Written by former President of the EFTA Court Professor Carl Baudenbacher who joined Monckton Chambers as a door tenant on 1 May 2018, see news.

In 1992, Jacques Delors, then President of the EU Commission, said that if, over the next ten years, Europe would not be imbued with a soul, meaning that it would be given a spirituality and a deeper sense, the game would be over. This was a somewhat presumptuous statement because Europe had from the very beginning of integration two souls. On 25 March 1957, the EEC Treaty with supranational institutions was concluded by France, Germany, Italy and the three Benelux countries. On 4 January 1960, the EFTA Convention was signed by Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. EFTA had no competence to enact legislation; there was no common surveillance and no common court; however, EFTA was an immediate economic success. However, the attractiveness of the EEC, later EC and EU, became so strong that from 1973 on, when the U.K. and Denmark left EFTA for the EEC, most EFTA States were determined to switch sides and in fact did so.

Nevertheless, today the three EEA/EFTA States, Iceland, Liechtenstein and Norway, prosper outside of the EU; their ambition is limited to economic objectives, namely to secure their operators comprehensive access to the single market. The fourth EFTA State, Switzerland, is linked to the EU by way of a series of bilateral agreements which do not, however, cover the whole single market acquis. Whereas the three EEA/EFTA States are linked to the EU by way of a two pillar system which gives them the right to have their own independent surveillance authority and their own court, the Swiss-EU agreements are governed by diplomatic bodies. All the four EFTA States have safeguarded their sovereignty in crucial areas which in the EU have been communitised, such as agriculture, fisheries or foreign trade. “Two souls, alas, dwell in my breast” is the lament of Goethe’s Faust, describing one as clinging to the world with robust love’s desires and the other as rising from the dust to reach sublime ancestral regions.

Europe’s division is made manifest, in part, through its two families of legal systems. Britain is the birthplace of the common law. Unlike in civil law jurisdictions, the traditional focus is not on legislation, but on case law. The comparative law theory of legal origins holds that institutions depend on political factors, in particular the dominant beliefs in France on the one hand and in England on the other on the roles of the King/Queen/Government, the Parliament, the judiciary and individuals in society. The school’s basic finding has been described by Professor Paul G. Mahoney from the University of Virginia, in the following words:

“English common law developed as it did because landed aristocrats and merchants wanted a system of law that would provide strong protection for property and contract rights, and limit the Crown’s ability to interfere in markets. French civil law, by contrast, developed as it did because the revolutionary generation, and Napoleon after it, wished to disable judges from thwarting government economic policies.”

In order to achieve certainty, uniformity and consistency, the common law relies on judicial precedent (stare decisis). When a court engages in vertical stare decisis, it follows a precedent from a higher court. A court adhering to its own precedent or a precedent by another court on same judicial level engages in horizontal stare decisis. But the doctrine of precedent allows for a certain degree of flexibility. Under specific conditions, courts may overrule, reverse or disapprove of previous decisions. As a result of the precedent system, judges have enormous power to shape the law. Civil law systems place the main emphasis on comprehensive codes of law and other statutes. Courts find the law by interpreting the law enacted by the legislature.

The four EFTA countries are usually considered civil law countries. On closer inspection, however, one discovers that they have a flair of a hybrid between common and civil law. Article 1 of the Swiss Civil Code gives the judge the power and the duty to act like a legislature in certain situations. Benjamin N. Cardozo, the later Justice of the U.S. Supreme Court, wrote in 1920 that “the tone and temper in which the modern judge should set about his task are well expressed in the first article of the Swiss Civil Code of 1907.” Iceland and Norway do not have a concise civil code. The courts have thus been given a significant role in developing judge made law. As regards Liechtenstein, it should be added that the country has, as the only civil law jurisdiction, largely adopted Anglo-Saxon trust legislation.

The five countries at issue have more commonalities. They are in particular characterised by their belief in free trade and open markets. In the U.K. as in Switzerland, the Hegelian glorification of the state as “the reality of the moral idea” has barely found followers. Nor has the French idea of “la Nation” as being the only legitimate power been adopted. The same goes for Liechtenstein. Norway is, on the other hand, characterised by a strong state. This is, however, not the case in Iceland. Both in the U.K. and in Switzerland, courts base themselves on the assumption that human beings are reasonable in the sense of “normal.” In 1933, Lord Justice Greer in Hall v Brooklands Auto-Racing Club famously termed the reasonable man ‘the man on the Clapham omnibus.’ In Switzerland, the same liberal image of man has been used by the courts in unfair competition cases. Similarly, in cases concerning internet law and insurance law such as Inconsult or Vienna Life, the EFTA Court has based itself on such an image of man.

When I spoke on Brexit and EEA at UCL on 7 February 2018, Professor Piet Eeckhout argued that the five non-EU countries in question ought to join forces. I concur. The goal should be to establish a comprehensive European two pillar system whose common denominator would be the single market. The experience of the EEA Agreement and of its institutions, ESA and the EFTA Court, could play a role in this. With the participation of Switzerland and of the U.K., the non-EU States could possibly negotiate some sort of a co-decision right on the legislative level. That is what the influential Brussels based Bruegel Think Tank has suggested in late August 2016.

I finally add that the five non-EU countries seem to have important brothers in spirit within the EU27. The U.K.’s closest partners in the North – the Netherlands, Denmark, Ireland, Sweden, Finland, the Baltic states – appear to feel orphaned by Brexit. Their approach to trade and economic policy is basically the same as the one of the five outsiders. The concerns of the northern EU States are all the more justified since then French President François Hollande stated a few days after the Brexit vote that the EU27 should consider “adapting” EU competition law focusing on growth, employment and investment. This corresponds to traditional French wishes could easily go hand in hand with an (even) more protectionist trade policy. One may therefore assume that the Northern EU states have an interest to support the construction of two structures of the kind outlined above.

Last month, I wrote a post describing the dispute settlement provisions in the draft Withdrawal Agreement as they relate to the transitional period, which is set to run from the day after Brexit day (30 March 2019) until the end of December 2020. As promised at the time, the present post concerns the period beginning on 1 January 2021.

As explained in the last post, the draft WA, which had been prepared by the Commission, consists of green, yellow and white passages. The parties have highlighted in green the passages on which they have reached a consensus, subject only to improvements in the drafting. With respect to the provisions marked in yellow the negotiators have reached an agreement on the policy objectives. Finally, the UK has not yet agreed to any of the text which has been left white.

Most unfortunately, although negotiations between the UK and the EU took place from 16 to 18 April, no progress appears to have been made on any front. Ominously, no fresh documents at all have been posted on the Commission’s website since then.

Even if the WA is concluded, it will only postpone the “cliff edge” by 21 months and 2 days. In other words, at the end of the transitional period, the overwhelming majority of the provisions of the EU Treaties will cease to apply between the EU and the UK with very serious consequences. (Of course, the Government intends to continue applying swathes of EU law unilaterally in an amended form for some time on the basis the European Union (Withdrawal) Bill) in particular; but that is another matter.)

Having said that, the draft WA and the protocol on Ireland and Northern Ireland set out a few exceptions: the UK would continue to be bound by a few provisions of EU law to which the EU attaches particular importance.

In addition, the draft WA envisages various dispute settlement mechanisms which would be applicable for a limited period (“the intermediate period”). The purpose of this post is to consider these mechanisms. Since the relevant provisions are as convoluted as they are numerous, what follows is merely a summary of the salient points.

As explained in the previous post, all the British judges and the British Advocate-General will be required to leave the Court on Brexit day (29 March 2019) by virtue of Article 6 of the draft WA. After that date, proceedings before the Court of Justice or the General Court will take place without them.

The relevant provisions fall into various different categories which will now be considered in turn.

1) Judicial Proceedings Relating to Facts which Occurred before 2021

By virtue of Article 82 of the draft WA, the Court would not lose its jurisdiction over proceedings brought by or against the UK before the end of the transitional period.

Article 83(1) would empower the Commission to commence proceedings against the UK for infringement of the Treaties or the transitional provisions in Articles 121 to 126 of the draft WA, so long as the facts occur before the end of transitional period. It would also be open to one of the 27 remaining Member States to initiate proceedings against the UK pursuant to Article 259 TFEU in the same circumstances. But the UK would not be able to bring such proceedings against the EU27 – a lack of reciprocity which seems hard to justify.

By the same token, a UK court or tribunal would be able to make a reference for a preliminary ruling so long as the facts of the case occurred before the end of the transitional period: Article 83(2).

What is more, the Court will be able to impose pecuniary sanctions on the UK pursuant to Article 260 TFEU for failure to comply with a judgment finding that it has committed an infringement, even where the latter judgment was delivered before 2021 or pursuant to Articles 82(1) or 83(1). This is spelt out in Article 85(3).

All these provisions would apply across the board. They have all been left in white, indicating that the UK had not yet agreed to them.

2) Citizens’ Rights

Unsurprisingly, the EU is particularly concerned about the fate of EU27 citizens and their families residing in this country, including their right to continue carrying out economic and professional activities here. Accordingly, Articles 151 and 152 of the draft WA provide for additional mechanisms for the enforcement of the substantive rules set out in Part Two of the draft. British citizens resident in the EU27 would enjoy the same rights mutatis mutandis under all these provisions.

In essence, Article 151 would confer on courts in the UK the power to make a reference for a preliminary ruling in cases which commenced at first instance within 8 years of the end of the transitional period; and the judgment of the Court of Justice would be binding in the usual way.

What is more, the UK would be required to establish an independent authority with “equivalent powers to the Commission acting under the Treaties” to monitor the implementation of Part Two by the UK’s administrative authorities and to enforce the rights concerned in the UK courts for at least 8 years after the end of the transitional period: Article 152.

The UK has agreed to both Article 151 and Article 152.

3) The Protocol on Ireland and Northen Ireland

Just one draft protocol is annexed to the draft WA; it relates to Ireland and Northern Ireland. As is well known, the most thorny issue is how, if at all, a “soft” Irish border can be maintained. But the draft protocol also contains a number of other important provisions such as Article 1 which requires the UK to ensure full compliance with the part of the Good Friday Agreement of 1998 entitled “Rights, Safeguards and Equality of Opportunity”, and the provisions of EU law on combatting discrimination which are to be listed in Annex 1. In the current version of the draft, Annex 1 is merely an empty shell; but it is to be hoped that the list will include all the anti-discrimination provisions of EU law – or at least those which are relevant to Northern Ireland’s particular situation.

By virtue of Article 12(1)(c) of the Protocol, all the provisions of that instrument would be governed by the mechanisms enshrined in Articles 151 to 156 of the draft WA. The most important mechanisms in issue are outlined immediately below.

Those provisions

In relation to the economic matters covered by Chapter III of the Protocol, including the fraught customs status of Northern Ireland, the above-mentioned provisions would be supplemented by the more elaborate mechanisms contained in Article 11. In the absence of a satisfactory solution proposed by the UK, the EU envisages that the province would continue to be treated as part of the EU so that all the usual judicial remedies laid down in the Treaties would continue to apply there indefinitely. This is highly contentious!

The UK had not yet given its consent to Article 11 or Article 12.

4) Miscellaneous Provisions on Judicial Proceedings

Article 258, 260 and 267 would continue to apply for an unlimited period to the UK with regard to the diverse sectors referred to in Part Three of the draft WA (e.g. customs, VAT, IP and judicial cooperation in criminal matters) and certain issues relating to the EU budget. This is spelt out in Article 153. To date, the UK has only agreed to this provision in so far as it concerns the EU budget.

By virtue of Article 154, the UK would be entitled to intervene in any proceedings before the Court of Justice. Conversely, Article 155 would empower the Commission to intervene in writing before the UK courts in pending cases involving the interpretation of the WA and, with the permission of the court concerned, to make oral submissions. Both provisions would appear to apply to all areas of EU law and for an unlimited period.

The UK has agreed to Articles 154 and 155.

5) The Joint Committee: Referrals to the Court and Possible Sanctions

When the EU concludes agreements with third countries, it is customary for a Joint Committee consisting of representatives of the parties to be established. Usually, these bodies are simply talking shops where differences of view are settled (see Article 162 of the draft WA).

However, under the draft WA the Joint Committee would play a more important role: under Article 162(3) and (4): a dispute could be submitted to the Court by the Joint Committee or by either the EU or the UK, and the Court’s judgment would be binding.

Should either party fail to comply with the ensuing judgment, then in accordance with Article 163 the other party may request the Court to impose a lump sum or period penalty payment. Whilst such a mechanism already exists with regard to the Member States pursuant to Article 260 TFEU; for the EU to be sanctioned by the Court in this way would be unprecedented.

Rather than taking a dispute to the Court, the aggrieved party may opt to suspend parts of the WA other than the provisions on citizens’ rights. The suspension must be proportionate to the breach complained of.

The UK has not yet agreed to any of these provisions.

Conclusion

Many of these provisions go well beyond the classic dispute settlement mechanisms in international law; and some are intended by the EU to last for several years after the end of the transitional period.

But the risk of the UK leaving the EU without any Article 50 agreement cannot be ruled out. Of course, the particularly thorny issue of the Irish border is likely to be the main sticking-point, but the need to reach consensus on the dispute settlement mechanisms is equally pressing. Regrettably, the negotiations on many of the provisions discussed in this post have still not been concluded.

In any case, a subsequent post will be devoted to the mechanisms which might be laid down as part of the “future relationship” referred to in Article 50. Those future arrangements are not expected to come into force until some years after 2020 – not least because the EU is insisting that no Agreement between the EU and the UK on those arrangements can even be signed until after the transitional period.

On Monday 19 March, the Commission published a new version of the draft Withdrawal Agreement to be concluded with the United Kingdom pursuant to Article 50 TEU. A most welcome feature of this document is that whole swathes of the text have been agreed between the parties.

The draft, which had been prepared by the Commission, consists of green, yellow and white passages. The parties have highlighted in green the passages on which they have reached a consensus, subject only to improvements in the drafting. With respect to the provisions marked in yellow the negotiators have reached an agreement on the policy objectives. Finally, the UK has not (yet) agreed to any of the text which has been left white (so much less frightening than red which, rumour has it, was used initially for these passages !).

On Friday, the EU27 gave their seal of approval to the draft – in so far as it is complete – at their summit in Brussels. So the time is ripe for an update on dispute settlement following my earlier posts on the subject (see here and here).

Some of the relevant provisions of the draft Agreement are “green”, while many are “white”. This comes as no surprise: the Government is opposed to any suggestion of the Court of Justice of the EU retaining any jurisdiction over the UK in certain after Brexit, although it has now made certain concessions as we shall see. While it is highly unusual for the domestic courts of one State or of an international organisation to enjoy jurisdiction over another State, it is not wholly unprecedented: as mentioned in my first post (link 3), the Agreement on air transport between the EU and Switzerland confers jurisdiction over disputes on the Court of Justice. (It may also interest readers to know that, in parallel with the Brexit negotiations, the EU is also seeking to persuade that country to grant the Court much wider jurisdiction over its disputes with the EU.)

Let us start at the very end of this rather lengthy document (Article 168 (yellow)). Arguably, this is the most important provision of all because the draft is not structured chronologically; and it is only when you reach Article 168 that you discover which provisions apply during the transitional period and which ones only take effect at the end of the transitional period (1 January 2021). The beginning and the end of the transitional period (which runs from 30 March 2019 until 31 December 2020 inclusive and is also known as the implementation period) are spelt out in Articles 122 (green) and 168.

Another notable feature of the relevant articles is that they are both numerous and complex. Consequently, we cannot possibly consider them exhaustively here. Instead, this post only concerns the transitional period, leaving the rules applicable thereafter to be dealt with in one or more further posts.

The crux of the draft is that, subject to certain exceptions, EU law is to be preserved during the transitional period. This key principle is set out in the first subparagraph of Article 122(1) and in Article 122(6) (both green). The former provision reads as follows:

Unless otherwise provided in this Agreement, Union law shall be applicable to and in the United Kingdom during the transition period.

Article 122(6) provides:

Unless otherwise provided in this Agreement, during the transition period, any reference to Member States in the Union law applicable pursuant to paragraph　1, including as implemented and applied by Member States, shall be understood as including the United Kingdom.

The draft WA contains several exceptions to this principle (provisions which “provide otherwise”), including Article 6 which will be discussed below.

Article 161 of the draft Withdrawal Agreement (green) requires the EU and the UK to resolve any disputes which they may have by having recourse to the procedures set out in the Agreement. This mirrors Article 344 TFEU which prohibits the Member States from seeking other fora for settling their disputes.

As is usual in treaties concluded by the EU with third countries, the draft provides for the establishment of a Joint Committee consisting of representatives of each party (Articles 157 (green)). Among the tasks assigned to this body is to “seek appropriate ways and methods of preventing problems that might arise in areas covered by this Agreement or of resolving disputes that may arise regarding the interpretation and application of this Agreement” (Article 157(4)(c) (green).

In addition, by virtue of Article 126, the jurisdiction of the Court of Justice over matters concerning the United Kingdom will remain intact throughout the transitional period. In particular, the UK courts will be able to continue making references for preliminary rulings pursuant to Article 267 TFEU, and infringement proceedings could still be brought against the UK pursuant to Articles 258 to 260 TFEU – and the UK would also be entitled to bring such proceedings against a Member State under Article 259.

Although it has been hostile to any suggestion that the Court of Justice might retain jurisdiction over the UK after Brexit day, the Government has apparently made this concession – as regards the transition period only. No-one is likely to be surprised though that the Government is continuing to balk at Article 165 (white), which would empower the EU to suspend “certain benefits deriving for the United Kingdom from participation in the internal market”, should it fail to comply with a judgment in infringement proceedings or an interim order delivered by the Court. By virtue of Article 165(2), the suspension must be proportionate and the Union must “take account of the possible consequences of a suspension on the rights and obligations of natural and legal persons” (the language quoted here is taken from Article 7 TEU, which confers on the EU the power to suspend certain rights of a Member State which persistently breaches the rule of law and respect for democracy). The suspension may not exceed 3 months, although it is renewable (ibid.). Before the sanctions can take effect, the UK must be given 20 days’ notice to allow it to remedy the breach (Article 165(3)).

On a related matter, it follows from Article 122 of the draft that parties will retain the right to be represented before the Court of Justice by British barristers or solicitors.

According to Article 6(1)(a), one change in EU law which will come into effect immediately after Brexit day is that the United Kingdom will cease to be treated as a Member State as regards “the nomination, appointment or election of members of the institutions, bodies, offices and agencies of the Union, as well as the participation in the decision-making and the attendance in the meetings of the institutions”. Manifestly, this means (or is intended to mean) that the judges and Advocates-General of the Court of Justice who have been nominated by the UK will have to leave the Court on Brexit day (29 March 2019), as they will no longer be able to “participate in the decision-making”.

This will make no difference to the outcome of pending cases, since a very high percentage of cases have always been decided without the participation of a judge of the nationality of the Member State concerned. Indeed, it is clear from Article 18 of the Statute of the Court, a protocol to the EU Treaties, that a party may not challenge the composition of the Court or the Chamber by reason of the absence of the judge of his nationality. By the same token, for obvious ethical reasons, Advocate-Generals do not sit on cases in which a measure taken by their own Member State is in issue.

What of the position as regards the application of EU law in the UK courts during the transitional period?

Unsurprisingly, the definition of “Union law” in Article 2 of the draft (green) is all-embracing. As one would expect, this definition expressly includes both the Charter of Fundamental Rights and the general principles of EU law. Article 2 applies to all proceedings, not merely those before the UK courts; but only in relation to the latter is a political problem at all likely to arise.

The UK has given its blessing to this provision, although it means that the European Union (Withdrawal) Bill currently before Parliament will have to be amended: clause 5 of the Bill as it stood when it reached the Lords in January of this year (link 6) expressly precludes the UK courts from applying the Charter after Brexit day and Schedule 1 to the Bill would severely restrict reliance on general principles. As George Peretz QC explained back in October 2016, attempting to sever the substantive provisions of EU law from the Charter and the general principles is not only artificial, but would lead to EU law as applied in the UK courts diverging from EU law proper.

The UK has not yet agreed to the following provisions of Article 4 of the draft WA:

1. 1. Where this Agreement provides for the application of Union law in the United Kingdom, it shall produce in respect of and in the United Kingdom the same legal effects as those which it produces within the Union and its Member States. …
   2. The United Kingdom shall ensure compliance with paragraph 1, including as regards the required powers of its judicial and administrative authorities, through domestic primary legislation.
   3. The provisions of this Agreement referring to concepts or provisions of Union law shall be interpreted and applied in accordance with the same methods and general principles as those applicable within the Union.
   4. The provisions of this Agreement referring to Union law or concepts or provisions thereof shall in their implementation and application be interpreted in conformity with the relevant case law of the Court of Justice of the European Union handed down before the end of the transition period. …

Quite why that UK has any objection to Article 4 when it has approved Article 2 is not entirely clear, although of course the former provision applies only to the UK. It is also true that Article 4(4) would require an amendment to clause 6 of the Withdrawal Bill, which specifically states that the UK courts will not be bound by any judgments or orders delivered by the Court of Justice after Brexit day. But then the UK has accepted a number of provisions in the draft WA (and not just Article 2) which would require amendments to the Bill.

Needless to say, none of these provisions will come into force unless there is a meeting of minds on the “white” passages – including those providing for the Court of Justice to retain jurisdiction over the UK in respect of some matters, especially citizens’ rights, after the end of the transitional period. A restful Easter break in warmer climes will be needed before the complex and thorny issues raised by those provisions can be confronted in another post on this Brexit blog.

In her wide-ranging Mansion House speech last week, the Prime Minister said she wanted to see a comprehensive system of mutual recognition that would enable self-employed legal professionals to continue to travel to the EU to provide services to clients in person.

That would be good news for justice and the legal services sector, but as Brexit Working Group Members Philip Moser QC and Evanna Fruithof explain, such an offer may look like a bid to have a deal more favourable than existing Member States.

 

In an article today for politics.co.uk, George Peretz QC has commented on issues arising from Jeremy Corbyn’s speech yesterday on Labour’s Brexit policy.

The article is here.

This briefing reflects, with an introduction and some updating, George Peretz’s comments at the UK Trade Forum/Steptoe & Johnson seminar on 15 January 2018 on trade remedies in the United Kingdom after Brexit.

1. Introduction
2. Outline of the trade remedies regime set out in the Bills
3. Constitution of the TRA
4. Economic interest and public interest
5. Appeals
6. WTO and EU law
7. Conclusion

To read full blog please click here. It was first published on UK Trade Forum.

On 7 November 2017, the Government presented to Parliament the Trade Bill. This is one of the eight bills that were envisaged in the 2017 Queen’s speech in order to manage Brexit.

The Trade Bill provides for

• the power to implement the Government Agreement on Procurement,
• the power to implement trade agreements with third parties which mirror those the latter have with the EU,
• the establishment of a Trade Remedies Authority.

This blog entry will examine the power to implement trade agreements.

The power to implement international trade agreements

This power is laid down in s 2(1) which reads as follows:

An appropriate authority may by regulations make such provision as the authority considers appropriate for the purpose of implementing an international trade agreement to which the United Kingdom is a signatory…

The subject-matter of this power is about agreements with countries which have a trade agreement with the EU either at the time of Brexit or at an earlier time when the above regulations are made.

Why the power to implement trade agreements?

The power to implement trade agreements is provided for two main reasons. The first is practical and is about ‘continuity in the UK’s existing trade and investment relationships’ (para. 38 of the Trade Bill Explanatory Notes) with the countries with which the UK, pursuant to its EU membership, shares a trade agreement. The Explanatory Notes suggest that the aim of the Bill is ‘to establish a UK trade agreement with each partner country based, as closely as possible, on the corresponding trade agreement that country has with the EU’ (ibid).

The second reason for which the power to implement trade agreements is introduced in the Trade Bill is related to EU law. The UK is prevented from negotiating and concluding trade agreements whilst still an EU Member State. This is one of the reasons for which the Department for International Trade has been engaged in a scoping out exercise in third countries, merely exploring the possibility for possible trade deals in the future.

What is the scope of the power to implement trade agreements?

The scope of the power to implement trade agreements is broad.

First, it covers free trade agreements (FTAs) or agreements that mainly relate to trade (but it does not cover tariff provisions, as these would be dealt with under the Taxation (Cross‐Border Trade) Bill). This definition is quite broad and may catch a wide range of agreements. In the context of EU law, for instance, there is a solid body of case-law addressing the question which agreements relate mainly to trade. The definition provided in the Trade Bill would clearly cover, amongst others, mutual recognition agreements. The EU has free trade agreements with more than 50 countries (here) and is currently negotiating with an even greater number of  countries.

Second, the power to implement trade agreements is not confined to existing agreements between the EU and third countries, but also covers any agreements that the EU may sign with a third country prior to the Brexit date.

Third, the power to implement is about

• modifying primary legislation that is retained EU law;
• conferring functions on the Secretary of State or any other person, including conferring a discretion;
• delegating functions;
• providing for penalties for failing to comply with the regulations.

Fourth, the duration of the power is 5 years. This may be renewed for no more than 5 years at a time.

What lies underneath: implementation of trade agreements presupposes renegotiation

The power to implement trade agreements pursuant to the Bill appears to be about the transitional application of existing trade agreements. It may also appear to amount to grandfathering or rolling over existing trade agreements. In legal terms, neither of these positions is entirely accurate.

The power to implement pursuant to the Trade Bill presupposes the post-Brexit application to the UK of the existing agreements between the EU and third countries. Such application, however, requires the consent of the contracting parties under international law. While the UK is currently bound by trade agreements with third countries concluded either by the EU alone (such as the Agreements with South Africa on trade in wine) or by the EU and the Member States (such as the Free Trade Agreement with South Korea), both types of agreements would cease to apply to the UK after Brexit: the former because the UK is not a party to them; the latter, known as ‘mixed agreements’, because they are in essence of a bilateral character, even though the UK is a contracting party (the status of such agreements post Brexit was examined in this blog last year (here).

In the light of the above, the extension of the application of the existing agreements to the UK post Brexit presupposes the consent of the other contracting parties. This consent would require a modification of the existing agreements. It is for this reason that the Explanatory Notes to the Trade Bill state that ‘the new UK-third country agreements that are implemented through use of this power will be legally distinct from the EU-third country agreements on which they are based’ (para. 53).

There is no information as to the form of these ‘new UK-third country agreements’. Their scope, however, may vary. The existing EU-third country agreements would certainly require some amendments to their wording, so that they reflect their application to a state which is no longer an EU Member State. They may well require more than technical modifications. For instance, it may be necessary to adjust some of their provisions to the new post-Brexit trade reality.

The range and depth of such changes would depend to a great extent on the approach of the other contracting parties. Trade treaties, after all, are the outcome of long and complex negotiations and of package deals and compromises reached in a very specific policy context.  The Trade Bill presupposes the good will of third countries to extend existing deals to a completely new context. It may not prevent, however, these countries from seeking to unravel specific aspects of these deals in order to maximise the benefits for their economy.

The challenges of achieving what the power to implement trade agreements presupposes

In addition, therefore, to the negotiations that the UK carries out with the EU in the context of Article 50 TEU, there is an international trade layer to the current efforts to manage Brexit. It involves the third parties with which the UK currently shares trade agreements pursuant to its EU membership. The timely and successful outcome of such negotiations may be facilitated considerably by the cooperation between the UK and the EU – after all, the EU is a party to all the trade agreements to which the Trade Bill refers and which currently govern the UK’s relations with a considerable number of third countries.

The UK-EU cooperation on this issue is mentioned expressly in the Guidelines for Brexit Negotiations that the European Council adopted on 29 April 2017 (‘a constructive dialogue with the United Kingdom on a possible common approach towards third country partners, international organisations and conventions concerned should be engaged’, para. 13) (here). Similarly, the negotiating directives adopted by the Council on 22 May 2017 state that ‘a constructive dialogue should be engaged as early as practicable with the United Kingdom during the first phase of the negotiation on a possible common approach towards third country partners, international organisations and conventions in relation to the international commitments contracted before the withdrawal date, by which the United Kingdom remains bound, as well as on the method to ensure that the United Kingdom honours these commitments’ (para. 17) (here).

Two points about such a common approach are worth making. First, the overall climate of the Article 50 negotiations is bound to have an impact on how smooth and efficient the post-Brexit adjustment of the UK’s existing trade treaties would be.

Second, and following from the point made in the previous section, the willingness of third countries to accept the arrangements proposed by the UK or by the UK and the EU should not be presumed. In fact, the challenges of this process have already become apparent in the World Trade Organisation (WTO) context. In September 2017, the UK and the EU reached agreement about the adjustment of tariff rate quotas on the basis of historical averages. Before, however, they even notified the Permanent Representatives of the other WTO parties formally, they received a letter from the representatives of the United States, Canada, Brazil, Argentina, New Zealand, Thailand, and Uruguay in which this approach was rejected (here). In other words, adjustment or extension of existing trade relations post-Brexit would require negotiation.

The reliance upon Henry VIII powers

The power to implement trade agreements pursuant to the Trade Bill is a power for the executive. As it provides for the amendment by the executive of primary legislation that has the status of retained EU law (in the meaning of the Withdrawal Bill), it introduces Henry VIII clauses in the area of implementing international agreements. Whilst the power to implement is exercised by unamendable statutory instruments, its renewal is subject to a resolution of each House of Parliament (Schedule 2(4)).

The extensive use of Henry VIII clauses is a thread that runs through the Brexit Bills that have been presented to Parliament (see in this blog). It is a controversial aspect of the Withdrawal Bill that is being debated in the House of Commons at the time of writing. In the specific context of the Trade Bill, the scope of the power to implement is broad and is not be confined to merely technical adjustments. As the Department for International Trade acknowledges in a memorandum on delegated powers that accompanies the Trade Bill, the power ‘is broad enough to allow implementation of substantial amendments, including new obligations’ (para. 46). (here).

There is a disjunction between the implementation of trade agreements pursuant to Henry VIIl clauses and the increasing emphasis on transparency and accountability in international trade law. The latter has emerged in the last few years in response to the strong public disquiet about international trade deals and their implications for domestic legal orders. Whilst the extensive use of Henry VIII powers may appear to provide the process of the implementation of trade agreements with flexibility, it feeds into the growing concern about the lack of accountability in the area.

What is missing from the Trade Bill

The Trade Bill does not deal with trade agreements that the UK intends to negotiate once it has left the EU. It is also silent on the direction of the future trade policy of the UK. Instead, it merely provides the main elements of a mechanism for implementing existing trade agreements once the latter have been adjusted in order to deal with Brexit. In doing so, as this blog suggested, the Trade Bill leaves important issues open.

The EFTA Court, the equivalent of the CJEU for the non-EU countries within the European Economic Area, has handed down a judgment in Case E-16/16 Fosen-Linjen AS v AtB AS, holding that a simple breach of public procurement law may in itself be sufficient to trigger the damages liability of a contracting authority. Provisions of EEA public procurement law are identical to those within the EU and hence the UK.

This ruling puts the EFTA Court at variance with our own Supreme Court and its finding that a “sufficiently serious breach” is required to trigger the liability of a contracting authority in such circumstances in EnergySolutions v NDA.

The EFTA Court judgment is of particular interest while an EEA-type solution, including the EFTA Court’s jurisdiction, remains on the table as a possible transitional or even permanent outcome in Brexit negotiations.

A link to the Monckton summary and case note on EnergySolutions case may be found here.

The EFTA Court’s summary of the Fosen-Linjen judgment is here.

Brexit is generating debate on so called Henry VIII powers, and is likely to do so for a number of years. They give rise to some basic questions. How do we identify Henry VIII powers? How are they different from the power to make delegated legislation? Henry VIII powers would allow ministers to change primary legislation. That leads to a fundamental question over the legality of such powers under the constitution. The use of such powers will become increasingly important when the process of dismantling those parts of the vast body of EU law incorporated into UK law under the European Union (Withdrawal) Bill that the UK does not wish to keep begins.

It is already strongly arguable that unless ministers are given sufficiently clear authority to change primary legislation by statute, ministerial attempts to change primary legislation without further sanction from Parliament would be unconstitutional.

Henry VIII was given his powers by the Statute of Proclamations, passed by Parliament and repealed by Parliament following his death as the following brief historical perspective on Henry VIII powers shows. That article draws attention to a talk given by Lord Judge in 2016 where his lordship questioned the legality of skeletal provisions enabling ministers to change primary legislation. The Supreme Court in the Miller judgement ([2017] 1 ALL ER 593) referred to Henry VIII clauses in the context of the power to make ancillary regulations. The Supreme Court also lends support to Lord Judge’s contention that skeletal provisions permitting changes to primary legislation would be unconstitutional by making clear that

“…the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost’, and so ‘fundamental rights cannot be overridden by general … words’ in a statute”.

There is understandable concern over the prospective use of Henry VIII powers. However historical and recent legal precedent provides ammunition for contesting the use of such powers.