Pharmaceutical Regulation, the Court of Justice, and the Hunt/Starmer Exchange: Some Brief Thoughts

A recent letter to the Financial Times from the Secretaries of State for Health and Business (Jeremy Hunt and Greg Clark), and the reply from the Shadow Brexit and Health Secretaries (Sir Keir Starmer QC and John Ashworth), drew attention to the importance of pharmaceutical regulation after Brexit.

As Mr Hunt and Mr Clark accept, there are many reasons why the UK, and the UK pharmaceutical industry in particular, will want to maintain deep co-ordination with the EU/EEA regulatory regime (much of which was originally based on UK law).  An obvious reason is that the additional costs of submitting drugs for authorisation under two separate regimes rather than one are very high.  Another reason is that, as the European Medicines Agency (EMA) has pointed out, the EU requires that pharma companies maintain key operations and staff (such as QPPVs – officials responsible for regulatory compliance) within the EEA – these are things the UK will not want to lose.  A less obvious, but potentially life-and-death, reason is that there is some evidence that new drugs arrive later in smaller regulatory regimes such as Canada, as pharmaceutical companies focus first on getting approval in the big regimes (the EU and US).

Medicines regulation raises complex legal as well as scientific issues. So, even if scientific and administrative cooperation remains deep, as Mr Hunt and Mr Clark propose, any arrangement with the EU that keeps the UK sufficiently connected to the EU regime to allow the EU to treat the UK as being in the regime for regulatory purposes, thereby avoiding double regulation, will require that the UK continue to apply, and also be recognised by the EU as applying, EU law. Much of that law is found in complex and developing ECJ jurisprudence: it is no accident that the UK courts have, in this area, frequently used the preliminary ruling procedure under Article 267 TFEU to ask the Court of Justice of the EU (CJEU) to answer the very difficult legal questions that frequently arise (a recent case before Mrs Justice Whipple in the High Court, here, gives a flavour). Further, the Commission is able to take infraction proceedings before the CJEU under Article 258 TFEU if a Member State’s interpretation of the law differs from those of the EMA or other states.

So, even if the text of UK law in this area remains unchanged after Brexit, and even if there is intense scientific and administrative cooperation, there will need to be a robust legal mechanism, acceptable to the EU, to prevent UK courts from diverging from CJEU case-law.  Given the difficulty and complexity of this law, divergence is otherwise all too likely.

Mr Hunt and Mr Clark do not deal with this issue: but, as Sir Keir and Mr Ashworth point out, the CJEU “red line” apparently drawn by the Government is problematic here.  That is because it removes the existing legal mechanisms, set out above, that ensure continued consistency of interpretation.

What, then, is the answer?  One answer in theory would be some form of agreement by which the EU and UK would grant more or less automatic approval to drugs approved under the other’s regime and allow, for example, QPPVs for one side to be based in the other – a mutual recognition agreement (“MRA”).  An MRA would tolerate regulatory divergence.  But negotiation of any such MRA would be complicated by the fact that pharmaceutical regulation is both politically sensitive (with public memories of disasters such as Thalidomide) and commercially very important: and, moreover, it is not clear what the EU, as by far the bigger player, would gain from such an MRA with the UK.

That means that the only realistic approach for the foreseeable future is one that keeps the UK regime tied to that of the EU.  As explained above, that means a robust legal mechanism to keep the tie in place.

If the UK joined the EEA, there would be no difficulty: the EFTA Court plays the same role as the CJEU, following the CJEU case-law (and sometimes leading the way).  But, on the assumption that the EEA is off the table, my suggestion would be that the Government should, in order to maintain regulatory consistency, propose that in this area the UK courts would be able to refer legal questions to the EFTA Court, sitting with a UK judge.  An alternative mechanism would be for a new EU/UK court to have jurisdiction to give rulings in this area: but since the EFTA Court already exists, it would seem unnecessary to invent a further court just for this purpose.

Further, though the UK would not have a vote on legislative development of the EU regime, an arrangement of this type would be able to secure its continued ability to contribute to guidance (a very important aspect of the regime, as Whipple J’s judgment referred to above makes clear).

The approach sketched out here may well be appropriate for other regulatory regimes: but given the profound UK interests at stake, it would be particularly appropriate in pharmaceutical regulation.

Dispute Settlement Mechanisms after Brexit: where we stand now

When my post on dispute settlement (here) appeared in late March, few people realised that this issue was to be a key element in the negotiations between the EU and the UK.

No longer.

As explained below, the EU has made now it plain that, unless there is a meeting of minds on one or more dispute settlement mechanisms (DSMs), there can be no Withdrawal Agreement.

Hence the criticism by James Chapman, David Davis’ chief of staff until the election, of the Prime Minister’s “absolutist” refusal to accept the jurisdiction of the Court of Justice of the EU (CJEU) over the Withdrawal Agreement (here), which has catapulted the issue to the headlines. And since then Keir Starmer has been quoted in the FT as calling on her to abandon her “ideological and deeply unhelpful red line” about the CJEU, in order to retain access to key EU bodies.

Meanwhile, the EU institutions have published several key documents on the subject, and a number of posts have hit the blogsphere (see for instance here, here and here).

Given the plethora of EU documents and complex issues, this post does not purport to be exhaustive in any way.  Rather, I will concentrate on the salient points of dispute resolution in relation to the Withdrawal Agreement, as that is obviously much more immediate than the longer term “Free Trade Agreement” (no doubt a misnomer, as it will almost certainly cover many non-commercial matters), which can only be signed after Brexit Day.

On dispute resolution, the negotiating Guidelines adopted by the European Council at the end of April (here) are couched in very general terms.  Apart from confirming the need to preserve the autonomy of the CJEU, they do not tell us very much.

In consequence, on 22 May the Council of Ministers adopted a Decision giving the Commission a negotiating mandate (here and here).  This is also of a general nature, but it is accompanied by a much more detailed annex (here).  In particular, the annex states that the jurisdiction of the CJEU should be maintained for citizens’ rights (i.e. the rights of EU27 nationals resident in the UK to continue to live and work there, and vice versa), any sector in which it was decided that EU law should continue to apply on a transitional basis and the financial settlement.

Fleshing out these statements, the Commission’s “position paper” on governance (here), one of six such communications published by the Commission in late June, sets out the following points in particular:

(i) Unless otherwise provided in the Withdrawal Agreement, any reference to concepts or provisions of Union law must be interpreted in the light of case law of the CJEU delivered prior to Brexit Day.  Any subsequent case law must be taken into account.

(ii) The provisions of the Withdrawal Agreement on citizens’ rights and any other area of EU which continues to apply post-Brexit should have the same legal effects in the legal systems of all the Contracting Parties as they had before Brexit Day. The UK will be required to pass an Act of Parliament so as to ensure compliance by the administration and the judiciary with these provisions.

(iii) All rulings delivered by the CJEU pursuant to the Withdrawal Agreement are to be binding on the UK as well as the EU, and are to be enforceable under the conditions applicable within the Member States under Article 299 TFEU.

(iv) In any proceedings before the CJEU relating to the application and interpretation of the Withdrawal Agreement, the UK is to enjoy the same procedural rights as the Member States under the Court’s Statute and Rules of Procedure.

(v) The Withdrawal Agreement is to establish a Joint Committee whose role will be inter alia to settle “divergences of views” at a political level, wherever possible.

(vi) With respect to citizens’ rights and any other sector in which EU law continues to apply on a transitional basis, the Commission must retain full powers to bring infringement proceedings under Articles 258 and 260 TFEU, and the CJEU must also retain jurisdiction under those provisions as well as under Articles 263 to 268, 278 and 279 TFEU.

(vii) In relation to all other matters not mentioned, the Joint Committee would be empowered to adopt, where necessary, any appropriate measures to implement the solution agreed between the Contracting Parties – except in relation to the matters mentioned below.

(viii) Where the parties are unable to reach a solution within the Joint Committee under point (vii), the matter in issue can be referred to the CJEU either by a joint request of both parties at any time or by one party three months after the Joint Committee was first seized of the matter.

(ix) Finally, so as to ensure effective compliance with the judgments of the CJEU, provision must be made for “the complaining party” to apply to that court to request a lump sum or penalty payment (as under Article 260 TFEU) or “the suspension of certain parts of the Withdrawal Agreement other than citizens’ rights in order to ensure compliance with the ruling, after giving the other party the opportunity to express its position”.

As Philip Woolfe points out in his post (here), at this stage this “position paper” (and the other five) only represents the Commission’s view– except of course to the extent that it covers the same ground as the Council’s decision.

In any case, the EU has now set out its position in considerable detail.  And where does the UK stand now?  Nothing in the Government’s stance has changed since I wrote my previous post in late March. Even the Conservative Party manifesto (here) is silent on the matter.  But, as mentioned at the outset, pressure on the Government to abandon its opposition to the continuing jurisdiction of the CJEU is mounting.

As to (v) and (vii), Joint Committees are standard features of international agreements concluded by the EU.  Unlike all the other mechanisms set out here, it is of a political nature and acts on the basis of consensus.  Accordingly, it would not constitute any form of constraint on the UK and it is hard to see how the Government could object.

On all the other points, the various documents issued by the Council of Ministers and the Commission all propose maintaining the jurisdiction of the CJEU and indeed, in point (ix) even enhancing it.  Perhaps it is not beyond the realms of possibility that the EU might soften its position on some of these points, especially point (iv). But the EU is constrained by the CJEU’s long-standing protection of its own autonomy – as in Opinion 1/91on the draft EEA Agreement (here) and Opinion 2/13 (here), where it declined to give its blessing to the draft Agreement of Accession to the European Convention on Human Rights

So it seems hard to see how there can be a Withdrawal Agreement at all unless the Government abandons its “absolutist” refusal to countenance the continued jurisdiction of the CJEU under that agreement.

But is there room for a compromise.

One idea, advocated last month by Sigmar Gabriel, the German Foreign Minister, is to establish a “joint court that is staffed by Europeans and Britons” (here).  However, this proposal overlooks both Opinion 1/91 (where precisely the CJEU held same mechanism to be repugnant to the autonomy of the EC’s legal system) and Opinion 2/13 (where the CJEU declined to give its blessing to the somewhat different draft Agreement of Accession to the European Convention on Human Rights on the same grounds).

Another idea which is being widely floated is for the UK to remain in the European Economic Area – or at least for the UK to subscribe to the jurisdiction of the EFTA Court.   Unlike Sigmar Gabriel’s suggestion, this option is legally viable, since in effect the EFTA Court follows the case law of the CJEU.  The President of the EFTA Court is known to be enthusiastic about extending the jurisdiction of his court in this way. In addition, the three EEA-EFTA States (Norway, Iceland and Liechtenstein) apparently agree to the idea of the UK joining their number.  But would they accept the UK remaining a party to the EEA Agreement only for certain limited purposes (e.g. just for the jurisdiction of the EFTA Court)?  And what if the UK were to propose to do so just for a transitional period?  Could the EEA-EFTA States accept such an upheaval for just (say) three years?

Finally, what if the UK leaves the EU without any Withdrawal Agreement at all?  This prospect cannot be ruled out by any means.  As I explained in my earlier post, in those grave circumstances, the EU and the UK would have to agree to submit disputes – of which there would be many! – to some international tribunal such as the Permanent Court of Arbitration; and disputes relating to the WTO would be decided by arbitration in accordance with that treaty, while the International Tribunal for the Law of the Sea has jurisdiction over those concerning the United Nations Convention on the Law of the Sea.

The Brexit Transition: A rush to judgment?

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.

The British position on the rights of EU citizens living in the UK

On 26 June 2017, the Home Secretary presented to Parliament a document entitled The United Kingdom’s Exit from the European Union – Safeguarding the Position of EU Citizens Living in the UK and UK Nationals Living in the EU (here)

This document is in response to the EU’s position on citizen’s rights (here).

The stated objective of the British position is ‘to ensure continuity in the immigration status of EU citizens and their family members resident in the UK before [the UK’s] departure from the EU (including their ability to access benefits and services)’ (par.15).

Rights not automatic: the introduction of a process

Following Brexit, the right of EU citizens to live, work and continue to enjoy economic and other rights in the UK would not be automatic. Instead, an application to stay would have to be made to the Home Office. This would centre on their residence status which would need to be established by means of a residence document.

Settled status

The main thrust of the British Government’s position is the conferment of settled status on EU citizens. This would be about indefinite leave to remain, and would grant its beneficiaries rights (to work, benefits, pensions, healthcare) that are identical to those of UK nationals.

Settled status would be lifelong and would qualify an EU citizen who has acquired it and has also lived in the UK for at least 6 years to apply for UK citizenship. Settled status, however, would be lost if the citizen lived outside the UK for more than two years. If, therefore, an EU citizen who was granted settled status left the UK after Brexit for more than two years and wished to return, she would be subject to the UK’s immigration rules applicable at the time.

Settled status would be conferred following an application, and subject to a residence requirement and an assessment that the applicant’s conduct would not pose a threat to the UK.

Who may apply for settled status?

Settled status would be conferred on EU citizens who have been resident in the UK for 5 years at a cut-off date. The latter has not been specified yet. The Government suggests that it would be no earlier than 29 March 2017, that is the date on which the Article 50 procedure was triggered, and no later than the Brexit date.

Citizens who have lived in the UK for less than 5 years would not be deported. Instead, a grace period would be provided, during which they would be able to continue to live and work in the UK. This grace period would enable EU citizens who have lived in the UK for less than 5 years to settle their residence status. They could do so by applying for either settled status (if they met the 5-year residence requirement during the grace period) or for temporary residence (if they did not meet the 5-year requirement during the grace period, in which case they might wish to stay in the UK until this requirement was met, hence enabling them subsequently to apply for settled status).

What about family members?

The above provisions apply to family members who are resident in the UK before Brexit. The term ‘family members’ would cover those currently covered by EU law, such as spouse, civil partner, direct descendants under 21 or dependent, direct dependents in the ascending line. It would also covers both EU and non-EU citizens.

Future family members who arrive in the UK after Brexit would not be eligible to apply for settled status. Instead, their status would be determined on the basis of the UK immigration rules applicable at the time.

Which rights?

Settled status would provide the right to stay, work, study, look for a job and have access to healthcare, benefits, pensions and social security rules as comparable UK nationals.

How does the British position differ from the existing rules?

The British position differs from the existing rules on rights enjoyed by EU citizens.

  • The above rights are not automatic but subject to an application process. While the process is envisaged to be ‘as streamlined and user-friendly as possible’ (para. 35), its details  remain unclear: for how long would it last? What type of documentary evidence would be required? What fee would be charged? What would the ‘conduct and criminality’ test entail? Recent experience of EU citizens applying for permanent residence and the notorious 85-page application form they had to fill in may justify some scepticism. The Government suggests that this form would be abolished. Those EU citizens, however, who have already applied for permanent residence would have to apply again for settled status under the new arrangements.
  • Residence documents would be introduced. EU citizens would need to have theirresidence status confirmed and to apply to the authorities accordingly. The Government’s position does not specify the type of residence document that would be required (the introduction of identity cards has not been ruled out).
  • EU citizens would be deprived of their right to bring future family members in the UKunder the conditions that they enjoy currently. This is a significant change in their position, as rules imposing income tests and language requirements would apply.
  • The British position excludes the jurisdiction of the European Court of Justice. Instead,the proposed arrangements would be supervised by domestic courts, hence removing a layer of judicial protection that is currently available to EU citizens. Under existing EU law, EU citizens may have recourse to domestic courts which are bound by EU law and which may, and in certain cases must, refer to the Court of Justice for the interpretation of EU rules. In fact, the Court has been instrumental in the development of the rights of EU citizens who benefit from free movement.
  • The British position does not define the cut-off date on the basis of which settledstatus would be granted. Instead, it suggests that it would be a date between the triggering of the Article 50 procedure, that is 29 March 2017, and Brexit, that is either 30 March 2019 or any subsequent date, provided that an extension has been agreed upon by the European Council  unanimously in accordance with Article 50 TEU.
  • There is lack of detail regarding various aspects of EU citizens’ rights (for instance,frontier workers and the rights of EU students who complete their degrees in the UK).
  • It is worth recalling that the British position is subject to an overarching qualification,that is reciprocity. This suggests, however, that the rights of UK citizens living in the EU would also be affected along the above terms.

Does the British position give any ground?

There are certain issues over which the British position appears to abandon long-held opposition to certain aspects of EU citizens’ rights.

  • The exportability of child benefit would be maintained, subject to on-goingentitlement. It is recalled that former Prime Minister David Cameron tried very hard to change the rules prior to the June 2016 referendum.
  • The UK would maintain the current provisions about exporting and uprating the statepension within the EU.
  • The current rules on mutual recognition of professional qualifications be maintainedand the UK would recognise the right of professionals whose qualifications have been recognised to practice on the basis of non-discrimination.
  •  The requirement for comprehensive sickness insurance, necessary under EU law for economically non-active citizens, would no longer be relevant to the determination of  continuous residence.

Two broader issues

First, the British position envisages a deeply proceduralised mechanism. Checking and confirming the residence status of more than 3m people who would meet different conditions and whose circumstances would vary considerably would impose a heavy burden on the administrative machinery of the Government. This would be all the more so given the time constraints envisaged. There is concern that an unwieldy process might cause uncertainty, delays, and end up frustrating the rights of EU citizens.

Second, the crucial question is how the rights of EU citizens would be construed in practice. This applies not only to the right to reside but mainly to other rights, including work, healthcare and benefits. A case in point is our experience with Directive 2004/38 on the right of citizens of the Union and their family membersto move and reside freely within the territory of the Member States. The Court of Justice has been instrumental in the effectiveness of the rights laid down in EU law (and part of which the UK seeks to maintain). Put differently, the significance of the rights granted to EU citizens is directly linked to the interpretation and enforcement of these rights. This touches upon the fundamental difference between the UK’s and the EU’s approach as to the dispute settlement mechanism that would govern the withdrawal agreement.

What now?

The British position has not been received with unbridled enthusiasm. The Union’s Chief Negotiator, Michel Barnier tweeted: ‘More ambition, clarity and guarantees needed than in today’s UK position’ (here).

Negotiations between the UK and the EU have only just started. The British position on citizens’ rights is, therefore, a first step, in response to the Union’s earlier position. As the status of EU citizens in the UK is one of the issues on which ‘sufficient progress’ must be made for negotiations to proceed to the next phase (here), more detail should be expected to emerge before too long.

Brexit – after the UK General Election: has hubris led to nemesis or catharsis?

1. The UK General Election was confidently called in order to provide the Government with a stronger mandate for its hard-edged Brexit negotiation strategy. In fact , the UK Government’s position in Parliament has been weakened. There is now increased uncertainty . Yet, notwithstanding the result and ensuing discussion to secure a parliamentary majority, there are a few preliminary pointers which could usefully be taken into account by lawyers in in the absence of any adequate clarity about the UK Government’s negotiating strategy.

2. Practitioners will have observed the outcome of the General Election in the UK with some bemusement. Equally, lawyers and their clients will need quickly to analyse what is known and to make judgments about future legal risk accordingly.

What could lawyers usefully note about the constitutional aspects?

3. The EU/UK Brexit negotiations began on 19 June. The expectation was that the negotiations would begin by addressing the post-Brexit rights of EU and UK citizens, the size of the exit bill and the implications for the Republic of Ireland and Northern Ireland. It now seems to be accepted that a trade agreement or a transitional agreement will not be negotiated in parallel with the negotiations on the withdrawal agreement until sufficient progress has been made on the withdrawal agreement.

4.  The UK’s governing party, the Conservative Party, sought a strong mandate in the General Election for its Brexit negotiating strategy. Hubris or not, the expectation was that the Conservative Party would be returned with a larger majority than previously. In fact, as a result of the General Election,  the UK Government has no overall majority in the  House of Commons (the elected lower house of the UK Parliament), as it enjoyed before the General Election. That said, the Conservative Party has the largest number of members of parliament. To give it a working overall majority, the Conservative Party is negotiating a deal with the Democratic Unionist Party in Northern Ireland. The details of the deal are being worked out at the time of writing.

5. In parenthesis, it might be usefully noted that the public discourse on the arithmetic of votes in the House of Commons  seems   to have taken account neither of the Speaker’s and Deputy Speakers’ conventions on (not) voting nor the fact that Sinn Fein MPs do not take their seats at Westminster. Both are capable of having an impact on numbers in the voting lobbies.

6. The UK has a dualist tradition for the implementation of its EU and international obligations. Such obligations have to be expressly incorporated into UK domestic law in order to have legal effect. Incorporation is effected either by UK primary legislation (acts of the UK Parliament) or by secondary legislation made under powers conferred on the UK Government or on the devolved administrations by primary legislation. Without a reliable overall majority in the House of Commons, the successful passage of primary legislation cannot be guaranteed.

7. Against that background, there are two points to make. First companies and citizens need to have certainty that, post-Brexit, the UK will have effectively replicated the EU acquis in UK national law by virtue of the so-called Great Repeal Bill, as well as by virtue of several Brexit-related bills that are anticipated in respect of , inter alia, immigration and trade matters. Secondly, companies and citizens need to have certainty that their future rights which are agreed in the EU/UK withdrawal agreement under Article 50 are properly implemented into national law.

8. How can the desired level of legal certainty be delivered if the UK Government has no overall majority in the House of Commons and if, as is the case, the political parties are divided over what the Brexit negotiating strategy should be? The Conservative Government has hitherto argued (a) that the UK will not seek membership of the Single Market since the concomitant of membership of the Single Market would be that the UK could not maintain control over its borders and (b) that the UK wishes to leave the Customs Union, since membership would prevent the UK from negotiating bilateral trade deals with states which are presently third countries. But if it cannot get its legislation through the House of Commons (including a possible series of votes on the Queen’s Speech), some commentators would argue that the General Election has left the Government facing its nemesis.

What might an alliance with the dup mean for the parliamentary arithmetic?

9. The UK does not generally have coalition governments. But the party with the most MPS is entitled to try to form an alliance with another party or parties. The coalition between 2010 and 2015 was exceptional. In summary,  it is expected that, short of a formal  coalition, the DUP will support the Conservatives on the basis of a procedure called “supply” (voting with the Government where authority to spend money is required) and “confidence” (voting with the Government if Parliament is asked to approve a vote of no confidence in the Government).

10. The details of what the DUP will demand are not yet known. The question of the adverse impact of the negotiations on a highly sensitive peace process is a high priority for the EU and the UK. So far as Brexit issues are concerned, although closely aligned to the Conservatives, they are likely to demand a soft border with the Republic of Ireland. This would undermine the UK Government’s preferred negotiating strategy. Yet the two societies and economies are closely linked. If free movement by virtue of the Common Travel Area were stopped and  if tariffs were imposed in respect of cross border trade, with the resultant increase in border controls,  the consequences would be  serious , albeit presently  unquantifiable

Can lawyers presently prepare for an uncertain future?

11. Legal instability is inherent in the unpredictable substantive outcome of the EU/UK negotiations. But that instability is now exacerbated by the lack of clarity about whether the Conservative Government’s preferred policy (see above) is sustainable in the post-election environment.

12. With the parliamentary arithmetic so finely balanced, it is thought that the UK Government may have to soften its hard line stance. There have been calls for an attempt to build a cross party consensus. Might this lead to catharsis?

13.  With few exceptions, the Opposition parties are strong supporters of the advantages of the Single Market and of the Customs Union. That said, the Labour Opposition’s stance is nuanced. The Labour leadership has not committed itself to membership of the Single Market. But its Brexit lead is prepared to support membership of the Customs Union. Moreover, a reasonable number of Conservative MPs are themselves supporters of the Single Market, not least the  intake of  newly elected Scottish Conservative MPs. Yet the Scottish Conservatives also seek the UK’s withdrawal from the Common Fisheries Policy. Leaving aside the question whether the policy of withdrawal from the CFP would be wise, the UK may also close its territorial waters to non-UK fishing vessels. If so, the negotiations could become very difficult for EU Member States with large scale fishing interests such as Spain and Denmark. The inclusion in the Queen’s Speech of a Fisheries Bill will do nothing to alleviate concerns in other Member States until there is clarity about the scope of the bill, presently described as:  a bill to control access to its waters and set UK fishing quotas. The battle lines are being drawn.

14. There is also instability which flows from the length of the negotiating timetables, now accentuated by the absence of meaningful engagement during the UK election period.

15. Irrespective of the negotiations themselves and what they might mean, the UK Government will soon introduce legislation to give effect to the replication of EU laws in national law in readiness for the operative day of Brexit (paragraph 7 above). Aspects of these bills will be highly contentious and the parliamentary arithmetic, with or without DUP support, is unlikely to permit easy and safe passage.

16. For the moment, practitioners may have to plan ahead on the strength of more than one alternative. Since, notwithstanding the Conservative Party’s failure to gain a stronger mandate, they remain the party of government, practitioners will want to check the party’s published Manifesto for sign posts to an uncertain future. They will find no mention of the UK’s intended refusal to accept the jurisdiction of the CJEU in a post Brexit world. But they will find a reference to the need to increase protection from foreign takeovers for British companies. For a party that has been the champion of the free market and deregulation, is this the sign of protectionist things to come?

17. To conclude, it is too early to predict what the future holds . But unless the UK Government softens its hard line on its Brexit negotiation strategy , the result might be that it will face its nemesis in the UK Parliament. The Queen’s Speech on 21 June signalled eight Brexit related bills.  That is a complex bundle of contentious bills and the parliamentary  votes are likely to differ from topic to topic. The voyage ahead looks decidedly unsteady.

Michael Bowsher QC speaks to GBC News about Brexit negotiations

Michael Bowsher QC speaks to Jonathan Sacramento, News Editor of GBC News (Gibraltar Broadcasting Corporation) about how Gibraltar and the UK will have to see out the Brexit negotiations before they can make decisions on how European Legislation can be transposed to other institutions under the British Crown. Michael was a guest of the Middle Temple Association in Gibraltar and this was the theme of his address to  law professionals and members of the Judiciary at the Rock Hotel on the 25th May 2017.

Watch the interview here.

Becoming British does not mean end of EU Citizen’s EU Rights, says advocate general

In an opinion published today in Case C-165/16 Lounes, Advocate General Bot has advised the Court of Justice of the EU to hold that an EU citizen who becomes a British citizen retains important EU law rights over and above her rights as a British citizen. If the Court agrees, this is likely to have a significant impact on negotiations concerning the rights of EU citizens in the UK after Brexit.

The EU law right at issue was the right of EU citizens to bring their non-EEA family members with them to reside in the U.K.  Due to U.K. immigration policy, British citizens have no right to bring a non EEA spouse to live with them in the UK: they are permitted to do so only if they meet certain requirements, in particular a minimum earnings requirement. Poorer British citizens either have to live apart from their spouse or go to their spouse’s country to live. EEA citizens, however, have that right under EU law, in particular Directive 2004/38.

The facts in Lounes were that a Spanish citizen came to the UK in 1996 and took British nationality in 2009. She retained Spanish nationality. In 2013 she started a relationship with an Algerian national who had overstayed his UK visitor visa. They married in 2014. The Home Office sought to deny her husband residence.

The Advocate General held that Directive 2004/38 did not apply: it was confined to EU citizens who lived in Member States of which they were not citizens. But, he argued, general principles of EU law, derived from Article 21.1 TFEU(rights of EU citizens to reside and move freely within the EU), combined with the fact that her acquisition of British citizenship was intimately linked to her exercise of her EU law rights, meant that she should be held to have an EU law right to have her husband live with her in the UK. Further, if she lost her EU law right on acquiring British citizenship:

88. The deeper integration which [she] desired in the [UK] by becoming naturalised would ultimately deprive her of the rights granted to her in respect of her spouse by EU law, which would manifestly be likely to harm her pursuit of family life in [the UK] and thus, in the end, the integration which she has sought. What is given with one hand would therefore be taken away with the other.”

He regarded that result as “illogical and full of contradictions”.

If this approach is followed, it has significant implications for the approach to the post-Brexit protection of the rights of EU citizens already living in the UK. In particular, it means that – if Leave campaigners’ repeated promises that Brexit would not affect the rights of EU citizens already in the UK are to be honoured- even those EU citizens who have taken, or go on to take, British citizenship will need to be within the scope of the system of protection of EU law rights set out in the withdrawal agreement.

The case also illustrates why the EU is unlikely to accept that the UK courts are left to determine what the content of those continued rights are: after all, the Home Office has vigorously argued against the approach taken by the Advocate General.

Finally, the Advocate General’s comment on the illogicality of the position argued for by the Home Office is perhaps symptomatic of a widespread EU incomprehension of the serious restrictions that the UK chooses to impose on the rights of its own citizens to live in their own country with those whom they have chosen to marry.

Please click here to read the Opinion.

Is the triggering of Article 50 a good argument for making a reference to The Court Of Justice now?

As all readers of this post will know, the United Kingdom gave notice of its decision to withdraw from the EU on 29 March 2017. Under Article 50 TEU, that means that (subject to a different date being provided for in a withdrawal agreement or an extension by unanimity) the UK will cease to be subject to the Treaties on 30 March 2019.

Unless any different provision is made in a withdrawal agreement, the Court of Justice of the EU will cease, on that date, to have jurisdiction to rule on questions of EU law referred to it by UK courts under Article 267 TFEU.

Since the Court of Justice takes between 12-18 months to answer a request for a preliminary ruling, parties to litigation that raises questions of EU law may well be concerned that, unless a reference is made soon, there will be a serious risk that any reference will not be answered before Brexit day and so will never be answered. If parties think that the CJEU is more likely to give a favourable answer than the UK courts, they will want to accelerate the making of a reference so that it happens now or in the next few months, to avoid any Brexit risk.

In Coal Staff Superannuation Scheme Trustees v HMRC [2017] UKUT 0137 (TCC), the Upper Tribunal (Rose J) was faced with an application by the Trustees for an immediate Article 267 reference of questions of EU law arising in tax litigation on the basis that, if one was not made now, it might never be made. Rose J refused the application, holding that the triggering of Article 50 was not a factor that pointed towards a reference.

The Trustee argued, first, that because (on the likely future timetable of the case) the Upper Tribunal was the last UK court that would be able to make an Article 267 reference in time for it to be completed before March 2019, it was, in reality, “a tribunal … against whose decision there is no judicial remedy under national law” for the purposes of Article 267. Rose J rejected that argument: the service of a notice under Article 50 could not change the settled interpretation of Article 267 now, even adopting the appropriate teleological approach.

The Trustee also argued that the impending exit of the United Kingdom from the EU meant that the Upper Tribunal should exercise its discretion in favour of making a reference now. Again, Rose J rejected that submission. First, she observed that: –

we do not know what kind of transitional provisions will be put in place by the Government and the CJEU or other EU institutions to deal with people in the same position that the Trustee anticipates being in as at the date of the UK’s exit, namely in the course of litigation to determine issues of directly applicable EU law that have arisen during a period before that exit took place” (§24)

She then continued: –

Some solution to the problem that arises in this case will have to be implemented because there are likely to be very many people in the same position as the Trustee may be on the date of exit. Whatever those arrangements are will apply to the Trustee and will be implemented by the courts in accordance with whatever the law dictates. It would not be right to pre-empt that by rushing a preliminary reference off to the CJEU in the hope that the Court will give a ruling before the UK exit.

Rose J therefore took the view that, because some arrangement was likely to be made to deal with litigants in ongoing cases dealing with periods where EU law was directly applicable, it would be wrong to pre-empt that arrangement.

Since, leaving Article 50 to one side, the other factors pointing to an immediate reference were not compelling, the application was refused.

It was perhaps inevitable that UK courts would not be keen to accept an argument that would result in a large number of references being made over the next few months and at an earlier stage than would otherwise be considered sensible. Nor, it may be assumed, would the Court of Justice have welcomed such a tsunami of UK cases. However, it is worth noting that Rose J’s argument implicitly assumes that the parties’ ability to have a case referred to the Court of Justice is a right with little or no weight, and that parties’ rights to the fair and resolution of disputes will not be adversely affected by whatever arrangements are made for ongoing litigation involving EU law issues. The first assumption is perhaps contentious, and the second (while almost certainly correct) is not as matters stand entirely certain.

It is also worth noting that paragraph 35(a) of the Commission’s draft negotiating mandate (published after Rose J’s judgment) provides that in:

Judicial proceedings pending before the Court of Justice of the European Union on the withdrawal date involving the United Kingdom, United Kingdom natural and/or legal persons (including preliminary references); the Court of Justice should remain competent to adjudicate in these proceedings and its rulings must be binding upon the United Kingdom;

If the United Kingdom agrees to that (and it has taken no public position on the point) then the problem raised by the Trustee in this case would go away.

This case is not, however, the end of the story. While uncertainty persists, the next question that will arise is the mirror image of the issue in Coal Trustees: once we are within 12-18 months of Brexit day, should UK courts decline to make a reference in cases which they would otherwise refer because of the uncertainty as to what is to happen to pending references on Brexit day? Or, if it becomes clear that there will be a withdrawal agreement containing the provision on existing references outlined above, will there be a rush to get references made before Brexit day? Stay tuned for the next exciting instalment …

Brexit in microcosm: legal implications for the UK and Spain

On 8 May, the FIDE Foundation in Madrid held a seminar on the legal effects and repercussions of Brexit for Spanish companies and Spanish citizens . The speakers were Christopher Muttukumaru CB , Miguel Sampol (the Director of CJEU Litigation in the Spanish Ministry of Foreign Affairs), Miguel Sampol, and Manuel Conthe, a distinguished economist and international arbitrator. The seminar was chaired by Rafael Dominguez Olivera, chief legal adviser, Ministry of Infrastructure, Madrid.

Copies of the full handouts tabled at the meeting are available here.

In debate, the speakers and attendees covered a number of post-Brexit issues , including:

  • Citizenship rights, not least in the context of the European Commission’s negotiating directives published on 3 May;
  • Illustrative horizontal issues which will need to be covered in a permanent or transitional EU-UK trade agreement. Discussion centred on the impacts for contracts which straddle the pre- and post-Brexit boundary, on state aid and on environmental law;
  • The possible delays which might result from the need for national constitutional requirements to be satisfied if agreements under Article 218/TFEU need to be ratified by the EU27 (subsequently the judgment of the CJEU in respect of the EU- Singapore Free Trade Agreement was delivered on 16 May, confirming the possibility of delays, depending on the substantive content of any trade agreement);
  • The future role of the CJEU.

An executive summary of the key points made in discussion is available here.


Concluding Free Trade Agreements: the EU-Singapore Opinion and Brexit

On 16 May, the European Court of Justice rendered Opinion 2/15 (here) on the conclusion of the Free Trade Agreement between the European Union and Singapore.

What is it?

The Opinion is a legally binding ruling rendered on the basis of a procedure laid down in Article 218(11) TFEU. This procedure enables certain EU institutions and any Member State to ask the Court questions about the compatibility with the EU Treaties of international agreements that the EU is about to conclude. The rulings of the Court are binding (for instance, the EU has been unable to accede to the European Convention on Human Rights because, in an Opinion of December 2014 (here), the Court held that the Draft Accession Agreement that had been negotiated between the EU and the Council of Europe was not compatible with the EU Treaties).

What is it about?

After approximately 4.5 years of negotiations, the EU and Singapore finalised a Free Trade Agreement in October 2014. This took the form of a deep and comprehensive free trade agreement: its content went beyond the traditional tariff and non-tariff barriers to trade in goods and services, and covered areas such as intellectual property rights, public procurement, competition, sustainable development, and investment.

The Opinion is about who has the power to conclude the Agreement: the EU on its own, or along with the Member States? The answer to this question depends on whether the content of the Agreement falls within the exclusive competence of the EU, or whether the Member States share competence (in which case the agreement could be mixed).

Why does it matter?

This is a matter of considerable legal and practical significance. If the EU is exclusively competent, the Agreement would be concluded by the Council alone (Article 218(8) TFEU) and with the consent of the European Parliament (Article 218(6)(a) TFEU). If, on the other hand, the Agreement was mixed, it would be concluded by the Council and every Member State, the latter ratifying the Agreement in accordance with their constitutional procedures. This process may not be smooth. It is recalled that the conclusion of the Comprehensive Economic and Trade Agreement between the EU and Canada (CETA) was nearly derailed by the Walloon Parliament in Belgium in October 2016 (I examined this issue in this blog entry: here).

The Opinion on the EU-Singapore Agreement was anticipated eagerly. The underlying issues are central to the conduct of the Union’s external trade policy, and the Opinion was expected to shed light on the reforms introduced in the area by the Lisbon Treaty. The Opinion, furthermore, would have implications for the conclusion of the trade agreement that the UK would conclude with the EU about their post-Brexit relationship.

The significance of these issues is illustrated by the fact that the Opinion was rendered by the Full Court, that is a composition that is rarely convened and only for the most important matters. It is also noteworthy that the Governments of 25 Member States made submissions.

What did the Court hold?

The Court held that the EU-Singapore Agreement was mixed and that the EU could not conclude it on its own. This is because two parts of the Agreement were covered by shared competence. These were about:

  • Indirect foreign investment (such as portfolio investment, that is any investment involving the movement of capital for personal gain without any intention to influence the management and control of the undertaking where the investment is made);
  • the establishment of an investment-State dispute settlement (ISDS) (investors are given the right to bring an action against either party before an arbitral tribunal).

The Court held that the EU had exclusive competence over all the other provisions of the EU-Singapore Agreement covering the following:

  • trade in goods and services (including transport services and public procurement);
  • foreign direct investment (that is investment by an EU national in Singapore, or vice versa, involving movement of capital enabling the investor to participate in the management of an undertaking or in its control)
  • intellectual property rights;
  • competition;
  • sustainable development (including environmental protection and labour standards).

As far as the ISDS mechanism is concerned, the Opinion was confined to the question of competence. It did not address the compliance of the mechanism with EU law, in general, and the principle of autonomy, in particular. It is only a matter of time before this is raised before the Court of Justice (Belgium has undertaken to raise it in the context of the ISDS system laid down in CETA).

Is this a victory for the Member States?

As the Court sanctioned the participation of the Member States in the conclusion of the EU-Singapore Agreement, the Opinion may appear to suggest a victory for the Member States. Appearances, however, may be deceptive. The arguments of all the intervening Member States about a more narrow reading of exclusivity were largely rejected, and the Court went farther than Advocate General Sharpston had suggested (here). Overall, the exclusive competence of the Union in international trade has been bolstered considerably. For instance, the Opinion construes broadly the scope of the Common Commercial Policy (CCP), where the EU is exclusively competent under Article 3(1)(e) TFEU. By bringing the sustainable development provisions of the Agreement within the scope of the CCP, the Court has given the Lisbon reforms teeth. In many respects, the Opinion makes it easier for the Union to conclude trade agreements.

What are the implications for the EU-Singapore Agreement?

In the light of the Opinion, the EU-Singapore Agreement, in its present form, will be concluded by the EU and its Member States, of the one part, and Singapore, of the other part. Given the participation of Member States, national parliaments and, in some cases, regional assemblies will be involved in order to ratify the Agreement in accordance with the constitutional law of each Member State.

In order to speed things up, the parties may decide to apply provisionally the parts of the Agreement that fall within the Union’s exclusive competence. Provisional application requires a decision by the Council once the Parliament has given its consent. This decision would apply until the agreement had been ratified by all Member States.

The EU-Singapore Agreement could be concluded by the EU alone only if it was amended in order to comply with the Court’s Opinion. This would entail the removal of its parts dealing with indirect foreign investment and ISDS, a development that would, of course, require its renegotiation.

What are the implications for Brexit?

The negotiation of the post-Brexit UK-EU agreement is bound to be complex. It is, therefore, in the UK’s interest to reduce the number of legal obstacles that may derail this process. Viewed from this angle, a UK-EU only agreement, that is without the participation of the Member States, is the most attractive formula for the British negotiators: there would be fewer constituencies to satisfy, the unpredictable role of national parliaments would be avoided, and the whole process would take less time to complete.

The conclusion of the EU-Singapore Opinion may suggest that Member States would have to participate to such an agreement. This, however, would be deceptive: as most areas covered by the Agreement fall within the EU’s exclusive competence, a free trade agreement which would not cover indirect foreign investment and which would not provide for a ISDS mechanism would be concluded by the EU alone. A separate Bilateral Investment Treaty, dealing with the above two issues, could be, then, negotiated between the UK and the EU and its remaining 27 Member States. Given the UK’s insistence for joint participation in trade negotiations, it is somewhat ironic that the rejection of most of its arguments might make it easier for it to negotiate its post-Brexit relationship with the EU.

There are two qualifications. First, it by no means follows that the content of a UK-EU agreement would mirror the EU-Singapore Agreement. Whilst the latter is comprehensive, it may not provide a model for the former which would be negotiated, after all, in unique circumstances.

Secondly, the broader the scope and deeper the content of a UK-EU Agreement, the more complex its conclusion. If, for instance, such an agreement were an association agreement, its conclusion would require unanimity in the Council (Article 218(8) paragraph 2 TFEU). The UK Government has suggested that this type of agreement would be of no interest, and that it would negotiate, instead, for a ‘big, very ambitious free trade agreement’ (David Davis, Secretary of State for Exiting the European Union, reported in The Times, 15/5/2017, p10). The negotiations, however, have not started yet, and, therefore, the shape of the post-Brexit Agreement is unclear.