Dispute Settlement Mechanisms after Brexit: where we stand now

10 Jul 2017

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

No longer.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But is there room for a compromise.

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

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

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