The EU-Mercosur Agreement: New Opportunities for Transatlantic Trade

After 26 years of negotiations, a comprehensive trade agreement was signed on 17 January 2026 between the EU and four South American States: Argentina, Brazil, Paraguay, and Uruguay. While Bolivia and Venezuela are also part of the Mercosur trade bloc (with Venezuela suspended since 2016), but not parties to the Agreement, references in this article to 'Mercosur countries' pertain exclusively to the four signatories.

The Agreement is a wide-reaching partnership that, in addition to its free trade section, establishes a framework for political cooperation on a range of issues including law enforcement, sustainable development – where new initiatives on climate and energy can be mentioned – and business.

The Mercosur Agreement significantly reduces trade barriers between the parties. It liberalizes trade in goods, facilitates cross-border establishment and provision of services, and promotes new investments.

Key Provisions of the Agreement

• Customs duties and other similar tariffs will be phased out in stages over 10–15 years, where the timeline will differ for agricultural and industrial goods. In addition, customs procedures for imports and exports are simplified. To facilitate for small and medium-sized enterprises, a special database of trade and customs rules will be established.
  A controversial issue in the EU has been the effect of the Mercosur Agreement on European farmers, who argue that the Agreement exposes them to unfair South American competition. To address this criticism, certain goods – such as beef, chicken and ethanol – will be subject to tariff quotas, where only specified volumes of imports into the EU will receive reduced or eliminated tariffs. The Agreement also includes a mechanism to pause tariff reductions on imports from Mercosur in case import volumes risk seriously harming European industry.
  
  
• The Agreement further creates new opportunities for service providers by lowering barriers to cross-border trade and establishment in both Mercosur and the EU. It additionally includes provisions intended to facilitate foreign direct investment.
  
  
• The Agreement also contains a number of common rules for the implementation of public procurement, including a central provision on non-discrimination, which makes it easier for companies from Mercosur and the EU to participate in procurement procedures in their respective markets. It is worth noting, however, that the rights to participate in procurement in the EU conferred on Mercosur companies are not as extensive as those enjoyed by companies originating from third countries that are parties to the WTO Agreement on Government Procurement.
  
  
• The Agreement aims to increase exports of critical raw materials to the EU through lower tariffs, expanded opportunities to invest in their extraction, and regulations designed to counteract discriminatory pricing and monopolization.
  
  
• Furthermore, through common rules of origin, the parties undertake to protect each other's geographical indications and have agreed on methods for certification. With regard to Swedish geographical indications, Swedish aquavit, Swedish punsch and Swedish vodka are now protected from imitation by producers in Mercosur.
  
  
• The Mercosur Agreement also contains provisions in several other areas, such as intellectual property, small and medium-sized enterprises (SMEs), and State aid and other competition law issues.
  
  
• Notably, the agreement does not include an ISDS protection mechanism, which would allow investors to bring direct claims for damages against contracting parties via arbitration, so-called investment disputes. Mercosur investors must rely on other treaties and bilateral investment protection agreements, where those are applicable, for such claims against EU Member States. Before initiating such claims, investors should closely review the case-law on intra-EU investment arbitration from the European Court of Justice, to ensure that the claim would be compliant with EU law. Alternatively, investors can rely on dispute resolution clauses set out in their commercial agreements (see more below).
  
  

When will the Agreement enter into force?

Given the EU's exclusive competence over trade policy, the Agreement is in fact divided into two agreements. The free trade provisions are set out in an 'Interim Agreement', which will enter into force upon approval by the European Parliament. This Interim Agreement will remain in effect until all EU Member States ratify the full partnership agreement, a process that may take several years.

The European Parliament voted on 21 January to request an opinion from the Court of Justice of the European Union on the compatibility of the Mercosur Agreement with the EU Treaties. Until the Court renders its opinion – which normally takes at least a year – the Parliament will not be in a position to ratify the Interim Agreement. At the time of writing, the date of entry into force of the Agreement is thus to a large extent in the hands of the Court. However, it cannot be excluded that the parties agree in the meantime to apply parts of the Agreement provisionally.

Five practical recommendations for Mercosur companies doing business in the EU (and Sweden in particular)

1. Adapt your contract strategy to EU and Swedish legal culture

Most EU Member States, including Sweden, are based on civil law systems. However, Swedish private law is often described as a hybrid between civil law and common law, combining statutory law with a strong reliance on case law. Swedish contract law places significant emphasis on reasonableness and fairness between the parties, and courts may intervene where contractual terms are considered excessively imbalanced. As a result, certain clauses may be declared unenforceable under Swedish law in specific circumstances – for example, one-sided limitation of liability clauses, penalty clauses, or far-reaching non-compete clauses.

It is also important to understand that Swedish business culture is generally collaborative, consensus-driven, and low-hierarchical, which of course can affect contract negotiations as well as business operations.

2. Ensure compliance with applicable EU legislation

Unlike Mercosur, the EU has its own legal system which has supremacy over national law. EU regulations apply directly and uniformly across Member States, while EU directives impose binding obligations that national legislation must comply with. Provisions of both EU regulations and EU directives can, under certain conditions, be invoked in actions before national courts.

Companies operating in the EU may therefore be directly subject to EU rules on, for example, competition law, product safety, environmental protection, data protection, cybersecurity, AI, customs, and trade. EU law also requires companies to actively implement anti-corruption and anti-money laundering measures.

Compliance with relevant EU legislation is therefore a key aspect of doing business in the EU. 

3. Expect transparency and strict public authorities – no informal deals with the public sector

Obviously, the business must be modified to be compliant with the local laws of every EU member where the company in question operates. The approach to public authorities must also be managed accordingly.

With respect to Sweden, all governmental agencies and public authorities are subject to a “principle of transparency”. Put simply, all communications with public authorities are, as a main rule, accessible to the public. This means that virtually all emails sent to any public authority, as well as virtually all court filings, are public documents accessible by anyone.

Swedish authorities tend to be strict and follow protocol. Any attempt to seek informal solutions or shortcuts in dealings with public officials is strongly discouraged and may give rise to legal and reputational risks.

4. Be mindful of sustainability and labor laws

Both legislation and business culture in the EU require a strong commitment to sustainability and fair treatment of employees. Larger companies are subject to extensive sustainability reporting obligations, including under the Corporate Sustainability Reporting Directive (CSRD). Further, larger enterprises are required to perform due diligence on human rights and environmental impacts in their value chains under the Corporate Sustainability Due Diligence Directive (CS3D). Under the EU Deforestation Regulation (EUDR), additional due-diligence obligations apply for products linked to deforestation. The EUDR already covers larger enterprises and will include all companies by 2027.

Swedish labor law also provides extensive protection for workers. This includes the trade unions’ rights to strike and other labor actions, as well far-reaching individual rights to sick leave, parental leave, pension, and protection against arbitrary layoffs. Foreign companies unfamiliar with these rules may face costly disputes after terminating employment without sufficient legal grounds.

5. Arbitration is the most common dispute resolution mechanism

In European business, and particularly in Sweden, arbitration is often the preferred way of resolving contractual disputes. Swedish courts are arbitration-friendly and arbitral awards are easy to enforce. For Mercosur-based companies, arbitration also offers procedural flexibility. Unlike court proceedings in Sweden, which must be conducted entirely in Swedish, arbitration allows the parties to choose the language and tailor the procedure. For example, a company based in the Mercosur may appoint an arbitrator familiar with Latin American business practices who is fluent in Spanish or Portuguese.

Preferably, use a well-recognized arbitral institution that is used to handling cross-border disputes, such as the ICC or SCC. If you prefer an institute based outside the EU, institutes such as LCIA and SIAC are widely recognized options.

Read Vinge’s comprehensive guide Doing Business in Sweden here.

More information on the Mercosur Agreement can be found on the European Commission's website, and in the Commission's press release of 17 January.

Contact us:

Martin Johansson
Partner / Advokat
EU, Competition & Regulatory
Brussels

James Hope
Partner / Advokat / Solicitor-Advocate (England & Wales)
International Disputes
Stockholm

Hedvig Josefson
Senior Associate / Advokat
EU, Competition & Regulatory
Brussels

Nils Ivars
Senior Associate / Advokat / Attorney-at-law (New York)
International Disputes, Latin America focus
Stockholm

Isak Lefvert
Associate
EU, Competition & Regulatory
Brussels