Catherine Barnard and Emilija Leinarte*

*Professor of EU law, University of Cambridge and PhD student, University of Cambridge. This research has received support from the ESRC’s UK in a Changing Europe programme.

A recent publication by UK in a Changing Europe examined various governing structures that could be used to manage the UK-EU relationship following Brexit. The released White Paper offers a glimpse into the institutional structure that the UK envisions for its future dealings with the EU after withdrawal. This piece will examine the potential benefits and drawbacks of the UK’s proposals and explore possible alternatives, specifically focusing on the dispute resolution mechanism post-Brexit.

Institutional Structures

The White Paper suggests that an association agreement (AA) could form the basis for governing UK-EU relations. This agreement would provide a comprehensive institutional framework, encompassing various individual agreements covering economic, security, and cross-cutting cooperation. A mixed free trade agreement (FTA) would likely be used to define economic cooperation.

The White Paper proposes two primary institutions for governance:

• A Governing Body, responsible for setting the overall direction of the future relationship.

• A Joint Committee, overseen by the Governing Body, to manage the implementation of the relationship.

The Governing Body, composed of heads of state and presidents of EU institutions, would meet at least twice a year and hold additional ad hoc meetings at the ministerial level. This structure grants authority to Member States. The Joint Committee, on the other hand, would consist of officials from both the EU and the UK. Additionally, there would be regular and formal dialogue between the UK Parliament and the European Parliament.

The White Paper’s proposed structure is a hybrid model, as both EU Member States and institutions would have authority in governing the relationship. This differs from existing EU association agreements, where Member States do not directly supervise or implement the agreement. For instance, the EU-Ukraine and EU-Moldova AAs feature an Association Council (similar to the proposed Governing Body), comprised of members from the Council of the European Union and the European Commission on the EU side. Typically, EU AAs operate supranationally, with EU institution representatives responsible for overseeing implementation.

Dispute Resolution

The White Paper outlines a framework for resolving disputes between the parties involved in the AA. This proposed mechanism would address binding commitments, including trade obligations. However, it would not cover the protection of private rights. This means British individuals or companies believing their rights under the AA have been violated could only seek legal recourse through UK courts domestically or EU courts within the EU. This approach aligns with typical EU AA practices, as seen in the EU-Moldova AA, which also excludes private rights from its dispute resolution mechanism. Similarly, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) explicitly excludes private action against contracting parties.

Private rights are also absent from the dispute resolution mechanism under the Agreement on the European Economic Area (EEA Agreement) between the EU and EFTA members Norway, Liechtenstein, and Iceland. To address this, the European Commission (EU) and the EFTA Surveillance (EFTA) can receive complaints regarding the EEA Agreement’s application and potentially impose fines on individuals or entities violating it.

In contrast, recently concluded FTAs, such as the EU-Canada Comprehensive Economic and Trade Agreement (CETA), establish a separate mechanism for investor claims and disputes within the financial services sector, with compensation as the primary remedy. The White Paper does not mention this option, and it remains unclear whether the UK-EU FTA will include an investment protection chapter.

Dispute Resolution Body

The White Paper suggests disputes between the EU and UK should be initially addressed within the Joint Committee. This intermediary role for an executive body is common in EU AAs. The EU-Moldova AA, for example, requires consultations to be initiated through a written request to the other party, copied to the relevant Association Committee. Similar arrangements for trade disputes exist in the EU-Ukraine AA.

If negotiations within a reasonable timeframe prove unsuccessful, either party can escalate the dispute to an independent arbitration panel. This approach, using independent arbitration panels for dispute resolution, is standard practice in EU AAs, as demonstrated by the EU-Moldova AA and the EU-Ukraine AA. However, the EEA Agreement diverges in this aspect, granting the judicial function to an executive body rather than establishing an independent arbitration mechanism.

The White Paper does not specify the arbitration panel’s composition, appointment process, access criteria, or publication of findings. It only states that the panel would include members from both parties. The CPTPP’s detailed rules on panel composition, outlined in Article 28.9, could potentially serve as a model in this regard.

Remedies

In case of non-compliance, the White Paper grants the aggrieved party the right to take measures to mitigate harm, including financial penalties or suspension of specific obligations (retaliation). These measures, as is customary in trade regimes like the WTO and CETA, must be temporary and proportionate. The use of compensation and suspension of obligations for violating trade obligations is typical in EU AAs, explicitly outlined in both the EU-Moldova AA and the EU-Ukraine AA.

Regarding the suspension of obligations, WTO law permits the complaining party to retaliate against any economic sector of the non-compliant state. For instance, if the EU violates the agreement, the “carousel” principle allows for rotating the targeted goods and member states to avoid concentrated consequences. The White Paper does not address whether this principle should apply to the UK-EU relationship, only mentioning that the suspension should be localized to the specific area affected by the dispute. This suggests that violations of trade obligations would likely result in suspensions limited to trade.

In conclusion, the White Paper’s proposed dispute resolution mechanism combines common elements from existing EU association agreements with some innovative features. While the proposal is subject to negotiation with the EU, scrutiny and criticism from Westminster are expected to be more intense.

The Role of the CJEU

The UK Prime Minister cited the influence of the Court of Justice of the European Union (CJEU) on the UK’s judicial system as a significant factor contributing to the Brexit vote. The UK government has consistently emphasized that leaving the EU entails leaving the CJEU’s jurisdiction, making it a non-negotiable red line. However, Theresa May, in her speeches in Florence (September 2017) and Mansion House (March 2018), suggested that UK courts could consider CJEU judgments to ensure consistent interpretation of relevant EU law. This suggests a potential softening of this particular red line.

The question arises: what does it mean to leave a court’s jurisdiction while still considering its judgments?

The White Paper, perhaps intentionally, does not provide a clear answer to this fundamental question. It proposes a dual role for the CJEU post-Brexit: (1) concerning UK courts enforcing private rights arising from the future relationship and (2) regarding the state-to-state dispute resolution mechanism. This differs from recently negotiated EU FTAs, like CETA, where the CJEU plays no role. However, it aligns with typical EU AA practice, potentially because AAs aim to pave the way for eventual EU membership, unlike economic cooperation under FTAs. The White Paper highlights the complexities of disentangling from the CJEU’s influence, which proves more challenging than some Brexit proponents initially anticipated.

Let’s delve into the dual role proposed for the CJEU in the White Paper.

The Role of the CJEU in Domestic Cases

The obligation for UK courts to adhere to CJEU case law depends on whether the dispute involves the “common rulebook” or other binding commitments outlined in future agreements. The White Paper proposes a “common rulebook,” effectively a customs arrangement where the UK maintains the same rules for trade in goods as the EU to ensure frictionless trade and avoid a hard border between Ireland and Northern Ireland. However, it remains unclear if the UK intends to update its rules in line with future changes in EU law.

For private rights enforcement stemming from commitments beyond the “common rulebook,” the White Paper suggests that UK courts “could” consider relevant CJEU case law. This echoes the language in Section 6(2) of the recently adopted EU (Withdrawal) Act 2018, allowing courts or tribunals to consider post-exit day actions of the European Court if relevant to the matter at hand.

Furthermore, the White Paper introduces a backdoor for CJEU case law influence. Should “significant” divergence arise between EU and UK court interpretations of the agreements, the Joint Committee (the governing body for the future relationship) “could be empowered to act to preserve the consistent interpretation.” However, the practicalities of granting such unprecedented power over domestic courts to an executive body remain unclear.

The obligation for UK courts to follow CJEU case law is stronger concerning the “common rulebook,” with the UK committing to its courts paying “due regard” to CJEU case law. This effectively means that the CJEU’s interpretation of rules governing trade in goods would be binding on UK courts. This differs from the EU-Moldova and EU-Ukraine AAs, which lack a “common rulebook” and instead focus on progressive legislative approximation to align their laws with those of the EU. While legislative approximation necessitates considering CJEU case law (as seen in the EU-Ukraine AA’s Article 153 on public procurement rules), it does not directly bind domestic courts to follow CJEU case law.

In contrast, the EU-Turkey Customs Union requires the implementation of rights and obligations, insofar as they mirror corresponding provisions in EU Treaties, to be interpreted in line with CJEU case law. Unlike Moldova and Ukraine, which lack a customs union with the EU, Turkey must ensure its trade policies align with the EU’s to maintain frictionless trade.

However, the White Paper clarifies that UK courts would not have the right to request preliminary rulings from the CJEU for clarification on EU law interpretations. Conversely, the draft Withdrawal Agreement, which governs the UK’s exit from the EU and transitional arrangements, allows EU citizens to request UK courts to make references to the Court of Justice. Specifically, Article 151(1) of the Withdrawal Agreement allows UK courts to request preliminary rulings (decisions on interpretation) from the CJEU (without a British judge present) for citizens’ rights cases initiated within eight years of the transition period’s end. While the transition period’s timeframe remains uncertain and subject to potential extensions, it is evident that the UK’s disentanglement from the CJEU is not as complete as some may perceive.

In short, the question of whether the UK has fully broken free from the CJEU’s influence elicits a nuanced answer: not to the extent that many might desire.

The Role of the CJEU in Dispute Resolution Between the Parties

Beyond domestic cases, the White Paper also addresses dispute resolution between the UK and the EU.

Disputes concerning the “common rulebook” for trade in goods would necessitate resolution in line with CJEU case law. Both the Joint Committee (by mutual consent) and the arbitration panel would have the authority to request preliminary rulings from the CJEU. Notably, the CJEU’s interpretation of EU law would be binding on both the Joint Committee and the arbitration panel.

This approach aligns with existing agreements. For example, Article 403 of the EU-Moldova AA mandates that CJEU rulings are binding on matters of EU law in disputes between the EU and Moldova, which encompasses the “common rulebook.” Similarly, Article 322 of the EU-Ukraine AA requires the arbitration panel to seek a CJEU ruling, which would be binding on the panel, when disputes involve EU law.

However, the EEA Agreement takes a different approach. Reference to the CJEU is neither mandatory nor automatic. Only if a dispute remains unresolved within three months of being brought before the EEA Joint Committee can the parties consider jointly requesting a CJEU ruling on the interpretation of relevant EU law.

In conclusion, the extent of the CJEU’s influence over the UK’s judiciary will depend on the volume of EU law integrated into the domestic system: a deeper relationship translates to a greater role for the CJEU. A “no deal” Brexit scenario would mark a clean break from the CJEU’s jurisdiction. However, even in this scenario, the Withdrawal Act allows British courts to consider CJEU case law, highlighting the enduring influence of EU law embedded within the UK legal system for decades to come.

Barnard & Peers: chapter 27

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