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Dispute Settlement under the draft Withdrawal Agreement: the Transitional Period

26 Mar 2018

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

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

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

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

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

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

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

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

Article 122(6) provides:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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