The European Union’s Anti-Coercion Instrument – A Closer Look at Decision-Making under a Politicized Trade Instrument

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Introduction

The European Union’s (EU, Union) Anti-Coercion Instrument (ACI) is finally here. After an overwhelming majority vote by the European Parliament (EP) and the formal adoption by the Council, the ACI has now also made it into the Official Journal of the European Union. Regulation (EU) 2023/2675 (the Regulation) embodies the instrument vesting the EU with the powers to take action when facing (the threat of) economic coercion from third countries. After an intense legislative procedure spanning just under two years, the ACI has entered into force on 27 December 2023.

For an overview of the ACI see here and for its practical implications here. This post takes a closer look at the ACI’s nature as a politicized instrument and at the resulting involvement of the Council in the decision-making process.

The ACI as a Politicized Instrument

The ACI is – at its core – a highly politicized instrument. In essence, it gives the Union the ability to act on behalf of even one single Member state (MS) that is facing economic coercion as a result of the MS’ political decisions. Under the ACI, the Union can enact drastic Union response measures affecting the internal market and thus the whole bloc in order to defend a (legitimate) sovereign policy choice of one of its MSs – even if that choice might not touch upon any common Union policies or if other MSs might not share the same views.[1]

By definition, an interference with one MS’ markets will undoubtedly count as an interference with the single market – thereby underlining the need for a Union-wide response (see Recital 10 of the Regulation). However, the Union stepping in on behalf of one MS inherently means that action is taken in the name of the other MSs – and thus entails a certain curtailment of those MSs’ sovereign choice to not step in. The Commission argues that the ACI is a mere necessity in light of the principle of conferral in order to allow the Union to act the same way as a sovereign state would in such a situation. However, this conveniently overlooks the fact that the EU is, in fact, not a sovereign state – and brings to light the stratagem which makes an instrument such as the ACI possible.

The ACI becomes less politicized considering it only applies in cases of economic coercion – i.e. interference with legitimate sovereign choices of the Union or of a MS via a trade or investment measure. This way, the economic element of the ACI manages to fill a certain competence gap and the Common Commercial Policy competence under Article 207 TFEU acts as a device to enable a common Union response in the face of (economic) coercion.

The Council’s Involvement in the Decision-Making and Its Implementing Powers  

The high political stakes that the ACI bears played a significant role during the legislative process. Deviating from the Commission’s proposal, the final outcome of the Regulation confers significant decision-making powers on the Council. The Council plays a key role under the instrument, most notably in the following instances:

First, the Council determines via an implementing act (voting with qualified majority) whether there is economic coercion in a given case (Article 5 ACI). This determination is necessary to kick off the further procedural steps under the ACI. Second, while the Commission has implementing powers to decide on the imposition of Union response measures, the MSs exercise their control upon the Commission via the examination procedure under the Comitology Regulation (Article 8 ACI). Further MSs influence is reinforced by the no opinion – no action clause in Art 18 para 2 ACI, meaning that the Commission should not adopt the implementing act where the Committee delivers no opinion.

The ACI is the first trade policy instrument granting implementing powers to the Council. As a general rule, Union law is primarily to be implemented by MSs. Where uniform conditions for implementing legally binding Union acts are needed, those acts (basis acts) should confer implementing powers on the Commission, or, in exceptional cases, on the Council.

Given the fundamental idea of the ACI as a Union-wide response to economic coercion, it is sensible to assume that its implementation will require uniform conditions. However, the Council can only be granted implementing powers in a duly justified specific case. While the Union legislature has discretion to decide when to confer implementing powers under Article 291 para 2 TFEU,[2] it is nonetheless subject to a duty to state reasons under Article 296 para 2 TFEU. In its case law, the Court of Justice requires a proper explanation as to ‘why exception is being made to the rule that, under the system established by the [EC] Treaty, it is the Commission which, in the normal course of events, is responsible for exercising [implementing] power.’[3] While this line of case law relates to Article 202 EC Treaty (which only talked of ‘specific cases’) the amended wording of Article 209 TFEU (‘duly justified specific cases’) conveys the exceptional nature of delegating implementing powers to the Council even more clearly.[4] The Regulation text does not at any point provide an explanation as to why determining the existence of economic coercion under the ACI constitutes such a duly justified specific case.

Still A Deterrent?

As the legislative procedure shows, the deviation from the Commission’s proposal was a political compromise for the Council to support the instrument, as it considered that MSs were not sufficiently involved in the decision-making process. Given the political nature of the ACI as described above, this did not come as a surprise. However, including an additional decision-making actor certainly poses a challenge to the effectiveness of the instrument.

The involvement of an additional institution – especially one embodying 27 different positions – will significantly slow down the decision-making process. At the same time, the ACI’s raison d’être is deterrence (see Article 1 para 2 ACI). The Union should have at its disposal a tool powerful enough to deter third countries from exerting economic coercion, while actual action (in the form of countermeasures) should be the last resort. However, a real, credible deterrent effect presupposes a streamlined procedure allowing swift action by the Union when facing (the threat of) economic coercion (see Recital 8 ACI). Clearly, the more actors are involved and the more interests are to be taken into account, the heavier the procedure becomes and the more credibility the ACI loses.

To compensate this gain of decision-making power, the Council had to pay a price in the legislative procedure by accepting a series of amendments from the EP’s side – most notably the extensive list of response measures at the Union’s disposal as a last resort (see Annex II ACI). This way, credibility is somewhat restored on the substantive side. Nonetheless, none of the measures contained therein can be deployed if the Council does not vote, with a qualified majority, that a given situation constitutes a case of economic coercion.

In conclusion, the ACI was the result of compromise. While the Union legislature succeeded in finding a competence for a Union response to coercion, the foreign policy implications attached to this trade instrument resulted in what will likely turn out to be – if ever applicable – an onerous decision-making process.

[1] Cf the case of Lithuanian economic operators facing a Chinese boycott after Lithuania strengthened diplomatic ties with Taiwan.

[2] Case C-427/12 Commission v Parliament and Council [2014] para 40.

[3] Case C-257/01 Commission v Council [2005] para 51.

[4] See also Martin Gellermann, ‘Artikel 291. Durchführung des Unionsrechts‘ in Rudolf Streinz (ed), EUV/AEUV (3rd edition 2018), para 13.