Brexit from an EU perspective – the Magical Mystery Tour

09 Feb 2017

25 January and 8 February 2017

Christopher Muttukumaru CB writes that, thus far, the Brexit debate has focused purely on the UK wish list. What are some of the significant legal issues which the Commission and the other 27 Member States may need to consider in order to protect the EU’s interests? This post is based on a presentation at the Ministry of Infrastructure and Environment in The Netherlands on 18 January 2017 and updated to reflect the Government White Paper on the United Kingdom’s policy on exit from the European Union.

The UK Prime Minister has now made two speeches (2 October 2016 and 17 January 2017) in which she has set out her wish list for the upcoming Brexit negotiations. On 2 February, a White Paper was published by the UK Government (The United Kingdom’s exit from and new partnership with the European Union). This post covers some legal and legal policy issues that arise from the UK’s wish list, but from an EU perspective. This post should be read with earlier Monckton posts identified below.

The issues covered in this post. Although the picture is constantly changing, the issues arising from the UK wish list covered here are: (a) the instability that will result from the unknown numbers of agreements (and their content) that the UK wishes to negotiate and from the non-UK national constitutional implications that will inevitably flow from the EU/UK agreements; (b) the harm that could be done to the principle of uniform application of EU laws, to the extent that they continue to apply in the UK, if the UK successfully argues that it should be free from the jurisdiction of the Court of Justice of the EU; (c) the question whether the UK’s plans to replicate the EU acquis in domestic law are capable of early and effective enactment; (d) the question whether there will be any supervisory regime in place to enforce the replicated rules or the new UK/EU trade agreements after the European Commission ceases to have an enforcement role.

The UK Government’s wish list for the negotiations

By early January 2017, there were a number of emerging themes in the UK Prime Minister’s preferred vision of the UK’s post-Brexit future, including:

(a)The UK’s future was to be a global future;

(b) “It is not a… negotiation to establish a relationship anything like the one we have had for the last forty years or more. So it is not going to be a “Norway model”. It’s not going to be a “Switzerland model”…. I want it to include cooperation on law enforcement and counter-terrorism work. I want it to involve free trade in goods and services. I want to give British companies the maximum freedom to trade with and operate in the Single Market – and let European companies do the same here…”

That was a reasonably clear signal that the UK would not seek to retain membership of the Single Market or the EEA; nor would the UK accept the jurisdiction of the CJEU. Since the UK Prime Minister rejected the Norway model, that seems to suggest that she had similarly excluded the jurisdiction of the EFTA Court.

On 17 January 2017, the UK Prime Minister clarified her previous views: “…being out of the EU but a member of the Single Market would mean complying with the EU’s rules and regulations that implement the [Four Freedoms] …It would mean accepting a role for the [CJEU] that would see it still having direct legal authority in our country… So we do not seek membership of the Single Market. Instead we seek the greatest possible access to it… through a Free Trade Agreement. That…may take in elements of current Single Market arrangements in certain areas – on the export of cars and lorries, for example, or the freedom to provide financial services across national borders…”

Also on 17 January, Mrs May said that she would not want to be limited by the Common Commercial Policy or by the Common External Tariff. So she would not want the UK to be part of the Customs Union. But the UK did want a customs agreement with the EU.

The White Paper, published on 2 February 2017, shows signs of having been drafted in haste, largely cutting and pasting the UK Prime Minister’s earlier wish lists of 2 October and 17 January.

A summary of the overall position in the White Paper is this. There will of course have to be a withdrawal agreement under Article 50 of the TEU. Moreover, the UK “will pursue a new strategic partnership with the EU, including an ambitious and comprehensive Free Trade Agreement and a new customs agreement” (chapter 8 of the White Paper). In addition, to avoid a “disruptive cliff edge…we should consider the need for phasing in any new arrangements we require as the UK and EU move towards a new partnership” (chapter 12 of the White Paper) – in other words, a transitional agreement. Thus the UK seems to have in mind the probability that at least four agreements would be required to establish a new strategic partnership with the EU.

The Magical Mystery Tour had begun.

Point (a) Timing: the impact of uncertainty.

Leaving aside the extensive debate about how long the negotiations as such will take, there are a number of other unpredictable factors in respect of timing. Few observers would doubt that unquantifiable delay is going to result in instability, both for businesses and for individuals. Critically, on what basis should nationals of other Member States plan, for example, an entity considering investment in the UK; or an EU national resident and working in the UK planning for their future; or otherwise?

First the original starting point had appeared to be that the UK would seek (i) two agreements (withdrawal agreement under Article 50 and an agreement governing future legal relations with the EU – a trade agreement) or (ii) three agreements (a withdrawal agreement, a long term trade agreement and a transitional trade agreement ). In fact the better view is now that there is an option (iii) which is in play – four agreements (withdrawal agreement; free trade agreement; customs agreement; transitional trade agreement).

Secondly, what national constitutional requirements might be triggered in the 27 other Member States by the agreements between the UK and the EU, however many there are? The withdrawal agreement will be governed by Article 50 and will be concluded by the Council and not by the individual Member States. It is unlikely to require ratification by each Member State. But the Article 50 agreement will be limited in scope and, in essence, will deal with the treatment of existing rights and obligations, including rights of residence , budgetary matters, and transitional measures. Any future trading agreement (and other agreements) will be negotiated in line with the Treaty provisions on agreements with third countries. A trading agreement (and other agreements) would therefore be subject to ratification in line with national constitutional requirements, if applicable. In other Member States, for example, there are bound to be constitutional requirements which apply, including the possibility that any agreement other than the withdrawal agreement could be subject to a national referendum.

Thirdly, on 17 January 2017, the UK Prime Minister said: “…the Government will put the final deal that is agreed between the UK and the EU to a vote in both Houses of Parliament.” This appears to mean that, before the UK signs the negotiated agreements with the EU, the UK Parliament will be given a chance to debate the deal(s) and vote on it/them. Under the UK parliamentary system, depending on the kind of vote that is offered, that does not mean that the vote will be binding on the UK Government. But, if it is binding, and if the deal is rejected by Parliament in whole or in part, what is the scope for further delay? Questions about the type of vote, as well as its effect and timing, are under debate in the UK Parliament at the time of writing.

Fourthly, as a result of the judgments in the Supreme Court in the Miller litigation, new legislation has been introduced in the UK Parliament to permit the triggering of Article 50. But this is unlikely to undermine the timing of the Article 50 notice.

Point (b). Rejection of a continuing role for the CJEU

There are two aspects to the question whether the Commission, acting on behalf of the 27 Member States, should accept the UK negotiating position on CJEU jurisdiction – (a) in respect of the EU acquis to be preserved by the Great Repeal Bill and (b) in relation to the Single Market rules to which the UK will have to adhere if it wishes to have partial access to the Single Market permanently or on a transitional basis. A Customs Agreement might raise different questions unless it replicates aspects of the provisions of the Customs Union.

In the context of the UK wish list to enjoy such partial Single Market access , there are at least six issues which arise for other Member States to consider if the UK continues to oppose the future jurisdiction of the CJEU. Some of these points apply equally to the EU acquis as will be preserved by the Great Repeal Bill.

First if the UK wishes to have partial access to the Single Market permanently or on a transitional basis, that must mean acceptance of EU rules and regulations in those sectors. If so, is it plausible to think that the other 27 Member States would not demand the uniform application of the same rules for all States which are party to a new agreement under which partial UK access to the Single Market is permitted?

Secondly, although many Brexit supporters resist it (as do the UK Prime Minister and the White Paper), the rationale for a role for the CJEU is that it ensures that the law applies uniformly across the EU. As Mr Justice Bingham said in the Samex case, the ECJ (as it then was) could apply “… [its] panoramic view of the Community and its institutions, a detailed knowledge of the Treaties and of much subordinate legislation made under them, and an intimate familiarity with the functioning of the Community market which no national judge denied the collective experience of the Court of Justice could hope to achieve…”

Thirdly, the EFTA Court could be an option to deliver a measure of uniformity even though I have drawn the inference that that has been excluded by the UK. But Judge Bauchenbacher’s speech in October 2016 at King’s College, London, might offer a view of the EFTA Court’s jurisdiction and approach which might attract the UK Government. That said, it could be an uphill struggle to persuade the 27 EU Member States to agree.

Fourthly, the White Paper , having rejected a role for the CJEU (chapter 2) , recognizes that “ensuring a fair and equitable implementation of our future relationship with the EU requires provision for dispute resolution”. The paper continues:” Dispute resolution mechanisms ensure that all parties share a single understanding …of interpretation and application. “ The White Paper describes at length the dispute resolution mechanism in the CETA (Canada/EU Free Trade Agreement) model as an example of what could be agreed by the EU and the UK. Crucially, the 27 Member States, if they intend effectively to safeguard the interests of their nationals, are likely to consider whether a dispute resolution mechanism which applies only at the international level with no direct effects in UK domestic law and enforceable at the instance of EU nationals, confers adequate protection on them.

Fifthly, a dispute resolution mechanism would not guarantee uniformity of legal approach. To the extent that the Single Market rules continue partially to apply to the UK in a post Brexit world, there would be two supra-national judicial bodies whose views on the same rules could theoretically diverge. There could of course be provision made for a choice of forum for disputes under the EU/UK consensus , but that would not adequately respond to the question of divergent jurisprudence. Moreover if a preliminary opinion were sought of the CJEU on the compatibility with the EU treaties of a dispute resolution mechanism, the CJEU’s Opinion 2/13 on the Accession of the EU to the ECHR might make uncomfortable reading for the 27 Member States and the UK.

Sixthly, if it is eventually decided that the UK Supreme Court should become the final appellate court in cases involving relevant “preserved” parts of the acquis (or, far more improbably in respect of any new rules which are agreed in EU/UK agreements), a critical issue will be whether the UK courts will be able, either by express provisions of the withdrawal treaty (and the Great Repeal Bill – see below ) or by rules of domestic judicial interpretation, to follow, or at least take account of, the judgments of the CJEU in respect of relevant preserved EU laws. Happily the White Paper seems to agree with the concerns expressed above since it asserts: “In general, the Government also believes that the preserved law should continue to be interpreted in the same way as it is at the moment” (chapter 1.5 of the White Paper). The question is: how will that be achieved?

The wise outcome would be for the parties to the withdrawal agreement and trade agreements to decide what should happen, both in a transitional period and beyond it. In that way, the 27 Member States would be properly protecting the interests of their commercial entities and citizens operating in, or living in (as the case may be), the UK.

Point ( c ) UK domestic legislation which implements the consensus – the Great Repeal Bill

Under normal circumstances, the domestic implementation of an international agreement would be of limited interest to another Member State – unless their own national interests might be at stake if the consensus is not properly implemented. At present, the Commission performs a watchdog role and protects the interests of all Member States.

On 17 January, repeating what had been said on 2 October 2016, the UK Prime Minister affirmed: “[Re certainty] We will provide certainty wherever we can…It is why , as we repeal the European Communities Act, we will convert the “acquis” …into British law…the same rules and laws will apply on the day after Brexit as they did before.”

This passage helpfully signalled the importance of legal stability after Brexit in the short term. An equally significant issue is what will happen in the long term since the proposal is to repeal, amend or reenact EU rules over the ensuing period.

But the issues are not limited to the existing EU acquis. In the light of the evolving signals from the UK Government, there are at least three types of rights and obligations arising from the Brexit treaties which will have to be covered in the UK’s domestic laws: (a) rights under the present EU acquis; (b) rights under the withdrawal treaty under Article 50; (c) rights under the trade treaties, permanent or transitional.

Will the replication scheme work as intended?

If, in the short term, the EU acquis is going to be replicated in UK domestic law, it inevitably means that the UK will protect EU Law rights and obligations until such time as the rules are revoked or amended. So it is a transitional measure, with no signal as to the UK Parliament’s likely future approach.

Unfortunately, the apparent clarity of the Prime Minister’s promise on 17 January in respect of legal stability has been watered down in the White Paper or, as the case may be, become more realistic. It now says: “…wherever practical and appropriate, the same [EU] rules and laws will apply on the day after we leave the EU as they did before [emphasis added] ”. There are of course obvious problems with simple replication, such as how to deal with cases where the European Commission would previously have had an enforcement role (see point (d)) but will no longer have such a role in a post Brexit world. But what else does the new qualification mean? We are promised a further White Paper on the Great Repeal Bill, which may answer some of these points.

In these cases, it is also self-evident that the rules will be incorporated as if they had been frozen at relevant time, eg. the point at which exit takes effect. What if, before the rules are subject to a process of domestic amendment or revocation, the rules subsequently change at the EU level?

Previous posts (see list at the end of this post) have covered the complexity of the replication exercise. One example is as follows. EU legislation is subject to the application of fundamental EU principles. It follows that the rules of interpretation requiring compliance with the fundamental principles will no longer apply unless the withdrawal agreement requires it (possibly as a quid pro quo for post hoc access to the Single Market) or the UK Government implements them. The rules would include principles such as non-discrimination on grounds of nationality, proportionality and fiscal neutrality. How, in this context, should EU businesses plan ahead if there are doubts about the level of protection that they will be afforded by UK domestic legislation?

Here are two further complications to keep in mind. First, by way of example, in evidence to the Environmental Audit Committee of the UK Parliament, the Secretary of State for Environment, Foods and Rural Affairs said: “We think that in the region of about two thirds of the [environmental] legislation that we are intending to bring into UK law will be able to be rolled forward with just some technical changes, so roughly a third won’t, which means that obviously there will be work to do to ensure that those measures continue to work once we leave the EU”. This is hardly surprising. But from the perspective of EU entities or nationals seeking to plan ahead, might there be similar difficulties in other policy sectors?

Secondly, EU Member States will need to take into account the UK’s devolution arrangements, in particular in relation to Scotland. Scotland enjoys considerable devolved lawmaking competence in a number of policy areas and may have its own views about how the EU acquis should be replicated.

Point (d) Policing the consensus

On the hypothesis either that replicated EU rules would continue to apply domestically or that, if continued access to agreed EU sectors was agreed, adherence to relevant Single Market rules would be the price of access, how would the preserved rules be enforced in a world where the Commission no longer had an enforcement function? The White Paper is silent in this regard. The UK could of course establish new domestic supervisory bodies to carry out the functions of the Commission. But there would be no obligation to do so unless the trade agreements required it. In any case, it is questionable whether the EU would be prepared to accept surveillance by a national body in cases within the scope of the trade agreements.

Things happen in negotiations. So far the UK Government has a wish list and the EU is waiting for notice under Article 50 before disclosing its negotiating position. Things will happen – compromise is inevitable if deals are to be struck. Meantime, how should a waiting world (businesses and individuals) plan ahead for the lengthy period which the Magical Mystery Tour is likely to take?

Christopher Muttukumaru CB ( 31 August, 5 October and 30 November 2016)