not entail any direct legal effects for the complainants. The constitutional complaints are also inadmissible to the extent that they are directed against the proposed decision on the conclusion of CETA, which the Council has yet to adopt. It is accepted that the Council will only adopt this decision once ratification has been completed in all Member States, which is why no direct legal effects arise from the prospective Council decision at this stage. Lastly, the constitutional complaint lodged in proceedings II. is inadmissible to the extent that it is directed against a future domestic act of approval. Parliament has not yet adopted an act of approval in relation to CETA.

B. The Organstreit application lodged by the applicant in proceedings V. is not admissible in all respects either.

I. The application is admissible to the extent that it challenges the participation of Germany’s representative in adopting the Council Decision of 28 October 2016 on the provisional application of CETA. In this context, the applicant can assert rights of the Bundestag by way of vicarious standing (i.e. standing to assert the rights of others in one’s own name) in its capacity as a parliamentary group.

II. However, its application in the Organstreit proceedings is inadmissible to the extent that the applicant challenges the signing and conclusion of CETA, as presently no direct legal effects arise therefrom. This was already decided in the judgment of the Second Senate of 13 October 2016 concerning the applications for preliminary injunction.

C. To the extent that the constitutional complaints are admissible, they are manifestly unfounded.

I. According to Art. 23(1) first sentence GG, the Federal Republic of Germany participates in establishing and developing the European Union. To this end, Art. 23(1) GG lays down a commitment to ensure the effectiveness and enforcement of EU law to the extent that the Basic Law, and corresponding acts of approval, permit or provide for a transfer of sovereign powers. It is only within the limits deriving therefrom that the application of EU law in Germany is based on the necessary democratic legitimation. It is incumbent upon the Federal Constitutional Court to uphold these constitutional limits, in particular when conducting a review on the basis of constitutional identity (identity review) or an ultra vires review.

II. Where Germany makes use of participation rights in institutions and bodies of the European Union, it exercises domestic public authority. When undertaking negotiations or voting in the Council, Germany’s representative remains bound by the Basic Law. The right of citizens derived from Art. 38(1) first sentence in conjunction with Art. 20(1) and (2) and Art. 79(3) GG is therefore violated if the German representative in the Council participates in a legal act that encroaches upon Germany’s constitutional identity or amounts to an ultra vires act.

III. In the case at hand, the participation of Germany’s representative in adopting the Council Decision of 28 October 2016 on the provisional application of CETA is not objectionable under constitutional law. The Council Decision neither amounts to an ultra vires act nor does it encroach upon the basic tenets of the principle of democracy within the meaning of Art. 20(1) and (2) GG, which form part of the Basic Law’s constitutional identity.

1. Taking into account the reservations laid down as to its scope, the Council Decision on the provisional application of CETA extends only to matters that undisputedly fall within the competences of the EU. As regards the contested treaty-making competence for portfolio investment, investment protection, international maritime transport services, the mutual recognition of professional qualifications and labour protection, these matters are exempted from provisional application.

a) It is submitted that the Council Decision on provisional application could be qualified as an ultra vires act on the grounds that CETA potentially allows a further transfer of sovereign powers to the system of tribunals and committees envisaged thereunder. In this respect, it appears doubtful whether affording the EU a comprehensive treaty-making competence in common commercial policy matters would be compatible with Art. 23(1) GG, as this would conversely diminish the powers of Member States and have far-reaching implications for their status as subjects of (international) law. However, these risks are sufficiently countered not only by the fact that Chapter Eight (Investment) is exempted from provisional application, but also by the declarations entered into the Council minutes regarding the CETA Joint Committee. Most notably, statement no. 19 to the Council minutes explicitly declares that positions taken within the CETA Joint Committee must be adopted by common accord, which makes such decisions contingent upon the consent of the German representative in the Council.

b) Ultimately, it can be concluded that the Council Decision on the provisional application of CETA upholds the competences of the Members States. Taking into account the reservations limiting the Council Decision’s scope, and the aforementioned declarations, a manifest and structurally significant encroachment upon the competences of the Members States can in any case be ruled out.

2. It is also not ascertainable that the Council Decision on provisional application encroaches upon the Basic Law’s constitutional identity, in particular the basic tenets of democracy and sovereignty of the people (Art. 20(1) and (2) GG).

a) Art. 26.1 of CETA provides for the establishment of a CETA Joint Committee responsible for all questions concerning trade and investment between the Parties and the implementation and application of the Agreement. Its decisions – subject to the completion of any necessary internal requirements and procedures – are binding on the Parties and must be implemented by them. Significant powers of the CETA Joint Committee, as set out in the Agreement, include the power to decide on amendments to the Agreement and to amend its protocols and annexes. Moreover, the CETA Joint Committee may, by decision, add other categories of intellectual property to the definition of “intellectual property rights” laid down in the Agreement. Given the ambiguous nature of Art. 30.2(2) second and third sentences of CETA, it appears possible that such decisions by the CETA Joint Committee do not require approval by the Parties. Even though the Committee can only make decisions by mutual consent, meaning that it cannot adopt decisions against the vote of the European Union, it is not guaranteed that the Federal Republic of Germany will have the power to influence the Committee’s activities. It thus seems possible that German authorities will be excluded from exerting any kind of direct influence on decision-making taking place in the Committee. This in turn renders it impossible to ensure the personal and substantive democratic legitimation of committee activities through the participation of German state representatives and to thereby ensure accountability vis-à-vis citizens. It therefore appears doubtful whether decisions taken by the Committee would meet the level of democratic legitimation and oversight required under Art. 20(1) and (2) of the Basic Law.

b) Yet these concerns need ultimately not be resolved in the present case. The reservations laid down in the declarations to the Council minutes, which essentially limit the scope of the Council Decision on provisional application, rule out an encroachment upon the principle of democracy. From the drafting history and the context of statement no. 19 to the Council minutes in particular, it follows that any position to be taken by the EU and its Member States within the CETA Joint Committee must be adopted by common accord. This means that the consent of the German representative in the Council is required, which rules out the risk that the competences of the CETA committee system or its procedures will encroach upon the Basic Law’s constitutional identity (Art. 79(3) GG) during the stage of provisional application.

III. The constitutional review conducted in the present proceedings must be based on the substantive meaning of the Council Decision of 28 October 2016 as reasonably interpreted at the time that decision was adopted. The manner in which the decision was subsequently applied is irrelevant. It thus has no bearing on the present case that the CETA committee system already became operational when CETA provisionally entered into force. According to the Federal Government, the committees will refrain from making any decisions on matters falling within the competences of the Members States during the stage of provisional application. Similar considerations apply with regard to the opinion of 16 May 2017 on the EUSFTA, which was delivered by the CJEU after the Council Decision on provisional application had been adopted. In that opinion, the CJEU’s conclusions differ from the findings laid down in the judgment of the Second Senate of 13 October 2016 regarding the competences of the Members States for matters of international maritime transport, the mutual recognition of professional qualifications and labour protection. However, this has no bearing on the question whether the Federal Government, by consenting to the Council Decision of 28 October 2016 on the provisional application of CETA, has violated it responsibility with regard to European integration. This notwithstanding, German constitutional organs remain obliged to counter any measures taken during the stage of provisional application that amount to an ultra vires act or an encroachment upon the Basic Law’s constitutional identity. Where such action by the Federal Government is not successful, it still has the option to terminate the provisional application of CETA as a last resort.

D. To the extent that the Organstreit application lodged in proceedings V. is admissible, it is manifestly unfounded for the same reasons as the constitutional complaints lodged in proceedings I. to IV.