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TILEC

TILEC Discussion Paper DP 2016-013

NEGOTIATING SERVICES LIBERALIZATION WITHIN TTIP - THE EU EXTERNAL TRADE POLICY AT CROSSROADS

by Panagiotis Delimatsis

June 28 2016

ISSN 1572-4042 ISSN 2213-9419 http://ssrn.com/abstract=2801524

Electronic copy available at: http://ssrn.com/abstract=2801524

Negotiating Services Liberalization within TTIP – The EU External Trade Policy at Crossroads

PANAGIOTIS DELIMATSIS

ABSTRACT

The conclusion of the Transatlantic Trade and Investment Partnership (TTIP) constitutes a priority and key component of the new external trade policy of the European Union (EU) and an immediate follow-up to several years of regulatory cooperation between the two global trade powers. In an era of megaregionals, services in the only area where significant negotiating traction exists at the bilateral and multilateral level. From an EU viewpoint, services is a key sector in these negotiations. As expected, the EU Commission, backed by the EU executive, has advanced an ambitious agenda and conditional offer to the US, hoping for further liberalization on the two sides of the Atlantic. Importantly, these negotiations are expected not only to generate additional liberalization, but should also reshape the regulatory philosophy as far as the regulation of trade in services is concerned. Against this backdrop, this article offers a critical account of the current TTIP negotiations relating to trade in services from an EU perspective. When needed, the article draws parallels with other EU Free Trade Agreements (FTAs) and the General Agreement on Trade in Services (GATS).

A.

Introductory remarks

The Trans-Atlantic Trade and Investment Partnership (TTIP) is in its 13th round of negotiations. The negotiations that started between the EU and the US in July 2013 have only intensified



Professor of Law and Director, Tilburg Law and Economics Center (TILEC), Tilburg University, the

Netherlands; Fellow, Program on International Financial Systems, Harvard Law School. Thanks go to Bernard Hoekman, Pascal Kerneis, Juan Marchetti, Aaditya Mattoo, Petros Mavroidis, Hans-Wolfgang Micklitz and the participants of the conference on “Issue Linkage and TTIP: Domestic Regulation and Transatlantic Integration” held at the European University Institute in Florence, 7-8 December 2015. Remaining errors are of the author’s alone. This Article takes into account developments as of 30 May 2016. All hyperlinks were last accessed the same day. Contact: [email protected].

-1Electronic copy available at: http://ssrn.com/abstract=2801524

since mid-2015. Other than the obvious impact that a potential transatlantic deal may have on the two most advanced economies in the worlds, TTIP has sparked a significant controversy in the wake of recent leaks of several draft chapters of the deal that did not help dispel increasing public opposition. TTIP forms part of the EU’s considerate turn in external trade policy to focus on the conclusion of trade agreements that can have a significant impact on EU trade. Thus, under the instructions of the European Council,1 the European Commission’s interest shifted towards the launch of negotiations with its strategic partners, which are at the same time important trade partners globally. Within this framework, concluding comprehensive and balanced trade agreements with US, China, Russia, Japan, India and Brazil became a top priority for the EU trade policy.2 There is a varying degree of progress in these negotiations. For instance, negotiations with India have witnessed sluggish progress and no real prospect for the conclusion of a trade and investment agreement any time soon. The same appears to be the case with MERCOSUR, although the EU and MERCOSUR exchanged market offers this year for the first time in over ten years. On the other hand, the US (but also Japan) appear to be the top political priorities for the new Juncker administration.3 In his State of the Union speech, the president of the European Commission reiterated his willingness to conclude a reasonable and balanced agreement with the US in 2016.4 The US also is committed to concluding the agreement before the US President Obama leaves office and ahead of the France and Germany elections in 2017. However, the conclusion of the Trans-Pacific Partnership (TPP) by the Obama administration in 2015 and the controversy as to its ratification would suggest that the next big US free trade agreement (FTA) may need to be concluded by the next US administration. In any event, TTIP will not enter into force before 2018. Taking into account the most recent views of the Commission, it seems that the EU opts for immediately prioritizing three agreements: TTIP, the agreement with Japan and the investment

1

See European Council Conclusions of 16 September 2010, EUCO 21/1/10, 12 October 2010, para. 4.

2

See European Commission Communication, “Trade Policy as a core component of the EU’s 2020 strategy”,

COM(2010) 612 final, 9 November 2010, p. 11. 3 4

TTIP is one of the 10 top priorities that Jean-Claude Juncker set for his term as European Commission’s president. See

Jean-Claude

Juncker,

“State

of

the

Union

2015”,

9

September

2015,

available

at:

http://ec.europa.eu/priorities/soteu/docs/state_of_the_union_2015_en.pdf. See also President Juncker’s political guidelines addressed to the next Commission, “A New Start for Europe: My Agenda for Jobs, Growth, Fairness and Democratic Change”, 15 July 2014.

-2Electronic copy available at: http://ssrn.com/abstract=2801524

agreement with China.5 In all cases, the EU confirms the importance of concluding WTOconsistent bilateral agreements although it is hardly conceivable achieving substantial progress on both the bilateral/plurilateral and the multilateral front simultaneously.6 For our purposes, it is interesting that services is probably the only area where the EU expressly confirms its commitment to the bilateral route (through agreements with the US, Canada or Korea) and the multilateral/plurilateral route (through TiSA within the WTO framework).7 Upgrading the cooperation with the US in all fronts is the clear message from the European leaders.8 The Transatlantic Economic Council (TEC) did not achieve as much as was expected, but for others it did set the foundations for a more comprehensive collaboration and understanding, in particular on regulatory matters. The conclusion of the TTIP is also a priority for this European Commission, TTIP will be an interesting legal construct under the EU external relations law lens. To be sure, it is not the first FTA that the EU negotiates nor is it the first FTA that the EU concludes after the entry into force of the Lisbon Treaty. The Comprehensive Economic Trade Agreement (CETA) with Canada will also be concluded under the relevant new Common Commercial Policy (CCP) provisions of the Treaty on the Functioning of the European Union (TFEU), notably Article 207. The EU Free Trade Agreement with Korea, EU’s first with an Asian country, was also concluded recently.9 This agreement was concluded as a “mixed” agreement, which in EU jargon means that both the EU and its Member States together shall conclude the agreement.10 In practice, mixity requires ratification by all Member States before it can produce any legal effects. In the case of the Korea FTA, though, the Council had decided to provisionally

5

See European Commission Communication, “Trade for all: Towards a more responsible trade and investment

policy”, 2015. 6

Ibid, p. 27. The Communication recalls the by now maintream idea that FTAs can be laboratories where countries

may test policies and measures before multilateralizing them. For instance, the new EU ambitious agenda for including investment disciplines in its FTAs is based on the premise that in the medium run it will be possible to introduce such disciplines at the WTO level, an attempt that failed in the Seattle Ministerial (the so-called “Singapore issues”). 7

Ibid, pp. 10-11.

8

Ibid, para. 7b.

9

See Council of the European Union, “EU-South Korea free trade agreement concluded – Press release”, 1 October

2015, available at: http://www.consilium.europa.eu/en/press/press-releases/2015/10/01-korea-free-trade/. 10

See C. Hillion, “Mixity and Coherence in EU External Relations: The Significance of the ‘Duty of Cooperation’”

in C. Hillion and P. Koutrakos (eds), Mixed Agreements Revisited – The European Union and its Member States in the World (Hart Publishing, 2010), 87.

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apply the FTA as of July 2011.11 This is the first agreement of what the Commission calls the new generation of EU FTAs. However, both FTAs were concluded based on respective mandates that were addressed to the European Commission prior to the entry into force of the Lisbon Treaty, with much confusion surrounding the normative character of the changes brought about by the then forthcoming introduction of the new Lisbon treaty rules on EU’s trade policy. The TTIP negotiating mandate on the other side was approved by the Council of the EU in 2013.12 Thus, all related decisions and acts were adopted after the entry into force of the Lisbon Treaty. Another, less mediatised agreement also has similar characteristics: The FTA with Singapore, negotiations for which were finalized in October 2014, absent political will to conclude a comprehensive agreement with all ASEAN countries.13 The FTA with Singapore, however, is not as prominent as TTIP in terms of trade flows: Singapore is EU’s 17th trading partner. Still, the FTA with Singapore is of high constitutional significance for the evolution of EU external relations law, as the European Commission decided to go a step further and claim exclusive competence for the conclusion of this agreement based on the new Lisbon framework. The new Article 207 TFEU appears to suggest that CCP, including investment, is an exclusive EU competence with varying decision-making procedures (that is, qualified majority combined with unanimity when liberalization of audiovisual or public services is at stake). The Commission’s request for an Opinion by the Court of Justice of the European Union (CJEU)

11

See Council Decision of 16 September 2010 on the signing, on behalf of the European Union, and provisional

application of the Free Trade Agreement between the European Union and its Member States, of the one part, and the Republic of Korea, of the other part [2011] OJ L 127/1. 12

Council of the European Union, “ Press Release - 3245th Council meeting”, 10862/13, 14 June 2013. The

document was declassified in October 2014: see Council Directives for the negotiation on the Transatlantic Trade and Investment Partnership between the European Union and the United States of America, ST 11103/13, 17 June 2013. Previously, the Council adopted negotiating directives for an EU-Japan FTA in November 2012, but negotiations intensified only recently, with prospects for an agreement this year being relatively high. 13

The EU Council agreed to launch bilateral negotiations with individual ASEAN countries, starting with

Singapore in December 2009 and continuing with Malaysia (September 2010); Vietnam (May 2012); Thailand (February 2013); and the Philippines (November 2015). After Singapore, the EU concluded negotiations with Vietnam and the preliminary text of the FTA is currently in the legal scrubbing phase. See also Council of the European Union, “Outcome of the Council Meeting – 3430th Council meeting (Foreign Affairs – Trade Issues)”, 14688/15, 27 November 2015. All negotiations with ASEAN countries are based on the Council negotiating directives obtained in April 2007. The directives were updated to include investment protection in July 2011 for the negotiations with Singapore. They were updated again in October 2013 to include investment protection for the negotiations with the remaining ASEAN countries.

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based on Article 218:11 TFEU is pending and awaited with great interest, as it may constitute a yardstick for all subsequent EU FTAs, including TTIP.14 Thus, just in terms of sheer trade size, TTIP is at the epicentre of public debate regarding trade and regulatory matters in both sides of the Atlantic. The US is EU’s most important trading partner, representing over 15 percent of extra-EU trade flows. For the US, the EU, taken together, is the second most important trading partner, after Canada. In the US, a recurring discussion about the benefits of NAFTA and TPP instigates suspicion against mega-regionals of this type. In the EU, on the other hand, the debate about TTIP is even more heated due to the trauma that the EC Hormones and the associated GMO saga caused but also due to the EUpeculiar concept of public services, that some see being put in jeopardy if a trade agreement with the US is to occur. In addition, statistics show that, even in times of crisis, the EU has had a steadily positive trade balance with the US in the last decade, making the case for further integration a “tough sell” to EU citizens anxious about their standards of living and the future of their welfare state so much hit by the recent Great recession.15 Against this background, this paper aims at offering a critical account of the TTIP negotiations relating to the liberalization of the supply of services at the bilateral level. Services is by now the only trade sector whereby the two economies are the biggest in the world. Thus, an integration of the two services markets would indeed create an unprecedented dynamique. After an analysis in Section B of the salient features of the negotiating mandate that the Council of the European Union addressed to the European Commission with respect to the transatlantic negotiations, Section C discusses the chapter on services, investment and e-commerce proposed by the EU. The most recent conditional offer on services liberalization is analysed in Section D. Section E concludes.

B.

The negotiating directives adopted by the Council

The Council unanimously adopted the negotiating directives addressed to the Commission in June 2013 pursuant to Article 207:4 TFEU. Such directives are typically based on a proposal (“recommendations”) submitted by the Commission, which has the power to initiate EU action

14

See Request for an Opinion submitted by the European Commission pursuant to Article 218:11 TFEU (Opinion

2/15). Typically, it takes over a year before the CJEU renders its Opinion. 15

See, for instance, Eurostat, “US EU international trade and investment statistics”, Statistics in focus 2/2015, 11

September 2015.

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in a given area after assessing whether the conclusion of a given international agreement is in EU’s interest.16 In the case of exclusive competence like in trade matters, the Commission is not only the initiator, but also the sole negotiator. Thus, at these first stages of the process, the institutional balance tilts in favour of the Commission. In its directives, the Council sets the general guidelines which convey the general objectives that the Commission should strive to achieve during the negotiations. The Council first posits the negotiations within the framework that the new Article 21 TEU establishes for the EU external action. Interestingly, the mandate appears to suggest that the EU and the US share values and principles enshrined in Article 21, including protection of human rights, democracy and rule of law, sustainable development and the right to regulate to protect non-economic objectives, including, quite controversially, the promotion of cultural diversity. Instantly, in paragraph 9, the mandate attempts to shield, for all practical purposes the cultural sector (alias, audiovisual services) from the scope of any future agreement between the EU and the US.17 The Council further underlines the significance of the successful conclusion of the negotiations as a herald of new global standards emanating from the two leading global trade powers. This sets the bar high with respect to the level of aspiration and expectations at least on the side of the EU. The mandate calls for a trade agreement that will be quite traditional – in that it would cover duties and market access – and at the same time innovative in that it encompasses regulatory matters, regulatory cooperation in issues such as technical barriers to trade and food safety regulations as well as investment protection. Indeed, the trust-building intentions of the Council are reflected in the regulatory cooperation chapter18 which reflects the good governance intentions that the EU has advanced in all FTAs that it has concluded to date, in a gradually revealing pattern of creating an external regulatory policy.19 With respect to services in particular, the mandate emphasizes the importance of using the

16

Cf. Opinion of AG Wathelet in Case C-425/13, European Commission v Council of the European Union,

ECLI:EU:C:2015:174, para. 69. 17

For all practical purposes, this exclusion apply to every EU trade agreement.

18

See European Commission, “TTIP – Initial Provisions for Chapter [ ] – Regulatory Cooperation”, 4 May 2015.

Also B. Hoekman, “Fostering Transatlantic Regulatory Cooperation and Gradual Multilateralization”, 18:3 Journal of International Economic Law (2015), 609. 19

Cf. M. Cremona, “Expanding the Internal Market: An External Regulatory Policy for the EU?” in B. Van

Vooren; S. Blockmans; and J. Wouters (eds), The EU’s Role in Global Governance: The Legal Dimension (Oxford University Press, 2013), 162.

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existing level of liberalization as the starting point for negotiations. Thus, both parties to the FTA should be willing to offer more appealing conditions to each other’s service suppliers than to the suppliers of their existing FTA partners.20 Due to the remaining controversy regarding the actual level of “GATS-plus” liberalization that existing FTAs achieve,21 the Council gives the green light to the Commission to be ambitious in these negotiations. Still, this should not be taken to mean that this view is shared by all Member States and with respect to all sectors. For instance, Member States have shown how sensitive they consider certain educational and cultural as well as social and health services to be by insisting on keeping a right to veto any future threat of their domestic policy preferences.22 In this regard, the Directives underline the importance of safeguarding the EU-specific framework on services of general (economic) interest. The Directives refer to Protocol No 26 on services of general interest and constitute a reminder that the protection of services of general (economic) interest forms integral part of the shared values of the Union. As mentioned earlier, the EU is required to pursue the shared values internally as well as in its external action by virtue of Article 21 TEU.23 In other words, the EU should either attempt to “export” this concept to its FTAs (as it did with its ENP partners) or otherwise exclude the sector altogether from any negotiations involving liberalization of services unless a higher level of protection is aimed at by the parties to a given bilateral agreement.24 Be it as it may, regulatory sovereignty of the Parties in this field is by no means limited by the existing mandate or subsequent negotiating proposals.

20

See also the final report of the US-EU High-Level Working Group on Jobs and Growth (HLWG), 11 February

2013, p. 3, available at: http://trade.ec.europa.eu/doclib/docs/2013/february/tradoc_150519.pdf. 21

See, for instance, R. Adlung and S. Miroudot, “Poison in the Wine? Tracing GATS-Minus Commitments in

Regional Trade Agreements”, 46:5 Journal of World Trade (2012), 1045. 22

Recall that unanimity is required for any liberalization commitments in these sectors pursuant to Article 207:4

TFEU. 23

Some would argue that the promotion of its values and ideals is the distinctive feature of the EU external action.

See I. Manners, “Normative Power Europe: A Contradiction in Terms?”, 40 Journal of Common Market Studies (2002), 235. Others have argued that the distinctive feature of the the EU external action is its governance mode that opts for the creation of stable and institutionalized relationships with other States and entities; promotes collective action; and uses regulatory frameworks that entail common articulated goals. See G. de Búrca, “EU External Relations: The Governance Mode of Foreign Policy”, in Van Vooren; Blockmans; and Wouters (eds), above note 19, p. 39. 24

Cf. EU Parliament Resolution, “Recommendations to the European Commission on the negotiations for the

Transatlantic Trade and Investment Partnership (TTIP)”, 2014/2228(INI), 8 July 2015.

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To reassure citizens and NGOs that were mobilized against the prospective deal, the EU and US recently pledged to approach public services in a manner that takes into account the important preferences and values that underlie the provision of such services.25 Water, education, health and social services are mentioned as mere examples of sectors in which important sensitivities on both sides of the Atlantic are recognized. This statement confirms the EU’s consistently reluctant stance in its FTAs with respect to public services (which leads to the introduction in a given FTA of a so-called “public utilities exception”) in line with the negotiating guidelines by the Council.26 The directives reflect the equally consistent reluctance regarding the opening of audiovisual services to the US service suppliers, leading to a recommendation by the Council to exclude this sector from the TTIP negotiations.27 Recently, the European Parliament (whose consent will be necessary in the end for TTIP to be concluded28) invited the Commission as the lead negotiator to exclude from the scope of TTIP public services to ensure that “national and if applicable local authorities retain the full right to introduce, adopt, maintain or repeal any measures with regards to the commissioning, organisation, funding and provision of public services as provided in the Treaties as well as in the EU’s negotiating mandate; this exclusion should apply irrespective of how the services are provided and funded.”29 Notably, the Parliament suggested the exclusion of public healthcare services from the negotiations due to the differing approaches between the EU and the US. By way of illustration, the horizontal chapter on regulatory cooperation proposed by the EU

25

See Joint Statement on Public Services by Ambassador Froman (USTR) and EU Commissioner Malström (DG

Trade), 20 March 2015. This statement should also be linked to the growing public debate within the EU as to the possibility of jeopardizing the status quo with respect to the supply of public services in Europe, which led to the collection of over 3 million signatures against the continuation of the TTIP negotiations. An unsuccessful attempt was made to register this initiative as a European Citizens’ initiative pursuant to Article 11 TEU and the corresponding Regulation 211/2011. Based on the refusal by the Commission to register the initiative in September 2014 due to the fact that the Council’s negotiating guidelines is a preparatory act that does not allow the Commission proposing a specific legal act to the Council, the organizers of the initiative pledged to challenge the Commission’s stance before the CJEU. For more details, see: https://stop-ttip.org/lawsuit-ecj/. 26

Such a clause was introduced previously in the EU FTA with South Korea or the EU-Cariforum Economic

Partnership agreement. See P. Delimatsis, “Services of General Interest and the External Dimension of the EU Energy Policy” in M. Krajewski (ed), Services of General Interest Beyond the Single Market – External and International Law Dimensions (Springer, 2015), p. 345ff. 27

With respect to both audiovisual services and public services, see the European Parliament Resolution on the

opening of negotiations on a plurilateral agreement on services (TiSA), 2013/2583(RSP), 4 July 2013. 28

See Art. 218:6(a)(v) TFEU.

29

See above note 24, para. 2(a)vii.

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essentially excludes services of general interest (i.e. public services) from the scope of that chapter.30 In addition, the Parliament agreed with the Council regarding the exclusion of the audiovisual sector. The Parliament even spelled out this carve-out a bit more by asking the Commission to actively pursue the introduction of a provision that would allow the EU and its member States to continue subsidizing and providing financial support to cultural industries and cultural, educational, audiovisual and press services. The Council’s Directives call for new market access commitments that will reflect the high level of ambition save for sensitive services sectors, but also signals the importance of reinforcing the regulatory, due-process-related disciplines on domestic regulations (GATS Article VI-type of commitments) of both parties. The Council agrees that it is high time binding commitments on transparency, impartiality and due process with respect to licensing and qualification requirements and procedures were included in an agreement of this type.31 For a long time, several FTAs have incorporated commitments on non-discriminatory measures and additionally referred to the possibility of including in their bilateral setting the results of the negotiations conducted under Article VI GATS. In its directives, and due to the current slow progress of WTO negotiations, the Council instructs the Commission to take stock of the current FTAs that both parties have signed to date and deepen regulatory convergence regarding non-discriminatory measures that aim to enhance the quality of the service. Even though the EU has consistently proposed regulatory disciplines in the most recent generation of its FTAs, the depth and level of ambition of TTIP can only be compared to the CETA with Canada. Notably with respect to professional qualifications, the Council calls for the development of a framework allowing for mutual recognition of professional qualifications. The same level of ambition applies to establishment (commercial presence in the GATS/FTA parlance) whereby restrictions to national treatment should only be allowed to certain specific services sectors. The European Parliament, in its recent recommendations was quite specific as to the objectives that the EU negotiator should focus on during the TTIP negotiations. According to the Parliament, an ambitious and balanced deal with the US would entail the removal of US 30

See European Commission, above note 18, para. 3.

31

The US also is like-minded in this respect: see Obama’s administration letter to the US Congress on March 20,

2013,

p.

3,

available

http://www.ustr.gov/sites/default/files/03202013%20TTIP%20Notification%20Letter.PDF.

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at:

restrictions on foreign ownership of transport services and airlines; better access to US telecommunications markets and liberalization of the US public procurement market at all levels of government. The Parliament calls for Commission’s particular attention to the EU’s high level of data protection and conditions for data flows, an issue which despite the recent EU-US Privacy Shield agreement in the aftermath of the Schrems case-law remains open.32 Finally, the Parliament calls for the convergence of regulations relating to professionals which still hamper mutual recognition of equivalent standards. Facilitating mobility should be an important objective of the EU to the benefit of both partners. Interestingly, it matches similar levels of ambition expressed within the TPP, which incorporates a separate chapter on professional services.

C.

The EU proposal for a services, investment, and e-commerce chapter33

I.

The scope of the proposed rules – A new taxonomy for services supply

The EU’s draft chapter on services and investment (hereinafter, the “draft chapter”) calls for progressive reciprocal liberalization in these fields as well as e-commerce without jeopardizing Parties’ right to regulate in the pursuit of public policy objectives including the protection of public order, public health or consumer protection. In this respect, it reflects the dynamic nature of the prospective trade deal, obliging the two parties to review rules and commitments at regular intervals. The draft chapter distinguishes between rules on investment and rules on cross-border supply. Recall that the GATS logic relies on the distinction among four modes of supply: Cross-border supply (Mode 1); consumption abroad (Mode 2); commercial presence (Mode 3); and temporary movement of natural persons (Mode 4). Compared to the GATS, the draft chapter merges Modes 1 and 2 under the concept of “cross-border supply”, while mode 3 is now dealt

32

Case C-362/14, Schrems, ECLI:EU:C:2015:650; and European Commission Communication, “Transatlantic

Data Flows: Restoring Trust through Strong Safeguards”, COM(2016) 117 final, 29 February 2016. 33

European Commission, “Trade in Services, Investment and e-commerce”, 31 July 2015. We only discuss the

EU proposals here, as the US offer has not been made public to date in accordance with the US Executive Order 13526 of 29 December 2009 that authorizes confidential treatment of foreign government information. See TTIP negotiating

document

procedures

as

descibed

in

an

USTR

letter,

available

at:

https://ustr.gov/sites/default/files/US%20signed%20conf%20agmt%20letter_0.pdf. When applicable, we also draw from the recently leaked consolidated version of the chapter on cross-border trade in services of 30 November 2015, available at: https://www.ttip-leaks.org/menelaos/doc3.pdf.

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with under investment, which, however, and quite crucially, also includes investment in areas other than services. Thus, the new classification of service supply that the EU proposes is the following: (a) cross-border supply of services (very similar to the EU fundamental freedom of providing and receiving services); (b) the supply of services by an enterprise that is an investment on the other Party, including establishment; (c) the supply of a service through the temporary stay of natural persons. More specifically, the sub-heading on investment clarifies that it applies to measures adopted or maintained by a Party affecting the establishment of an enterprise or the operation of an investment by an investor of the other Party in its territory, thereby covering both pre- and postestablishment restrictions. In addition, according to the general provisions of the draft chapter, the concept of cross-border supply includes the possibility of supplying a service through remote means (whereby the supplier and the consumer do not move from their respective territories) but also the situations whereby the service recipient moves in the territory of the other Party to receive the service. Mode 4 relating to the temporary movement of natural persons is dealt with in a separate sub-heading. The draft chapter concludes with: (a) a subheading relating to the regulatory disciplines that apply to services and investment, including transparency, equivalence and mutual recognition as well as sector-specific regulatory disciplines; and (b) a subheading on e-commerce. In the end of the draft chapter, a general exception provision is introduced which combines elements from both Articles XX GATT and XIV GATS and is applicable to all subheadings mentioned above, offering a safety valve for genuine regulatory interventions in the public interest. In line with the negotiating mandate, the draft chapter excludes audiovisual services from its purview. Just like in the GATS, the draft chapter excludes from its scope services supplied in the exercise of governmental authority, thereby offering a shield for activities which are performed neither on a commercial basis nor in competition with one or more economic operators.34 Furthermore, it is clarified that subsidies are dealt with in a separate subheading relating to competition and State aid. The same applies to government procurement which is subject to another sub-heading relating to public procurement. These exclusions apply to both investment and cross-border supply of services. In terms of territorial scope, the draft chapter clarifies that it applies throughout the territory of the parties, including any sub-division of government.

34

For the scope of this exception, see E. Leroux, “What is a ‘Service in the Exercise of Governmental Authority’

Under Article I:3(b) of the General Agreement on Trade in Services?”, 40:3 Journal of World Trade (2006), 345.

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In the leaked consolidated version of the disciplines on cross-border trade in services, financial services and air services are equally excluded, as there are sector-specific rules for these two fields. In addition, both the EU and the US appear to agree on the sweeping territorial scope of the draft rules, covering every level of government as well as self-regulatory bodies that are tasked with regulatory powers. In addition, both parties acknowledge the importance of periodic reviews of the implementation of the agreed rules. They seem to agree on the need for the establishment of a new body or committee which would be tasked with amending if needed the annexes to the FTA that includes specific commitments and reservations. Importantly, the US proposes that the parties consult annually upon issues of mutual interest that pertain to the implementation of the FTA. II.

The proposed rules on investment

With respect to the investment disciplines proposed by the EU, the draft chapter appears to only cover establishment and post-establishment matters, but not any pre-establishment situations.35 The rules incorporated in this section echo the main liberalizing instruments set out in the GATS and call for periodic reviews of the investment regime in the territories of the two Parties. Article 2-2 on market access prohibits quantitative restrictions such as limitations on the number of enterprises, the total value of transactions or assets the total number of natural persons that can be employed or the total quantity of output in sectors where commitments are undertaken. These prohibitions cover both discriminatory and non-discriminatory measures that impose maximum ceilings of this type. Like in Article XVI of the GATS, limitations on legal form and foreign capital participation are also prohibited unless a reservation is scheduled in this regard. Crucially, no market access reservations are allowed other than at the level of local government and the ones inscribed in Annex III. Such reservations are listed in a positive list for market access. In other words, parties shall list only those sectors in which they commit to not apply quantitative limitations. Non-discrimination is the second important principle of this sub-heading relating to investment. Article 2-3 calls for equality of competitive opportunities in like situations among the investors

35

However, the draft chapter includes a broad definition of “investor” to also cover natural or legal persons which

seek to make an investment in the territory of the the other party. In the financial services chapter of TPP, it is clarified in a footnote that concrete action or actions (eg. channeling resources or capital in order to set up a business, or applying for permits or licenses) are required for that person to be regarded as an investor for TPP purposes. Similar clarifications shall be welcome in the relevant TTIP chapters.

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of both parties and their investments regarding establishment and operation of companies, whereas Article 2-4 extends to investors and investments of the two Parties more favourable treatment of investors and investments of any third party. Finally, and quite importantly, the subheading relating to investment outlaws a series of performance requirements. This provision seems to flesh out the prohibitions regarding market access mentioned above, but it also goes beyond these by referring to typical investment-related restrictions found in investment treaties. A series of reservations on non-discrimination and performance requirements are listed in the various annexes to the draft chapter. Contrary to market access, a negative list is used to schedule reservations in this case, but the draft chapter includes a grandfathering provision for existing non-conforming measures at all levels of government. III.

The proposed rules on cross-border supply

The sub-heading relating to cross-border service supply resembles even more part III of the GATS relating to market access and national treatment, but is adjusted to only cover GATS modes 1 and 2. Thus, for instance, the provision on market access only refers to limitations relating to the number of service suppliers, the total value of service transactions and the total number of service operations or output. Like in the case of investment, such quantitative limitations of both discriminatory and non-discriminatory nature are not allowed unless they are maintained at the local level of government36 or they are inscribed as reservations in committed sectors included in Annex III using a positive list. The provisions relating to national treatment and most-favoured-nation (MFN) treatment resemble the provisions on investment discussed above. However, the national treatment provision under this sub-heading in particular incorporates the codification of WTO case-law on national treatment that was included for the first time in paragraphs 2 and 3 of Article XVII GATS. Non-conforming measures can only be saved if included in the subsequent Annexes in a negative list. A provision on progressive liberalization is also built in this subheading of the draft chapter. The sub-heading on temporary movement of national persons (GATS mode 4) focuses on facilitating the entry and stay of specific categories of personnel such as intra-corporate transferees, business sellers or business visitors/personnel engaged in establishment.

36

Again, it bears mention that the draft chapter only exempts existing measures at the local level of government.

New measures would have to be saved throught the positive list in Annex III.

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IV.

The rules on domestic regulations in services and the “necessity test 2.0”

With respect to domestic regulation (typically non-discriminatory measures relating to licensing and qualifications requirements and procedures37 aimed at ensuring the quality of the service), the EU suggests a framework based on due process and more transparency for those sectors in which the two Parties undertook specific commitments and provided that they are not subject to any reservation in the Annexes. Crucially, the draft chapter extends the application of domestic regulation rules to the realm of investment, thereby extending the scope of such rules beyond services.38 Indeed, Article 5-2 is a salient feature of the draft chapter when it comes to measures relating to qualifications and licensing. This provision does not directly incorporate a so-called “necessity test”.39 Such a test, based on the wording of Article VI:4 GATS would require that only measures not more burdensome than necessary can be taken to ensure the quality of a service supply, avoiding any unnecessary burden on such activities. The discussions within the relevant body of the WTO, the Working Party on Domestic Regulation (WPDR) have been animated and intensive, with trading powers taking opposite sides and often even changing sides due to domestic pressures from interest groups. Against this framework, and taking into account that the US has opposed the introduction of a necessity test on domestic regulation in the GATS negotiations,40 the EU puts on the negotiating

37

The draft chapter uses the by now established GATS definitions of licensing and qualification requirements and

procedures. Qualification requirements are substantive rules relating to the competence of a natural person, whereas licensing requirements typically are concerned with substantive rules that both natural and legal persons have to comply with to receive authorization to supply a given service. Qualification and licensing procedures are rules of administrative or procedural nature with which compliance is necessary. Contrary to Art. VI:4 GATS, technical standards are treated here in a separate subheading. 38

To date, it seems that the US is reluctant to accept such an extension of rules that have been typically associated

exclusively with trade in services under the GATS. See also European Commission, "Note – Tactical State of Play of the TTIP Negotiations – March 2016”, p. 6, available at: https://www.ttip-leaks.org/pandaros/doc16.pdf. 39

For more details, see P. Delimatsis, “Who is afraid of necessity? And why it matters?” in A. Hoe Lim and B. De

Meester (eds), WTO Domestic Regulation and Services Trade – Putting Principles into Practice (Cambridge University Press, 2015), 95. 40

Having said this, the US does note seem to oppose the use of necessity tests at a sector-specific level. For

instance, in the US draft chapter on telecommunications services that was recently leaked, the US proposes that universal services obligations are not more burdensome than necessary for the kind of universal service a given party has defined. Additionally, the US has already accepted the same obligation under Art. 13-17 of TPP. Even if this obligation is virtually identical to the one under the Telecommunications Reference Paper agreed upon at

- 14 -

table an obligation similar to the one included in the EU Services Directive regarding conditions for the granting of authorizations.41 Rather than focusing on necessity, this provision identifies a list of criteria that would prevent competent authorities from exercising their power of assessment in an arbitrary manner. The traits of the criteria identified in Article 5-2 of the draft chapter codify some 40 years of case-law delivered by the Court of Justice of the European Union (CJEU) in the area of free movement law.42 Thus, according to this draft provision, the criteria on which the Article 5-2 measures are based shall be proportionate to a legitimate public policy objective; clear and unambiguous; objective; pre-established; made public in advance; transparent and accessible. For our purposes, other than the procedural character of these traits,43 proportionality is the substantive requirement of interest here, as it constitutes EU’s attempt to export in the transatlantic trade relationship a central notion of the EU constitutional law and a milestone of the rule of law à la EU. Proportionality is one of the most flexible and volatile yet highly developed concepts in the EU legal edifice.44 The CJEU recognized proportionality as forming part of the general principles of EU law45 and by now a value that the EU legislator is expected to abide by. Established CJEU case-law suggests that a measure is proportionate if it is: (a) suitable or appropriate to achieve the objective pursued (suitability); (b) necessary, i.e. the least onerous among several appropriate measures (necessity or proportionality lato sensu); and (c) proportionate in that the disadvantages (these are usually the damages to individual interests) are not disproportionate to the objectives which usually serve the public or the EU interest

the WTO in 1996, the continuous adherence to this rule by the US has a meaning. Indeed, the US claims in Mexico – Telecoms appear to suggest that the US sees the utility of maintaining such a rule. See WTO Panel Report, Mexico – Measures Affecting Telecommunication Services, WT/DS204/R, 2 April 2004, paras 4.302-3. 41

See Directive of the European Parliament and of the Council on services in the internal market [2006] OJ L

376/36, Article 10. 42

See, among others, V. Hatzopoulos, Regulating Services in the European Union (Oxford University Press,

2012); also European Commission, “Handbook on implementation of the Services Directive”, 2007, p. 25. 43

On the importance of these procedural guarantees (which in fact have been discussed by the CJEU under the

proportionality analysis), see C-203/08, Sporting Exchange [2010] ECR I-4695, para. 50. 44

See W. Sauter, “Proportionality in EU Law: A Balancing Act?”, 15 Cambridge Yearbook of European Legal

Studies (2013) 439. 45

Case 331/88, The Queen v. Minister for Agriculture, Fisheries and Food and Secretary of State for Health, ex

parte Fedesa and Others, [1990] ECR I-4023, para. 13, and Case C-180/96, United Kingdom v. Commission (BSE), [1998] ECR I-2265, para. 96.

- 15 -

(stricto sensu proportionality).46 Stricto sensu proportionality entails a cost-benefit analysis, the only difference being that the CJEU will not necessarily invalidate an act solely on the premise that the costs exceed the benefits.47 Generally, the application of proportionality has been fairly accommodating to protect different interests and thus the degree of judicial review has varied considerably.48 It can nevertheless be submitted that “the more intensive the [CJEU] scrutiny of national restrictions in the light of the proportionality principle, the greater the shift in powers from the national legislatures to the European judiciary”.49 Again, in numerous cases in which the assessment of measures taken by the EU institutions was at stake, the CJEU confined its judicial review in an assessment of whether the challenged measure is manifestly inappropriate in the light of the objective pursued by the competent institutions. According to the CJEU, such deference is premised on and justified by the complex assessments of political, economic and social nature that the EU institutions may be called upon to undertake.50 In other cases, the ECJ, au lieu of expressly scrutinizing whether the measure at stake was stricto sensu proportionate, it favoured the undertaking of a “marginal review” of costs and benefits of the contested measure under the guise of the necessity requirement. Nevertheless, this should not be taken as suggesting that the judicial review focuses on the existence of alternatives, since the quintessence of proportionality seems to be a balancing test weighing the

46

Joined cases T-125/96 and 152/96, Boehringer Ingelheim Vetmedica GmbH and C.H. Boehringer Sohn v.

Council of the European Union (T-125/96) and Commission (T-152/96), [1999] ECR II-3427, paras 73ff. 47

See P. Delimatsis, “Determining the Necessity of Domestic Regulations in Services – The Best is Yet to Come”,

19:2 European Journal of International Law (2008) 365, at 383. 48

G. de Búrca, “The Principle of Proportionality and its Application in EC Law”,13 Yearbook of European Law

(1993), 111; also Case C-384/93, Alpine Investments BV v. Minister van Financiën, [1995] ECR I-1141, para. 51. The U.S. Supreme Court appears to endorse a similar approach when adjudicating on regulatory measures under the Dormant Commerce Clause: M. Hilf and Puth, “The Principle of Proportionality on its Way into WTO/GATT Law”, in A. von Bogdandy, P. C. Mavroidis, and Y. Mény (eds.), European Integration and International Coordination – Studies in Transnational Economic Law in Honour of Claus-Dieter Ehlermann (2002), 208. See, however, Mathis’ analysis which suggests that the US Supreme Court would apply a more deferential approach notably in cases of non-discriminatory state laws than one would expect from the CJEU. See J. Mathis, “Balancing and Proportionality in US Commerce Clause Cases” 35:3 Legal Issues of Economic Integration (2008), 273. 49

J. H. Jans, “Proportionality Revisited”, 27:3 Legal Issues of Economic Integration (2000), 242.

50

See Case C-380/03, Germany v. Parliament and Council (Tobacco Advertising II) 2006 ECR I-11573, para.

145.

- 16 -

objective of a given measure against its adverse effects.51 In recent cases (for instance, those relating to gambling services), the Court has also been quite reluctant to interfere with the regulatory sovereignty of EU member State courts. In Garkalns,52 for instance, the Court first reminded that proportionality would require that national legislation be appropriate for ensuring attainment of the objective pursued only if it genuinely reflects a concern to attain it in a consistent and systematic manner.53 However, in sensitive sectors where public order and morality considerations play a prominent role, States enjoy a sufficient measure of discretion to protect consumers and preserve public order. In Garkalns, this margin of discretion would allow local authorities in Estonia to refuse authorization to open a casino, amusement arcade or bingo hall if the authorities found that the interests of the State and of the residents of the relevant administrative area were substantially impaired. Instead of deciding on whether this type of economic needs test goes beyond what is necessary to protect consumers and other societal concerns, the Court preferred to merely say that the exercise of the discretionary power should be transparent so that the impartiality of the authorization procedure can be monitored and then left the issue for the referring Latvian court to decide. Thus, as one can infer, necessity is an intrinsic feature of the proportionality test in EU law. Therefore, one cannot decide whether a given measure is proportionate without first examining whether the measure goes beyond what is necessary to achieve the public policy objective pursued. The European Union proposed the introduction of a “light” proportionality test in the GATS at the beginning of the GATS negotiations in 2001 without success.54 The wording of paragraph 2 of Article 5-2 proposed by the EU attempts to introduce an enhanced necessity/proportionality test for measures relating to licensing and qualification requirements and procedures with the overall objective of eschewing arbitrary exercise (in other words, abuse) of power by competent authorities. However, it is argued here that the EU proportionality test, as the Garkalns case-law

51

See Case C-169/91, Council of the City of Stoke-on-Trent and Norwich City Council v. B & Q plc.I, [1992] ECR

I-6635, para. 15. 52

See Case C-470/11, Garkalns SIA, ECLI:EU:C:2012:505.

53

See G. Mathisen, “Consistency and Coherence as Conditions for Justification of Member State Measures

Restricting Free Movement”, 47 Common Market Law Review (2010), 1021. 54

WTO (WPDR), “Domestic Regulation: Necessity and Transparency”, Communication from the European

Communities and their Member States, S/WPDR/W/14, 2001.

- 17 -

demonstrates, is more volatile and unpredictable than the WTO necessity test, as developed in cases like Korea – Beef and US – Gambling. One of the reasons is that the WTO judiciary’s analysis of the necessity of a given regulatory measure focuses on the thorough comparison of alternatives. If the US agrees to this insertion to the services chapter of TTIP, then approaching the EU as a “normative power” would be even more of a truism even in virtually balanced bilateral relationships (as compared with asymmetrical, ENP-type of relationships). For our purposes here, it is worth noting that the EU-Canada CETA does not incorporate a proportionality criterion, but merely the following three criteria listed in an exclusive manner: clear and transparent; objective, pre-established and made publicly accessible.55 Following the due process and good administration rationale, Article 5-2 of the draft chapter further calls for the establishment or maintenance of appropriate and independent remedial mechanisms in case of negative administrative decisions. In addition, paragraph 5 of Article 52 requires the use of an impartial and transparent selection procedures of licensees in case of a limited availability of licenses due to scarcity of natural resources or technical capacity.56 Provided that liberalizing commitments in telecommunications (a sector that the EU is willing to fully liberalize and has aggressive export interests) and energy are undertaken, this provision can have broad repercussions on the further integration of the transatlantic market. Paragraph 6 confirms Parties’ right to select the licensee based on economic but also non-economic criteria such as health, safety, consumer protection, the protection of the environment or the preservation of cultural heritage. Article 5-3 spells out good governance and due process principles as applied in licensing and qualification procedures. The draft provision calls for clarity, transparency, objectivity and impartiality, as well as independent review, simplicity and administrative neutrality. Any fees should be cost-oriented and processing of applications should be completed within a reasonable period of time. Rejection of applications should be duly communicated and a giving reasons requirement should be adhered to upon request.57 Overall, the text on domestic regulation appears to have been inspired from the most recent

55

See

Art.

X.2

of

the

EU-Canada

CETA

http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf.

As

text, the

EU

available proposal

to

at: these

negotiations was not made publicly available, we cannot know whether the EU attempted to incorporate the proportionality criterion but faced resistance from Canada. 56

For an identical obligation at the intra-EU level, see Art. 12 of the EU Services Directive.

57

Interestingly, there is no such requirement in the EU Services Directive.

- 18 -

efforts to finalize a text on domestic regulation under the GATS in fulfilment of the negotiating mandate set out in Article VI:4 GATS. Indeed, as early as in 2009, the WPDR, which administers these negotiations, has come up with a consolidated text that has been further refined by the WTO Members ever since in informal talks.58 The current plurilateral negotiations for a TiSA are also inspired by the efforts made within the WPDR in previous years. This high level of transparency is a necessary component of the trust-building efforts among the two trading powers and are further spelled out in the provisions relating to regulatory cooperation.59 V.

Mutual recognition of professional qualifications

Mutual recognition of professional qualifications ranks high in the list of priorities of the EU for the TTIP negotiations. While a highly integrated area, recognition of professional qualifications within the EU is a never-ending story. To be sure, the determination of the EU institutions to move forward in the area of professional qualifications should not be seen independently from the internal dimension of such recognition. Further integration of the internal market for services also ranks high in the list of the current Commission administration; TTIP is arguably yet another instrument to mobilize all these forces, which under internal but also external pressure, may allow for improved mobility of service suppliers and self-employed persons. The most conspicuous horizontal consolidation of the relevant legislation at the EU level took place with the adoption of Directive 2005/36/EC (the Professional Qualifications Directive– PQD),60 which introduced a flexible and automatic procedure for recognition of qualifications. PQD replaced three general and twelve sectoral directives relating to recognition of professional qualifications.61 PQD applies to regulated professions62 and covers both employed and self-

58

See P. Delimatsis, “Concluding the WTO Services Negotiations on Domestic Regulation – Hopes and Fears”,

9:4 World Trade Review (2010) 443. 59

Cf. M. Cremona, “Negotiating the Transatlantic Trade and Investment Partnership (TTIP)”, 52 Common Market

Law Review (2015), 351, at 353. 60

Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition

of professional qualifications [2005] OJ L 255/22. 61

Some sectoral directives are still in force such as the Directive 98/5 of the European Parliament and the Council

to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained 1998 OJ L 77/36 (Lawyers Directive). 62

According to the Directive, “‘regulated profession’ is a professional activity or group of professional activities,

- 19 -

employed activities within the EU. Through the recognition of professional qualifications of a natural person, the host MS allows access in that EU member State to the profession for which she is qualified in the home member State and to pursue it under the same conditions as host country nationals. The profession can be considered as being the same if the activities are “comparable”.63 One of the novelties of PQD vis-à-vis the previous legislative instruments is the partial liberalization of the provision of services. When the freedom to provide services is exercised, the Directive provides that access to the market of the host MS cannot be made conditional on the recognition of qualifications by that MS if the service supplier is legally established in a given MS and pursues there the same profession, thereby establishing in essence mutual recognition for temporary movement of professionals. If the profession is not regulated in the home MS, then the service supplier can legitimately be requested to provide evidence of two years of professional experience gained over the previous ten-year period. The Services Directive leaves no doubt as to the full application of the chapter of PQD relating to the freedom to provide services (Title II) with respect to issues associated with professional qualifications for regulated professions such as commercial communications, multidisciplinary practices, tariffs and so on. The PQD creates a presumption that the qualifications of an applicant entitled to pursue a regulated profession in one MS are sufficient for the pursuit of that profession in other MS.64 Nevertheless, the service supplier can be subject to professional rules of a professional, statutory or administrative nature which are directly linked to professional qualifications such as the definition of the profession, the use of titles and codes of conduct aimed as consumer protection and safety which are applicable in the host MS to professionals supplying the same services.65

access to which, the pursuit of which, or one of the modes of pursuit of which is subject, directly or indirectly, by virtue of legislative, regulatory or administrative provisions to the possession of specific professional qualifications; in particular, the use of a professional title limited by legislative, regulatory or administrative provisions to holders of a given professional qualification shall constitute a mode of pursuit”. The draft chapter narrows down this definition, but only slightly: regulated profession is a professional service, the exercise of which, including the use of title or designation, is subject to the possession of specific qualifications, by virtue of legislative, regulatory or administrative provisions. See Art. 5-5.1(f). 63

See Art. 4 of the Directive.

64

Cf. C-274/05, Commission v Greece 2008 ECR I-7969, para. 30.

65

Cf Art. 4:1 of the Council Directive 77/249/EEC to facilitate the effective exercise by lawyers of freedom to

- 20 -

Whereas prior controls and authorizations are in principle prohibited under EU law and settled ECJ case-law,66 in the case of regulated health- or safety-related professions (and which do not come under the automatic recognition regime that we discuss below), home MS authorities are allowed to perform an a priori evaluation of the professional qualifications of the service supplier to avoid serious damage to the health or safety of the service recipient due to a lack of professional qualification of that provider. Such an evaluation can take place only prior to the first provision of services. This means that service suppliers providing their services periodically for several years cannot be subject to such a requirement more than once. If there are substantial differences between the professional qualifications of the service supplier and the training warranted in the host MS which may be harmful to public health or safety, the host MS shall offer to the supplier the opportunity to demonstrate that she has in fact the necessary competences. For this purpose, the MS are encouraged to use an aptitude test.67 Under such exceptional circumstances, Article 7:4 of the PQD recalls that, strict time limits for a final decision (one month) should be respected. The same applies to the principle of proportionality. Absent any decision by the competent home MS authority within the given timeline, the service supplier should be allowed to deliver its services. In this case, the supplier is required to use its home-country professional title.68 More generally, the PQD provides that the service supplier wishing to deliver services on an occasional and temporary basis can only use the professional title of the home MS. Only in cases of automatic recognition can the service supplier use the professional title of the host MS.

provide services 1977 OJ L 78/17. See also Arts 6 and 7 of Directive 98/5. Directive 2005/36 provides that the two lawyers’ Directives remain applicable, although the PQD regulates the recognition of professional qualifications for lawyers for the purpose of immediate establishment under the professional title of the host MS. See Recital 42 of the Directive. 66

Cf C-189/03, Commission v Netherlands 2004 ECR I-9289, paras 17-18.

67

In Commission v Italy, the Court found that, while an aptitude test must be determined on a case-by-case basis

following a point-by-point comparison between qualifications and experience acquired and warranted, this does not relieve the host MS of the obligation to specify and publish the subjects regarded as indispensable for practising the profession concerned and the rules regulating the conduct of the aptitude test for the sake of legal certainty. Potential applicants can thus be acquainted with the nature and context of the test they must take. See C-145/99, Commission v Italy 2002 I-2235, paras 52-53. See also Art. 3(h) of the Directive 2005/36, codifying this line of case-law. 68

In Hartlauer, the Court emphasized that a prior administrative authorization scheme can only be justified if it is

based on objective, non-discriminatory criteria known in advance, in such a way as adequately to circumscribe the arbitrary exercise of the national authorities’ discretion: C-169/07, Hartlauer 2009 ECR I-1721, para. 64.

- 21 -

Few professions, which have been harmonized initially through sectoral directives, benefit from automatic recognition. These include: doctors, nurses in charge of general care, dentists, veterinary surgeons, midwives, pharmacists and architects. For such recognition to occur, the Directive sets minimum training requirements and notably the minimum duration of studies for every profession coming under the above categories. Any service supplier meeting these requirements can automatically practice in any MS. Finally, if a profession is regulated by a professional association in the host MS, the service supplier should be able to become a member of that organization. However, according to Article 6, in the case of a service provider supplying services on a temporary basis within the meaning of Article 56 TFEU, the host MS cannot require that the provider be registered or become member of the corresponding host-state professional association before authorizing it to supply services.69 However, MS are allowed to provide for automatic temporary registration with or pro forma membership of such a professional association, provided that such registration does not have negative effects on the provision of services nor creates additional costs for the service provider. PQD was recently amended by Directive 2013/55 to introduce the European professional card (EPC) which aims at simplifying the recognition of professional qualifications.70 EPC is an electronic proof that a given professional passed administrative checks and that her professional qualifications were recognized by the host state – or, alternatively, that the conditions for the temporary provision of services were met.71 The Directive also introduced the possibility for

69

Note that Art. 16:2(b) of the Services Directive also provides that MS cannot restrict the freedom to provide

services by imposing an obligation on the provider to obtain an authorization from their competent authorities including entry in a register or registration with a professional body or association in their territory, except where provided for in the Directive or other instrument of EU law. 70

See Directive 2013/55/EU of the European Parliament and of the Council amending Directive 2005/36/EC on

the recognition of professional qualifications and Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System (“the IMI Regulation”) [2013] OJ L 354/132. The ensuing consolidated

version

of

Directive

2005/36/EC

is

available

at:

http://eur-lex.europa.eu/legal-

content/EN/TXT/HTML/?uri=CELEX:02005L0036-20140117&from=EN. 71

In June 2015, the European Commission adopted the Implementing Regulation 2015/983 regarding the

procedure for issurance of the EPC and the application of the alert mechanism according to the PQD [2015] OJ L 159/27. As of January 2016, the EPC will first be available for nurses in charge of general care, pharmacists, physiotherapists, mountain guides and real estate agents. Other professions are expected to follow soon. For now, the EPC is a voluntary instrument available for the professions which express an interest in benefitting from the new system. See also European Commission’s staff working document accompanying the Commission

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partial access to a given profession based on CJEU’s case-law.72 More importantly, it set the ground for harmonization of curricula and training programmes which, in the medium run, should lead to quicker, quasi-automatic recognition of professional qualifications. Striving to facilitate mobility between the US and the EU is a shared objective of all EU institutions. The European Parliament recently joined the Council and the European Commission in supporting discussions with the US on ensuring mutual recognition of professional qualifications. In the Parliament’s view, due to the US federal, decentralized system, a legal framework is needed with which the individual States of the US would agree. This is because the latter have significant regulatory powers regarding access to professions. However, the draft chapter reflects the reality of regulation of professions globally: such an initiative cannot yield the desired results without the active and genuine participation of professional bodies. In this regard, the draft chapter proposes the creation of a Committee on Mutual Recognition of Professional Qualifications (MRA Committee) which will receive, administer and eventually execute recommendations on mutual recognition agreements (MRAs) submitted by regulatory authorities or professional bodies. As expected, the EU does not promise the extension of the PQD framework to the US. Whereas EU member States are free to do this at the national level, other member States are not obliged to offer to these thirdcountry nationals the benefits deriving from the EU fundamental freedoms of establishment and services. However, third-country legal and natural persons that have a primary establishment within the EU can rely on EU law in the case of secondary establishment if they can prove that they have effective and continuous links with the EU member State of primary establishment. In all other cases, MRAs appear to be the only possibility, in which case the MRA Committee, based on recommendations by regulators or professional bodies, will decide whether an MRA should be negotiated and concluded. Recommendations should give information relating to the economic value of the prospective MRA; the existing level of market openness; industry needs and business opportunities as well as the expected gains. Based on this information, the MRA Committee will give the green light to the entities that made the initial recommendation to submit a draft MRA text to the Committee. Quite optimistically, the draft chapter assumes that several MRAs will be ready by the time the TTIP is ready to enter into force. To date, there is work underway in the architectural profession, with auditors and lawyers being considered as

Imlementing Regulation 2015/983, SWD(2015) 123 final, 24 June 2015. 72

See C-330/03 Colegio de Ingenieros de Caminos, Canales y Puertos [2006] ECR I-801, para 38 ; and, more

recently, C-575/11, Nasiopoulos, ECLI:EU:C:2013:430, paras 21ff.

- 23 -

possible candidates for such MRAs.73 EU-US MRAs would offer to US citizens EU-wide recognition of qualifications, thereby constituting an additional layer to the existing EU framework for the recognition of professional qualifications. Therefore, such agreements may have a very important positive effect on transatlantic mobility of high-skill professionals in the medium term. The provisions of the draft chapter relating to the regulatory framework conclude with an annex incorporating guidelines for the negotiation and conclusion of MRAs. Although both Parties have claimed that TTIP aims to set the new rules for global trade in the 21st century, this does not mean that inspiration cannot come from the past. In fact, in a clear signal of the extant path dependencies in international trade regulation, the EU proposed guidelines build on the nonbinding guidelines for MRAs in the Accountancy Sector,74 the first attempt within the WTO Council for Trade in Services (CTS) some 20 years ago to flesh out the substantive content of Article VI:6 GATS relating to professional services.75 Some similarities are indeed striking between the two documents both with respect to the procedure for negotiation of an MRA and the substantive content thereof. Like the accountancy guidelines, the guidelines proposed by the EU aim at providing practical guidance with a view to assisting the negotiation and conclusion of MRAs among the Parties. Thus, their non-binding nature should not affect their use by professional entities and relevant regulatory authorities. According to the proposed guidelines, MRAs should clearly identify the participants; the purpose of the agreement; the details of the mutual recognition provisions, including eligibility requirements for recognition and specification of the conditions under which any additional supplementary requirements may apply; or any further licensing or related requirements; the rules and procedures relating to monitoring, review, enforcement and remedies. Building on the accountancy guidelines, the proposed guidelines for MRAs in professional services propose a four-step process for the recognition of qualifications: (1) verification of equivalency: this step requires a careful comparison of qualifications in the respective jurisdictions. Assessment of equivalence of the content of education, the system of accreditation

73

Cf. European Commission, “Report of the Eleventh Round of Negotiations for the Transatlantic Trade and

Investment Partnership (Miami, 19-23 October 2015)”, p. 7. 74

WTO, “Guidelines for Mutual Recognition Agreements or Arrangements in the Accountancy Sector”, adopted

by the CTS on 28 May 1997, S/WPPS/W/12/Rev.1 and S/L/38. 75

Art. VI:6 GATS provides: “In sectors where specific commitments regarding professional services are undertaken,

each Member shall provide for adequate procedures to verify the competence of professionals of any other Member.”

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or the system for granting rights to practice may fall into this category and is a precondition for any agreement to mutually recognize respective regulatory frameworks.76 Overall equivalence should be confirmed if there are no substantial differences between jurisdictions as regards the qualifications of the regulated profession or the scope of rights to practice; (2) evaluation of substantial differences: these differences may relate to the duration or content of the training or the subject matter of the qualifications; (3) compensatory measures: in case of substantial differences, an adaptation period or, if required, an aptitude test should be considered. However, before that, each negotiating entity should carefully examine whether professional experience in the home jurisdiction would be sufficient to remedy the differences. In this regard, the guidelines build on the EU experience with compensatory measures in the area of professional qualifications in the aftermath of the first system of recognition of professional qualifications within the EU that was adopted in the early ‘90s; (4) identification of the conditions for recognition: this step concerns setting the scene for future recognition and finalizing the MRAs. There is nothing erroneous with building on previous legislative work notably when it expresses a critical mass of multilateral consensus (recall that the CTS adopted the MRA guidelines for accountancy services by consensus). However, in the last twenty years, these guidelines have been barely used. Obviously, the fact that the accountancy disciplines adopted at the WTO level remained a draft for over twenty years (the disciplines adopted in 1998 must be integrated into the GATS at the end of the Doha Round whenever that occurs)77 created high levels of uncertainty which may have deterred potentially interested entities from using them. Thus, it should be expected with great interest the reaction by the US on the EU proposal relating to these guidelines and their potential use in the near future by professional bodies and relevant regulatory authorities. The EU clarified that the acceptance of a binding framework for MRAs and the actual conclusion of MRAs in individual professional services sectors are prerequisites for the validity of the EU offer on professional services. VI.

Sector-specific rules of the services chapter proposed by the EU

The draft chapter proposed by the EU goes on with sector-specific rules: Section III focuses on computer services and proposes an Understanding on computer services; Section IV deals with postal and courier services and, interestingly, includes a provision on universal service

76

Cf. K. Nicolaidis and G. Shaffer, “Transnational Mutual Recognition Regimes: Governance Without Global

Government”, 68 Law and Contemporary Problems (2005), 263, at 290. 77

See WTO, “Decision on Disciplines Relating to the Accountancy Sector”, S/L/63, 15 December 1998.

- 25 -

providing that universal service obligations should not be regarded as anti-competitive per se, as long as they are administered in a transparent, non-discriminatory and competitively neutral manner and are not more burdensome than necessary to achieve the policy objective pursued, typically relating to accessibility, affordability and quality. In the EU’s view, express delivery services should not be subject to universal service obligations. More recently, the EU presented a text proposal on delivery services, including express delivery, which focuses on crosssubsidization; universal service obligations, transparency of licensing requirements and procedures as well as the independence of the relevant regulatory bodies.78 Electronic communications networks and services is one of the areas where negotiations are in an advanced stage and the EU and US have produced a tentative consolidated text,79 which goes further than the GATS Annex on telecommunications in enhancing transparency, due process, fair competitive opportunities and regulatory/administrative neutrality, but still not as far as the TPP corresponding chapter. Section IV of the draft chapter proposed by the EU deals with financial services and essentially mirrors the GATS financial services Annex. Some elaborations are still included. For instance, new financial services are in principle permitted but either party may impose a particular legal form and/or require authorization for the supply of that service. Such authorization can be refused only based on prudential reasons. Furthermore, the EU proposes the introduction of a necessity test to assess the compatibility with the FTA of measures taken for prudential reasons, whereas the US supports the anti-circumvention approach reflected in paragraph 2 of the GATS financial services Annex. It bears mention that the EU-Canada CETA does not include either of the two different approaches but allows parties to take or maintain reasonable measures for prudential reasons.80 In the wake of the recent Argentina – Financial Services dispute81 brought by Panama, challenging Argentina’s discriminatory treatment based on whether certain countries cooperate or not in the area of tax information exchange, more emphasis should be expected to be put on

78

See

EU

Text

Proposal

on

delivery

services

in

TTIP,

23

February

2016,

available

at:

http://trade.ec.europa.eu/doclib/docs/2016/march/tradoc_154376.pdf. 79

See https://www.ttip-leaks.org/agamemnon/doc4.pdf.

80

See EU-CETA draft legal text, Art. 13.16.

81

One of the most controversial issues dealt with in this case was whether financial service suppliers from non-

cooperating countries, on the one hand, and such suppliers from cooperating countries are like. The Panel answered in the affirmative but the Appellate Body resolved the dispute before reaching this central question. See Appellate Body Report, Argentina – Measures Relating to Trade in Goods and Services, WT/DS453/AB/R, 14 April 2016.

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the drafting of the so-called prudential carve-out, perhaps linking it to international standards in the area such as those adopted by the OECD. With respect to dispute settlement in financial services, the EU draft chapter is quite vague as to potential sector-specific provisions that may be needed in view of the peculiarities of the financial sector. On the other hand, the US should be expected to support the introduction of the nuanced system set out in TPP, which allows dispute settlement proceedings brought by investors in financial services but establishes sectorspecific rules relating to procedures and compensation.82 Interestingly, the EU-CETA includes similar provisions.83 In addition, the sub-heading relating to financial services proposes a framework under which regulatory cooperation in financial services could occur. This provision also links this draft chapter with the chapter on horizontal regulatory cooperation, something that the US opposes to. For now, the EU proposes a soft, best-endeavour obligation to achieve mutual compatibility of the regulatory and supervisory financial regulatory frameworks of the two parties and later reflect on the possibility of recognizing equivalence when comparable outcomes are achieved. The EU has signaled that its financial services offer is conditional upon “satisfactory engagement in regulatory cooperation”.84 More importantly, the proposed Article 5-38 calls for upstream regulatory cooperation, which, crucially, is not new between the EU and the US in the area of financial services. The Financial Markets Regulatory Dialogue (FMRD) and cooperation in international fora in the aftermath of the crisis witness enhanced bilateral collaboration between the two parties.85 The proposed chapter wants to further institutionalize and possibly upgrade cooperation through the establishment of the Joint EU/US Financial Regulatory Forum, bringing together representatives of regulators, supervisors and competent authorities. The EU’s ambition is to establish regulatory cooperation not only at the federal level but also between EU member States and the US States. The recently leaked TTIP texts86 reveal that the EU and the US agreed on a separate chapter on financial services, probably à la TPP and CETA and are currently working on the consolidated

82

See Chapter 11 of TPP.

83

See EU-CETA draft legal text, Art. 13.19-13.21.

84

See above note 38, p. 6.

85

See also European Commission, “EU-US Transatlantic Trade and Investment Partnership (TTIP) – Cooperation

on financial services regulation”, 27 January 2014, p. 2. 86

See above note 38.

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version, attempting to agree on the actual scope of that chapter. The US seems to prefer rules that focus on financial institutions only rather than on the broader category of financial service suppliers that the EU advanced in its draft chapter. More interestingly, it is still unclear whether finance-related investor-State dispute settlement will be allowed. CETA does allow for such a possibility87 so it appears unlikely at first blush to exclude such a possibility in TTIP, The remaining two sector-specific sections relate to maritime and air transport services. The last sub-heading of the draft chapter lays down rules in the area of e-commerce. It clarifies that it covers trade enabled through telecommunications and other ICT means, but excludes gambling, broadcasting, audiovisual services, services of notaries or similar professions and legal representation services. It should be expected that the US will strive to include more detailed rules, matching the level of ambition reflected in the relevant TPP chapter, including rules on digital products. However, the EU’s concern has been that such rules should be without prejudice to the EU’s expressed preference to exclude audiovisual services from the FTA.

D.

The EU current offer relating to services liberalization88

As noted earlier, services negotiations within TTIP are undertaken under the first pillar of the prospective agreement that relates to parties’ access to each other’s market. The EU proposal focuses on three types of sectors: first, growth-enabling sectors that boost the digital economy such as computer and telecommunication services; second; sectors that determine the pace of integration of global value chains such as (maritime and air) transport, courier services or business services; and third, certain key economic sectors such as construction, distribution, energy and environmental services. The EU offer in the areas of services, investment and e-commerce is included in three annexes to the draft chapter. The annexes include sectoral commitments and exceptions thereto (socalled “reservations”). In terms of classification, the EU uses the CPC 1.0 of 1991.89 Whereas this is the classification system used for the completion of the GATS Schedules of Commitments at the end of the Uruguay Round in the early 90s, the decision not to use the more sophisticated version of CPC 2.0 of 2015 appears to be a missed opportunity here, as CPC

87

EU-Canada CETA, Art. 13.2.4.

88

European Commission, “Services and Investment Offer of the European Union”, 31 July 2015.

89

Provisional Central Product Classification (CPC), Statistical Papers, Series M No.77, United Nations (1991).

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1.0 constitutes by now an outdated classification system notably in the area of services.90 On the other hand, the use of the same classification system as in the GATS arguably indicates the EU willingness to ensure comparability with its GATS commitments (but also other FTA commitments) and this is only possible through the use of the CPC. Most similarities with the GATS scheduling system are to be found in Annex III of the EU offer whereby the EU uses a positive list approach to identify these services sectors in which it commits to refrain from applying quantitative limitations. Like in the GATS, limitations (or reservations) to these commitments are exhaustively listed in Annex III (negative listing). However, for commitments other than market access, Annexes I and II follow a negative list approach. In this respect, the EU’ TTIP approach resembles the approach taken in the TiSA negotiations, which is a hybrid approach combining a positive listing for market access and a negative listing for reservations on the otherwise horizontal application of national treatment.91 Nevertheless, the EU used a negative list approach in the EU-Canada CETA and the same goes for the current negotiations with Japan. The commitments in Annex I and II relate to national treatment, performance requirements, rules applying to senior management and board of directors, and most favoured treatment. Annex I lists reservations for existing measures, while Annex II lists reservations for existing and future measures. The measures included in Annex I are subject to a ratchet clause, leading to bind future additional liberalization. Importantly, though, the very first reservation in Annex I is a type of grandfathering provision excluding all existing non-conforming measures from virtually all pertinent obligations set out in TTIP. Annex II, on the other hand, includes reservations typically found in the horizontal section of GATS Schedules such as discriminatory measures relating to commercial presence and investment, acquisition of real estate or the entry and temporary stay of natural persons. Liberalizing commitments taken under Annex II are reversible, contrary to the Annex I commitments and reservations. Furthermore, the public service exception is disentangled in Annex II. The Annex includes a reservation of health, education, social services and water. An additional reservation in Annex II relates to new services, for instance, as a result of technological advances. Finally, Annex II includes reservations to the MFN with a view to shielding differential treatment granted before the entry

90

See also P. Delimatsis, “Trade in Services and Regulatory Flexibility – 20 Years of GATS, 20 Years of Critique”,

7 European Yearbook of International Economic Law (2016). 91

See

the

EU’s

initial

offer

in

TiSA

negotiations

http://trade.ec.europa.eu/doclib/docs/2014/july/tradoc_152689.pdf.

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of

November

2013,

available

at:

into force of TTIP as well as future EU enlargement, pre-accession agreements, the European Economic Area (EEA) as well as the EU-Switzerland agreements. Annex III includes market access limitations following a positive list approach. It starts with the by now standard public utilities exception that the EU introduces in its FTAs to shield public monopolies, exclusive rights and services of general economic interest (SGEI).92 Limitations to public services, acquisition of land and movement of natural persons are listed as per the GATS four modes of supply, which is inconsistent, as the draft chapter does not refer to the GATS classification of service supply. Annex III promises liberalization of commercial presence (alias, investment) in various areas of manufacturing from petroleum products to food products and tobacco to motor vehicles. In addition, it offers full opening of market access in certain sectors such as postal and courier services; telecommunication services; computer services; research and development services; and various business services.93 Finally, it is worth mentioning the treatment of two quite strategic services sectors for the EU: energy and financial services. Energy is an interesting sector with public good characteristics in which negotiations could produce tangible results, notably as the US resolutely becomes the biggest energy producer in the world94 and the EU moves towards establishing an energy Union to address the challenges that EU dependency of foreign energy sources raises. Ambitious commitments of the side of EU to liberalize access may not be welcomed by all Member States, as internal disagreements remain regarding the usefulness of monopolies, the appropriate extent of exclusive rights and the scope of public service obligations. In its recommendations, the European Parliament called for a high level of ambition on a reciprocal basis. It recommended the elimination of existing restrictions of export for fuels, including liquefied natural gas (NLG) and crude oil, in order to create a non-discriminatory energy market, thereby allowing for diversification of energy resources and contributing to security of supply.95 Previously, the Council also underlined the importance of an open, transparent and predictable business environment in energy among the

92

See, generally, Krajewski, above note 26.

93

These liberalization commitments do not include mode 4; this is dealt with in a separate section.

94

See Bloomberg Business, “US Ousts Russia as Top World Oil, Gas Producer in BP Data”, 10 June 2015,

available

at:

http://www.bloomberg.com/news/articles/2015-06-10/u-s-ousts-russia-as-world-s-top-oil-gas-

producer-in-bp-report. In 2014, the US produced around 90 percent of the energy it consumed last year. 95

See above note 24, para. 2(d)vii et seq.

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two partners and of making sure that access to raw materials is sustainable and unrestricted.96 Annex II includes various conditional commitments in the energy sector subject to reciprocal commitments on the side of the US. According to the offer, the EU is willing to liberalize extraction of crude petroleum and natural gas; mining of uranium and thorium ore; processing of nuclear fuel; generation of nuclear-based energy in the EU member States which allow it; the production of energy, transmission and distribution of electricity on own account; as well as the manufacture of gas and the distribution of gaseous fuels through mains on own account. Whereas the EU includes financial regulation in the draft chapter by drawing on the GATS financial services Annex, it refrains from committing any additional liberalization in financial services. In the aftermath of the financial crisis, the EU as a block is willing to take a cautious approach in financial services and is prepared to make bold steps only if accompanied by similar action on the US side. For the time being, the reluctance seems to be reciprocal, as for the US any liberalization on financial services does not appear to be a priority either. Both parties are currently in the process of an overwhelming regulatory reform of financial regulation, the US with the implementation of the Dodd-Franck act and the EU with the implementation of the banking and fiscal Union. Whereas for some both parties indeed should concentrate on cleaning up the slate internally, for others this moment of restructuring is in fact the ideal instance for increased cooperation and regulatory convergence based on the prudential considerations that regulatory authorities in both parties are bound to pursue. In addition, the fact that internal reforms take place does not ipso facto exclude the possibility of advancing international cooperation simultaneously, as evidenced by the recent decisions relating to central counterparties (CCPs) in derivatives markets.97 The EU has put on the negotiating table the issue of more efficient regulatory cooperation in financial services,98 supported by the financial industry on both sides of the Atlantic.99 In fact, the European Commission links the two issues

96

See above note 12, para. 37.

97

See Commission Implementing Decision 2016/377 on the equivalence of the regulatory framework of the United

States of America for central counterparties that are authorised and supervised by the Commodity Futures Trading Commission to the requirements of Regulation 648/2012 of the European Parliament and the Council [2016] OJ L 70/32; and Commodity Futures Trading Commission (CFTC), Comparability Determination for the European Union: Dually-Registered Derivatives Clearing Organizations and Central Counterparties, 81 FR 15260 (2016). 98

See European Commission, “TTIP and Regulation: An Overview”, 10 February 2015, p. 17.

99

See “The CityUK co-signs letter to TTIP negotiators calling for financial and related professional services issues

to

be part of an ambitious and comprehensive agreement”,

30 January 2015, available at:

http://www.thecityuk.com/media/latest-news-from-thecityuk/thecityuk-co-signs-letter-to-ttip-negotiators-calling-

- 31 -

in that it conditions the EU financial services offer on progress in the area of financial regulatory cooperation.

E.

Conclusion

There is by now compelling evidence suggesting that TTIP would be beneficial for the EU and the US.100 With a combined transatlantic trade volume of around €400 billion in 2014, accounting for over half of global trade in services, services is a key component of a future transatlantic deal. TTIP exemplifies EU’s considerate shift in its external trade policy to focus on the conclusion of trade agreements that can have a tangible impact on EU trade. Services is one of the few areas where the EU attempts to keep a balance between preferentialism and multilateralism, even if the EU has been criticized for bypassing the WTO through its leadership in the TiSA negotiations. Coupled with the middling progress in preferential trade negotiations for the conclusion of partnership agreements (EPAs) with its ACP partners, the TiSA initiative does create some cracks in the EU’s trust-building efforts vis-à-vis the developing world in trade matters. On the other hand, the EU’s approach to TiSA negotiations has been WTOfriendly in that it is premised on a modular approach101 whereby all TiSA results are incorporated into annexes which could later become part of the GATS. However, the fact remains that a growing disconnect between developing and developed counties is developed which the EU should be wary of. TTIP constitutes a turning point for global regulation and liberalization of services and will have significant signaling effects to the rest of the world as to the possible directions to be taken in this area. As discussed above, the EU has been quite liberal in approaching its conditional offer and experts similarly bold commitments on the side of the US. This applies, among others, to business services, computer services, telecommunications, or energy. Despite their differences and regulatory preferences in areas such as public services, audiovisual services or for-financial-and-related-professional-services-issues-to-be-part-of-an-ambitious-and-comprehensiveagreement/. See also Financial Services Forum, “Financial Industry Associations Urge TTIP Negotiators to Include Financial Services Regulatory Coordination in US-EU Trade Agreement”, 14 July 2014, available at: http://financialservicesforum.org/2014/07/financial-industry-associations-urge-ttip-negotiators-to-includefinancial-services-regulatory-coordination-in-us-eu-trade-agreement/. 100

World Trade Institute (WTI), “TTIP and the EU Member States – An assessment of the economic impact of an

ambitious Transatlantic Trade and Investment Partnership at EU Member State level”, 2016. 101

European Commission, “A modular approach to the architecture of a plurilateral agreement on services”, Non-

Paper, September 2012.

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government procurement, services markets for trade-enabling services sectors such as financial, telecommunications or business services are highly interoperable and, in certain instances, interdependent. Recent agreements recognizing the equivalence of substantive requirements in several areas ranking from toy safety to financial products to credit rating agencies are concrete examples. Such characteristics do create significant levels of trust on which both parties should build, reaping the benefits of many years of cooperation among State and non-State entities on the two sides of the Atlantic. Regulatory cooperation appears a thorny issue, but it is submitted that it may not be as complicated as suggested by some: both sides have experimented with soft-law regulatory approaches at the bilateral level and thus, moving to the next level is the natural evolution of previous efforts. Regulatory cooperation between the EU and the US is everything but new.102 Efforts for cooperation at the level of regulatory authorities have started in the early noughties and intensified after the creation of the EU-US High-Level Regulatory Cooperation Forum in 2005. Indeed, in its recommendations, the European Parliament reminds of the progress made in previous cooperation initiatives and urges the European Commission to build upon that experience. Adopting disciplines on regulatory coherence, transparency and regulatory compatibility has also been a central recommendation of the US-EU High-Level Working Group.103 The Group went further to propose that such coherence should be achieved through early consultations on significant regulations; joint impact assessments; periodic review of existing regulatory measures; and application of good regulatory practices. It also suggested that the US and the EU can consider various integrationist strategies such as regulatory harmonization, equivalence or mutual recognition in well-specified sectors in goods and/or services. For the EU, regulatory cooperation has been an important, inextricable part of its global market access strategy to address non-tariff barriers. Regulatory convergence has been particularly pertinent with respect to the most important trading partners.104 But this has been no less a 102

Instances of regulatory cooperation can be traced even earlier than that. For a useful chronology, see T. Takács,

“Transatlantic regulatory cooperation in trade – Objectives, challenges and instruments for economic governance”, in E. Fahey and D. Curtin (eds), A Transatlantic Community of Law – Legal Perspectives on the Relationship Between the EU and US Legal Orders (Cambridge University Press, 2014), 158, at 167. 103

See above note 20, p. 4.

104

See European Commission Communication, “On the external dimension of the Lisbon Strategy for growth and

jobs: Reporting on market access and setting the framework for more effective international regulatory cooperation”, COM(2008) 874 final, 16 December 2008.

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priority for the US both within its FTAs and at the WTO level. For instance, the US has consistently underlined the importance of transparency and detailed procedural rights in trade matters. Cooperation in financial matters is less self-evident due to the fact that, compared to the EU, private parties are more involved in the regulatory process in the US. Thus, the EU’s demand for financial regulatory cooperation may in the end fail due to pressures by lobbies in the US. Even so, due process and good governance in services regulation is here to stay and the two most important trading powers signal a new era of services regulation at the international level. It remains to be seen whether the two parties will agree in making such obligations subject to investor-state arbitration or else to an expedited and effective form of dispute settlement for individual service suppliers. The recently leaked consolidated text on cross-border trade in services105 reveals that such individual rights are excluded. The text excludes the possibility for investor-state dispute settlement in the case of cross-border supply of services, but allows possibility for state-to-state arbitration if, for instance, domestic regulation or transparency rules are violated. More research will be needed in the future to identify the pros and cons of an expedited dispute settlement system to which individual services suppliers and small and medium enterprises (SMEs) would have access with a view to resolving disputes at a reasonable costs and within a reasonable period of time.

105

See above note 33.

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