Exit Day! What Does it Mean for a ‘Transitional’ Deal?

 

The UK Government has announced that it intends to propose an amendment to its own European Union (Withdrawal) Bill to specify the day and the time of the UK’s exit from the European Union. ‘Exit day’ is to be 29 March 2019 at 11.00pm.

Under the original Bill, ‘exit day’ would have been decided upon by ministers. This left open the possibility that the UK and the EU might agree to defer the UK’s withdrawal in order to give the UK more time to prepare for life outside the EU. This option to defer departure as a means of transitioning to a new UK-EU relationship has now apparently been closed off. So what might this new amendment tell us about the possibilities for transition and the domestic legal instruments to implement transition.

With colleagues at the University of Cambridge, we have been thinking a lot about how a transitional framework might be constructed, and we wrote a briefing paper in October setting out some options. There are two levels to consider. First we need to think about what is legally possible under the Article 50 process in terms of a transitional framework. Second, it is important then to work out how domestic legislation might interact with an EU transitional framework. Clearly, of particular importance would be how the European Union (Withdrawal) Bill might relate to an agreed transitional arrangement.

In a paper published this week, I set out the four main options for an EU-level transitional deal:

  • An Article 50 withdrawal agreement that would contain a time-limited derogation to maintain certain ‘saved’ provisions of EU law. This body of ‘saved EU law’ would continue to impose reciprocal obligations as if the UK were still a Member State.
  • A provisional trade or provisional association agreement.
  • A transitional membership of EFTA and access to the Single Market via the European Economic Area Agreement.
  • A deferred departure from the European Union to give the UK more time to prepare for non-membership.

Given the announcement of an exit day that would scupper a deferred departure – unless of course the Bill retains a power for ministers to change that day – and given the political and legal obstacles to either a provisional agreement on the future relationship, or an EFTA/EEA approach, the front runner for a transitional framework would seem to be some sort of continuation of a limited set of current obligations on a strictly time-limited basis.

In other words, the Article 50 agreement would seek to achieve something similar to the domestic Withdrawal Bill by trying to preserve key aspects of EU law. Whereas the Withdrawal Bill domesticates EU law lock, stock and barrel, an Article 50 transitional agreement would be limited to saving those key provisions that domestic law alone cannot put into operation, namely reciprocal obligations such as those ensuring trade that is free from tariff and non-tariff barriers.

The UK would likely have to concede that any such arrangement would entail acceptance of the institutional arrangements that go hand in hand with these obligations including the jurisdiction of the Court in interpreting and applying those provisions.

The problem of this option is that it potentially muddies the waters for the operation of the domestic Withdrawal Bill, whose working assumption even before today’s announced amendment was that there would be a single ‘exit day’. If a transitional arrangement were to save certain EU obligations on existing terms, that would then need to be reflected in domestic law.

Today’s announcement might then be a much more important signal that is apparent at first sight. It is possible that the Withdrawal Bill will not seek to manage an EU transitional framework at all. Rather, it’s possible that a new Bill will be proposed that will give domestic legal effect to a transitional agreement. The Withdrawal Bill will domesticate EU law up until 29 March 2019, whereas a new Bill will allow for the continued application of certain ‘saved’ provisions of EU law for the period of transition. The new Bill might look and feel much like the European Communities Act 1972 which is set to be repealed. Indeed, keeping the same sort of constitutional architecture in place may be key to the EU’s willingness to accept any sort of transition on these terms.

Politically, replicating aspects of the 1972 Act in a new Bill that would continue to impose EU obligations for a time-limited period would likely encounter strong headwinds from those keen to ensure that the UK leaves the EU by March 2019. The announcement of a specific ‘exit day’ and the removal of an option to defer departure might well be the political bone that the Government is willing to throw in order to make a transitional arrangement more palatable.

 

The “Direct Effect” of the Withdrawal Agreement: Do Davis and Barnier Agree?

With a fourth round of Brexit negotiations drawing to a conclusion, David Davis and Michel Barnier held their customary joint press conference. Both negotiators were keen to highlight developments in the negotiations and drew particular attention to the progress made in respect of citizens’ rights. Indeed, both Barnier and Davies referred to giving a future Withdrawal Agreement “direct effect” to protect citizens’ rights.

For Barnier, the importance of this is that: “It will give the assurance to our citizens that they will be able to invoke their rights, as defined by the Withdrawal Agreement, before UK courts.”

For Davis, “… we have listened to the concerns that have been raised – and as a direct result of hearing those concerns the United Kingdom has committed to incorporating the final withdrawal agreement fully into UK law. Direct effect if you like.”

While there is apparent agreement on the idea that citizens’ rights will be capable of being enforced in UK courts, it is far less obvious that there is any real agreement as to how this is to be achieved legally. In particular, the use of the term “direct effect” is open to radically different views.

The concept of “direct effect” is a familiar one to EU lawyers, although even among EU lawyers it is capable of narrower or more expansive readings. Nonetheless, a key feature of directly effective law is its capacity to be invoked and enforced before national courts. This is the apparent common ground between Barnier and Davis.

However, it is an essential aspect of direct effect that it is a legal quality that arises independently of the legislation of a state. Accordingly, directly effective substantive provisions of EU treaties can be enforced in national courts without national legislation having to substantively incorporate or replicate those rules in national law. In other words, the source of the norms and the legal effects to be attached to those norms derive directly from EU law and its legal order, and not from domestic law and its legal order.

It rapidly becomes apparent that what Davis describes as “Direct effect if you like” is actually unlike what Barnier might have in mind. For Davis, domesticating a Withdrawal Agreement brings it within the control of the UK legal order in much the same way as the European Union (Withdrawal) Bill intends to do for substantive EU law. Indeed, clause 9 of the Bill makes provision for ministers to make regulations for the purpose of implementing the Withdrawal Agreement. It is not clear whether Davis is going further in the sense of creating an additional domestic legal instrument of primary law to incorporate the Withdrawal Agreement, or whether he is simply restating a power  that the Bill would create to use secondary legislation to implement the Withdrawal Agreement. As a matter of domestic law, this choice is important. But from an EU law perspective, this is not direct effect in the sense that it shifts the normativity of citizens’ rights from the EU to the national level.

That Barnier may have in mind a more EU law conception of direct effect is also revealed in the obvious point of continuing disagreement between the EU and the UK, namely, the role of the Court of Justice. Direct effect is itself a product of the case law of the Court of Justice. It is an effect that the Court can deploy not least in circumstances where Member States fail to ensure the protection of rights within their domestic systems. So the Court has found directives to be directly effective – notwithstanding that these instruments are specifically intended to be transformed into national law – to manage the situation where states fail to give effect to those right completely, or do so only partially, or do so in a manner that is contrary to what EU law intended. In other words, direct effect can act as a corrective for national failure. And not surprisingly, the EU might consider it important to ensure that the EU court ought to continue to ensure the effective protection of citizens’ rights, especially if – for the EU – those rights continue to derive their authority from  EU law itself.

Look at the wording of Barnier’s statement to the press. He refers to: “rights, as defined by the Withdrawal Agreement”. He doesn’t refer to rights “contained” in the Withdrawal Agreement.

The more that the Withdrawal Agreement simply refers to rights which remain part of the EU acquis the more that the EU is likely to insist that the meaning and effect of those rights must continue to be determined by EU law, including the jurisdiction of the EU courts.

On the other hand, if the Withdrawal Agreement itself is the source of a set of rights, then the enforcement of those rights may simply be a matter for UK courts, subject to the normal dispute resolution mechanism that will ensure that the parties abide by the obligations they have entered into under the Article 50 agreement. On that basis this may not include a role for the Court of Justice other than a right to give authoritative interpretations as to what EU law means, with their legal effects and their means of protection being subject to other mechanisms of enforcement and dispute resolution.

While it is good to see that the EU and UK negotiators are seeking common ground, it is important to look behind the warm words and to see whether agreement is apparent or real. There are worrying signs that the agreement on the direct effect of the Withdrawal Agreement does more to expose the differences between the two sides and their contrasting world views about citizens’ rights.

Staying in the Single Market: Not so EEAsy?

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.

 

 

Control over Laws – Why all the fuss about the European Court of Justice?

Following on from yesterday’s blogpost on the UK Government’s new position paper on enforcement and dispute-resolution beyond the “direct jurisdiction” of the Court of Justice, today, I publish an extract from Brexit Time: Leaving the EU – Why, How and When? (Cambridge University Press) that looks at why the Court became a focal point of the referendum debate.

 

Control over law is also about having control over who interprets the law. The role of the Court of Justice as the authoritative interpreter of EU law was at the fore of criticisms about a loss of control over law. The Court’s interpretation of the primary law of the treaties is crucial because the treaties contains fundamental rules on inter alia the reach of EU free movement rules, citizenship, aspects of equality law and competition law, together with the fundamental rights protected by the EU Charter of Fundamental Rights. Given that primary law can only be changed by national governments through a treaty revision process requiring the unanimous consent of national governments as well as ratification by all Member States, it is clearly extremely difficult for an individual state to try and reverse a Court of Justice ruling with which it disagrees.

The Court’s extension of gender equality protection in respect of pay to include occupational pensions schemes can be cited as an example where the preferences of the Court and national governments diverged. It is also a rare example of a situation where Member States sought to regain control by agreeing the Barber Protocol to the treaties to limit the temporal effects of the Court’s judgment in the occupational pension sphere thereby minimising its financial repercussions.

The Court of Justice’s interpretation of EU legislation is also significant. As with the interpretation of the primary law of the treaties, there are examples where the Court gives binding interpretations that are out of step with the preferences of governments, employers and sometimes also employees. The example of the Working Time Directive is again a case in point. Clarifications given by the Court on what constitutes working time – to include the time that a person is required to be available for work (even if the person may rest while ‘on call’) – have been criticised for their impact on the organisation of emergency and health services. Legislative acts are not burdened by the same constitutional impediments to their alteration but it may, nonetheless, be difficult to find majority support for legislative change. Indeed, following controversial interpretations of the Posted Workers Directive by the Court of Justice, the Commission found it extremely difficult to come up with substantive legislative proposals that would meet the very different interests of workers from ‘old’ and ‘new’ Member States. The Member States are also not free to amend EU legislation in a way that would conflict with the primary law of the treaty as interpreted by the Court of Justice.

In an earlier time when the sorts of cases coming before the Court concerned prosaic issues such as the imposition of customs duties on the import of urea formaldehyde or the requirement that imports of Scotch whisky be accompanied by a certificate of origin, it was possible for the Court to cloak its institutional role in the guise of terse, abstract legalism. With national courts also willing to supply the Court of Justice with a steady stream of new cases, the domain of legal integration could continue to expand. But in more modern times when the issues before the Court are more controversial, the Court, as an institution, is more socially and politically exposed, and its apparent ‘activism’ scrutinised.

Yet for all this, it is difficult to pinpoint clear examples of judgments of the Court of Justice which generated the sort of level of political or social controversy that might lead voters to consider that the UK should leave the EU. Indeed, the complaints were more typically about the judgments of the European Court of Human Rights – an organ of the Council of Europe and not of the European Union.

The EU courts were also useful to the UK in two ways. Firstly, a strong compliance machinery increases the functional capacity of the EU to achieve its aims by ensuring that Member States comply with their obligations. Secondly, governments are also litigators before the EU courts. Member States may litigate before the EU courts for a number of reasons but one of those reasons concerns the adoption of EU rules by Qualified Majority votes. It is one thing for a Member State to accept the primacy of EU rules when those rules require all national governments to agree to them: the power of veto gives each state control over what it will or will not accept. Where primacy doesn’t just bite, but hurts, is when EU rules are adopted by a Qualified Majority of EU states. With successive treaty revisions – and following successive enlargements of the EU –majority voting has become the norm. To be sure, institutional practice is such that where possible, a consensus is sought without the need for a vote. But, there are instances where EU rules are adopted in the face of opposition by a state and this is where a state may wish to instil the help of the Court of Justice in striking down the offending rule.

An example of the UK Government challenging an EU legislative measure before the Court of Justice concerns the controversial Working Time Directive that set down limits on the number of hours that a worker could legally work. In fact, the UK had not voted against the measure but merely abstained. The Commission had also agreed to water down the directive by allowing derogations to allow individual workers to contract out of the time limits. The Court of Justice rejected the UK’s claims that the legislation had an incorrect legal basis in the treaties and was an employment policy measure, rather than one correctly relating to health and safety. But it became a totemic example of claimed EU interference in a sphere of social and employment relations that British Conservative governments sought to insulate from EU control.

In the years leading up to the referendum, the UK Government became a more frequent litigator before the Court of Justice in its challenge to EU rules on ‘short-selling’, the proposal for a Financial Transaction Tax and caps on bankers’ bonuses. The UK lost in the first two cases and abandoned the third. Outside the legislative context, the UK did win an important case before the EU’s General Court challenging a policy of the European Central Bank that would require institutions clearing Euro-denominated securities to be based in a Eurozone Member State. But these examples illustrate not just how much post-crisis regulatory responses have heightened tensions between the UK and the EU but also how even sceptical governments in practice rely on EU courts to try and regain what they have lost in the political arena.

Nonetheless, it is misleading to evaluate the impact of EU law on the UK legal order simply through examples of situations of conflict or controversy. Day-to-day, national courts have simply got on with the task of interpreting and applying EU law. If the political task of doing EU business is a routine aspect of national administrative life, then enforcing EU law in national courts may also be regarded as unexceptional. Indeed, discontents with EU law may not be a function of conflict, but on the contrary, the willingness of the judiciary to carry out its responsibilities to ensure the effective enforcement of EU law in the UK.  Much like complaints about the application of the European Convention on Human Rights by UK courts, it is a sense of the empowerment of unelected judges that seems to drive antipathy towards ‘European’ law and which, in part, motivates Brexit.

British workers and citizens have, of course, been the beneficiaries of a capacity to apply and enforce EU law in national courts and tribunals. But, it is not obvious that this capacity has engendered a wider social affinity between the EU and citizens and indeed, litigating EU rights may seem like the preserve of the few not the many.

 

Leaving Luxembourg – The UK’s Position on Enforcement and Dispute-Resolution after Brexit

Today the UK Government has published the latest in its series of Brexit policy papers, this time taking on how the issue of ‘Enforcement and Dispute Resolution’ in UK-EU relations will be resolved. This is all part of an attempt by the Government to get on the front foot in shaping negotiations which thus far have been driven by the well-oiled Brussels negotiating machine. To date, there has been an apparent gulf between the two sides.

In her Lancaster House speech back in January, the Prime Minister Theresa May set out her Government’s approach to Brexit. Echoing one of the key themes of the ‘Vote Leave’ campaign, she stated that: ‘we will take back control over our laws and bring an end to the jurisdiction of the European Court of Justice in Britain’.

Things look somewhat different on the EU side. The European Council guidelines make clear that the EU will seek to protect its interests and its autonomy, including the role of CJEU. The negotiating directives go further particularly in signaling a potential role for the CJEU in the enforcement of the withdrawal agreement itself. It is said that the withdrawal agreement shall include ‘effective enforcement and dispute settlement mechanisms that fully respect the autonomy of the Union and of its legal order, including the role of the Court of Justice of the European Union, in order to guarantee the effective implementation of the commitments under the Agreement.’

To date, it has seemed possible that the differences in approach between the UK and the EU might derail negotiations with both sides locked into their own ideologies. On the UK side, the ideological element is rooted in a belief within government that what matters is to ‘keep faith’ with the referendum decision. Given that taking back control from the Court of Justice was one strand of the Leave campaign, for some – including the Prime Minister – this means an inability to agree anything that will see a post-Brexit role for the CJEU. As the White Paper presented to Parliament in February states: ‘We will take control of our own affairs, as those who voted in their millions to leave the EU demanded we must, and bring an end to the jurisdiction in the UK of the Court of Justice of the European Union’. The EU side may equally have too much ideological skin in the game to allow for compromise solutions to be found. The attachment to the autonomy of the Union legal order and the Court as its institutional safeguard casts the CJEU in the somewhat heroic role of the constitutional guarantor of the rights of citizens. And yet it is the national courts that in the end do much of the judicial heavy lifting. The European Court of Justice has limited powers to give remedies whereas the national courts have access to a wide range of remedial orders.

Only if we are really honest about the appropriate division of responsibilities between the CJEU and the national courts and between the use of judicial and non-judicial dispute resolution mechanisms will negotiations be able to move forward in designing a post-Brexit dispute-resolution and remedial architecture.

Today’s paper from the Government is a very welcome appraisal of the range of possible mechanisms for the enforcement of rights and obligation under any agreements reached between the UK and the EU, and for resolving disputes that may arise under those agreements.

Rightly, the paper recognizes that where such agreements create rights and obligations enforceable by private parties, it shall be for the national courts – the UK courts and the courts of the EU Member States – to provide effective judicial protection. That includes citizens’ rights. It has always been overly simplistic to see the Court of Justice as the guardian of these rights. While its interpretation of what rights EU citizens possess is, of course, a matter entirely within the Court of Justice’s jurisdiction, the practical enforcement of these rights and the remedies needed to protect them has always been for the national courts to provide. The Government is well within its rights to highlight the central role of UK courts in doing the heavy lifting in the protection of rights and enforcement of obligations under any Withdrawal Agreement. Indeed, the UK is keen to deploy the issue of the ‘autonomy’ of legal orders – often a trump card played by the Court of Justice – against the EU in order to demand respect for the autonomy of the legal orders of the UK (recalling, of course, that the UK is multi-jurisdictional itself given the autonomy of Scots Law in particular).

The paper is also right to distinguish the enforcement mechanisms for the correct application of any agreement, from the dispute resolution mechanism for issues arising from the incorrect application of, breach of, or interpretative deviation from, any such agreement. It draws inspiration from the dispute resolution mechanisms under a variety of EU agreements – free trade and association agreements – to highlight the range of political and non-judicial mechanisms that might be deployed. It notes the legal impediment that may arise from EU law itself in creating new judicial organs to interpret and enforce agreements insofar as they might encroach upon the jurisdiction of the Court of Justice. It was precisely because of the objections of the Court of Justice to the establishment of a new court under the EEA agreement (Opinion 1/91) that we ended up with an EFTA Court and the Court of Justice operating parallel jurisdictions in the applications of the EEA Agreement. Indeed, there is much in the paper which clearly draws inspiration from such a ‘twin pillar’ model, including the role of a Joint Committee to mediate between the two pillars in finding solutions to problems that might arise. It is worth recalling that in the EU’s own position paper, the idea of a Joint Committee is floated as a dispute resolution mechanism. Intriguingly, the paper notes that under the EEA Agreement – Article 111(3) – the contracting parties may agree to ask the Court of Justice to give an interpretation of the relevant rules of the agreement where they are identical to provisions of EU law (the parties having already agreed that in situations where the rules are identical the meaning should be the same). That the Court of Justice might be given such a role under any agreement between the UK and the EU leaves open the question of whether this amounts to a backtracking on the commitment to end the jurisdiction of the Court of Justice post-Brexit.

At a rhetorical level is it striking that there are multiple references to excluding the UK from the “direct” jurisdiction of the Court of Justice. This might entail two rather different things. At a domestic level, it could mean that while UK courts will lose powers to refer issues of interpretation to the ECJ, UK courts will continue to have regard to, or take account of, judgments of the Court of Justice but without being bound by them or obliged to follow them. This sort of consistency or “homogeneity” principle is part of the structure of the EU’s relationship with the EFTA states through the EEA agreement. The EFTA states are not under the jurisdiction of the Court of Justice (direct or otherwise), but instead fall under the jurisdiction of the EFTA court. Nonetheless, the homogeneity principle seeks to secure compliance with the same rules as between the EU and EFTA states. Similarly, national courts can follow principles of consistent interpretation. Clause 6 of the European Union (Withdrawal) Bill permits UK courts to interpret “retained EU law” in accordance with any retained case law. This retained case law includes EU case law, meaning “any principles laid down by, and any decisions of, the European Court, as they have effect in EU law immediately before exit day “ So even in advance of the negotiations with the EU, the Government seems ready to allow ECJ case law as it exists prior to the UK’s departure to have a direct influence on UK law, but without the Court having direct jurisdiction (something which clauses 6(1) and (2) of the Bill seek to exclude).

The other sense in which “direct” jurisdiction may be excluded is to give this an entirely formal meaning in the sense that once the UK withdraws from the treaties that confer jurisdiction on the Court of Justice, by necessity, those treaties will not themselves directly create a continuing jurisdiction for the Court over the UK. That would not prevent, however, new treaties or agreements between the UK and the EU from creating such a jurisdiction. So in much the same way that other aspects of Brexit will seek to keep things the same through the adoption of mirror or shadow legal provisions, it is not implausible that new legal frameworks agreed between the UK and the EU could create a role for the ECJ. To return to the example of Article 111(3) of the EEA Agreement, the limited jurisdiction of the Court of Justice arises under the EEA Agreement and not the EU treaties and only where the contracting parties agree to refer the question of interpretation to that Court. This may seem like drawing fine legal distinctions but they do create wiggle room for the government in keeping faith with its promise to end the jurisdiction of the Court while also allowing it some room for manoeuvre in the negotiations.

Today’s paper also highlights the role that might be played by arbitration under any future trade deal and by systems for monitoring and reporting to determine whether there is continuing compliance. Overall its strategy is to say to the EU that there is more than one way to skin the dispute-resolution cat.

The focal point for this paper is clearly upon the withdrawal agreement and any future trade agreement with the EU. In reality, there will be a range of legal instruments producing rights and obligations applicable in a post-Brexit world. These include: (1) the current treaties, the rules made under them, and the principles applicable to them; (2) the withdrawal agreement(s); (3) measures taken by the UK to implement the withdrawal agreement(s), as well as instruments to preserve and convert EU law within domestic law; (4) any agreement on transitional arrangements; and, (5) a future ‘deep and special’ partnership agreement between the UK and the EU. There are different things that the parties to any dispute might need or want. These include: (1) an authoritative interpretation of relevant law; (2) a means of seeking to challenge the validity of a legal instrument; (3) mechanisms for managing and resolving disputes; (4) remedies for the enforcement of duties and the protection of rights; and (5) reciprocal means of enforcement of judgments rendered by courts, including those of the national courts of the UK and the EU27. And there are different potential plaintiffs and defendants in any future disputes. These include: (1) the United Kingdom; (2) the 27 Member States; (3) the EU, its institutions, agencies and bodies; (4) UK citizens and companies; (5) citizens and companies from the EU27; and (6) other countries, their citizens and companies.

It should be abundantly clear that to reduce the debate down to a proxy referendum on the jurisdiction of the CJEU – Yes or No – is to fail to take seriously the keyword: ‘jurisdiction’. What negotiators needs to get right is the relative jurisdictions of EU and national courts, as well as the relative division of roles between judicial and non-judicial institutions. It is to be hoped that today’s constructive paper is a sign that the UK is willing to get out of its ideological silo and to focus on what sort of dispute resolution mechanism is needed for what type of problem. One can only hope that the same will be true on the EU side.

Putting the Cart before the Horse: what’s missing from the UK’s Customs Paper

The UK Government has published its anticipated ‘partnership paper’ on a future customs arrangement with the European Union. Much of the paper is a statement of generalities about the Government’s commitment to, and aspirations for, free trade notwithstanding the UK’s decision to detach itself from its principal trading party, its Single Market and its Customs Union. Indeed, the first line of the paper’s ‘executive summary’ states in clear terms that when the UK withdraws from the EU it will leave the Customs Union. To underline the point, the paper repeatedly states that whatever future customs arrangement the UK agrees with the EU, ‘the UK would seek to pursue its independent trade policy objectives’. Given that membership of a Customs Union means that member countries align their trade policies and apply a common external tariff, this would be incompatible with what appears to be the prime directive of government policy, namely the pursuit of an independent trade policy.

At the core of the paper are two principal options for future customs arrangements.

The first option would be to adapt existing procedures for handling the movement of non-EU goods within the EU (and also EFTA states) to now include good originating in the UK or imported into or transiting through the UK. Sensibly, the paper reflects the significant improvements which have been made over the years to streamline formalities and to use technologies like the New Computerised Transit System (NCTS) to avoid the need physically to present goods at customs offices for customs clearance. Significantly it also points to membership of the Common Transit Convention which manages the procedure for the transit of goods (EU and non-EU)  not just through the EU but also other countries that are parties to the Convention (Article 15a would allow the UK to accede to that Convention). What is vital about this model is that it tells us virtually nothing about the underlying regimes that would apply to goods in the UK and the EU in respect of (1) applicable tariffs (2) taxes (3) other charges including any relevant anti-dumping measures and (4) regulatory standards including health and safety requirements. This is all about trade facilitation between the EU and the UK as a new non-EU state at an administrative level rather than at a regulatory level (see para 38 of the paper).

The second option is some sort of new customs partnership that fall shorts of the existing Customs Union. This could see the UK effectively acting as the agent of the EU in applying the EU’s external trade policy (including ensuring that applicable EU tariffs were paid) for goods entering the EU via the UK. For goods destined for the UK, the UK would apply its own trade policy including applicable tariffs. But what remains unclear is what tariffs would be applicable for goods that are placed on the UK market but then sold onto the EU market. All of which depends on whether there is a trade agreement between the UK and the EU and, if not, what limitations WTO rules might impose. In other words, this puts the cart before the horse: we don’t know what the customs side should look like until we see what the trade (and other regulatory) terms will be.

The UK has also set out its proposals for a time-limited ‘interim arrangement’ pending agreement on a future customs and trade deal. It envisages a ‘new’ customs union with a shared external tariff. There would need to be a mechanism for apportioning how this tariff would be paid to the UK and EU respectively. But the major difficulty would be how to reconcile this new customs union with the Government’s ambitious trade policy agenda. The paper attempts to square the circle by stating that while it would ‘pursue new trade negotiations’ it would not bring into effect any new arrangements that were not consistent with the interim deal with the EU. However, in practice, the UK will need to settle its future trade relationship with the EU before it can realistically hope to come to arrangements with other non-EU states. The result would be that the UK would have left the Customs Union only to replicate it but with all the uncertainty over whether any future trade deal with the EU – and on what terms – could be agreed.

Meanwhile the issue of the border with Northern Ireland depends not just on smoothing the formalities of customs administration but also, again, on knowing what the future trading relationship between the UK and the EU will be. And as long as Government policy is overshadowed by a focus on trade deals outside the EU and insufficiently attentive to how the UK will trade with the EU, these key issues will remain unresolved, heightening economic uncertainty.

Much more flesh needs to be put on the bones of Government policy on future customs and trade policies. But whether or not we get to that point still depends on UK-EU negotiations making sufficient progress on other issues including citizens’ rights and settlement of the UK’s financial obligations to the EU: a point made clear in a tweet from Michel Barnier within hours of the publication of the UK’s paper.

Net Figures, Gross Deception – Why there is no big Brexit bonus for public services

Emblazoned across posters, leaflets and big red buses, the Vote Leave campaign stated in stark terms that membership of the EU cost UK taxpayers £350 million per week. It was a figure repeatedly challenged by the Remain campaign and by fact-checking organisations who pointed out that it ignored the automatic deduction of a rebate before any contributions are made to the EU budget. It wasn’t even the case that money was ‘sent’ and then a proportion ‘returned’: it was never sent in the first place.

Actual contributions vary between years depending on changes in Gross National Income, but with the application of the rebate, in 2014 the weekly contribution was more like £282 million or 14.7 billion for the year. The £350 million figure also failed to account for the money transferred back to the UK public sector under a range of EU programmes. Once these are taken into account the Office for National Statistics calculated the UK’s net contribution in 2014 at £190 million a week or £9.9 billion for the year.

But whether the figure was £350 million or some other figure probably wasn’t relevant. The point was that voters either couldn’t see or didn’t value what they got for their money, underlining what has sometimes been seen as a ‘transactionalist’ approach to EU membership rather than a more value-driven concept of membership. Voters were, however, clearer that the UK had experienced a post-financial crisis period of austerity and budget cuts. EU contributions were being made as domestic spending was being squeezed. If we are to understand what taking back control over money might mean, answers lie in the different features of EU and domestic public spending and the relationship between the two.

For the EU 2016 budget, annual spending commitments on all EU policies amounted to €155 billion. By comparison, UK government spending in 2016-17 was expected to be £772 billion, with spending on health alone (£145 billion) amounting to more than the total annual EU budget. These figures tell us something important about the differences between EU and domestic public spending. The main items of domestic expenditure reflect the primary role of the nation state in redistributive policies and the provision of public goods. It is precisely in the areas of welfare, health and education that the EU plays a limited role. The EU itself does not provide these public goods and services.

Instead, EU spending focuses on a set of policy initiatives that reflect the specific tasks and competences of the EU as well as priorities set by EU leaders. For 2016, the EU annual budget set out principal headings for expenditure: €19 billion allocated to supporting growth, jobs and competitiveness, including €9.5 billion for Horizon 2020, the EU’s strategy to support research and innovation; €50 billion for territorial cohesion (tackling economic disparities between different parts of the EU); and €42 billion supporting farmers under the Common Agricultural Policy. The EU budget is, of course, partly spent in the UK. The most significant funds for UK purposes are the ‘European Regional Development Fund’ (‘ERDF’) which supports disadvantaged regions and the ‘European Social Fund’ (‘ESF’) which promotes skills and training to support labour market participation. For 2014-2020, the UK is allocated €17.2 billion. The European Agricultural Guarantee Fund is the principal source of direct payment to farmers under the Common Agricultural Policy. The allocation to the UK for 2014-20 is €22.5 billion.

Once it is recognised that sums of money flow back to the UK from the EU budget, it becomes even more apparent that there never could have been a £350 million a week Brexit bonus for the UK to spend on the NHS. The only way of getting close even to the figure of £282 million that took the rebate into account would be to cut to zero all the expenditure on things like research, regional policy and support for farmers that currently comes back to the UK out of the EU budget.

But beyond the narrow narratives of the referendum campaign, the wider context for concerns about control over money were to be found in the post-crisis politics of austerity. For voters who had felt the effects of a shrinking public sector both in terms of employment and the provision of public services, rejection of EU membership was an opportunity to challenge ideas that the economy was either simply a product of market forces or the object of a type of post-political technocratic managerialism that seemed to characterise the European response to the financial crisis of a decade ago. That a Conservative Government was backing EU membership while pursuing policies of austerity that were, in any event, consistent with the prevailing European preference for fiscal discipline, created a focal point for political resistance, not least for traditional Labour voters. Viewed in this way, we can also see more clearly why the idea of diverting resources from the EU to public spending on the NHS might have resonated strongly with voters.

* * * * *

A year on from the referendum and the figures for the year in which the referendum was held show that the UK’s net contribution to the EU was £156 million a week. Meanwhile it is also reported that the UK may have outstanding liabilities to the EU of £36 billion that will need to be settled as part of the UK’s withdrawal from the EU. New money will be spent after Brexit but it will be on putting in place new IT systems for customs and immigration and on creating new regulatory structures needed to make markets operate after Brexit. There will be no Brexit social dividend for public services. And the NHS will not get £350 million a week of new spending.

Adapted from Chapter 7 ‘Control over Money’ in Brexit Time – Leaving the EU: Why, How and When? which is out now.