ORIGINAL PUBLISHED ON EU LAW ANALYSIS
by Gesa Kübek, PhD candidate at the law faculty of the University of Passau.
On 14th February 2017, the European Court of Justice (ECJ) concluded, in Opinion 3/15, that the European Union (EU) is exclusively competent to conclude the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired, or Otherwise Print Disabled (hereafter: Marrakesh Treaty). Its decision in Opinion 3/15 mirrors, at first sight, Advocate General (AG) Wahl’s Opinion, which equally argued that the EU has exclusive competence to conclude the Marrakesh Treaty. A closer look at Opinion 3/15, however, reveals that the Court opted for a much stricter interpretation of the scope of the EU’s Common Commercial Policy (CCP) – ie the EU’s international trade powers – than the AG. Moreover, the Court’s answer to the question of exclusivity does not clarify the correct choice of legal basis.
The following blog post provides an overview of the Court’s Opinion 3/15 and a short analysis thereof. The first part describes the conflict at stake and the arguments of the parties. The second part outlines the Court’s position. The final section discusses some of the implications of Opinion 3/15 for EU treaty-making.
The conflict at stake: Questions of exclusivity and the choice of legal basis
In June 2013, the World Organisation on Intellectual Property (WIPO) finalised the negotiations of the Marrakesh Treaty, which aims to facilitate access to published work for persons who are blind, visually impaired or otherwise print disabled (hereafter: “beneficiary persons”). The Marrakesh Treaty stipulates two separate, but interrelated instruments to fulfil its objectives. First, it obliges its contracting parties to provide for an exception or limitation to the rights of reproduction, distribution and making available to the public in order to make format copies more readily available for beneficiary persons. Second, it facilitates the cross-border exchange of accessible format copies.
In April 2014, the EU Council decided to sign the Marrakesh Treaty for the European Union based on Article 207 TFEU (the EU’s CCP power) in conjuncture with Article 114 TFEU (the EU’s internal market power, which is the basis for harmonising copyright law within the EU, among other things). The subsequent Commission proposal for the conclusion of the agreement was, however, rejected by the Member States as represented in the Council, which caused fierce institutional debate over the choice of legal basis. According to the Commission, Arts. 207 and 114 TFEU were correctly selected. In the alternative, the Marrakesh Treaty may be based on the CCP alone, which the Lisbon Treaty confirms as an exclusive competence (Art. 3 (1) (e) TFEU). In any event, the Commission argued that the rights and obligations comprised by the Marrakesh Treaty were largely harmonized by EU internal legislation. As a result, it asserted that exclusive EU competence can be implied (Art. 3 (2) TFEU).
The eight intervening Member States rejected the assumption of EU exclusivity. Instead, in their view, the competences to conclude the Marrakesh Treaty ought to be shared, which may result in the conclusion of a “mixed agreement” that lists both the EU and the Member States as contracting parties. Given the persisting institutional conflicts, the Commission asked the Court to clarify whether the EU has the exclusive competence to conclude the Marrakesh Treaty.
As was stated above, AG Wahl supported the Commission’s quest for exclusive EU treaty-making powers. Somewhat surprisingly, the AG, however, determined that the Marrakesh Treaty should be concluded on the basis of Art. 207 TFEU on the CCP and – as contended by numerous Member States – Art. 19 (1) TFEU, the EU’s power to adopt many non-discrimination laws. The latter provision underlines the Marrakesh Treaty’s objective to promote non-discrimination, equal opportunity, accessibility and participation of disabled persons in the society. Despite the implication of exclusivity, the choice of Art. 19 (1) TFEU entails important procedural consequences: As the provision stipulates that the adoption of EU legislation requires unanimity in the Council, EU treaty-making under the anti-discrimination power equally grants the Member States veto powers in the Council (Art. 218 (8) TFEU).
The Court‘s position in Opinion 3/15
In order to answer the preliminary question, the Court, first, examined whether the Marrakesh Treaty, in full or in part, falls within the scope of the CCP. Thereafter, the ECJ analysed whether exclusivity can be implied within the meaning of Art. 3 (2) TFEU.
The reach of “commercial aspects of intellectual property rights”
To start with, the Court recalled that according to settled case-law, an EU act falls within the CCP “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” (Daiichi Sankyo). Conversely, the mere fact that an EU act is liable to have implications on international trade is not enough for it to be concluded under the CCP.
In its subsequent reasoning, the Court outlined that neither one of the aforementioned instruments of the Marrakesh Treaty intends to promote, facilitate or govern international trade. The Court’s Opinion is particularly striking with regard to the import and export of format copies, as “there is no doubt that those rules relate to the international trade of such copies” (para 87). Nevertheless, the Court stated that the cross-border exchange specified by the Marrakesh Treaty cannot be equated with international trade for commercial purposes. On the one hand, the objective of the circulation and exchange of format copies is non-commercial in nature. The Marrakesh Treaty solely uses cross-border transactions as a mean to improve access of beneficiary persons to accessible format copies and not to promote, govern or facilitate trade. On the other hand, the Marrakesh Treaty’s non-commercial character results from the fact that it does generally not stipulate trade for profit.
Indeed, the Marrakesh Treaty provides that trade in format copies covers only authorised entities, which operate on a non-profit basis and provide their service to beneficiary persons alone. According to AG Wahl, the non-profit basis of trade in format copies, is, however, irrelevant for the application of the CCP. To that extent, the AG proposed a very broad definition of commercial aspects of intellectual property rights (IPR), which Article 207 (1) TFEU expressly includes within the scope of the CCP. In his view, the CCP does not exclude from its ambit transactions or activities of a non-commercial nature as the mere exchange of goods and services implies that they are being traded. Instead, Art. 207 (1) TFEU excludes non-commercial aspects of IPR, i.e. issue areas that are not strictly or directly concerned with trade in their entirety, such as moral rights.
The Court, however, rejected the claim that commercial aspects of IPR carve out only those rules relating to moral rights. Such a broad interpretation would, in the eyes of the Court, “lead to an excessive extension of the field covered by the common commercial policy by bringing within that policy rules that have no specific link with international trade.” (para 85) Consequently, the ECJ concluded that the Marrakesh Treaty falls outside the ambit of the CCP.
Implied exclusivity and the “ERTA doctrine”
Subsequently, the Court analysed whether exclusivity can nevertheless be implied via the well-known “ERTA doctrine” (referring to the Court’s ERTA judgment), which is codified in Article 3 (2) TFEU. According to this doctrine, EU obtains exclusive treaty-making powers where the conclusion of an international agreement “may affect common rules or alter their scope”. In its ERTA line of case law, the Court has developed a two-level test for establishing external Member State pre-emption: First, it conducts a “comprehensive and detailed analysis” to determine whether the provisions of the envisaged agreement are largely covered by common EU rules (Opinion 2/91). Second, it determines whether the conclusion of the international agreement affects the “uniform and consistent application” of these common EU rules “and the proper functioning of the system which they establish.” (Opinion 1/13, discussed here).
There was little disagreement between the parties that the Marrakesh Agreement had to be implemented within the framework of Directive 2001/29 on the harmonisation of certain aspects of copyright and related rights in the information society. The Court, however, pointed out that “it is clear (..) that the EU legislature brought about only a partial harmonisation of copyright and related rights, given that the directive is not intended to remove or to prevent differences between national laws which do not adversely affect the functioning of the internal market.” (para 115) Indeed, Directive 2001/29 provides, within its harmonized legal framework, for considerable Member State discretion as regards the implementation of exceptions and limitations to distribution for the benefit of people with disabilities. Does such a residual Member State competence mean that the Marrakesh Treaty is not largely covered by common EU rules, and therefore prevent implied exclusivity?
The Court answered this question in the negative. Directive 2001/29 subjects the Member States’ remaining competence to a number of conditions. The Member States’ discretion can therefore only be exercised within the limits enjoined by EU law, so that the Member States “are not free to determine, in an un-harmonised manner, the overall boundaries of the exception or limitation for persons with a disability.” (para 122) Moreover, the Marrakesh Treaty – unlike Directive 2001/29 – imposes an obligation on the contracting parties to provide for an exception or limitation. The Member States are therefore mandated to comply with the restraints imposed by EU law. As a result, the Court concludes that independent external Member State action would affect common EU rules. The EU is therefore exclusively competent to conclude the Marrakesh Treaty.
Opinion 3/15 and EU treaty-making: A short analysis
As stated in the introduction, the Court’s finding of (implied) exclusivity does not come as a surprise to many observers. Neither does the broad interpretation of the “largely covered” part of the ERTA-test. After all, the Court already confirmed in Opinion 1/03 and, more recently, in Green Network, that considerable Member State discretion in the implementation of EU legislation does not rule out exclusivity. Nevertheless, as was pointed out by AG Wahl, the case law “begs the question: when is an area sufficiently covered by EU rules to exclude Member State competences to act externally?” (para 130 of the opinion) By inference, to what extent does the EU have to exercise its internal competence to trigger the “ERTA effect”?
Green Network and Opinion 3/15 suggest that the Court will place much greater emphasis on the effects of international agreements on common EU rules, rather than on the extent of their material overlap. Even if the EU law in place specifies residual Member State powers, and is therefore, arguably, not largely harmonised, (adverse) affects on the EU’s internal legal framework suffice to trigger implied exclusivity within the meaning of Art. 3 (2) TFEU. However, if the Member States may be pre-empted where an agreement is only partially covered by EU internal legislation, may they be also pre-empted where the EU cannot exercise its internal competence at all, provided always that the envisaged agreement clearly affects the EU law in force? The Court is expected to answer this question in its pending Opinion 2/15 on the conclusion of the EU-Singapore Free Trade Agreement (discussed here). Here, among other things, the Court is asked to determine whether the “ERTA effect” may exceptionally be triggered by EU primary law provisions.
The Court’s clarification of the scope of Art. 207 (1) TFEU, and in particular, “commercial aspects of IPR”, might also have some impact on future EU treaty-making. Opinion 3/15 shows that the mere exchange of goods or services cross-border is not enough to equate a measure with international trade for commercial purposes. Instead, a link with trade implies that the transaction or activity aims at fulfilling a commercial objective. By inference, using trade as a mean to fulfil non-commercial objectives is not enough to bring a measure within the scope of the CCP. While the Court did not entirely exclude that “commerce” may, on a case-by-case basis, include trade on a non-profit basis, it contrasted AG Wahl’s suggestion that Art. 207 TFEU generally encompasses transaction or activities of a non-commercial nature. In view of Opinion 2/15, which also raises this issue, it may be noted that the Court did not dispute the AG’s claim that moral rights fall outside the scope of the CCP.
When returning to the Marrakesh Treaty, Opinion 3/15 leaves another pressing question unanswered: What is the correct legal basis for the agreement’s conclusion? The Court only clarifies that the Council Decision on the signature of the Marrakesh Treaty was wrongfully based on Art. 207 TFEU, but does not further elaborate on the correct choice of legal basis. It is true that the Commission’s preliminary question is confined to the exclusive nature of the agreement. The choice of legal basis, nevertheless, qualifies the modus operandi of (exclusive) EU treaty-making. In particular, the Court refrains from discussing AG Wahl’s reference to Art. 19 (1) TFEU, and, more broadly, the effects of the non-discrimination principle on EU external action. Whilst clarifying the EU’s capacity to conclude the agreement alone, the choice of legal basis – and therefore the choice of procedure – is left to the discretion of the EU institutions. Throughout the proceedings, the Commission continued to assert that the Marrakesh Treaty should be based on Art. 114 TFEU instead of Art. 19 TFEU. Conversely, the majority of the intervening Member States sided with the AG. As the use of Art. 19 (1) TFEU would trigger unanimous Council voting, and therefore Member State veto powers in the Council, institutional debate over the conclusion of the Marrakesh Treaty might continue.