The external representation of the European Union in the International Maritime Organization: A Question of Labelling rather than of EU Competence

 

Cathleen Berg, doctoral student, University of Bayreuth

On 25 November 2021, Advocate General (‘AG’) Szpunar delivered his Opinion in an action for annulment brought by the Commission against the Council (Case C-161/20). The Opinion exemplifies the conflict of interests between the European Union (‘EU’) and the Member States when it comes to exercising their external competences within the framework of an international organisation in which the EU can participate neither as a member nor as an observer. If the Court of Justice follows AG Szpunar’s reasoning, the present Case will have the potential to change the assessment as to who (the Commission or the Member States) represents the Union interest in committees of the International Maritime Organization (‘IMO’). Moreover, it will presumably reinforce the Commission’s ambition to strive for a change of the IMO legal framework in order to allow the EU to become a member or at least an observer.

Background

The issue raised by the Commission concerns the power to submit proposals to a committee of an international organisation in which the EU can participate neither as a member nor as an observer. The EU cannot become an IMO member because, according to the IMO Convention, membership is open to States only. Usually, if the EU cannot exercise its external competence because the international organisation does not allow it to become a member or an observer, the Member States exercise the EU competence acting jointly in the EU interest (para 64 of the Opinion; cf. also Opinion 2/91). In particular, Member States must refrain from submitting a national proposal to an international committee when the proposal could affect common rules (see Case C-45/07).

Due to some Member States’ opposition to grant the European Community the status as IMO observer, only the European Commission became an IMO observer in 1974 when it concluded a Cooperation Agreement with the IMO (cf. Article 66 of the IMO Convention). As observer, the Commission has the right to participate in the work of the IMO and its committees. However, unlike the Member States which enjoy full IMO membership, the Commission has no right to vote. Yet, this does not prevent the Commission from acting as the Union representative with reference to the sixth sentence of Article 17(1) TEU, which reads: ‘With the exception of the common foreign and security policy, and other cases provided for in the Treaties, it [the Commission] shall ensure the Union's external representation.’ Therefore, the Commission consistently strives to coordinate the Member States’ positions when EU external competence is involved and to ensure that the common position is presented in IMO committees on the EU’s behalf. However, Member States in practice occasionally depart from the common position.

The Commission’s action: The Commission wants the EU interest to be included and the Member States to be excluded

In the present case, the Marine Environment Protection Committee (‘MEPC’) of the IMO instructed the Intersessional Working Group on Reduction of GHG Emissions from Ships in 2019 to develop life cycle greenhouse gas (‘GHG’)/carbon intensity guidelines for all relevant types of fuels. In the same year, the Intersessional Working Group ‘invited interested Member States and international organizations to cooperate and submit proposals for draft guidelines on life cycle GHG/carbon intensity for all relevant types of fuels’ (para 29). The submissions were supposed to function as an inspiration for future guidelines on life cycle GHG/carbon intensity which the MEPC considered as a preparation for an implementation programme for effective uptake of alternative low-carbon and zero-carbon fuels. In response to the invitation, the Permanent Representatives Committee (Coreper) endorsed, on 5 February 2020, a submission on behalf of the Member States and the European Commission. This submission was transmitted to the Intersessional Working Group by the Presidency of the Council shortly after. In doing so, Coreper did not follow a suggestion by the Commission to submit a proposal for guidelines ‘by the Commission on behalf of the European Union’, thereby leaving the Member States out. In particular, the Commission considered that the area addressed by the proposal was covered to a large extent by common rules of the EU and that the EU, therefore, had the exclusive external competence under Article 3(2) TFEU (‘ERTA doctrine’). According to the Commission, a proposal ‘on behalf of the Member States’ could not sufficiently demonstrate that the Member States act in the Union interest.

In Case C-161/20, the Commission challenged the Council decision endorsing the submission on two grounds. First, the Commission argued that the proposal was submitted in breach of the EU exclusive competence under Article 3(2) TFEU and that, therefore, the proposal should have been issued ‘by the European Commission on behalf of the European Union‘. The Council contended that EU exclusive competence only covered a part of the submission, while the remainder fell under shared competence of the EU and the Member States. Second, the Commission alleged a breach of its institutional prerogatives under Article 17(1) TEU insofar as the Council decision entrusted the Presidency of the Council with transmitting the proposal.

A triviality? By no means! Although the submission did not constitute a binding decision establishing the positions to be adopted on the Union's behalf within the meaning of Article 218(9) TFEU, the present case concerns the fundamental issue of the discrepancies between the international legal order and the European Union legal order. In his Opinion, AG Szpunar, first, addressed the alleged infringement of Article 17(1) TEU, before turning to the question of the nature of EU competence regarding the proposal.

Infringement of Article 17(1) TEU: EU interest vs. obligation to exercise EU external competence in observance of international law

The particularities of the external representation of the Union interest in the IMO arise from the twofold status of the Commission. On the one hand, the sixth sentence of Article 17(1) TEU, as such, only refers to the prerogatives of the Commission acting as an EU organ. On the other hand, the Commission has the status as IMO observer, however, without being considered to act as the representative of the EU.

AG Szpunar tried to resolve the discrepancy between, on the one hand, the IMO rules, preventing the EU from directly participating in the IMO, and on the other hand, the internal rules in the Treaties on the division of external powers and their exercise, by referring to the case-law of the Court of Justice, according to which the Union must exercise its powers in observance of international law (para 64; see Antarctica Cases). The AG examined whether the disputed submission could have been transmitted as a Union act in line with the IMO rules, the Union being represented by the Commission (para 72 et seq). However, the AG denied the admissibility of such course of action by strictly limiting the right to participate in the IMO to the Commission as observer. In particular, he rejected the Commission’s argument that it can be inferred from the Lisbon Treaty, which provided for the substitution of the European Community by the EU, that the Commission’s status as observer means that the Commission acts as an organ of the EU and that, therefore, proposals in the name of the Commission can be considered as proposals of the EU (para 74 et seq). According to the AG, the invitation from the Intersessional Working Group to submit proposals did not extend to international organisations without any rights in the IMO. In fact, the invitation required the power to participate effectively in the Working Group, which the EU lacks (para 78).

Having denied the possibility of submitting the proposal on behalf of the EU, the wording of Article 17(1) TEU suggests that it is not applicable in the case that the EU cannot act on its own behalf (para 81 et seq). AG Szpunar pointed out that there is a significant difference between, on the one hand, the Member States acting in the Union interest, but in their own name, and, on the other hand, the Member States acting as representatives of the EU (cf. Article 7 of the Vienna Convention on the Law of Treaties) (para 84). When the Member States act in their own name, they are free to choose whom they want to entrust with transmitting the proposal (in the present case, the Presidency of the Council and not the Commission) (para 85).

Nevertheless, the AG added that the Member States were obliged under the principle of sincere cooperation (see Article 4(3) TEU) and the principle of acting in good faith to inform the third parties involved that the Member States act in the Union interest (para 88). This follows from the fact that the Member States do not act ‘fully autonomous[ly]’ when they act in the Union interest (para 88). However, the obligation to act in the Union interest does not go as far as to oblige the Member States to include ‘on behalf of the EU’ in the heading of the submission as the external partners could reject such a submission (para 89). It is sufficient that the external partners can infer from the context that the Member States act in the Union interest (para 90).

The AG’s reasoning resembles the findings of the Court in the Antarctica Cases where the Court held that the EU did not enjoy a fully autonomous status in the Antarctic Treaty and that, therefore, it had to involve the Member States in submitting a proposal in the framework of the Canberra Convention. Yet, in contrast to the Antarctica Cases, AG Szpunar sought to restrict the scope of Member States’ action and not the exercise of EU external competence. The Court’s reasoning in the Antarctica Cases seems to evolve more and more into a generally applicable standard which does not seem to be restricted to specific cases with specific contexts (as was hoped for by many scholars). Arguably, it is also not restricted to favouring the Member States, but can also be applied in favour of the EU (cf. recently Opinion 1/19, where the risk of incurring international responsibility did not preclude the Union from exercising its competence without the consent of all Member States). The present case is based on the conflict between, on the one hand, the protection of the EU interest and, on the other hand, the obligation to exercise the EU external competences in observance of international law. Both principles govern the exercise of the EU external competences. The AG favoured the observance of international law over the protection of the EU interest (cf. para 92). Observing international law meant, therefore, that the proposal could not be submitted on behalf of the EU.

The (im)possibility to act on behalf of the EU does not depend on the nature of EU competence

The AG suggested that determining whether the EU competence was exclusive or shared with the Member States was not important to decide whether the proposal could have been submitted by the EU itself (paras 50, 97). Therefore, it is not a question of competence to determine whether a proposal can be submitted on behalf of the EU. It is rather a question of labelling a submission to the Intersessional Working Group the right way as to reconcile the IMO rules and the rules of the Treaties. AG Szpunar denied an ‘ERTA effect’, anyway, as there was no risk of common rules being affected by the mere prospect that future guidelines could inspire the EU to amend the common rules (para 153 et seq). Neither did he assume an exclusive competence under the second part of Article 3(2) TFEU (para 158 et seq). Consequently, he rejected the Commission’s plea alleging breach of exclusive EU competence under Article 3(2) TFEU.

The AG’s conclusion: Rather let the Member States represent the EU interest than the Commission?

The AG implied that the Union has only shared competence in the area covered by the disputed submission, without explicitly stating the legal basis for this competence (para 164). In line with settled case-law, he concluded that the Union can exercise the shared competence alone (para 164; see C-600/14). However, and this seems rather puzzling, he explained that ‘the Commission’s weaker status compared to that of the EU Member States in the IMO constitutes an argument in favour of the participation of the Member States in the exercise of the Union’s external competence.’ (para 164). He explicitly referred to the Antarctica Cases where the Court held that the Union could not submit a proposal in the framework of the Canberra Convention without the Member States due to special obligations and responsibilities of some Member States as parties to the Antarctic Treaty. However, comparing the status of the Member States in the IMO with their status in the Antarctic Treaty seems questionable. In the Antarctica Cases, the EU had acceded to the Canberra Convention whereas it cannot become an IMO member. Furthermore, it could be argued that the Commission as such has no right to vote in the IMO and that, therefore, it is not able to exercise the EU competence alone in the IMO in the first place.

AG Szpunar’s Opinion has surely dashed the Commission’s hopes of driving the Member States out of the representation of the Union interest in the IMO. In fact, the Commission’s status in the IMO appears to be even weaker than before. It is, therefore, for the Court to decide on who will represent the EU interest in the IMO in the future.

Barnard & Peers: chapter 24

Photo credit: Tagishsimon, via Wikicommons

No Pain, No Gain? Implementing the European Green Deal and Getting the EU Maritime Transport Sector “Fit for 55”

 

Killian O’Brien, DAAD Lecturer (Fachlektor), University College London

The EU has set a target of reducing its greenhouse gas emissions by 2030 by at least 55% compared to 1990 levels. This is to be achieved as part of the European Green Deal. With a somewhat unfavourable title reminiscent of a middle-aged sport group, the European Commission rolled out its much-anticipated “Fit for 55” legislative package on 14th July 2021. This bundle of legislative measures aims to secure rapid decarbonisation of the EU economy by transforming the bloc's emissions trajectory and bringing EU policies and legislation in 12 different areas into step. Given the significant impact of the transport sector in contributing to the EU’s overall emissions balance (ca. 25% of total emissions) and that emissions from this sector have been rising in recent years, it is unsurprising that many of the proposals are directed toward transport emissions. Given the sheer breadth and volume of proposals tabled, it is difficult to engage in a thorough analysis so soon, yet this short blog aims to outline some aspect of the proposed measures as they relate specifically to the maritime transport sector.

Four of the 10 proposals announced on 14th July address the maritime transport sector specifically, three being applicable to shipping and the fourth to certain ports within the European Economic Area. The three proposals related to shipping address establishing a revised system for greenhouse gas emission allowance trading (EU ETS proposal, COM(2021) 551 final), the use of renewable and low-carbon fuels in maritime transport (Fuel EU Maritime, COM(2021) 562 final) as well as a proposal restructuring the Union framework for the taxation of energy products and electricity (Energy Taxation Directive, COM(2021) 563 final). The proposed Regulation affecting ports deals with the deployment of alternative fuels infrastructure (AFIR, COM(2021) 559 final).

Arguably, the most significant proposal is for a revised Emissions Trading System Directive (EU ETS), which would include international shipping within the EU ETS framework. Under the broader applicable international legal framework (UNFCCC, UNCLOS, MARPOL etc), shipping, which is not regulated under the Paris Climate Agreement, falls under the auspices of the UN’s International Maritime Organisation (IMO). Despite having a broad mandate to regulate marine pollution, including GHGs (Article 2, IMO Convention), progress within this designated global regulator has been at times so painfully slow that the EU has now decided to take the step towards unilateral regulation and bring shipping within the EU ETS framework. Indeed, the European Commission notes at page 5 of the explanatory memorandum to the revised EU ETS proposal that “[IMO] measures are insufficient to decarbonise international shipping in line with international climate objectives”. This is not particularly novel as the EU has previously taken the lead in unilaterally lowering the sulphur content of marine fuels following a lack of progress at IMO and legally there is no obstacle to this kind of action. UNCLOS permits States to take action to “establish particular requirements for the prevention, reduction and control of pollution of the marine environment as a condition for the entry of foreign vessels into their ports or internal waters” (Art. 211 (3) UNCLOS). Indeed, broader principles of jurisdiction in public international law allow for such unilateral measures where a substantial nexus to the matter in question can be demonstrated. The significant effects of GHGs on the environment and on individuals’ health would seem to satisfy this jurisdictional criterion and the EU is therefore entitled to push forward with the creation of unilateral market-based measures in the form of ETS. Having said that, when considered from a trade policy point of view, there is some merit to calls for the EU to continue to work towards a global solution due to the threat of loss of competitiveness as well as the potential for harmful regime fragmentation and increased costly administrative burden for shipping companies and others due to, for example, multiple monitoring and reporting standards. To that end, the EU ETS Directive proposal contains a review clause to assess progress at IMO (Article 3ge).

Under the EU ETS scheme, companies buy allowances based on one allowance being equal to 1 tonne of CO2 emitted. The proposal makes it clear that shipping companies (or the party made responsible for the emissions) will not be entitled to any free allowances. Sufficient allowances must be surrenders to cover the emissions for the year. Allowances can be bought and sold as commodities so that (environmentally friendly) companies with more allowances than they need can sell them to others or keep the unused allowances in reserve. The scheme will apply to vessels of 5,000 gross tonnes and above. The applicability of the EU ETS Directive proposal rationae loci relates to emissions from all voyages between ports in the European Economic Area (EEA) and at berth in EEA, i.e. intra-EEA voyages. In addition, extra-EEA voyages, whether inbound or outbound also fall under the scope of the EU ETS proposal, albeit only 50% of the respective inbound and outbound emissions. The considerable impetus with which the European Commission is proceeding is evident in the fact that emission allowances will already have to be purchased from 2023. However, a graduated introduction of allowances is foreseen, starting with 20% of emissions in 2023, rising to 45% in 2024, 70% in 2025 and then to full 100% emission coverage for 2026. Sanctions are foreseen with fines of €100 per tonne CO2 and repeat offenders who have been non-compliant in consecutive years could even be denied entry to EU ports.

The other most significant element within this legislative package can be seen in the imposition of the first greenhouse gas intensity requirements on shipping fuels by way of the Fuel EU Maritime proposal. This proposed Regulation stipulates a limit on the GHG intensity of energy used on-board by a ship arriving at, staying within or departing from ports under the jurisdiction of a Member State (Art. 1). Ship fuels used by these ships must improve their GHG intensity by a prescribed percentage compared to a 2020 baseline (Art. 4). Once again, a graduated approach is envisaged, with ever-more stringent improvements required every 5 years until 2050. This proposed legislation will also apply to vessels of 5,000 gross tonnes and above.

The Fuel EU Maritime proposal could lead to a considerable proportion of the energy used by ships calling at EU ports being LNG and biofuels by 2035. Two primary concerns are pertinent in this respect, namely calculations suggesting that LNG, itself a fossil fuel, in fact offers minimal emissions reductions as well as releasing methane unburned during the energy conversion (combustion) process, and that many biofuels are suspected of having less than proven sustainability criteria, depending in particular on where they are produced. In addition, the requirement that shipping companies source adequate fuels, even when the ship is outside the EU, could be particularly burdensome to the point that it is excessive or disproportionate.

A significant development contained in the EU ETS and Fuel EU Maritime proposals is the strengthened recognition of the polluter pays principle in the sector. Typically, shipping companies could have been assumed to be responsible for emissions caused and the GHG intensity of a particular vessel. However, in what would appear to be a late inclusion in the draft proposals, the EU ETS and Fuel EU Maritime proposals include provisions recognising the role of the commercial operator. Under this regime, the shipping company would be permitted to make commercial operators, i.e. charterers who determine the choice of fuel, route and speed of the ship, responsible for costs of compliance with the two draft legislative proposals in question by way of an appropriate “commercial agreement”.

The third Fit for 55 legislative proposal aimed at the shipping industry (Energy Taxation Directive, ETD) relates to the taxation of energy products and discourages the use of fossil fuels by setting higher rates of taxation for fossil fuels and lower rates for renewables products thereby decreasing the relative price advantage of fossil fuels over less polluting alternatives. The material scope of the proposed ETD therefore imposes tax on bunker fuels sold in the EEA for voyages within the EEA, although Member States can choose to extend this to extra-EU voyages. As this is a piece of taxation rather than environmental legislation, unanimous approval in Council is required. It is therefore not unthinkable that certain Member States such as Cyprus, Greece and Malta, with their particular interest in the shipping industry, could block proposals or that proposals could be considerably amended to appease certain vested interests.

In respect of ports, the scope of the AFIR proposal is limited to those ports within the Trans-European Transport Network (TEN-T). Some 329 ports make up this network, which are determined on the basis of a set of quantitative thresholds. Hence, the largest ports in terms of freight volumes and passenger volumes are affected. These ports will be responsible for providing an “appropriate” LNG refuelling infrastructure as of 1.1.2025 (Art. 11) and must also provide a minimum shoreside electricity supply for containerships and passenger ships as of 1.1.2030 (Art. 9). The proposed Regulation contains mandatory national targets for the deployment of “sufficient alternative fuels infrastructure” in relation to vessels as well as road vehicles and stationary aircraft. Common technical mechanisms are foreseen (Art. 19), in addition to national policy frameworks (Art. 13) and robust reporting mechanisms (Art. 14). The European Commission’s choice of LNG as the preferred fuel-source is interesting in that full alignment between the Alternative Fuels Infrastructure proposal and Fuel EU Maritime proposal must be maintained throughout what could be a lengthy legislative process. This is illustrative of the inter-related nature of the various proposals. In any event, considering the aforementioned criticism of LNG, its largely recognised medium-term stop-gap character and the clear preference of some significant carriers for alternate fuel sources such as ammonia, it remains to be seen whether this proposal will have sufficient longevity to have the desired effect. Further discussions will almost certainly centre on avoiding carbon leakage, future proofing, clarifying the addressees of reporting obligations and, almost inevitably, the issue of funding for capital infrastructure investment projects.

Conclusion

This preliminary assessment has shown the generally far-reaching approach adopted by the European Commission with these proposals. The unilateral nature of EU action has been identified as legally acceptable but not entirely unproblematic from a political and trade policy point of view. At the same time, the EU has enjoyed success in driving the international regulatory agenda with a similar past strategy in relation to fuel sulphur-content limits and there is every reason to think that these measures could have the incidental effect of increasing the pace of negotiations at IMO. Of course, it goes without saying that all proposals will now be subjected to considerable scrutiny and negotiation within the Parliament and Council of the EU. It remains to be seen whether and with which measures the EU maritime transport sector can be whipped into shape to make it truly Fit for 55.

Photo credit: Łukasz Golowanow via Wikimedia commons

Barnard & Peers: chapter 22