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.
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.
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  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 …
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.
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;
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.
According to many Leavers, Brexit would allow the UK to recover its liberty by casting off a yoke of bondage imposed by EU law. Most competition lawyers could have been forgiven for thinking that after Brexit Articles 101 and 102 would no longer have direct effect in the UK.
The Government’s White paper on the Great Repeal Bill may therefore have come as something of a surprise. The Government announced that, at least for the time being, it intends to incorporate into UK law any EU treaty provisions which create rights that can be relied on directly in court by an individual – as Articles 101 and 102 undoubtedly do.
What difference will this make?
The main benefit is that, so long as Articles 101 and 102 are part of UK law, you have a straightforward legal basis for bringing claims based on them in the national courts, i.e. as claims for breach of statutory duty.
As and when those articles stop being part of UK law, such claims will probably need to be brought as claims for a breach of a foreign tort. The claimant will have to prove that the EU rules formed part of the law of, say, France, and will be obliged to call expert evidence to prove their substantive content as a matter of fact.
Show me a lawyer who thinks this sort of additional complexity would be a good idea, and I will show you someone who thinks they can make money out of it.
But we should distinguish between claims relating to pre-Brexit and post-Brexit periods.
One of the main reasons to base claims on Article 101 or 102 after Brexit will probably be to bring a ‘follow on’ action relying on a European Commission infringement decision (assuming these are preserved). If you need to prove the infringement yourself, it will generally be easier to claim under the Competition Act.
Even after we have left the EU there should be a steady flow of Commission infringement decisions covering the pre-Brexit period: competition investigations are lengthy affairs, and unlawful activities can remain hidden for years.
It may not, though, be strictly necessary to incorporate the main EU antitrust provisions in order to facilitate such claims. That is because, while section 2(1) of the European Communities Act 1972, which currently gives Articles 101 and 102 legal effect in this country, is due to be repealed, section 16 of the Interpretation Act 1978 states that, unless the contrary intention appears: “where an Act repeals an enactment, the repeal does not … (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under that enactment … [or] (e) affect any … legal proceeding or remedy in respect of any such right, privilege obligation, liability, penalty, forfeiture or punishment”.
As a result, if you acquired a right to sue someone for breach of statutory duty as a result of a pre-Brexit infringement of Article 101 or 102, then you should still be entitled to bring legal proceedings to vindicate your rights even after the repeal of the 1972 Act (perhaps basing your claim on both the 1972 and 1978 Acts).
Turning to claims covering the post-Brexit period, it is difficult at the moment to know how beneficial it would be to retain Articles 101 and 102 within our domestic legal framework over the medium term.
That is because it will partly turn on the outcome of the Brexit negotiations. The UK and EU might agree, for example, that Articles 101 and 102 should continue to apply to the UK for the purpose of any Commission competition investigations already underway at the date of Brexit. And the potential attractiveness of the UK as a forum for damages claims relating to EU or global cartels will depend on what is agreed in respect of jurisdictional and choice of law rules.
But there are at least three good reasons to domesticize Articles 101 and 102 at least for the time being.
First, despite the possibility of relying on the Interpretation Act, having Articles 101 and 102 within the domestic legal framework will remove any doubt as to the legal basis for bringing claims relating to the pre-Brexit period. Given there will be a great deal of legal uncertainty around, any opportunity to reduce it should be grasped.
Second, and however unhelpfully from our perspective as lawyers, cartelists and abusive companies are not going to end their unlawful activities the day before Brexit and initiate a new set of practices a day later. Claims will inevitably straddle the pre-Brexit and post-Brexit periods, and if you need to base your pre-Brexit claim on the EU antitrust provisions in order to take the benefit of a Commission infringement decision it will be a lot easier if you can use the same legal basis for your post-Brexit claim.
Third, depending on what is negotiated, there may be real benefit to facilitating EU law claims even if they only cover the post-Brexit period.
Set against this, there is no obvious down-side to keeping Articles 101 and 102 within UK law. The ‘inter-state trade’ jurisdictional threshold means that the EU rules don’t apply to UK-specific practices, and any UK companies which export to the continent will need to comply with them in any event. All it does it make it easier for people to bring claims in the UK courts.
Even if the Government felt that it would be incongruous to keep Articles 101 and 102 as part of UK law over the long term, it would be unwise for it to try to specify an end-date while the future situation remains as unclear as it is at the moment. More sensible would be if the relevant secondary legislation under the Great Repeal Act gave ministers the power to repeal the provisions if and when that was considered appropriate at some point in the future – after properly consulting the sector.
That would be consistent with the broader approach set out in the White Paper, namely that we should maintain the current legal status quo for the time being and work through whether or not we want to repeal or make changes to EU-derived law over time, i.e. after we have left the EU.
It would certainly be nice if the Government took advantage of the extra time it has bought itself by calling a general election two years after the last one and avoided taking rushed decisions in this and other areas. I love the an election night infographic as much as the next man or woman, but some more concrete benefits in exchange for the joys of the next few weeks would be greatly appreciated.
The Brexit Competition Law Working Group (“BCLWG”) has today published its draft report on the implications of Brexit for UK competition law and policy.
The draft report will be discussed at a half-day conference on 2 May 2017 and written comments are also invited by 15 May 2017 (email@example.com). A final report will be then be produced.
Some of the key recommendations are as follows.
Section 60 of the Competition Act 1998 (“CA98”) should be amended such that, when applying the Chapter I and Chapter II prohibitions, UK authorities and courts are only required to ‘have regard to’ EU judgments relating to Articles 101 and 102 (at the moment these are effectively binding).
Existing EU block exemption regulations should continue to exempt agreements from the Chapter I prohibition. However, new regulations issued after Brexit should not result in ‘parallel exemptions’ under the CA98. Instead, the CMA should enact its own domestic block exemptions under section 6 CA98.
Sections 47A and 58A of the CA98 should be retained so as to preserve the ability of private parties to bring EU ‘follow-on’ damages actions relating to breaches of Articles 101 and 102 in which Commission infringement findings are binding on the issue of liability.
The current statutory criteria for mergers and market investigations should be retained. In particular, the group recommends against expanding the role of public interest criteria under the merger regime.
Commitments from past antitrust and merger cases should be ‘nationalised’ under the Great Repeal Bill, and the CMA should adopt any pre-Brexit leniency offers made by the Commission.
Arrangements will need to be put in place for close cooperation between the CMA and Commission, not least to deal with difficult transitional issues arising from cases which straddle the date of Brexit.
Brexit will lead to a significant increase in the CMA’s merger workload, i.e. because of the end of the one-stop-shop. A substantial increase in the CMA’s resources will be needed if its other activities are not to be squeezed.
There is considerable common ground on these points between the BCLWG draft report and the two other weighty reports that have been produced on this subject, namely those by COMBAR and the City of London Law Society. This largely reflects a widespread desire amongst the legal community to promote legal certainty by minimising regulatory upheaval, an objective shared by the Government.
The Government’s proposed approach has recently been set out at some length in its White Paper on the Great Repeal Bill. The White Paper is mentioned in the BCLWG document, but it was published relatively late in the day after the group had done much of its thinking. One issue for discussion at the 2 May conference and which needs to be considered further before the report is finalised is whether the broader legislative approach of the Government that is starting to emerge has additional implications in the field of competition policy.
This and various related issues will be discussed in subsequent posts.
Danish Association for European Law: seminar 6 April 2017: Copenhagen
Post Brexit aims of the UK Government : White Paper on exit from the EU and later texts .
(Florentine map of the world from an early 17th century atlas in the Fellows’ Library – with thanks to the Principal and Fellows of Jesus College, Oxford)
Note: a White Paper is a description of a document containing a synthesis of facts and argument leading to a statement of UK Government policy,
SUMMARY AND KEY TEXTS
1. The UK seeks a global future
The aim of this presentation is to describe the key strategic issues that will arise in the UK/EU Brexit negotiations; to identify, assuming agreement is reached, how many agreements are contemplated; and to offer a view on what (in practice) the negotiations will involve .
The UK intends not only to form a new partnership with Europe but also with the rest of the world. The Government foresees a “truly global” Britain.
” All the world’s a stage
And all the men and women merely players;
They have their exits and their entrances ;
And one man in his time plays many parts,
His acts being seven ages.”
2. Key Brexit policy documents
The UK Prime Minister has made two speeches (2 October 2016 and 17 January 2017) in which she has set out her wish list for the upcoming Brexit negotiations. On 2 February, a White Paper was published by the UK Government (The United Kingdom’s exit from and new partnership with the European Union). On 29 March, the UK Prime Minister notified the EU of its intention to leave under Article 50/TEU, together with a further elaboration of the UK Government’s aims and its preferred approach to the negotiations. On 30 March, the European Council published its “Draft guidelines following the United Kingdom’s notification under Article 50 TEU“.
3. A summary of the agreements for negotiation.
A withdrawal agreement under Article 50 of the TEU.
The UK “will pursue a new strategic partnership with the EU, including an ambitious and comprehensive Free Trade Agreement and a new customs agreement” (chapter 8 of the White Paper).
A transitional agreement.
Thus at least four agreements would be required to establish a new strategic partnership with the EU.
4. Phasing of negotiations – the competing arguments.
How shall we start? How long have we got? In her letter of 29 March, the UK Prime Minister argued that the right way is to negotiate a withdrawal treaty and future trade agreement(s) simultaneously with one another.
By contrast, in the draft EU Guidelines, the EU follows the approach that is contemplated in Article 50. As to simultaneous negotiations, the Council will monitor progress on the terms of the withdrawal agreement. When “sufficient progress has been made”, it will determine whether to allow negotiations to proceed to the next phase.
5. The Withdrawal agreement
The Withdrawal Agreement under Article 50 would seek the disentanglement of the UK from the EU and “from all the rights and obligations the United Kingdom derives from commitments… as Member State”. The exit invoice is already a major issue. So is the position of EU citizens in the UK and UK citizens in other Member States. It will have to provide for handling the future of UK membership of EU agencies and for the future of UK officials in the EU institutions. It will have to deal with transitional matters such as legal certainty and equal treatment in respect of cases before the CJEU; and for administrative procedures pending before the Commission or the agencies.
Separately the UK will also have to handle the implications of exit for obligations that it has adopted under international treaties negotiated on its behalf by the EU, such as air services agreements with third countries like the USA.
6. The free trade agreement.
The UK aim.
The White Paper says that the UK will not seek membership of the Single Market. In paragraph 8.1, it states: “It is in the interests of the EU and all parts of the UK for the deeply integrated trade and economic relationship between the UK and the EU to be maintained after our exit from the EU. Our new relationship should aim for the freest possible trade in goods and services between the UK and the EU”. That agreement may take in elements of the current Single Market arrangements in certain areas. In her letter of 29 March, the UK Prime Minister asserts that it should “cover… sectors crucial to our linked economies such as financial services and network industries”. The network industries include transport, energy and telecommunications
The EU aim.
The EU guidelines recall that Article 50 requires the parties to take account of the framework for future relationship with the EU in arrangements for withdrawal . Specifically the EU has stated that “[p]reserving the integrity of the Single Market excludes participation based on a sector-by-sector approach. A non-member of the Union that does not live up to the same obligations as a member, cannot have the same rights and enjoy the same benefits as a member”.
7. The Customs Agreement.
The UK wishes to take advantage of the opportunity to negotiate its own preferential trade agreements around the world. So it will not be bound by the Common External Tariff or participate in the Common Commercial policy (paragraph 8.43). It further observes (paragraph 8.2) that “The UK already has zero tariffs on goods and a common regulatory framework with the EU Single Market. ” The implication seems to be that that is what the UK will seek.
8. Security cooperation: has a threat been made by the UK?
The UK has, on one view of its Article 50 letter, linked future security and intelligence cooperation with securing an acceptable trade deal. No responsible government should bargain on the basis of threatening to undermine a friendly State’s national security.
9. The unpredictable timeline for the period of negotiation, including national constitutional requirements (if any)
Point (a) Timing: the impact of uncertainty
The possible length of the negotiations is totally unclear. If the European Parliament is to be given a reasonable opportunity to consider the texts, it will need at least six months. But some sectoral industries are already alarmed at the prospect of the negotiations going down to the wire. Few observers would doubt that unquantifiable delay is going to result in instability, both for businesses and for individuals.
Point (b) : National constitutional requirements. Could national constitutional requirements be triggered in the 27 other Member States by the agreements between the UK and the EU, however many there are?
The withdrawal agreement will be governed by Article 50 and will be concluded by the Council and not by the individual Member States. It is unlikely to require ratification by each Member State.
Any future trading agreement (and other agreements) will be negotiated in line with the Treaty provisions on agreements with third countries (Article 218/TFEU) . A trading agreement (and other agreements) could therefore be subject to ratification in line with national constitutional requirements, if applicable.
10. Transitional trade arrangements
The challenge of the timeline of two years has brought some realism into each side’s thinking. Both sides recognise (but the EU holds the whip hand) that there may have to be a transitional agreement to provide legal certainty while a permanent trade deal is finalised.
The EU’s guidelines: “To the extent necessary and legally possible, the negotiations may also seek to determine transitional arrangements which are in the interest[s] of the Union…Any such transitional arrangements must be clearly defined , limited in time and subject to effective enforcement mechanisms. “
Crucially, the guidelines make clear that , if a transitional trade agreement is entered into, by the EU, existing EU regulatory, budgetary , supervisory and enforcement instruments will continue to apply – namely the Commission and CJEU will continue to have jurisdiction.
11. International Law obligations.
What will happen to the international treaties negotiated by the Commission , binding on each Member State?
12. The negotiations
The Commission will lead the negotiations for the EU. But while it has a negotiating mandate, the Member States will decide the fate of the negotiations on the basis of the voting procedure in Article 50. The guidelines make a significant point about the nature of the endgame. The Union will approach the negotiations with unified positions and will only engage with the UK exclusively through the channels anticipated in the negotiating mandate.
The negotiations on the Article 50 Agreement, the EU/UK Trade Agreement and the Customs Agreement will be separated , save where there are overlaps. In each area, the negotiators will split it into sectoral technical working groups, such as a working group on financial services and a working group on each of the main network industries, as well as on cross-cutting issues.
In line with established practice, “nothing is agreed until everything is agreed”. In the endgame, there will be a cauldron full of the biggest issues. Then the trade offs will begin. The assumption is that these negotiations are too big to fail. But what if the unthinkable happens?
DFE presentation 6 April 2017: Aspects of post Brexit regulation in the Aviation sector: The last scene that ends this strange and eventful history
(As you like it – William Shakespeare)
(Florentine map of Denmark from an early 17th century atlas in the Fellows’ Library – with thanks to the Principal and Fellows of Jesus College , Oxford)
Summary and key texts
The issues raised by this presentation may help to illustrate aspects of the Brexit endgame. “The last scene that ends this strange and eventful history”
1. Context: How important is the Aviation sector to the UK and the EU?
This presentation assists in understanding the rules governing the EU Aviation Single Market; in the light of that understanding, it notes what UK air carriers stand to lose if no agreement is reached at UK/EU level; and it identifies practical considerations for lawyers to address. The points raised are illustrative, not comprehensive.
The UK Prime Minister has signalled the importance of an ambitious free trade deal covering the Financial Services industry and the EU’s network industries, including transport. They were, she said, crucial “to our linked economies”.
Context on the contribution that air transport makes to the economies of the UK and the EU:
In 2014 (UK Civil Aviation Authority evidence to the UK Balance of Competences Review in the Transport sector), the CAA said: “overall, air transport contributes E365 billion yearly to European GDP and directly supports 5.1 million jobs. Air transport is the main vehicle for tourism in Europe, generating E900million per day and provides direct or indirect employment for 23 million people”;
In its evidence to the UK Balance of Competences Review, the British Air Transport Association said: “EU oversight over air transport has been extremely beneficial , creating a very liberalised and efficient sector in Europe, allowing the industry entry to markets in Member States and to grow across borders, delivering better and cheaper travel for the public”;
Easyjet, the world’s third largest low cost carrier, said: “Easyjet is a product of the EU’s deregulation of Europe’s aviation market. Without deregulation, we would not exist.
2. Summary of coverage of this presentation:
a) The strategic air transport vision within the EU:
b) The rules on safety – an interface between domestic law, EU Law and International Law
c) An Institutional snapshot: the future role of an EU agency in the safety field;
d) The rules on security- another interface between domestic law, EU Law and International Lawe) The Futuroscope : beyond the Great Repeal Bill : the Denied Boarding Regulation
This presentation is not a discussion of many other matters that arise in a post Brexit aviation context, eg:
How the EU and UK might agree to treat tariff free movement of aeronautical parts and equipment ;
How the UK will need to determine urgently the future of bilateral air services agreements that the EU has concluded with third countries, most importantly the EU/US Open Skies agreement .
3. The strategic vision : access to the liberalised aviation single market in the EU
The EU principle of freedom of access means that every Community air carrier is entitled to operate any intra Community air services. Access to this market is permitted by a system of licensing and certification.
A Community air carrier is defined as an air carrier with a valid operating licence. Under Regulation 3.1 of Regulation 1008/2008, no EU undertaking is permitted to carry by air passengers, mail or cargo unless they have an appropriate operating licence. To obtain one, an undertaking must meet the criteria in Chapter II
Under Chapter II, an undertaking must be granted an operating licence by the competent licensing authority of a Member State if a number of criteria are satisfied.
The first criterion in Regulation 4 is that its principal place of business should be located in that State.
A second criterion in Regulation 4 is that an undertaking must hold a valid air operator certificate issued by a national authority of the same Member State whose competent licensing authority is responsible for granting , refusing, revoking or suspending the operating licence of the Community air carrier
An air operator certificate means a certificate confirming that the operator ” has the professional ability and organisation to ensure the safety of operations specified in the certificate.” [Regulation 2.8]
From the effective date of Brexit, subject to a transitional or permanent EU/UK agreement, a UK airline will no longer be a Community air carrier for Single Market purposes since it will not hold an operating licence as defined.
Key practical points for consideration
a) Revival of dormant bilateral air services agreements between the Member States and the UK to fill any gap in a post-Brexit future?
b) Moving the principal place of business of UK carriers to one of the other 27 Member States?
c) Post Brexit day, the probability is that there will be continuing technical compliance with EU rules by UK carriers . So how might the framework for access to the Aviation Single Market be adjusted if, politically, the 27 wished it, eg, in the transitional agreement, deeming a UK air carrier to be a Community air carrier or providing a UK air carrier with access to the Aviation Single Market? Politically, would the former be acceptable to the UK Government?
d) Joining the European Common Aviation Area? But that too would mean compliance with Single Market rules.
e) If an EU/UK deal is agreed, UK compliance with the EU rules will rely on the way that the EU acquis is incorporated into UK national law. Across all areas of regulation, Danish lawyers would be wise to keep under scrutiny the progress of the Great Repeal Bill . Remember that the Commission will no longer have a role.
4. Aviation safety
5. The future role of an EU agency – the European Aviation Safety Agency
Major airlines operate within the EU and outside it. It is business critical to comply with both EU and International Civil Aviation Organisation (ICAO) safety standards; but if regulatory cost burdens are to be minimised by cooperative means, so much the better. So the EU and ICAO have entered into a memorandum of understanding which aims to give a framework for enhanced cooperation in aviation safety, aviation security, environmental protection and so on.
Regulation 216-2008 confirmed the continued existence of the European Aviation Safety Agency and established the basic rules governing the operation of civil aviation in the Community.
Article 1 provides for the application of common standards (a) to the design, production , maintenance and operation of aeronautical products , as well as to the personnel and organisations involved in the design of such products; (b) to personnel and organisations involved in operation of aircraft; (c) design, maintenance and operation of aerodromes.
Article 2 contains important overarching principles such as establishing and maintaining a high level of aviation safety in Europe; ensuring a high level of environmental protection; facilitating the free movement of goods, persons and services ; promoting cost efficiency in regulatory and certification processes; assisting Member States to fulfil their obligations under the Chicago Convention.
The responsibility for regulatory oversight and certification processes is split between EASA and the competent authority designated by each Member State.
Critically for businesses and passengers, there is mutual recognition of certificates. Article 11 provides that Member States must , without further technical requirements or evaluation , recognise certificates which are issued in accordance with Regulation 216-2008.Mutual recognition maintains high common standards and reduces costs.
Key practical points for consideration
a) On Brexit day, UK air carriers are likely to be in technical compliance with EU safety rules.
b) Dormant bilateral air services agreements will need to be examined to check relevant coverage..
c) Strict position is that, absent an EU/UK agreement, certificates of safety issued by the UK CAA would cease to be valid in the Single Market on Brexit-day. Without valid safety certificates, an air operator certificate could not be issued to a UK based air carrier which seeks access to the Aviation Single Market. Equally if there is no agreement at the EU/UK level , the UK could refuse to recognise EU carriers’ safety certificates. But that would be wholly implausible;
d) The biggest headache would be for the UK to replicate the role of EASA, not least in connection with its type approval functions.
6. Aviation Security
EU Aviation standards are intended to be consistent with the Chicago Convention requirements
On 11 March 2008, Regulation 300-2008 on Common Rules on Aviation Security was adopted. This provides for common basic standards for security at EU airports.
Member States are entitled to adopt more stringent standards, based on a local risk assessment.
Key practical points for consideration
a) Aviation security should not become a pawn in a negotiating game;
b) Some countries have a greater security risk profile. The UK is one. If the UK imposes more stringent measures, they are capable of undermining airline schedules and adding to cost burdens.
7. The Futuroscope: what EU rules might the UK Parliament decide to revoke or amend in a post Brexit phase? Illustrative case: Denied Boarding Regulation
The UK Government has said that, notwithstanding the incorporation of EU Law into domestic law, the UK Parliament will later have the right to consider whether to amend or repeal those laws after Brexit.
Under Regulation 261-2004, the Denied Boarding Regulation, there is a right to compensation for cancellations or denied boarding on defined flights. There is also a right to assistance in the case of long delays to flights.
The Regulation was opposed by air carriers because of the costs of compliance.
In cases C402/07 Sturgeon and C432/06 Block, the CJEU extended the availability of compensation for passengers in a way that did some injustice to the drafting of the Regulation. This increased the costs exposure of airlines. Low cost carriers are especially at risk.
But if the UK Government acts as it has promised, the Regulation will be duly implemented into UK national law.
Key practical points to be considered
a) Aspects of the Regulation are an obvious target for subsequent amendment in a deregulatory policy environment in a post-Brexit UK. Yet deregulatory measures, if out of step with the EU rules, would result in a competitive advantage for UK carriers if they had continued to enjoy access to the EU Aviation Single Market. The EU’s negotiating guidelines make clear that, if a transitional agreement is reached, existing EU regulatory rules would have to continue to apply.
b) Even if the Regulation is properly implemented into UK law, what about the incorporation of subsequent amendments to the Regulation at EU level? In this case, the Commission has in fact proposed legislative amendments to the Denied Boarding Regulation.
8. How ends “this strange and eventful history” ?
Will there be a deal on UK access to the Aviation Single Market? The EU’s negotiating guidelines emphasise that nothing is agreed until everything is agreed.
Overall, taken on a sectoral basis, it is doubtful whether the EU, even if it holds most of the cards, would want to deny continuing access. There are many significant economic interests to consider, which could be undermined by instability , such as the impact on the tourism industry.
But there are also some Member States which may see advantage in denying access on Single Market terms to powerful UK low cost carriers if that could help to safeguard their national air carriers.
Will either side want to stare into the abyss?
“……Last scene of all
That ends this strange and eventful history is second childishness and mere oblivion
Sans teeth, sans eyes, sans everything” (As you like it).
At a Brexit seminar in Copenhagen at the Danish Association for European Law on 6 April, Tim Ward and Christopher Muttukumaru were principal speakers. Their presentations included post Brexit regulation of the Aviation and Telecommunications sectors.
The event was chaired by Professor Ulla Neergaard , Professor of EU Law at the University of Copenhagen. The third principal speaker was Ros Kellaway, head of EU and Regulatory group, Eversheds-Sutherlands.
The seminar was attended by private practitioners, academics and law students.
The speakers covered the following topics:
” All the world’s a stage ” – the UK Government’s White Paper on Brexit , including the UK’s new global outlook; the Article 50 letter of 29 March and the Commission’s response;
Aspects of post-Brexit regulation in the Competition field;
Aspects of post-Brexit regulation in the Telecommunications field;
Aspects of post-Brexit regulation in the Transport (Aviation) field;
The Great Repeal Bill – its purpose and coverage;
The roles of the national courts, of the CJEU and of the Commission in a post Brexit world.
There followed a very lively series of questions and answers about a post-Brexit future . Topics raised by the audience included questions about cartel investigations in a post Brexit world; UK support for the EU environmental acquis ; and the “what if ” questions about the future of Scotland.
The speakers’ written materials have been published on the organisers’ website here.
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