The unsustainable lightness of enforcement procedures: environmental standards in the EU-Mercosur FTA by Giovanni Gruni

The European Union has been increasingly active for more than a decade in the conclusion of free trade agreements (FTAs) directly with partner countries and outside the WTO. This has brought to the conclusion of some very large free trade agreements such as the CETA with Canada or the more recent EU-Japan FTA. On the 28th of June 2019 the EU reached an agreement in principle on another major deal with Mercosur countries (Brazil, Argentina, Paraguay, Uruguay). All recent EU FTAs contain clauses obliging the parties to the free trade agreement to respect a set of basic environmental standards. This short contribution assesses what kind of obligations on environmental protection are included in the EU-Mercosur FTA and if the enforcement mechanism is up to the ask. The main claim of this short contribution is that whereas EU-Mercosur does contain some obligations on environmental protection, their obligatory value is often weakened by too vague and unprescriptive legal wording. In addition, the enforcement mechanism remains considerably weaker than the one used to enforce economic clauses and intellectual property rights of the same EU-Mercosur FTA. The article concludes with some proposals on how to amend the enforcement mechanism in EU FTAs looking at EU laws on commerce and other international experiences such as the recent Comprehensive and Progressive Agreement for a Transpacific Partnership (CPTPP).

The EU-Mercosur FTA

Mercosur is an economic organisation comprising Argentina, Brazil, Paraguay, and Uruguay, it includes 260 million consumers and is the 5th largest economy outside the EU with an annual GDP of 2.2 trillion. Mercosur is also considered a relatively closed market where exports from the EU face high tariffs and non-tariff barriers. Being Mercosur a key destination for EU goods and services, the EU has been negotiating since 1999 a free trade agreement with this group of countries. These negotiations that happen outside the World Trade Organization (WTO) are allowed by some flexibility in the law of the WTO, such as Art. XX GATT on goods and Art. V GATS on Services. Besides traditional WTO+ commitments on liberalisation of goods, services, protection of intellectual property rights, and other standard WTO issues, the EU-Mercosur FTA also contains a section on sustainable development obliging the parties to this free trade agreement to respect a number of labour and environmental standards. This section of the EU-Mercosur free trade agreement is an innovation compared to the WTO, where WTO Members do not have any obligations to respect labour or environmental standards. However, with regards to environmental standards, the EU-Mercosur FTA is a glass half empty since while including some innovations compared to WTO law it also fails to give to environmental obligations the same legal prescriptiveness and enforcement like the one provided to the other economic obligations of the same EU-Mercosur FTA (e.g. liberalisation of goods and services or intellectual property rights).

Environmental obligations in the EU-Mercosur FTA

The EU-Mercosur FTA contains a section called « Trade and Sustainable Development, » which comprises a number of obligations to respect or uphold a set of environmental and labour standards derived from other international treaties. This is not the first time international trade law refers to instruments of other areas of international law. It happens, for instance with intellectual property rights included in WTO agreements and in EU’s free trade agreements via sections or dedicated agreements on Trade-Related Intellectual Property Rights (TRIPS). Compared to intellectual property obligations however, obligations on environmental standards in the EU-Mercosur FTA tend to remain more general and less prescriptive. Notwithstanding the more exhortatory nature of legal drafting in the section on environmental protection, the EU-Mercosur FTA does contain clear obligations to promote and effectively implement multilateral environmental agreements (EU-Mercosur TSD Art. 5.3) as well as to implement the Paris Agreement on climate change (EU-Mercosur TSD Art. 6.2a). In addition, the free trade agreement includes references to the Convention on Biological Diversity (CBD), the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), United Nations Sustainable Development goals and to a number of international instruments on conservation of fisheries and the marine environment. In this context, it is possible to identify some more prescriptive language, for instance, with regard to fighting illegal trade in wildlife (EU-Mercosur TSD 7.2c), illegal logging (EU-Mercosur TSD 8.2c) and the protection of fisheries and the marine environment (EU-Mercosur TSD 9.2). Since most of the binding obligations included in the EU-Mercosur free trade agreement are references to international treaties that the EU, its Member States, and Mercosur countries already had to respect under international law the main contribution of the EU-Mercosur FTA could be supporting the implementation of such international obligations via an enforcement mechanism based on trade measures. As a matter of fact, most of the international environmental agreements, including the Paris Agreement on Climate Change, lack of procedures to enforce their obligations in case of non-compliance. However, even if the EU-Mercosur FTA does contain an full-fledged enforcement system for economic obligations and intellectual property rights, this mechanism cannot be used to ensure the respect of environmental obligations contained in the EU-Mercosur FTA.

Enforcement mechanism

In fact, where environmental protection in the EU-Mercosur FTA remains considerably deficient is the part of enforcement. First, it lacks obligations on how such environmental standards should be enforced at the domestic level. In comparison, the section onintellectual property of the same EU-Mercosur FTA contains a very extensive section on Civil and Administrative enforcement obliging the parties to the EU-Mercosur FTA to ensure a number of procedural guarantees whenever intellectual property rights are litigated via domestic courts (Art. X.44). The part on environmental standards contains virtually none of such obligations. Second, as mentioned above, obligations on labour and environmental standards are excluded from the standard state-to-state dispute settlement of the EU-Mercosur FTA, and economic or trade sanctions cannot be utilised to persuade third countries to respect such obligations. Instead, environmental obligations utilise a separate softer mechanism allowing for consultations and the creation of a panel of experts but no sanctions in case of protracted non-compliance. Finally, EU domestic mechanisms of enforcement such as the Trade Barrier Regulation which allows companies to file a complaint to the European Commission in case of alleged violations cannot be utilised to enforce environmental obligations of EU FTAs. In a recent paper published on the Common Market Law Review, I start addressing these shortcomings together with my colleague Marco Bronckers with regard to labour standards.

Possible improvements

In order to improve sustainability chapters in EU’s FTAs, the EU should avoid unprescriptive or dubious legal language and refer to environmental obligations clearly, precisely, and unconditionally. This can be done at least stating that the parties to the free trade agreement have obligations to ratify, implement via domestic legislation, and enforce via domestic courts the referred environmental standard without additional conditions.

The EU should also close the still very wide gap in the quality of enforcement of environmental obligations if compared to the other economic obligations and intellectual property rights of its FTAs. First, EU FTAs should include specific procedural obligations on how environmental standards shall be enforced via domestic courts as it is done with intellectual property rights (Art. X.44). Second, environmental standards can be enforced via the standard dispute settlement mechanism of the FTA, which also includes economic sanctions. This already happens in FTAs concluded by other countries. For instance, in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) environmental obligations can be litigated via the standard dispute settlement mechanism of the FTA via a panel that includes experts of environmental law (CPTPP Art. 28.9(5)) Economic sanctions can also be adapted to the case of environmental obligations to ensure enforcement in case of protracted non-compliance. Finally, a major contribution to enforcement of environmental standards should result from the reform of EU the Trade Barrier Regulation, which the recently appointed Commission von der Leyen wants to perform. In the context of this reform, private parties (companies, trade unions and environmental groups) should be allowed to submit complaints to the European Commission, which would then investigate violations of environmental standards protected by EU’s FTAs as it already happens for economic obligations and intellectual property rights.

Conclusions

The EU-Mercosur FTA is a step forward on environmental protection if compared to the WTO, which virtually does not include any obligations on environmental standards. However, the enforcement mechanism given to such obligations is considerably weaker than the one given to economic clauses and intellectual property rights of the same EU-Mercosur FTA, it does not allow for sanctions in case of protracted non-compliance and does not refer to domestic enforcement of such rights. In addition, the EU Trade Barrier Regulation cannot be used to enforce environmental standards contained in the EU’s FTAs. All these issues could be addressed with relatively small amendments and in the case of the EU Trade Barrier Regulation via a new EU Regulation, which does not require a renegotiation of the EU-Mercosur FTA.

 

gioGiovanni Gruni teaches international trade law and European Union Law at ESADE Law School. He holds a Phd in international economic law from the University of Oxford and an LLM from the European University Institute. His book “The EU, World Trade Law and the Right to Food” was published in 2018. His academic articles are available here: https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1489584 ;  Twitter: https://twitter.com/giovannigruni. Linkedin: https://www.linkedin.com/in/giovannigruni/

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