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Is there a deal to be done if the UK gives some ground on its substantive obligations, and the EU gives some ground on how they are enforced?
By Raphael Hogarth
Nothing divides British and European Union negotiators so much as the role of EU law in the UK’s legal system. EU leaders want it to be the star of the constitutional show, still capable of regulating government decisions, and even restricting the application of Acts of Parliament. The British government would rather that EU law made only a brief cameo in the immediate aftermath of Brexit, applying during the ‘standstill’ transition period set to run until the end of this year, but not thereafter. Those differences look intractable – and yet, they are probably not.
EU negotiators worry that, if future British governments legislate to repeal EU rules on labour or the environment, that could allow British businesses to steal a march on their competitors across the Channel. Freed from regulatory burdens, they could produce goods and services at lower cost, and sell them at lower prices. That, says the EU, would amount to unfair competition.
As well as scaling back the state where it makes life harder for businesses, the EU worries that Brits might scale up the state where it makes life easier, handing out more freebies to British business once the UK has left the EU’s state aid regime.
Ministers have tried to assuage those fears in EU capitals. David Davis – Britain’s first Brexit secretary – promised in 2018 that Brexit would not turn Britain into a ‘Mad Max-style dystopia’. Last month the Prime Minister mocked what he called the ‘absurd caricature’ of Britain as a nation bent on deregulation. He noted, too, that EU governments’ purse strings have been looser than the UK’s when it comes to state aid. Given all that, he said, there is ‘no need’ for the UK to be bound by EU law, still less to make that law enforceable before British courts as it is now.
The EU has reasons to be sceptical of those assurances. First, they might not be made in good faith. After all, the government is already rowing back on its promises concerning Northern Ireland. In a treaty ratified by the UK last year, it promised that some goods moving from Great Britain to Northern Ireland would have to comply with EU regulations, and some would be subject to a tariff.
Now the Prime Minister says that there will be no checks at the border, making that commitment near impossible to discharge. If the British government will so readily abandon legal obligations, EU negotiators might think they would be foolish to trust mere ministerial promises.
Second, even if promises of high standards were made in good faith, the road to Mad Max dystopia is paved with good intentions. The kind of trade agreement Boris Johnson wants will involve an economic hit, as businesses hit new trade barriers. The government will be looking for ways to cushion the blow. Some solutions, which might have seemed unthinkable when the government was basking in the warm afterglow of an election win, might seem more attractive once the British economy is out in the cold.
The EU therefore wants EU law to subsist in the UK in two main ways. First, it wants the UK to commit to ‘dynamic alignment’ with the EU’s state aid rules. That would see the UK applying both existing EU state aid law, and rules that the EU makes in future. Second, the EU wants the UK to commit to keeping the same level of protection on labour and the environment as is provided by EU law at the end of the transition period.
That creates a headache for negotiators. In other international negotiations, the UK and EU have argued that there is no point in partners having shared rules unless they share an interpretation of those rules. Because of legal constraints on the EU side, however, it is difficult for the authority on EU law to be any institution other than the European Court of Justice (ECJ).
In the early 1990s, the first draft of the European Economic Area Agreement, which extended the European single market to countries outside the European Economic Community (the EU’s precursor), was thrown out by the ECJ. That treaty would have created a new tribunal, comprising a mix of ECJ judges and judges from the other contracting countries, with the power to issue binding rulings on the interpretation of single market law. The ECJ said that this was unlawful: only the ECJ can bind the EU to an interpretation of EU law. It has reiterated that view in several subsequent opinions.
If only the ECJ can bind the EU, and whoever binds the EU must also bind the UK for alignment to work, then it follows that the ECJ must bind the UK. That does not sit comfortably with the UK’s stated position that there will be ‘no role’ for the ECJ in the future relationship.
There is room for compromise. As far as rules on labour and the environment go, the EU’s objective is to stop the UK deregulating. It would be possible to couch that commitment in language that made no reference to EU law, but only to the UK’s ‘level of protection’. That would keep the ECJ out of the picture.
Whereas the withdrawal agreement gave itself a form of ‘direct effect’ in the UK, making it enforceable before domestic courts, any agreement on the future could stop short of that. The government would not then find its measures struck down either in Luxembourg or the High Court. Instead, disputes about the UK’s ‘level of protection’ could go to international arbitration, the dispute resolution process already agreed for commitments that do not involve EU law.
On state aid the two sides are further apart. Yet the UK already committed, in the withdrawal agreement, to keep applying EU state aid law, supervised by the EU institutions, in respect of state aids affecting trade between Northern Ireland and the EU.
State aids with national application are likely to fit that description. The EU would not lose much protection against unfair competition, therefore, by relaxing its demands on state aid provisions in the future relationship, while adopting an expansive interpretation of the state aid provisions that the UK has already ratified.
The future relationship treaty could still impose restrictions in respect of measures that do not affect Northern Ireland, but in a way that appears less heavy-handed to the government. This part of the scheme would be administered by the Competition and Markets Authority rather than the European Commission, with no jurisdiction for that body or the courts to strike down primary legislation which falls foul of the treaty obligations. The treaty could also acknowledge that although these obligations might be based on rules of EU law, Great Britain was leaving the EU state regime. It would follow that some difference in interpretation between judges on either side of the Channel was legally possible. It would also mean that the application of new EU rules was not automatic.
There is a deal to be done, in other words, if the UK gives some ground on its substantive obligations, while the EU gives some on how those obligations are enforced and updated. The parties might always flounce out of the room, of course – but some nifty framing of the treaty provisions could give the EU most of what it wants without saddling the UK with much of what it fears.
Raphael Hogarth is an Associate at the Institute for Government and a pupil at 11KBW.
Nothing divides British and European Union negotiators so much as the role of EU law in the UK’s legal system. EU leaders want it to be the star of the constitutional show, still capable of regulating government decisions, and even restricting the application of Acts of Parliament. The British government would rather that EU law made only a brief cameo in the immediate aftermath of Brexit, applying during the ‘standstill’ transition period set to run until the end of this year, but not thereafter. Those differences look intractable – and yet, they are probably not.
EU negotiators worry that, if future British governments legislate to repeal EU rules on labour or the environment, that could allow British businesses to steal a march on their competitors across the Channel. Freed from regulatory burdens, they could produce goods and services at lower cost, and sell them at lower prices. That, says the EU, would amount to unfair competition.
As well as scaling back the state where it makes life harder for businesses, the EU worries that Brits might scale up the state where it makes life easier, handing out more freebies to British business once the UK has left the EU’s state aid regime.
Ministers have tried to assuage those fears in EU capitals. David Davis – Britain’s first Brexit secretary – promised in 2018 that Brexit would not turn Britain into a ‘Mad Max-style dystopia’. Last month the Prime Minister mocked what he called the ‘absurd caricature’ of Britain as a nation bent on deregulation. He noted, too, that EU governments’ purse strings have been looser than the UK’s when it comes to state aid. Given all that, he said, there is ‘no need’ for the UK to be bound by EU law, still less to make that law enforceable before British courts as it is now.
The EU has reasons to be sceptical of those assurances. First, they might not be made in good faith. After all, the government is already rowing back on its promises concerning Northern Ireland. In a treaty ratified by the UK last year, it promised that some goods moving from Great Britain to Northern Ireland would have to comply with EU regulations, and some would be subject to a tariff.
Now the Prime Minister says that there will be no checks at the border, making that commitment near impossible to discharge. If the British government will so readily abandon legal obligations, EU negotiators might think they would be foolish to trust mere ministerial promises.
Second, even if promises of high standards were made in good faith, the road to Mad Max dystopia is paved with good intentions. The kind of trade agreement Boris Johnson wants will involve an economic hit, as businesses hit new trade barriers. The government will be looking for ways to cushion the blow. Some solutions, which might have seemed unthinkable when the government was basking in the warm afterglow of an election win, might seem more attractive once the British economy is out in the cold.
The EU therefore wants EU law to subsist in the UK in two main ways. First, it wants the UK to commit to ‘dynamic alignment’ with the EU’s state aid rules. That would see the UK applying both existing EU state aid law, and rules that the EU makes in future. Second, the EU wants the UK to commit to keeping the same level of protection on labour and the environment as is provided by EU law at the end of the transition period.
That creates a headache for negotiators. In other international negotiations, the UK and EU have argued that there is no point in partners having shared rules unless they share an interpretation of those rules. Because of legal constraints on the EU side, however, it is difficult for the authority on EU law to be any institution other than the European Court of Justice (ECJ).
In the early 1990s, the first draft of the European Economic Area Agreement, which extended the European single market to countries outside the European Economic Community (the EU’s precursor), was thrown out by the ECJ. That treaty would have created a new tribunal, comprising a mix of ECJ judges and judges from the other contracting countries, with the power to issue binding rulings on the interpretation of single market law. The ECJ said that this was unlawful: only the ECJ can bind the EU to an interpretation of EU law. It has reiterated that view in several subsequent opinions.
If only the ECJ can bind the EU, and whoever binds the EU must also bind the UK for alignment to work, then it follows that the ECJ must bind the UK. That does not sit comfortably with the UK’s stated position that there will be ‘no role’ for the ECJ in the future relationship.
There is room for compromise. As far as rules on labour and the environment go, the EU’s objective is to stop the UK deregulating. It would be possible to couch that commitment in language that made no reference to EU law, but only to the UK’s ‘level of protection’. That would keep the ECJ out of the picture.
Whereas the withdrawal agreement gave itself a form of ‘direct effect’ in the UK, making it enforceable before domestic courts, any agreement on the future could stop short of that. The government would not then find its measures struck down either in Luxembourg or the High Court. Instead, disputes about the UK’s ‘level of protection’ could go to international arbitration, the dispute resolution process already agreed for commitments that do not involve EU law.
On state aid the two sides are further apart. Yet the UK already committed, in the withdrawal agreement, to keep applying EU state aid law, supervised by the EU institutions, in respect of state aids affecting trade between Northern Ireland and the EU.
State aids with national application are likely to fit that description. The EU would not lose much protection against unfair competition, therefore, by relaxing its demands on state aid provisions in the future relationship, while adopting an expansive interpretation of the state aid provisions that the UK has already ratified.
The future relationship treaty could still impose restrictions in respect of measures that do not affect Northern Ireland, but in a way that appears less heavy-handed to the government. This part of the scheme would be administered by the Competition and Markets Authority rather than the European Commission, with no jurisdiction for that body or the courts to strike down primary legislation which falls foul of the treaty obligations. The treaty could also acknowledge that although these obligations might be based on rules of EU law, Great Britain was leaving the EU state regime. It would follow that some difference in interpretation between judges on either side of the Channel was legally possible. It would also mean that the application of new EU rules was not automatic.
There is a deal to be done, in other words, if the UK gives some ground on its substantive obligations, while the EU gives some on how those obligations are enforced and updated. The parties might always flounce out of the room, of course – but some nifty framing of the treaty provisions could give the EU most of what it wants without saddling the UK with much of what it fears.
Is there a deal to be done if the UK gives some ground on its substantive obligations, and the EU gives some ground on how they are enforced?
By Raphael Hogarth
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