Steve Peers

During the Scottish National Party (SNP) conference, Scotland’s First Minister, Nicola Sturgeon, revealed the Scottish Government’s plan to present a draft bill for a second independence referendum. She also announced their intention to introduce an alternate plan ensuring Scotland’s continued participation in the EU single market, even if the rest of the UK chooses to leave. This proposal would involve granting the Scottish Parliament substantial new powers, encompassing all current EU-related powers held by Scotland and additional authority to negotiate international treaties and manage immigration.

Essentially, the Scottish government is presenting the UK government with a choice: collaborate to secure Scotland’s place in the single market as a distinct entity within the UK or face the possibility of another independence referendum. This analysis will examine the legal aspects of these options and compare the Brexit process with the potential for Scottish independence.

Scotland’s Single Market Participation within the UK

Can Scotland maintain single market participation within the UK if the UK as a whole exits the EU? This scenario, referred to as the “Scottish Economic Area,” raises the question of whether part of a non-EU country can participate in the internal market while the rest of the country does not. In theory, it’s possible, but it would require consent from both the EU and the UK’s Westminster government as part of their post-Brexit agreement. Significant devolution of power to Scotland would also be necessary.

Practically, the single market encompasses the free movement of goods, services, people, and capital, including the freedom of establishment for companies and self-employed individuals. It involves extensive EU legislation establishing common standards across various sectors and encompasses competition law and state aid regulations. While a free trade agreement with the EU, the UK government’s likely preference, might seem sufficient, full single market participation offers a deeper level of integration, particularly for financial services.

Implementing this arrangement would be complex. Applying EU laws with domestic effects in Scotland, such as consumer, environmental, and labor laws, would be straightforward. However, laws with cross-border implications, like financial services market access, would necessitate a clear definition of when a firm is based in Scotland (and benefits from the Scottish Economic Area’s single market access) versus when it operates from the rest of the UK (subject to a less favorable trade agreement).

The movement of goods and people presents the most significant challenge. Would differing rules for Scotland-EU relations compared to the rest of the UK necessitate border controls between Scotland and the rest of the UK? The Westminster government’s assurance of no border controls between Northern Ireland and the Republic of Ireland, despite becoming an EU/non-EU border, suggests a similar arrangement could be feasible for the Scotland-England border.

While the Scottish government wouldn’t have direct EU decision-making power, it could potentially hold a similar role to Norway and Iceland within their single market treaty with the EU: participating in consultations on proposed EU laws, holding the power to reject them (though with the possibility of retaliation), and participating in the EFTA Court for single market dispute resolution.

While undeniably complex, the concept offers flexibility, allowing Scotland to participate fully in specific areas of the single market rather than the entirety of it, as Norway and Iceland do.

An Independent Scotland

Two primary possibilities exist for an independent Scotland: EU membership or a close relationship with the EU as a non-member, potentially closer than the remaining UK’s relationship. The latter could also serve as a steppingstone toward full membership. While an independence referendum encompasses issues beyond Scotland’s EU relationship, this analysis focuses on that aspect.

Scotland as an EU Member State

Joining the EU would require either an Accession Treaty or a Treaty amendment to include Scotland as a member. While an accession treaty, involving a potentially expedited negotiation process, is the traditional route, it would likely involve applying Schengen and the single currency, potentially without the UK’s budget rebate. However, the deficit criteria for single currency adoption only apply upon a Member State’s application to join, not as a condition of EU membership.

A Treaty amendment could provide an alternative route, potentially even amending Article 49 TEU to address Scotland’s unique situation. One possibility involves replacing “United Kingdom” with “Scotland” throughout the Treaties, allowing Scotland to inherit the UK’s opt-outs from the single currency, justice and home affairs, and Schengen.

However, both options necessitate unanimous agreement among Member States, posing a political risk. Concerns over a potential Spanish veto due to fears of emboldening separatist movements in Spain or elsewhere remain, although some argue these concerns are unfounded. Timing also presents a challenge: how would Scotland’s EU membership be addressed if independence occurs before, during, or after Brexit? A temporary arrangement between Scotland and the EU could bridge the gap.

Scotland as a Non-EU Member State

Joining the European Economic Area (EEA) alongside Norway, Iceland, and Liechtenstein presents a viable option for Scotland. The EEA grants participation in the EU’s single market freedoms, relevant EU legislation, and most EU employment and environmental law. While it wouldn’t cover areas like agriculture, fisheries, tax, and justice and home affairs, Scotland could negotiate separate agreements with the EU, much like Norway and Iceland. Although current EEA members have joined Schengen, this remains a separate agreement, and Scotland would be under no obligation to follow suit.

Importantly, EEA membership wouldn’t require adopting the EU single currency. It would also allow Scotland to pursue independent trade agreements with non-EU countries, as the EEA doesn’t cover the EU’s customs union. This is crucial as it allows for a potentially closer economic relationship with the remaining UK than it might have with the EU.

Scotland could also engage in free trade agreements signed by EFTA members (EEA states and Switzerland) with non-EU countries. It would also retain the power to negotiate its own treaties or maintain its own versions of EU free trade deals, as the remaining UK intends to do. While becoming a separate WTO member would be necessary, Scotland could expedite the process by emulating the remaining UK’s detachment from the EU’s WTO membership.

Some argue against EEA membership for the UK due to objections to single market participation, ECJ jurisdiction, continued financial contributions, the UK’s size compared to other members, and limited influence over applicable EU laws. However, these objections are less relevant to Scotland. The first three are moot, given that Scots voted to remain in the EU, thereby supporting the single market, ECJ jurisdiction, and budget contributions. Notably, EEA contributions are recalculated based on the economic standing of each member.

The size objection is less convincing, as Scotland’s population, location, and economy are comparable to Norway’s. While EEA states have limited influence over EU laws, they are consulted on draft legislation and can reject new laws (albeit with the possibility of EU retaliation). This still grants more influence than Scotland currently holds within the UK or would have as part of the UK after Brexit.

The EEA option aligns with Scotland’s desire for single market participation while avoiding potentially undesirable aspects like the single currency, Schengen, and EU trade and fisheries policies. It also offers a potentially faster route, as the EU can provisionally apply treaties with non-EU countries pending national ratification.

Concerns regarding a potential Spanish veto on Scotland joining the EEA are likely overstated. The EU recently concluded an association agreement with Kosovo despite Spain and four other Member States refusing to recognize Kosovo’s independence. The EEA is also an association agreement, and Member States hold veto power over their initial conclusion.

Alternatives to EEA membership exist. Scotland could explore closer relations with the EU than the remaining UK might have, perhaps as a non-EEA member of EFTA, like Switzerland. Unless it joins the EU’s customs union, Scotland would retain the autonomy to maintain a strong economic bond with the remaining UK.

Scottish Independence and Brexit: Drawing Parallels

The Brexit process holds relevance for the Scottish independence debate, both through analogy and a broader political dynamic. Many arguments used by Brexiteers, now embraced by the Westminster government, can be readily applied to the Scottish context. For instance, independence would grant Scots significantly more control over their laws and finances than leaving the EU would for the UK.

Direct comparisons are also possible. Scotland lacks the veto power the UK holds within the EU on issues like tax laws and defense policy. Similarly, Scotland approves over 90% of laws passed in Westminster, unlike the UK’s influence within the EU.

Brexit’s impact on the UK economy can be interpreted in various ways. A perceived benefit from Brexit could either negate the need for Scottish independence or demonstrate its potential to be painless. Conversely, if Brexit negatively impacts the UK, it could either highlight the necessity of Scottish independence to escape those consequences or underscore the potential for even greater economic hardship with independence.

The argument that remaining in the UK ensures continued EU membership, prevalent in 2014, no longer holds water. Leaving the UK doesn’t guarantee EU membership, but staying within the UK now guarantees leaving the EU. While independence may bring disruption, Brexit’s inevitable disruptions make it debatable which path poses greater risk or offers more stability.

Just as Brexiteers argue, the remaining UK would have a strong economic incentive to establish new trading arrangements with an independent Scotland. Refusing to do so to punish Scotland would beg the question: why remain in a union that treats its members poorly?

Given the UK’s transformation since 2014, there’s a strong case for a second independence referendum. Would Scots have voted differently knowing that a “Yes” vote would lead to a “hard Brexit”?

Currently, the UK government hasn’t proposed any new devolved powers for Scotland, let alone fundamental changes to the UK’s constitutional structure. Consultation on Brexit is promised, but differential EU relations are not. The government has prioritized a low net migration target over economic interests, refused to allow Westminster (let alone Holyrood) control over Brexit’s form, treated EU citizens as “bargaining chips,” and aimed to reduce foreign students and expel foreign doctors. There’s been no attempt to engage with the significant minority of British voters, and the majority of Scots, who voted “Remain.” Instead, the government’s media allies have resorted to labeling Brexit critics as traitors deserving of silencing and imprisonment.

If another referendum takes place, Scots must decide if they are still “better together” under these conditions.

Barnard & Peers: chapter 27

Photo credit: http://www.businessforscotland.co.uk/an-independent-scotland-would-get-a-better-deal-from-the-eu/