The positions of the UK Government and official Opposition on what exiting the European Union could look like is beginning to come into somewhat sharper focus after months of ambiguity (constructive or otherwise). In particular, for the Labour Party, keeping the United Kingdom in a single European market and in a customs union with the EU is key to its vision of the UK’s transition from EU membership. The position of the UK Government has been further clarified by answers given by the Secretary of State for Exiting the EU, David Davis in response to questions in the House of Commons. When asked by MP John Whittingdale whether he agreed that continuing ‘membership’ of the single market might be worse than membership of the EU, Mr Davis replied:
“The simple truth is that membership of the European Free Trade Association, for example, which would be one way to retain EEA [European Economic Area] membership, would do exactly that: it would keep us within the acquis, and it would keep us within the requirements of free movement, albeit with some limitations, but none of those have worked so far. In many ways, it is the worst of all outcomes. We did consider it—I gave it some considerable thought, maybe as an interim measure—but it seemed to me to be more complicated, more difficult and less beneficial than other options.”
And with the Government intent on having the freedom to conduct its own independent trade policy, it is clear that the idea of retaining a customs union with the EU is clearly not on its agenda.
But when opposition political parties say that are in favour of keeping the UK in a single market – as both Labour and the Scottish Government advocate – what do they really mean? After all, the Government seems also to want to maintain all of the same benefits of being in the EU single market but by reproducing and mirroring existing arrangements. If this sort of ‘bespoke Brexit’ is not what the opposition parties have in mind, then what might be a more ‘off-the-shelf’ solution?
Writing for LabourList, Stephen Kinnock MP is blunt in his assessment of the model which Labour should advocate as a transition from EU membership: “ … if we are looking for a ready-made transition model, then EEA/EFTA membership is the only viable option. As well established and well understood international frameworks the EEA and EFTA offer precisely the security, certainty and stability that our country so desperately needs, in these turbulent times.” I happen to agree.
But we need to deal with some of the legal arguments that have been swirling around this debate. There are two main strands to this. The first concerns the UK’s current legal relationship with the participating EFTA and EU states under the EEA agreement. The second highlights potential obstacles to keeping the UK in a single European market via a transitional EEA arrangement.
The European Economic Area Agreement between the European Union and the three participating EFTA states – Norway, Iceland and Liechtenstein – entered into force on 1 January 1994. Among the listed contracted parties is the United Kingdom. Which has led some to argue that unless and until the UK withdraws specifically from the EEA Agreement, using the mechanism laid down in Article 127 of the Agreement, it would remain bound by the Agreement and by virtue of that status, remain within the single market. Litigation was brought in the UK courts to test that very point, but the application for judicial review was considered to be premature. As I have argued elsewhere the idea that the UK would remain in a single European market simply by virtue of this agreement alone is unconvincing. The purposes and intention behind the agreement is to create an ‘association agreement’ between the EU and willing EFTA states, with the institutional framework of the agreement reinforcing this ‘two-pillar’ approach. With the UK leaving the EU pillar, the continuing application of the agreement to the UK would seem to run counter to its clear purpose and intent.
Further, the UK signed the agreement insofar as the agreement covered matters within the competences of the Member States, whereas the EU signed the agreement for matters for which the Member States had transferred competences to the EU. Given the degree to which Member States have transferred powers to the EU for the purposes of completing a single market, this would suggest a somewhat residual role for the Member States in the enforcement of the agreement. Moreover, Article 126 of the agreement limits the territorial application of the agreement to the EU and to the participating EFTA states. In short, once the UK leaves the EU – and absent any other agreement – any attempt to enforce the agreement would encounter significant legal objections in terms of its material and territorial scope.
Perhaps unsurprisingly, for the Government, the question of whether the UK should formally withdraw from the EEA Agreement in terms of Article 127 of that agreement is largely a question of legal housekeeping. As David Davis stated in a reply to a question from Stephen Kinnock on 7 September:
“We are considering what steps, if any, we might need to take to formally confirm our withdrawal from the EEA agreement as a matter of international law.”
However, for those who advocate remaining in the single European market through the EEA, not triggering the formal withdrawal process may still be of some importance even if – of itself – the UK’s current legal position within the EEA Agreement would not be enough. In other words, not triggering a formal withdrawal may be a necessary but not a sufficient basis to keep the UK in the single market through the EEA.
Which leads us to the more direct issue of the legal means by which the UK might use the EEA Agreement as a transition from EU membership.
Writing earlier in the month, Jean-Claude Piris – the former Director General of the Legal Service to the Council of the EU – confirms the view expressed above that the UK would not ‘remain’ in the single market through the current EEA agreement after Brexit. But he went further in raising legal obstacles to any future use of the EEA as a transitional vehicle. In particular, he suggest that the correct legal route would be for the UK to seek to re-join the European Free Trade Association and only once its candidacy was accepted and the UK joined EFTA could it then seek to become a party to the EEA Agreement in the terms laid out in Article 128 of the EEA Agreement. That provision requires an agreement between the contracting parties and the state joining the agreement and for the agreement to be ratified by the contracting states in accordance with their own procedures. So for Piris – and indeed, it would seem, for David Davis – the time this will take and the procedural obstacles to be overcome, do not make this a suitable vehicle for a transitional arrangement. If right, then there would be a need for a transition to transition, with the risk that the conditions of trade would simply fall back onto WTO terms.
Nonetheless, I think there is value in continuing to explore whether existing legal resources might fashion a transitional relationship between the UK, the participating EFTA states and the EU through the EEA Agreement. I can foresee two possibilities.
If we think back to the original EEA Agreement, it came into force before the accession of more than a dozen new EU Member States. The accession of these states to the EEA agreement has followed the path described by Piris (but on the EU rather than the EFTA side). So when Bulgaria and Romania joined the European Union on 1 January 2007, an EEA enlargement agreement was signed with the two new countries on 25 July 2007, but the agreement did not enter into full force following ratification until 9 November 2011. But that did not mean that the EEA agreement did not apply during this four year hiatus. Because on 7 July 2007, the EU entered into an exchange of letters with the participating EFTA states to ensure the provisional application of the agreement pending formal ratification.
If an exchange of letters is enough to provisionally apply an agreement that would see Bulgaria and Romania become parties to the EEA Agreement, why could the same not be true for the UK if it sought to use the EEA Agreement on a transitional basis?
The circumstances are different. Bulgaria and Romania were Member States of the EU at the time that their accession to the EEA Agreement was agreed in July 2007. The UK would not be in a position to join EFTA and to access the EEA Agreement until it left the EU. Nonetheless, there is nothing in principle to prevent the EFTA Council preparing a decision unanimously approving UK membership of EFTA that would come into force simultaneously with the UK’s withdrawal from the EU. At the same time, the UK’s accession to the EEA Agreement could be agreed by the EEA Council and signed by the contracting parties ready for formal ratification. Pending ratification, an exchange of letters could secure its provisional application without the hiatus that Piris anticipated.
But there also remains the issue of whether there is anything in the UK’s existing legal relationship with the single market through the EEA Agreement which can be built upon. In other words, even if one takes the view that the current legal position would not, in itself, be sufficient to keep the UK in a single market, could that legal framework, nonetheless, be amended to do so.
Article 89 of the EEA Agreement establishes the EEA Council which takes decisions, including concerning any amendment to the agreement. This is also the means by which new states join the agreement. It is not beyond the legal imagination to contemplate circumstances in which the status of the UK as an autonomous contracting party to the agreement was clarified and amended to retain existing rights and duties under the agreement, on the understanding that competences previously exercised on the UK’s behalf through the EU would now revert back to the UK. Additional institutional changes might also need to be agreed to manage the unusual nature of the transition. Indeed, this may only be an arrangement on a temporary basis – indeed be the very transition to transition that Piris suggests – with the arrangement lapsing if formal EFTA membership and EEA accession described above was not completed within a certain time period. While any such amendment to the EEA agreement would entail agreement by all parties and likely also trigger approval procedures, nonetheless, provisional application of the agreement pending completion of approval procedures could be agreed.
Of course, this does not resolve every issue relating to the UK’s future relationship with the EU. The UK would not be in a customs union with the EU unless it reached an agreement in those terms. If it did so, the UK would find itself in an EEA+ position.
Without a customs agreement, there would remain the issues of the customs frontier between Ireland and Northern Ireland. But even here, there are means and mechanism by which goods originating between the contracting parties as well as goods from third countries can be subject to customs and transit procedures that would not require goods to be customs cleared at a border but instead would move through approved economic operators, freight forwarders and warehousing systems that would handle the clearance processes. Maintaining regulatory convergence on EU health and safety standards would, of course, be important to prevent the need for inspections. And there is good experience under the EEA agreement which sees non-EU states like Norway checking that non-EU goods imported into the single market meet EU standards, with mutual recognition of those checks ensuring that once cleared by Norwegian authorities further checks when the goods enter the EU is not required.
David Davis has called for ‘flexibility and imagination’ in negotiations. With flexibility and imagination it is possible to see a way in which the EEA could facilitate the UK’s transition from EU membership. That option should be kept on the table and it would be wrong for the UK Government to formally notify its intention to withdraw from the EEA Agreement unless and until it is clear that there is no viable means of adapting the EEA to the needs of Brexit. Indeed, to take such an unnecessary step at this point would be a deliberate and overtly political tactic designed to undermine the kinds of contributions that have been made not just by the Labour Opposition but also by the Scottish Government.
But Labour also needs to have some flexibility and imagination too. Particularly where it is unclear where transition might lead the UK, there is every good reason to see EFTA membership and the EEA as a viable medium-term strategy and not a short term delaying tactic. As both the EU and EFTA contemplate where European cooperation is heading beyond Brexit, there is more that is in flux than just the UK’s departure from the EU. It is time to think of the EEA as more than just transition except in the sense that, historically, it might be view as a stepping stone to a more longer term settlement of European cooperation in a single market beyond EU membership.