The Brexit Transition: A rush to judgment?

29 Jun 2017

The European Commission has today published six position papers on key aspects of the Brexit transition covering: police and judicial cooperation, functioning of Union institutions, Governance, the fixing of the time when goods are placed on the market for the purposes of determining the applicable law, judicial cooperation in civil and commercial matters and ongoing EU judicial and administrative procedures. One key issue which these position papers address is the point in time when, in the Commission’s view, the switch is to be made in each of these areas from the application of EU law to the application of whatever legal arrangements take the place of EU law.

The position papers make interesting – and sometimes disturbing – reading for lawyers. For example:

  • The position paper on judicial cooperation in civil and commercial matters contains the reassuring principle that the choice of applicable (substantive) law for a contract should be determined on the basis of the law in force at the time that the contract is made. Similarly jurisdiction should be determined on the basis of the EU law which was applicable at the date the proceedings were commenced. However, the Commission also considers that current EU law on the recognition and enforcement of judgments should apply only to judgments that are issued prior to the withdrawal date. If this approach is adopted, and no agreement is reached prior to the withdrawal date on replacement arrangements for the recognition and enforcement of judgment, then there is likely to be considerable pressure on claimants suing EU-domiciled defendants to reach judgment before the withdrawal date so as to take advantage of the established Brussels I mechanism. Equally defendants may have a strong incentive to delay trial and judgment specifically so as to render enforcement more difficult.
  • The position paper on ongoing EU judicial and administrative procedures also envisages the EU Courts having a role in UK legal proceedings for many years to come, stating that “The Court of Justice is competent to adjudicate in preliminary references submitted by courts in the United Kingdom after the withdrawal date relating to facts that occurred before the withdrawal date, as well as for infringement procedures relating to such facts”. This is unsurprising, in that such proceedings will relate to settled legal rights and obligations between the parties and, to the extent that those legal rights and obligations are derived from EU law, one would expect the ECJ to be the ultimate authority on relevant points of law. Similarly, the position paper envisages that the Commission will remain able to take action against the UK or against UK nationals and UK companies in respect of infringements of EU law committed prior to withdrawal. In principle therefore one might envisage the Commission making a cartel infringement decision in a decade’s time which covers the territory of the UK, which may then be appealed to the General Court. Notably the position paper also considers that EU procedural rules should continue to apply to necessary investigations.
  • The position paper on goods adopts the important principle that “a good which has been lawfully placed on the single market before the withdrawal date can continue to be made available on the market of the United Kingdom and on the single market after the withdrawal date”. This will however require the determination of the factually complex question of when precisely particular goods have been placed on the market. The definition adopted in the position paper itself is one derived from current EU legislation, namely “any supply of a product for distribution, consumption, or use on the […] market in the course of a commercial activity, whether in return for payment or free of charge”. It is evident, for example, that there may be considerable scope for debate as to when particular goods have been supplied for distribution.
  • In respect of police and judicial cooperation in criminal matters, the position paper adopts a quite minimalist position that “the Withdrawal Agreement should allow for the orderly completion of ongoing procedures”, without going into detail as to the Commission’s views of what this means.
  • Interestingly, the position paper on Governance – which deals with how the Withdrawal Agreement itself is to be supervised – does not appear to adopt a doctrinaire position that it must be subject to supervision by the ECJ. The position paper states “Disputes concerning the application or interpretation of the Withdrawal Agreement, including those concerning the application or interpretation of any concepts or provisions of Union law referred to in the Agreement, should be settled exclusively by the means foreseen in the Withdrawal Agreement” (emphasis added). However, the paper does go on to say that it must be the case that any “rulings [which are] given by the Court of Justice pursuant to the provisions of the Withdrawal Agreement are binding on the Union and the United Kingdom”.

The position papers are of course only a first cut of the EU’s position. They have been circulated to the EU 27 for consideration. Further the actual arrangements will be determined by whatever is actually agreed in the terms of the Withdrawal Agreement itself, and whatever may be agreed as regards the longer term relationship between the UK and EU. It is difficult – though unfortunately not impossible – to imagine, for example, that the UK and EU will not at some stage agree a framework for the mutual recognition of civil judgments. However, for lawyers advising their clients on the Brexit transition and businesses planning for transition risks, the position papers make for essential reading.