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Analysis

ECJ climbdown or common sense?

by Nick Kent | 23.08.2017

Hard Brexiters might see the government’s new position paper on dispute resolution with the EU after Brexit as a climbdown, but it would be better described as realistic. The notion that the UK could cease to have any connection with the European Court of Justice (ECJ) after leaving the EU was always wrong. The EU is the UK’s largest export market. As that market is regulated by the ECJ, British businesses and citizens were going to have to continue to obey its rulings in order to trade there.   

The government’s change of position since the prime minister’s Lancaster House speech in January, when she ruled out a role for the ECJ after Brexit, appears to be quite small. But it is significant. The paper, published on Wednesday, does not talk of ending the ECJ’s jurisdiction in the UK but rather its “direct” jurisdiction.

An ECJ ruling is binding directly on businesses and citizens in EU member states. By suggesting that the UK could participate in other arbitration procedures that would be binding and would take account of the ECJ’s verdicts, the government is accepting that the UK would implement ECJ rulings, but indirectly. This is what happens now, for example, in Norway and Switzerland.

Most non-lawyers will find the position paper hard going. This is a technically complex area and the language is obscure. But what kind of dispute resolution procedure we agree with the EU to cover both the withdrawal agreement and any future UK-EU partnership is crucial for many reasons. Three stand out.  

First, there must be a system that gives people and businesses certainty about the UK’s agreements with the EU. The EU’s single market works because a single court – the ECJ – is the ultimate arbiter in the EU. Its decisions override those of national courts where EU law is concerned. This means that its judgements have direct effect in all member states. A lot of businesses will think twice about new investment if they are unsure about what dispute resolution procedures will apply.

Leave campaigners promised that the ECJ’s rulings would no longer apply to the UK after Brexit. At the same time they said the UK would continue to trade freely with the EU. The government’s problem is that these two promises were incompatible. For the UK to be able to continue to trade easily with the EU, in practice we will have to accept large parts of EU law. When the ECJ issues rulings after Brexit, British businesses will often be bound by them because that will be the price of doing business with EU states. This is the case for US and other non-EU companies. Major firms like Google and Microsoft have found that they cannot escape the reach of the EU if they want to trade in the single market.

Second, the government has made this a political issue by ruling out any role for the ECJ after Brexit. Without a majority in the Commons, it may need the votes of opposition MPs to carry any agreement that breaks this pledge. Drawing a red line over the ECJ has had perverse consequences, such as the decision to leave the separate Euratom Treaty, which is important to our nuclear energy industry and to the NHS.

The government is unlikely to get the Repeal Bill, necessary to take the UK out of the EU and put in place alternative arrangements, through Parliament without making some concession on the ECJ.  That will upset a noisy group of its own supporters; indeed, they are already complaining that the ECJ will have jurisdiction during the transitional period that is envisaged after leaving in March 2019.

Third, this issue matters a lot to the EU too. It is concerned to protect the rights of the three million EU citizens living in the UK. It is also in a long-running dispute with Switzerland over the role of the ECJ in settling EU-Swiss disputes – in theory the court doesn’t have one, but the EU wants that to change in future. The EU negotiators do not want to set a precedent with the British.  

The EU doesn’t want to punish Britain for leaving but it does not want to incentivise others to follow us out of the door. Too generous an agreement with the UK might give others the idea that by leaving they too could enjoy the benefits of EU membership without some of the disadvantages.  

The position paper is an opening gambit in a negotiation. It does not propose one particular solution but rather seeks to frame the debate by claiming that the role of the ECJ (and that of the European Commission in enforcing its judgments) is unusual.  There are lots of other precedents, says the paper, for resolving disputes in international treaties. That is true. The problem is that many of them are ineffective, which is why the ECJ was created.

A recent briefing from the Senior European Experts group highlighted one possible solution, utilising the Court of the European Free Trade Association (EFTA). This is far from perfect but it would enable both sides to follow an established precedent for resolving disputes between the EU and third countries. The court is also already in existence, which is helpful when time is short to reach agreement.

The government has shown some welcome pragmatism in its position paper, following its recent sensible acknowledgement that there will have to be a transitional period after we leave.  But dispute resolution is still an issue upon which the negotiations could founder because there is a lot at stake for both sides.  In the end, the government is going to have to face down some of its own supporters on this issue.

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Edited by Alan Wheatley

One Response to “ECJ climbdown or common sense?”

  • All this unnecessary effort in order to avoid the jurisdiction of the ECJ- whose existence is the direct consequence of the Single Market – is a complete waste of time and taxpayers money. How long will this farce continue of trying to extricate the UK from the EU, an impossible task and in no-one ‘s interest, before the UK government comes to its senses?