Affiliated with the University of Nicosia |
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THE DRAFT "DIRECT TRADE" REGULATION: A SHORT LEGAL ANALYSIS By Constantinos Lycourgos
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Senior Counsel of the Republic Head of the European Union Law Section of the Law Office of the Republic |
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In July
2004, in the aftermath of the referenda on the Annan Plan for a
comprehensive settlement of the Cyprus problem, which resulted in a
positive vote by the Turkish Cypriot community and a negative one by the
Greek Cypriot community, the European Commission tabled before the EU
Council two draft regulations aiming at rewarding the Turkish Cypriots
for their positive vote and at giving them a clear signal that their
future lies within the European Union. The first draft regulation, which
provided a framework for granting a 259 million euro financial
assistance to the Turkish Cypriot community, was adopted by the Council
with the support of the Cyprus Government. The second one, the so called
“direct trade” regulation has still not been adopted six years later.
Considered to be dormant since 2007, it was recently revived when the
Commission, invoking the change of procedure brought about by the Treaty
of Lisbon as regards the adoption of acts on the basis of article 207 of
the Treaty on the Functioning of the EU[1], submitted
the draft regulation to the European Parliament for discussion.
This draft
regulation, which provides for a preferential treatment of goods
originating in the occupied areas of Cyprus, within specific tariff
quotas, when these goods are transferred to another EU Member State, is
highly problematic both from a political and a legal point of view. The
present analysis will be confined to the main legal issues.
As it stands today, the draft regulation proposed by the Commission
completely ignores the suspension of the application of the Union’s
acquis in the areas of the
Republic of Cyprus where the Government of the Republic does not
exercise effective control, as well as the existence of a State, the
Republic of Cyprus, which has sovereignty over the entire island of
Cyprus.
As regards the first issue, it is reminded that under the provisions of
article 1 of Protocol No 10 to the Act of Accession of Cyprus to the
European Union, the application of the Union’s
acquis, i.e. EU law, is
suspended in the areas of the Republic of Cyprus where the Government
does not exercise effective control. The same article provides for a
procedure for lifting the suspension. This can be done through a
unanimous decision of the EU Council upon a proposal by the European
Commission. Thus, the application – and provisional non application – of
EU law in the areas of Cyprus where the Government does not exercise
effective control is fully regulated by Protocol No 10 and no legal act
which is part of EU law can apply in those areas if this is not done in
conformity with the provisions of Protocol No 10.
It is, I
believe, extremely difficult to argue that if the draft “direct trade”
regulation were to enter into force it would not result in any part of
EU law being applied in the occupied areas of Cyprus. It appears quite
obvious that the Turkish Cypriot Chamber of Commerce, which would be
authorized by the Commission under the provisions of articles 3 and 6 of
the regulation to issue a document certifying the origin of goods,
would, when issuing such document, be applying provisions of the
regulation and, thus, provisions of EU law in an area where the
application of EU law is suspended. The same is true regarding the
phytosanitary inspection and reporting that experts appointed by the
Commission are supposed to be doing in the occupied areas. In article 7
of the draft regulation it is clearly stated that these experts should
carry out inspections in the areas where the Government of the Republic
of Cyprus does not exercise effective control and verify that goods
produced there comply with the provisions of the said article and of
Directive 2000/29/EC.
Given that under the provisions of article 1 of Protocol No 10 the
application of the acquis is
suspended in the areas of the Republic of Cyprus where the Government
does not exercise effective control, it is not possible to apply the
acquis/EU law there without following the prescribed procedure in order
to lift the suspension, that is to say without a unanimous decision of
the Council taken on the basis of article 1, paragraph 2, of the same
Protocol. The draft regulation proposed by the Commission ignores the
need for such decision, as it does not have article 1 of Protocol No 10
as part of its legal basis.
Beside this
issue pertaining to the legal basis of the regulation, the other major
legal issue relates to the complete disregard shown in the Commission’s
proposal for the sovereignty of the Republic of Cyprus.
The draft
regulation is designed so as to function without any role or
intervention of the authorities of the Member State primarily concerned,
i.e. the Republic of Cyprus. According to the Commission’s proposal, a
legal person (the Turkish Cypriot Chamber of Commerce) which is
incorporated under the laws of the Republic of Cyprus, is to be
authorized to carry out functions within the territory of the Republic
of Cyprus for the purpose of implementing an EU regulation concerning
goods produced in the Republic of Cyprus and, nevertheless, the
authorities of the Republic of Cyprus should have no say on the
authorization of that legal person and no role regarding future control
of whether this legal person does its job correctly. It should be
reminded here that the Member States have the primary overall competence
for the implementation of EU law in their territory. This competence is
completely ignored by the draft regulation proposed by the Commission.
The draft regulation actually goes one step further: it completely
disregards the sovereign right of the Republic of Cyprus to designate
within its territory the ports and airports which are open to
international traffic. Following the Turkish invasion of summer 1974, on
the 4th of October of the same year, the Cyprus Government
decided to close all ports that were previously functioning in the
northern part of the island. Since then these ports have never been
reopened and the airports that were built in the occupied areas were
never designated under the Chicago Convention as open to international
flights. While these facts are not contested by the European Commission,
its draft “direct trade”[2]
regulation aims at regulating trade which can only be carried out
through these closed ports and airports. This inconsistency in the
Commission’s positions could only, from a legal point of view, have as
its basis the ill founded premise that, somehow, along with the
acquis, the rights of the
Republic of Cyprus under international law to close its ports to
international navigation or to designate its customs airports have also
been suspended in the areas where its Government does not exercise
effective control.
It is to be hoped that, ultimately, the Commission will see the value of
the Republic of Cyprus’s political and legal arguments and will not
insist on the adoption of its draft regulation. If this does not happen
and the Commission manages to get the regulation adopted by a qualified
majority on the basis of article 207 TFEU despite the strong opposition
of the only Member State directly concerned, it is likely that the
regulation will be annulled by the Court of Justice of the European
Union, after having in the meantime seriously harmed the trust of the
majority of the Cypriot population towards the European Union as well as
the prospects of reunification of the island.
[1] The
Commission considers that the proposed regulation primarily
concerns external trade and should, therefore, be adopted on the
basis of article 207 TFEU. This article regulates the Common
Commercial Policy and provides for a system of co-decision of
the European Parliament and of the Council, the latter deciding
by qualified majority.
[2] The
fact that what is sought to be achieved is characterized as
“direct trade” is, in itself, not insignificant. If one
considers, as is unanimously accepted by the international
community, that the territory of the Republic of Cyprus extends
to the whole island of Cyprus, then the ports of Famagusta,
Kyrenia, Limassol and Larnaca are all within that territory.
That being the case, why should trade of goods produced in the
occupied territories of Cyprus, shipped through Famagusta and
arriving in another EU port be considered as more “direct” than
the trade of the same goods shipped through Limassol and
arriving in the same EU port? If trade through Famagusta is
considered as “direct” while trade through Limassol is not, then
it must be that the occupied areas of Cyprus are not considered
by the authors of the draft regulation as being “quite” within
the territory of the Republic of Cyprus and, therefore, goods
produced there and passing to the government-controlled areas in
order to be shipped through Limassol are considered to have,
somehow, transited through the territory of a country other than
the one where they have been produced!
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