Gibraltar: a Sting in the Tail, but not a Surprise

Last week, the status of Gibraltar arose on two occasions in relation to Brexit.  The first passed wholly or virtually unnoticed, while the second caused a furore which has remained in the headlines for several days.

Before we consider those incidents, what is the status of Gibraltar with regard to the EU?  As a matter of UK constitutional law, it is not part of the UK, but a colony.  It is the only British colony in the EU, by virtue of Article 355(3) TFEU which reads: “the provisions of this Treaty shall apply to the European territories for whose external relations a Member State is responsible”.  However, by virtue of Article 28 of the Act of Accession of 1972, Gibraltar is not subject to the Common Agricultural Policy or VAT and, being outside the territory of the customs union (see Article 4 of the Union Customs Code), the Treaty provisions on the free movement of goods do not apply to it.

First of all, Chapter 5 of the Government’s White Paper on the Great Repeal Bill on which Julian Gregory commented (here and here ) began with the following statement: “The Crown Dependencies and the Overseas Territories, including Gibraltar, are not part of the UK for the purposes of EU law …” As regards Gibraltar, this statement is almost certainly incorrect for the reasons set out recently by Advocate General Szpunar (here); (the judgment is that case is still awaited).  After all, Gibraltar is in the EU by virtue of being a dependency of the UK; since it is not a Member State in its own right, it necessarily follows that the colony is part of the UK for the purposes of EU law.

Unsurprisingly, this apparent error has not caused a stir. Was I the only person to notice it?

In contrast, the second occasion on which Gibraltar was mentioned last week in one of the key Brexit documents caused a national outcry that does not yet appear to have abated.   The final paragraph of the European Council’s draft negotiating guidelines (here), reads as follows: “After the United Kingdom leaves the Union, no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom.”

In his post on the draft guidelines (here), Ben Rayment aptly described this assertion as a sting in the tail (for the British).   But it came as no surprise.

That Gibraltar would be vulnerable to Spanish pressure in the event of a British vote to leave the EU was never in doubt.   During the referendum campaign, the Government of the colony campaigned very hard for Remain and made this point most forcefully. So it is little wonder that 95.9% of the population of Gibraltar voted to remain in the EU.  The uncertainty of Gibraltar’s sovereignty after Brexit is also plain from the report on Gibraltar by the House of Lords Select Committee on the EU (here), published just a month ago, is replete with detailed information on the issue, including the witness statement by the Chief Minister of the colony.

However, the European Council’s draft negotiating guidelines on Brexit do not say that Spain would seek to regain sovereignty over Gibraltar.   In any case, such a move seems unlikely in the near future: the diplomatic and political hurdles would be dramatic; and, considering that the population of the colony opposes returning to Spain almost to a man, any attempt to force the Gibraltarians to accept this arrangement might not be altogether plain sailing in terms of international and human rights law.

On the other hand, there are a number of delicate issues to be solved, including the rights of frontier workers (said to account of 40% of the colony’s workforce) and aviation, a long-standing bone of contention since Spain claims that Gibraltar’s airport encroaches onto Spanish territory.  What is more, as the Financial Times suggests, the Iberian Member State might take advantage of the situation to press for the rights of its citizens who wish to live and work in the UK.

In any case, none of this comes as a surprise.

The fate of Charter rights under the Great Repeal Bill

In yesterday’s White Paper, the Government announced that the EU Charter of Fundamental Rights will not be converted into law by the Great Repeal Bill, on the basis that it “cannot be right that the Charter could be used to bring challenges against the Government, or for UK legislation after our withdrawal to be struck down on the basis of the Charter” (para 2.23). The Government, it appears, does not wish to have the rough with the smooth.

The White Paper’s summary of the Charter is at least accurate, insofar as it describes it as being “not designed to create any new rights or alter the circumstances in which individuals could rely on fundamental rights to challenge the actions of the EU institutions or member states in relation to EU law” but rather intended to make the rights “that already existed in EU law more visible by bringing them together in a single document” (para 2.24).

However, the White Paper is on more uncertain ground when it proclaims that the removal of the Charter “will not affect the substantive rights that individuals already benefit from in the UK”, claiming that “many of these underlying rights exist elsewhere in the body of EU law which we will be converting into UK law”. As EU law is “converted” into UK law by the GRB, the White Paper predicts that it will “continue to be interpreted by UK courts in a way that is consistent with those underlying rights”. Rights will still be relevant to case law, but the reference will be “only to the underlying rights, rather than to the Charter itself” (para 2.25).

While it is true that the Charter is a compendium of existing rights under EU, drawn from a number of different sources, it hardly follows that its removal won’t affect “the substantive rights that individuals already benefit from in the UK”, not unless you grant the rather dubious premise that rights under the Charter aren’t themselves substantive rights under UK law.

The reality is that, although the Charter contains a great many rights that the UK had already signed up to by way of various international human rights instruments (including the International Covenant on Civil and Political Rights, the Convention on the Elimination of all Forms of Discrimination Against Women, and the UN Convention against Torture, just to name a few), very few of those rights are enforceable (other than by way of the Charter itself) because they were never incorporated into domestic law. Although the government’s obligations under those instruments can sometimes affect the interpretation of primary legislation, the orthodox position remains that they can’t therefore create rights or impose duties.

The notable exception here is, of course, those ECHR rights which have been incorporated into UK law by way of Schedule 1 of the Human Rights Act. To this extent, the White Paper affirms that the UK’s withdrawal from the EU “will not change the UK’s participation in the ECHR and there are no plans to withdraw from the ECHR” (para 2.22). Plans to amend the HRA itself have been quietly shelved for the time being. It seems, therefore, that any EU measures which the Great Repeal Bill transfers into UK law will continue to be subject to challenge for compatibility with Convention rights under the HRA for the time being.

The overlap between the Charter and the Convention is itself addressed in article 52(3) of the Charter, which provides that – where there is an overlap – “the meaning and scope of those rights shall be the same as those laid down by the said Convention”. But article 52(3) also provides that the overlap between the ECHR and the Charter “shall not prevent Union law providing more extensive protection”, and in many places the Charter does go further than the Convention. The right to a fair trial under Article 6 ECHR, for instance, does not apply to all civil proceedings but only those which involve “the determination of … civil rights and obligations”, a phrase which has been held to exclude such things as immigration and asylum cases, or a challenge to a local authority’s refusal to house a homeless person. Article 47 of the Charter, by contrast, has no such limitation.

These are not the only rights which will be lost under the White Paper’s proposals. There are, for instance, those Charter rights that reflect rights in protocols which the UK government has not signed up to, such as the prohibition against being tried twice for the same crime under Article 4 of Protocol 7, but which has force in the UK vis-à-vis EU measures under article 50 of the Charter. Or the right to an effective remedy under article 13 ECHR which simply doesn’t appear in Schedule 1 of the Human Rights Act. There are the many Charter rights which don’t appear in the text of the ECHR, but which the Strasbourg Court has from time to time recognised as being implicit: e.g. the right to human dignity under article 1, the right to data protection under article 8 of the Charter, or the principle of academic freedom under article 13. These rights may continue to be protected to some degree under the HRA but plainly the precise extent will be the subject of extensive satellite litigation. And then there are those Charter rights which the Strasbourg Court has simply never grappled with, such as the prohibitions against eugenics and reproductive cloning in article 3(2) of the Charter.

Plainly, with the UK’s withdrawal from the EU, some of the rights contained in the EU Charter necessarily fall away, such as the right to vote and stand in elections for the European Parliament under article 39. But it seems ambitious, to put it politely, to suppose that the UK can transfer or transpose the entire corpus of EU law into UK law without affecting the balance between rights and obligations contained within those laws.

As it stands, the White Paper proposes keeping the obligation to obey a vast realm of rules and regulations derived from EU law but jettisoning the fundamental rights that go with them. As Lord Bingham once said, it is the kind of unfairness that would be apparent to even a child. The White Paper suggests that the courts will still be permitted to have regard to the ‘underlying rights’, but it seems unlikely that the courts themselves will welcome so much digging through the substrate. The risk for the government is that the courts may shortcut the excavations and resort to alchemy instead, declaring those rights previously contained in the Charter are now common law rights in any event. That would still leave a significant shortfall in the effective protection of the former Charter rights, but it would demonstrate the continuing supremacy of at least one body of law, namely that of unintended consequences.

The EU Council’s draft Art 50 Negotiating Guidelines: the ‘cliff edge’ recedes but no free trade agreement until 2022?

The EU Council has today published its draft Negotiating Guidelines setting out the overall positions and principles that the EU will pursue throughout the negotiation.

Article 50 provides that upon notification of a member state’s intention to withdraw from the EU “… the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.”

In her letter triggering the Art 50 process the Prime Minister stated that Her Majesty’s Government believed that “it is necessary to agree the terms of our future partnership alongside those of our withdrawal from the EU.” As things stand withdrawal will take effect on 29 March 2019.

Although written in a constructive tone the Guidelines unsurprisingly stick closely to the structure of Art 50 and confirm that the EU intends to follow a “phased approach” with the terms of withdrawal needing to be established first. As for the future relationship with the UK the Guidelines refer only to “Preliminary and Preparatory Discussions on a Framework for the Union-United Kingdom future relationship.” In particular they state that any free trade agreement (FTA) could only be “finalised and concluded once the United Kingdom is no longer a Member State.”

In his recent remarks in Malta on the EU Council’s phased approach to the negotiations the President of the EU Council, Donald Tusk, has also said,Once, and only once we have achieved sufficient progress on the withdrawal, can we discuss the framework for our future relationship. Starting parallel talks on all issues at the same time, as suggested by some in the UK, will not happen.”

In practical terms the 2-year period for withdrawal negotiations is in fact closer to 18 months because of the period likely to be needed for the ratification process of any agreements. The withdrawal issues alone are likely to be relatively complicated to settle. Some of the key ones referred to by President Tusk are: (1) settling the status and situation of citizens from all over the EU who live, work and study in the UK with reciprocal, enforceable and non-discriminatory guarantees; (2) preventing a legal vacuum for EU companies stemming from the fact that after Brexit the EU laws will no longer apply to the UK; (3) financial commitments and liabilities undertaken by the UK as a Member State; (4) solutions aiming at avoiding a hard border between Northern Ireland and Ireland. There is also a sting in the tail regarding Gibraltar giving Spain an effective veto over the applicability of the agreement to Gibraltar.

Once “sufficient progress”, which is not defined, is made on these issues the EU will then be prepared to discuss the framework for a future relationship, but this is some way from the hoped for comprehensive FTA ready to sign upon withdrawal.  Moreover, even discussions about the framework of future relations cannot according to the Guidelines commence before withdrawal issues are resolved, which include the thorny issue in any divorce of the finances.

If withdrawal with no deal is seen as unattractive by both sides and there is insufficient time or willingness to agree a comprehensive FTA, which could take effect upon the UK’s withdrawal (both likely), then the compromise solution would appear to be a transitional arrangement of some sort to enable such an FTA to be negotiated and finalised. Whilst practically and legally possible a transitional period will nevertheless raise political issues at least in some quarters of the UK as any such arrangements will need to have mechanisms of supervision and enforcement including potentially the involvement of the European Court of Justice. On the sensitivities of dispute resolution mechanisms see my colleague Peter Oliver’s blog post  The Prime Minister’s letter does not mention a transitional period in terms. It does however say that “In order to avoid any cliff-edge as we move from our current relationship to our future partnership, people and businesses in both the UK and the EU would benefit from implementation periods to adjust in a smooth and orderly way to new arrangements. It would help both sides to minimise unnecessary disruption if we agree this principle early in the process.” That is probably a realistic acknowledgment that not only is it likely that future arrangements will not be comprehensively sorted out by 29 March 2019, but also that there is no advantage to citizens or businesses in either the EU or UK in fuelling the notion that a true “cliff edge” come exit day is a realistic possibility.

The Council is not the only relevant actor in the negotiation process. As also foreseen in Article 50 any withdrawal agreement will also have to be approved by the European Parliament. On 5 April 2017 the European Parliament will debate a draft resolution setting out their conditions for a final approval by the European Parliament of any withdrawal agreement with the UK. Like the Council the European Parliament’s Press Release (29 March 2017) stresses the importance of settling the status of EU-27 citizens in the UK, the position of Northern Ireland and the need to address the UK’s financial commitments under the current EU long-term budget, even if these go beyond the withdrawal date. The draft resolution also appears to envisage that talks can start on possible transitional arrangements based on plans for the future relationship but only if and when good progress is made towards the withdrawal agreement. Furthermore any agreement regarding future transitional arrangements should not last longer than 3 years. The implication is that concluding a withdrawal agreement in addition to one governing future UK-EU relations after exit would take up to 5 years. Furthermore, to the extent that the UK remains a member of the EU during such transitional period the position is that the rules would continue to be overseen by EU institutions including the Commission and the Court of Justice.

Finally, the Guidelines are at this stage in draft and are due to be considered by the EU 27 at the end of April. The finalised Guidelines will be carefully scrutinised by those seeking to glean any change in direction or emphasis by the EU.

The Great Repeal Bill and the risk of enforcement black holes: some further thoughts based on environmental law

As noted in my blog post yesterday, one of the main concerns about the Great Repeal Bill is whether Brexit-related secondary legislation will receive proper Parliamentary scrutiny.

The Government’s line as set out in its White Paper is that secondary legislation will only be used to make technical changes needed to ensure EU laws work sensibly after Brexit, i.e. once they have been incorporated into UK law. It says that primary legislation will be used for any policy reforms.

But any distinction between technical changes (warranting less scrutiny) and policy reforms (warranting greater scrutiny) quickly collapses.

For example, the White Paper went out of its way to say positive things about environmental law and stated that the “Bill will ensure that the whole body of existing EU environmental law continues to have effect in UK law”.

Separately, though, it gave an example of the sort of technical changes that might be required, noting that the Offshore Petroleum Activities (Conservation of Habitats) Regulations 2001 requires the UK to obtain an opinion from the European Commission on certain types of project. The White Paper states that the Government’s delegated powers will allow it to either replace the reference to the Commission with a UK body or remove this requirement completely.

But the Commission’s environmental role is not limited to providing the odd opinion here and there. It also shares information, monitors progress and reports on Member State compliance. Crucially, it can bring infraction proceedings against governments that fail to comply with their obligations – and impose fines on them.

And, as became evident from internal Government documents relating to the 2015 Air Quality Plan that was the subject of the Client Earth (No.2) v DEFRA proceedings, the possibility of being on the receiving end of infraction proceedings provides a major incentive for the Government to comply with EU-derived environmental law.

If the legislative changes made under the Great Repeal Bill simply remove all references to the Commission’s environmental activities, rather than establishing an equivalent UK body to carry out the same tasks, the bottom line is that environmental law will be enforced less effectively.

And that is a change with significant policy consequences that would under normal circumstances be the subject of rigorous Parliamentary scrutiny, e.g. if the Government was trying to neuter a domestic regulator by taking away its enforcement powers.

The White Paper hints that the Government may reassess the environmental regulatory framework ‘over time’, i.e. after Brexit has taken place. But it could be years before sufficient Parliamentary time is available to put in place a new regulatory regime. Parliament will need to pass laws to implement whatever new trade arrangements are agreed with the EU, and there will be a backlog of other legislation to deal with given that there will not be much time for anything else other than Brexit over the next 24 months.

In short, there is a very real risk of ‘enforcement black holes’ opening-up if the Government simply removes references to all the Commission’s activities from the existing body of EU law. To avoid it, battles will need to be fought in Parliament to ensure that the changes made under the Great Repeal Bill ensure that independent UK bodies are put in place to carry out the Commission’s current enforcement functions.

And the rules of engagement for those battles will be determined by the detail of the Parliamentary procedures used for the mass of secondary legislation that will be passed under the Bill. The Commons Procedure Committee’s current inquiry into this issue could be of huge importance.

See also, in relation to environmental law after Brexit, this earlier post by Peter Oliver.

The Great Repeal Bill White Paper: what we have learned

Today the Government published a White Paper for the Great Repeal Bill, but confirmed it does not intend to publish the Bill in draft before it is placed before Parliament.

When it appears, the Bill is likely to be only a few pages long, but the changes made under it will dominate the current Parliament, transform the UK’s legal landscape and almost certainly result in numerous legal battles in our courts for years to come.

The White Paper says that the legislation will do three main things.

First, it will repeal the European Communities Act 1972 (“ECA”).

Second, most EU law as it stands at the moment of exit will be converted into UK law before we leave the EU. This is necessary so that the UK does not suffer from legal ‘black holes’ when we leave (e.g. an absence of laws regulating pharmaceuticals etc.) and in order to maintain legal certainty.

The Government is probably hoping that this approach will also help us to get a better trade deal from the EU, on the basis that Member States will be reassured that UK products and services will continue to comply with rules and regulations derived from EU law.

Third, the Great Repeal Bill will create powers to make secondary legislation to adjust EU laws which would no longer operate appropriately once we have left the EU (e.g. because they grant functions to EU institutions which we will need to replace with an equivalent UK body).

These reforms will raise many issues, some of profound constitutional significance, others of enormous complexity. Some will be explored in future posts on this Blog, while some already have been (such as in this post by Christopher Muttukumaru CB, and this one by George Peretz QC). These are some of the key points arising from the White Paper.

Which EU laws will be converted into UK law?

At the moment, EU law operates in the UK in a variety of ways. In certain areas, we have implemented EU law by passing pieces of primary legislation (such as the Equality Act 2010). These will obviously not need incorporating (but they may need amending).

In other cases, EU law is implemented through secondary legislation, including statutory instruments made under the ECA – which will need to be retained as they would otherwise fall away on exit.

Other types of EU law have direct effect in the UK, including more than 12,000 regulations and EU Treaty provisions. The White Paper clarifies that regulations will not be ‘copied out’ for domestic purposes, rather the Great Repeal Bill will provide that they will continue to apply as a matter of UK law “as they applied in the UK the moment before we left the EU” (subject to the discussion below concerning post-Brexit EU law judgments).

It was unclear how Treaty provisions would be treated before the White Paper. It states, however, that Treaty rights that can be relied on in court by individuals (e.g. such as those setting out worker and consumer rights) will be incorporated into UK law. That may prove quite significant over the longer term, not least because it will mean that UK litigants will still be able to rely on the more ‘teleological’ legal reasoning that is characteristic of EU law, alongside the ‘black letter’ approach traditionally favoured by the common law.

In his response to David Davis’ statement, Keir Starmer on behalf of Labour focused on the fact that the White Paper says that the EU Charter of Fundamental Freedoms will not be converted into UK law. One suspects that issue may have been selected in part for its usefulness for political campaigning, and not only because of its legal impact. As the Government notes, the Charter was designed to codify pre-existing EU law, much of which will be converted into UK law in any event. UK citizens will also be able to rely on the ECHR and the Human Rights Act, as well as the fundamental common law rights that our courts have been busy developing over the past few years.

It will be interesting to see if anyone can point to a Charter right that would not otherwise exist under UK law, although incorporating the Charter would obviously give those rights added protection against encroachment by future legislation.

Will all the legislative changes receive proper Parliamentary scrutiny?

That is the key question. A huge number of laws are going to need amending in a short period of time, in particular given that many of the required changes will only become clear once the Article 50 negotiations have progressed. The White Paper estimates that between 8,00 and 1,000 statutory instruments may be required for Brexit-related changes.

The Government correctly states that “there is a balance that will have to be struck between the importance of scrutiny and the speed of this process”. But the level of scrutiny that has been proposed is almost certainly not adequate and the Government will need to adjust its approach.

In a handful of areas, such as customs, immigration, agriculture and a few others, reforms will be properly scrutinised because they will be brought forward in primary legislation – because the UK will effectively need to set up entirely new domestic regulatory regimes.

It is in the areas where changes are to be made through secondary legislation that concerns arise. Mr Davis sought to reassure by saying that changes would generally be made through the standard procedures for statutory instruments, namely the negative procedure (which does not require debate) and the positive procedure (which requires debate and approval by both Houses).

But this is not reassuring because these procedures stack the deck in favour of the Executive, not least because it is generally not possible for Parliament to amend secondary legislation. While Parliament can sometimes intervene to require a ‘super affirmative’ procedure, this will not help much as it is almost as lengthy and detailed as that for primary legislation. As a result, it will not generally be viable given the time constraints.

It is for these reasons that it has been suggested that new, more flexible procedures should be introduced to give Parliament greater scope to review and amend Brexit-related statutory instruments where appropriate, without bringing the whole process to a standstill. Increased but timely scrutiny would also be facilitated if the Government agreed to publish its proposed legislation in draft, accompanied by White Papers summarising what changes were being made and why they were necessary.

These issues are likely to be picked-up in many of the responses to the White Paper as well as during the Bill’s passage through Parliament. They will be informed by the findings of the inquiry that has been launched by the Commons Procedure Committee into ‘Delegated powers in the Great Repeal Bill’.

Will there be legal constraints on what the Government can do?

Yes. The Government has said that the powers conferred on it by the Great Repeal Bill will be time-limited, although the White Paper does not specify a particular timeframe. The powers will probably need to extend beyond the date of Brexit, as even in the most hopeful scenario there will undoubtedly be legislative odds and ends that need sorting out. A cut-off of two or three years after Brexit has been suggested by others.

In addition, and importantly, the White Paper states that the Government “will ensure that the power will not be available where Government wishes to make a policy change which is not designed to deal with deficiencies in preserved EU-derived law arising out of our exit from the EU”. The powers conferred on the Government to amend the law through secondary legislation will therefore be expressly limited to Brexit-related issues.

Lawyers with clients itching to have their EU regulations amended for non-Brexit related reasons (e.g. because they regard them as unduly onerous), are therefore going to have to wait until after Brexit has taken place (except in those areas where broader reforms are brought forward in primary legislation where there may be more scope for lobbying). The Government will have plenty to do without also having to sift through a Pandora’s box of EU-related gripes.

In addition to the express wording of the Bill, the Government will also be subject to other, less obvious constraints. The effect of all of this is that many rules that were previously set out in effectively unchallengeable primary legislation (such as EU regulations and Acts of Parliaments) will in future be the product of statutory instruments – which there is much more scope to challenge.

The traditional approach of the UK courts is as has been stated by Lord Donaldson: “The duty of the courts being to give effect to the will of Parliament, it is, in my judgment, legitimate to take account of the fact that a delegation to the Executive of power to modify primary legislation must be an exceptional course and that, if there is any doubt about the scope of the power conferred upon the Executive or upon whether it has been exercised, it should be resolved by a restrictive approach”.

Various other principles of statutory interpretation will also be relevant, including the presumptions that secondary legislation should not infringe fundamental rights or change the law retroactively. Our courts are likely to be kept busy for many years with challenges to secondary legislation enacted under the Great Repeal Act.

What status will be given to EU judgments?

For all those areas of UK law which are derived from EU law, the White Paper proposes that UK courts will be required to treat EU case law that pre-dates Brexit as being equivalent to Supreme Court judgments (i.e. binding on all courts below the Supreme Court itself).

The position of post-Brexit EU judgments is less clear. The White Paper says that “the Bill will not require the domestic courts to consider the CJEU’s jurisprudence”. On the other hand, it also states that “for as long as EU-derived law remains on the UK statute book, it is essential that there is common understanding of what that law means”.

But what happens when the CJEU develops EU law after Brexit? If most UK courts are bound to follow the old, pre-Brexit EU law position, UK and EU law will diverge and there will no longer be a ‘common understanding’ – at least unless and until a UK case makes it to the Supreme Court. Our highest court is going to be very busy if it has to take responsibility for deciding cases every time there has been a development in EU law.

These difficulties can probably be minimised. If the Great Repeal Act is silent on post-Brexit EU judgments, UK courts will be free to treat them as being of persuasive authority (and probably will). They will then be free to follow post-Brexit EU law judgments, at least where there is no good reason for taking a different approach, so long as they can distinguish any earlier pre-Brexit EU authorities. It is only where those earlier judgments cannot be distinguished on the facts that the Supreme Court will be needed to develop EU-derived domestic law.

Nonetheless, this is not something that the White Paper grapples with at all and further thought will be required.

What happens next?

People will respond to the White Paper and the Government may adjust its position in various respects before it presents the Great Repeal Bill to Parliament, which will then spend several months debating it. Parliament will face a trade-off, though, as the longer it spends debating the Bill the less time it will have available to scrutinise the secondary legislation made under it.

In the meantime, Government departments will continue with trying to identify all the changes that need to be made to their areas of EU legislation in order to make them work properly at the time of Brexit. And now that Article 50 has been triggered, both civil servants and parliamentarians will be trying to hit something of a moving target as the negotiations develop.

There is, to put it mildly, a lot to be done.

 

Dispute Settlement Mechanisms after Brexit: a Crucial Element in the Forthcoming Negotiations with the EU

In his speech last week, Michel Barnier, the European Commission’s Brexit negotiator, warned that the Withdrawal Agreement which is to be negotiated pursuant to Article 50 TEU will have to be subject to the law and judicial system of the EU. Of course, that agreement will be an act of the EU institutions and so cannot escape the jurisdiction of the Court of Justice of the EU. It follows that the CJEU will be able to rule on the legality and interpretation of all the provisions of the Withdrawal Agreement and any implementing measures which may be adopted.

Does that mean that all disputes arising out of Brexit will be subject to the jurisdiction of the CJEU?

Not necessarily. That is crucial because – sadly – following Brexit a host of disputes can be expected to arise in relation to the Withdrawal Agreement (if there is one) and to wider Brexit issues. It is scarcely conceivable that a Withdrawal Agreement could be concluded at all without an effective dispute settlement mechanism involving a court or arbitration. At the same time, the Government stated in its White Paper that ending the CJEU’s jurisdiction over the UK was to be an essential element of Brexit, while acknowledging that it must continue to abide by international law.

Amongst the ideas floated in the White Paper is that the Withdrawal Agreement might only provide for a Joint Committee of the Parties for the settlement of disputes – a purely political mechanism under which, if attempts to reach a diplomatic solution fail, a Party can only adopt political sanctions or denounce the agreement.

Precedents for this “model” include many of the bilateral agreements between the EU and Switzerland (of which there are said to be about 130!). But, while the Withdrawal Agreement can be expected to establish a Joint Committee, the EU is unlikely to be satisfied with that alone, given the depth and complexity of the relationship between the UK and the EU. Indeed, negotiations are currently under way between the EU and Switzerland in which the EU is seeking to persuade Switzerland to accept a judicial dispute settlement mechanism.

In the White Paper, the Government referred to a number of arbitration mechanisms enshrined in existing trade agreements (e.g. that between New Zealand and South Korea) as well as CETA, the agreement between the EU and Canada which has been signed but not yet ratified. Disputes between the Contracting Parties and (in the case of CETA) investors are decided by arbitration. No suggestion can be found in the White Paper that it might be appropriate to submit post-Brexit disputes to any type of court.

The potential disputes fall into two categories: those between the UK and the EU and/ or its Member States (let us call them “interstate disputes” even though one of the parties is likely to be an international organisation); and disputes to which individuals and companies are party.

As to interstate disputes, the CJEU does not have jurisdiction under the EU Treaties over disputes involving a State outside the EU (a “third country”), unless the latter agrees to that jurisdiction beforehand. The only exception is that, where the EU institutions adopt an act with adverse consequences for a third country (e.g. a decision by the Commission to set off a sum due to the UK against an amount due from the UK after Brexit day), the latter would be able to challenge it before the CJEU. What is more, it is usual for State disputes to be decided by international courts or tribunals. So the UK might have a good case for resisting attempts by the EU to grant the CJEU jurisdiction over such disputes.

Having said that, Article 20 of the Agreement between the EU and Switzerland provides: “All questions concerning the validity of decisions of the institutions of the Community taken on the basis of their competences under this Agreement, shall be of the exclusive competence of the Court of Justice of the European Communities.” (see here and here)

Nevertheless, a more conventional forum would be a body such as the Permanent Court of Arbitration. Furthermore, disputes relating to the World Trade Organization (WTO) would be decided by arbitration in accordance with that treaty, while the International Tribunal for the Law of the Sea (ITLOS) has jurisdiction over those concerning the United Nations Convention on the Law of the Sea (UNCLOS); the UK is already party to both treaties.

In contrast, the UK might face more of an uphill struggle trying to prevent disputes involving private parties (companies or individuals) from being heard by domestic courts.

Admittedly, Article 30.6.1 of CETA specifically provides that its provisions may not be “directly invoked in the domestic legal systems of the parties”. Article 17.15 of the EU-Singapore Agreement is to the same effect. However, having been a member of the EU for over 40 years and sharing a land border with a Member State, the UK’s links with the EU run far deeper and are far broader than those of distant countries such as Canada and Singapore. Accordingly, it is questionable whether such a provision would be appropriate in the Withdrawal Agreement, as least as regards non-commercial issues.

In 2014, the draft agreement for the accession of the EU to the European Convention on Human Rights was rejected by the CJEU because some EU law issues would have been decided outside the normal mechanisms, thereby circumventing the Court’s role in interpreting and applying EU law. How broad this rule is remains a matter for speculation.

Debate is still ongoing as to whether the dispute settlement mechanisms in CETA are in line with EU law, as the establishment of arbitral tribunals of a radically new type laying the basis for a Multilateral Investment Court (see here) to hear disputes involving investors would bypass the Court in Luxembourg.

Belgium is set to request an opinion from the Court of Justice on the legality of these mechanisms, which should be delivered shortly before the UK leaves the EU in March 2019.

Unless the Court gives its blessing to the CETA mechanisms, the EU presumably will insist on British companies bringing their disputes involving EU law before the courts of the Member States or the Court of Justice, as the case may be. To ensure reciprocity, the EU will presumably want all or part of the Withdrawal Agreement to be introduced into UK law, to ensure that EU nationals and companies can litigate in the UK courts.

Even if the CJEU were to give its blessing to CETA, it should be recalled that, if there is to be any Withdrawal Agreement at all, it will cover the acquired rights of EU nationals resident in the UK and those of British expats living in the EU. It is hard to imagine any appropriate forum for determining disputes over these matters other than the domestic courts of the UK and the Member States of the EU, as the case may be: the proverbial Polish plumber could hardly be expected to go to international arbitration, and exactly the same applies to the British pensioner on the Costa del Sol.

Any mechanism requiring the UK courts applying provisions of the Withdrawal Agreement would probably encounter strong opposition from hardline Brexiters. No doubt, they would see it as introducing the case law of the CJEU into UK law by the back door.

On the other hand, this morning’s Financial Times suggests that the Government may take a more moderate line, speaking of “signs that Mrs May’s promise ‘to end the jurisdiction of the European Court of Justice in Britain’ is being recalibrated to provide room for manoeuvre in one of the most contentious areas of the negotiation”; and it quotes the Brexit department as saying that this means “bringing to an end the direct jurisdiction” of the Court in the UK (with the emphasis being on the word “direct”).

At any rate, given the massive uncertainties surrounding the forthcoming negotiations, other scenarios cannot be excluded. But the EU is likely to reveal its hand sooner than might have been expected, if Mr Barnier’s new bid to ensure the maximum possible transparency of the EU’s negotiating position gains the day.

Acknowledgements Many thanks to my colleagues Professor Panos Koutrakos and Conor McCarthy for their helpful comments on an earlier draft of this post. Responsibility for this post is mine alone, however.

 

The EU roll-over

On 13 March 2017, Anneli Howard participated in the UK Legal Future event at the House of Commons. Her Panel discussed the need for transitional arrangements for the period between the UK’s withdrawal from the EU and the eventual conclusion of the trade negotiations and thereafter. She focussed on the potential disruptions to cross border and pan European business outside the single market as well as the pragmatic solutions that companies should be considering as part of their Brexit preparations to ensure business continuity. A copy of her presentation is here.

Environment and Brexit: Strong Words from the House of Lords Select Committee

On Valentine’s Day, the House of Lords Select Committee on the EU published a report entitled “Brexit: Environment and Climate Change” .But there is nothing romantic about this document: while recognising that Brexit affords the UK the opportunity to improve on EU environmental legislation in certain respects, it paints a bleak picture of what environmental law in this country could become post-Brexit, all the more because this event will affect “nearly every aspect of the UK’s environmental policy”.

The report stresses the risk that binding environmental standards will be lowered for financial reasons, not least to attract foreign investment – although it points out that this risk may be especially high in England since, according to several witnesses, “in some respects the Devolved Administrations’ environment and climate change ambitions” are higher.  But it is clear from the report that this decline might occur quite slowly.  In the colourful language of one witness, it will not necessarily be “a race to the bottom” but could be “a stroll to the bottom” with standards being regularly pared down in small ways.

Having said that, the report underlines the fact that, if the UK is to continue to sell its products in the EU, it will have to meet the EU’s environmental standards.  In addition, the report indicates that the UK would be subject to firm diplomatic pressure if it were to lower its standards regarding air pollution, since the prevailing winds would sweep most of the pollution over to the Continent.

On the issue of the enforcement, the report is particularly forthright, stating:

The importance of the role of the EU institutions in ensuring effective enforcement of environmental protection and standards, underpinned as it is by the power to take infraction proceedings against the United Kingdom or against any other Member State, cannot be over-stated. The Government’s assurances that future Governments will, in effect, be able to regulate themselves, along with Ministers’ apparent confusion between political accountability to Parliament and judicial oversight, are worryingly complacent.

As if to emphasise this point, the very next day the Commission announced that it was issuing a reasoned opinion to the UK – along with four other Member States – for failing to address repeated breaches of air pollution limits for nitrogen dioxide (here).

To remedy this deficiency, the report calls for “an effective and independent domestic enforcement mechanism” with regular oversight of “Government’s progress towards its environmental objectives, and the ability, through the courts, to sanction non-compliance as necessary”. No doubt, the reference to “Government” here includes the Devolved Administrations, since environmental policy is primarily within their remit.

In short, in this report the Select Committee appears to cast some doubt on the Government’s statement in its recent White Paper on Brexit (here) that it is “committed to ensuring we become the first generation to leave the environment in a better state than we found it”.

What is more, the report warns of the dangers of legal uncertainty, quoting Professor Macrory as saying “on exit, whatever form it takes, we need a period of regulatory stability … The last thing you want is to find there are gaps, lots of litigation and so on; that will not help business or anyone else.”

As the report points out, the Great Repeal Bill could be a source of considerable legal uncertainty, given the numerous complexities of attempting to carry over the existing body of EU law into a post-Brexit UK – a point already made in relation to all the areas concerned by George Peretz QC back in October (here).  (Indeed, back in October 2016, DEFRA Secretary Andrea Leadsom had already acknowledged that around a third of environmental acts “won’t be easy to transpose” (here).

Again, the reference to the Great Repeal Bill must be taken to refer equally to the primary and secondary legislation enacted by the Devolved Administrations designed to achieve the same objective.  (In the White Paper, the Government reiterated its commitment to the effect that it would not attempt to recover devolved powers. That is in accordance with the Sewel Convention.)

The final chapter of the report is devoted to devolution.  In the absence of the “overarching framework of EU legislation”, considerable divergences between environmental law and policy in the four constituent parts of the UK can be expected, according to several witnesses to the Select Committee.  To some extent, because Scotland, Wales and Northern Ireland are widely expected to be more ambitious than the UK Government in this regard, this could be positive.  However, the report stresses the need for coordination to avert unnecessary divergences and even “friction”.

 

Publication of leading EU lawyers’ Opinion on Article 50 TEU

Gerry Facenna QC and former Head of Monckton Chambers Sir Jeremy Lever KCMG QC are two of the five authors of a legal opinion published today by “the People’s Challenge”, a group who took part as an interested party in the recent Supreme Court case initiated by Gina Miller. The Opinion, whose authors also include former CJEU Judge Sir David Edward KCMG PC QC and former CJEU Advocate General Sir Francis Jacobs KCMG PC QC, considers the United Kingdom’s constitutional requirements for withdrawing from the EU and the contentious issue of whether, under EU law, a notification given by a Member State of its intention to leave the EU may subsequently be revoked.

Please click here for the full news release, and here to read the Opinion.