Andreas Stephan, Professor of Competition Law & Head of UEA Law School, University of East Anglia*

In a speech delivered on March 2, 2018, Prime Minister Theresa May aimed to clarify the UK’s Brexit objectives. She proposed aligning UK State Aid and Competition rules with those of the EU, while allowing UK courts to consider European Court of Justice (ECJ) judgments. However, she emphasized that the ECJ would not have jurisdiction over the UK. This seemingly contradictory stance suggests a potential softening of the government’s commitment to a ‘hard Brexit,’ recognizing the complexities of maintaining close trade ties with the EU.

The UK government had aimed for a ‘frictionless’ border with the EU while simultaneously seeking control over immigration and ending the ECJ’s jurisdiction. This approach pointed towards a trade agreement similar to the EU-Canada Comprehensive Economic and Trade Agreement (CETA) as the most viable option.

Concerns about the Irish border highlighted the challenges of a hard Brexit. Reintroducing customs checks could disrupt the Northern Ireland peace process. However, granting Northern Ireland a special status aligning with EU regulations might jeopardize the Conservative Government’s stability due to their reliance on the Democratic Unionist Party’s support.

Anticipating a shift in the Prime Minister’s stance, many were surprised by her focus on competition policy. She stated that EU law and ECJ decisions would continue to impact the UK after Brexit. She explained that while UK courts would handle cases, they would still refer to ECJ rulings as they do with judgments from other countries. She further suggested that if the UK and EU shared identical laws, UK courts might consider relevant ECJ rulings to ensure consistent interpretation.

Using competition policy as an example, May emphasized fair trade and the need for binding commitments. She suggested the UK might align its regulations on state aid and competition with the EU’s, recognizing the UK’s role in shaping EU competition policy and the benefits of maintaining these frameworks.

These statements mark a significant departure from the government’s previous ‘in/out’ approach to Brexit. May’s proposition goes beyond the scope of WTO rules or a Canada-style trade agreement, both of which lack comprehensive competition provisions.

For instance, while CETA acknowledges the importance of competition policy in trade, it does not require identical rules between the EU and Canada. Regarding State Aid, the agreement mandates reporting subsidies and encourages minimizing adverse effects on the other party, but it does not impose pre-authorization rules like those in EU law.

Continued Influence of EU Law?

Early research on post-Brexit competition policy highlighted the advantages of aligning UK law with EU law to ease the regulatory burden on businesses operating in both areas. It also noted that UK courts routinely consider jurisprudence from similar jurisdictions like Australia and New Zealand, even without obligation. This approach aligns with the Brexit Competition Law Working Group’s recommendations and suggestions from legal experts for UK authorities to consider EU law and precedents.

May’s statement suggests an even stronger commitment than anticipated. Maintaining ‘in step’ competition and state aid rules implies a de facto obligation for UK authorities to adhere to EU jurisprudence. The suggestion of enacting identical laws to the EU further implies the enduring influence of EU law on the UK, even after Brexit, despite the UK’s diminished influence on EU rulemaking. This situation positions the UK as a rule-taker, akin to smaller nations in trade agreements with larger partners.

Without involvement in EU institutions, the UK’s competition authority, the CMA, might end up replicating the European Commission’s work to achieve the same outcomes, potentially wasting resources. While the UK played a significant role in shaping EU competition law, its departure could influence EU policy towards a less free-market and effects-based approach. Similarly, EU State Aid rules, which currently benefit the UK, may become less stringent.

Conclusion: A Move Towards a Soft Brexit?

The Prime Minister’s emphasis on competition policy provides much-needed clarity for businesses. Aligning UK and EU competition and state aid rules offers certainty and reduces regulatory burdens for investors. However, her speech raises legal questions regarding the extent of the UK’s obligation to align with EU rules and the circumstances necessitating identical laws. It remains unclear whether this approach extends beyond competition policy and whether the UK will accept being a rule-taker or seek some influence over EU lawmaking.

By opening the door to continued alignment with EU rules, questions about the autonomy of UK law post-Brexit resurface. This development, coupled with the Labour Party’s pursuit of a Customs Union arrangement, makes the prospect of a softer Brexit more plausible than before. The shift towards this possibility might have been inadvertently triggered by seemingly insignificant remarks about competition policy.

Barnard & Peers: chapter 27, chapter 17

Photo credit: hifi-forum.de

*Reblogged from Competition Policy Blog

**B Lyons, D Reader and A Stephan, ‘UK Competition Policy post-Brexit: taking back control while resisting the siren calls’ (2017) Journal of Antitrust Enforcement 5(1), pp. 347-374. An early draft is available as: ‘UK Competition Policy Post-Brexit: In the Public Interest?’ (2016) CCP Working Paper 16-12.