In the Brexit negotiation, the UK will never escape the close connection between judicial and trade cooperation

Politically, the European Court of Justice (ECJ)’s role after 2019 has become one the most controversial items of the Brexit negotiation. Legally, keeping a cooperation between the EU and the UK, and especially a strong one in trade, will require some mechanisms to settle inevitable disputes.

(Photo credit: European Commission)

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In the Brexit negotiation, the UK will never escape the close connection between judicial and trade cooperation

Politically, the European Court of Justice (ECJ)’s role after 2019 has become one the most controversial items of the Brexit negotiation. Legally, keeping a cooperation between the EU and the UK, and especially a strong one in trade, will require some mechanisms to settle inevitable disputes.

The question is very sensitive for both partners because the ECJ has always been extremely jealous of its supremacy regarding dispute settlement mechanisms in the EU external agreements. This was first expressed in Opinion 1/91 on the European Economic Area Agreement and its system of judicial review. This was repeated in Opinion 1/09 on the draft agreement for a unified patent litigation system, described at the time as the expression of “scepticism and distrust on part of the ECJ when it comes to the European Union’s international co-operation, especially its participation in international frameworks for dispute settlement.”[1]. Finally, it was heavily emphasized in Opinion 1/13 about the EU adhesion of the European Convention on Human Rights. The ECJ’s reluctance was so strong that Peers commented : “in short, the Court  is  seeking  to  protect  the  basic  elements  of  EU  law  by  disregarding  the  fundamental values upon which the Union was founded.”[2] One disabused ECtHR judge even described the cultural difference (and the supremacy debate) between the two courts in the following way : “the judges from Luxembourg each travel with their individual car and driver provided by the ECJ; the judges from Strasbourg go by bus.” [3] Such a background must be remembered. This creates a huge difference between already existing “off-the-shelf” solutions, and new ones. Any new system risks creating an additional need to consult the ECJ before concluding the negotiation.

This comment does not deal with the Article 50 TFEU agreement, but well with the future relationship (though there could be connections). The Article 50 agreement is meant to deal with the UK exit’s modalities. As Article 50 aims to establish clearly the right of any Member State to leave the EU, it would be strongly contradictory with this intention to maintain the ECJ’s role in the implementation of this agreement (except of course for conflicts that began before 2019)[4]. This does not mean at all that the ECJ has no competence, but that competence does not extend outside the EU territory, or to direct conflicts between the EU and the UK. One does not exit a club to remain. The negotiators would be well inspired to reduce anyway as much as possible the references to EU principles and legislations in the text. This would not only strongly complicate its implementation, but also engender multiple and endless new causes of friction between the EU and the existing state. Allowing requests for an ECJ preliminary ruling in 2049 in front of the Supreme Court in London invoking a 2034 EU regulation for someone who was not even born in 2019 is most probably not the way to prevent such frictions. Everybody should strive in good faith to build the foundations of a new satisfactory relationship, and maintaining the exiting state under the ECJ’s control would certainly not help.

If the UK intends to maintain a strong relationship with the EU, first in trade, at least in a transitory phase of a few years, things change. There are not many possible solutions. They have already been contemplated in EU negotiations with numerous third states. The EU will not be eager to modify them strongly, not at all in the intention of punishing the UK, but because this would run the (very huge) risk of destabilizing its relations with other partners. Basically, there is the CETA option, the EEA solution, and the EU/Ukraine solution.

In a nutshell, the CETA is the least ambitious for trade, and the least constraining for dispute settlement. The EU/Ukraine agreement is more ambitious for trade, but also more constraining for dispute settlement. Many analyses focus on the general provisions, and tend to forget the specific regime established by Article 322(2) of the Agreement. According to this text, the arbitration panel must submit directly many questions related to regulatory harmonization to the ECJ and follow its judgments[5]. This is a quite imperialist judicial mechanism, in fact. Finally, the EEA solution is globally the most ambitious for trade but not necessarily more constraining for dispute settlement.

Where do we go from there? The EEA presents many positive aspects for the EU. The judicial organ already exists and functions. It has not created major problems in the relationship with the ECJ. This prevents the multiplication of ad hoc

systems. It also prepares possible future exits of other Member States. And it could even open a reorganisation of the neighbourhood policy in the domain of trade, which is overdue in any case. It is important to keep a global vision of the EU strategy. On the other side, the presence of a more assertive UK in the EEA system could accentuate some until now limited (but growing nonetheless) adaptation problems.

The EEA solution also presents some advantages for the UK. The system already existing, the negotiation may quicker deal with other topics. Creating a totally new system risks multiplying frictions about its details, requires many implementation measures (see that creating the Unified Patent Court has not been a walk in the park) and it does not guarantee to reach a final solution. Fundamentally, this is the strong and stable solution that provides the greatest security to business, which is essential to protect investment and jobs. Furthermore, the UK will benefit from the trade agreements of EFTA, in a transitory period for which it has already no more the time and the means to negotiate dozens of new agreements. (since this requires first to establish a new transitory trade regime with the EU). Finally, the EEA allows the conclusion of trade agreements on goods since it is not a customs union. However, the EEA is strongly constraining in many aspects. Additionally, it is a quite heavy solution if meant to be only transitory.

So the UK has to make a choice. However, one principle must be crystal clear. Whatever it chooses, the more trade integration it desires, the more judicial integration it has to accept. If the UK prefers a tailor-made deep cooperation system, it will not escape some kind of EEA like system. The present UK government’s papers reflect that it would like strong trade integration and weak judicial integration. This mix will simply never be accepted by the EU, because it risks provoking a major unbalance in the single market. Brexiteers will thus have to make a difficult decision. If at the end they prefer the combination weak trade + weak judicial integration, this will probably increase the trade disruption damages. So this choice could well provoke Brexit – but also possibly the Tory party’s disintegration. If there are regular chokepoints at the customs, visible delocalizations of enterprises, and weak growth, the pressure of hard facts will become unbearable.

It is somewhat surrealistic to define first a precise position about courts, and second about trade, because at the end courts are only an instrument that supports a trade regime. So the approach should be reversed. The UK government should choose the trade regime first, and then bite the bullet for the courts[1]. And it should do that quickly because each wasted month now in defining a position and offering predictability to enterprises will increase at the end the losses in investments and jobs.

Franklin DEHOUSSE

Professor at the University of Liège

Former Special representative of Belgium

Former judge at the Court of justice of the European Union

[1] T. Stock, ‘Taking National Courts More Seriously? Comment on Opinion 1/09’, European Law Review, 36, 2011, 576.

[2] S. Peers, Opinion 2/13, ‘The  EU’s  Accession  to  the  ECHR:  The  Dream  Becomes  a  Nightmare’, German Law Journal, 2015, 213.

[3] L. Besselink, Should the European Union Ratify the European Convention for Human Rights? Some Remarks on the Relations between the European Court of Human Rights and the European Court of Justice, in A. Føllesdal, G. Ulfstein and B. Peters (eds.), Constituting Europe: the European Court of Human Rights in a National, European and Global Context. Cambridge Studies on Human Rights Conventions, Cambridge University, 2013, 306.

[4] See F. Dehousse, The European Union is exaggerating in its demands for Brexit, especially about the European Court of Justice’s future role, Egmont, 29 May 2017.

[5] This mechanism covers the numerous topics of Chapter 1 (Technical Barriers to Trade), Chapter 4 (Sanitary and phytosanitary Measures), Chapter 5 (Customs and Trade Facilitation), Chapter 6 (Establishment, Trade and Services and Electronic Commerce), Chapter 8 (public Procurement) and Chapter 10 (Competition).

[6] For example, as I argued 9 months ago, taking quickly a firm position in favour of a customs union would have simplified tremendously the preparation of Brexit by the industry and agriculture sectors, as we see now. See F. Dehousse, What if Mrs May had a strategy for Brexit, and her divided opponents had not?, Egmont, 17 January 2017.

(Photo credit: Rareclass, Flickr)