UK mimics EFTA rules in search for Brexit court fix

27 July 2017 5:09pm

🔊 Podcast: An early impasse for the Brexit negotiations

Formal Brexit negotiations have just begun, and already Brussels and London are expressing "fundamental divergence" over the role of the EU Court of Justice in policing citizens' rights in Britain after it leaves the bloc...

26 July 2017. By Matthew Holehouse.

The UK and the EU are looking to Norway for a route out of the most difficult element of the Brexit talks: the role of the EU Court of Justice in policing citizens' rights in Britain.

In a public overture to the British side last week, EU chief negotiator Michel Barnier noted the EFTA Court — which oversees the participation of Norway, Liechtenstein and Iceland in the EU's single market — is empowered to interpret the EU's legal texts.

The UK accepts the withdrawal agreement will need a dispute resolution mechanism — but fiercely rejects the EU's proposal that this job falls to the EU Court of Justice in Luxembourg (see MLex's analysis here.)

British Prime Minister Theresa May's spokesman declined to give a view on the merits of the EFTA Court as a model. The body is conspicuously omitted from a UK government paper examining alternatives to the EU's higher court after Brexit.

But Britain's lawyers are studying it closely. The UK's proposals on the status of EU case law post-Brexit, and the legal architecture of the withdrawal agreement, clearly mimic the EEA Agreement.

Judges of the EFTA Court sit independently of the EU Court of Justice, but mirror its jurisprudence when handling questions of EU law. Their judgments aren't formally binding on the courts of participating EEA states.

Senior figures in the EFTA Court think UK participation is an obvious solution to the challenge of Brexit: how to preserve the uniformity of EU law, while respecting the sovereignty of non-EU states.

Influential Conservative Party backbenchers, who reject the Luxembourg court's doctrines of supremacy and direct effect, also think the EFTA Court is a sensible model.

Case law

The UK and the EU agree that any deal on citizens' rights will incorporate large volumes of European legislation in fields such as pensions, social security and residency rights.

EU negotiators argue that handing oversight to a court other than the Court of Justice would jeopardize the homogeneity of EU case law — a constitutional redline.

But Barnier observed at a press conference last week that the EFTA Court successfully "dovetails" with the EU Court of Justice.

He also told a UK Parliament committee on July 12 that Norway and Iceland had "accepted a specific jurisdiction, which is backed up by the European Court of Justice, and there has been no contradiction between the two."

Both the EU and UK position papers on the handling of case law post-Brexit imitate the EFTA Court regime.

The EU negotiating directives say that, while citizens' rights must still fall under the bloc's highest court, an alternative disputes body could be conceived for other elements of the withdrawal agreement that rely on EU law.

For this alternative body, EU law should be interpreted in line with Court of Justice precedents in place before Brexit. The body must also "take into account" post-Brexit case law.

That formulation mirrors closely Article 6 of the EEA accord, which draws the same distinction between Court of Justice rulings issued pre- and post-agreement.

The UK's draft EU (Withdrawal) Bill, a piece of legislation designed to prepare the UK statute book for Brexit, sets out a similar proposition: the UK courts will treat pre-Brexit case law as binding, with only the Supreme Court able to deviate from it in rare circumstances. But courts will be free to take account of post-Brexit Court of Justice rulings "if appropriate."

There's room for more flexibility. The British are open to further discussions about the handling of future case law when applied to EU citizens' rights, according to a table issued jointly by UK and EU negotiators last week.

Direct effect

The UK is also mimicking the EEA agreement's interpretation of direct effect. This is the legal theory that EU law creates rights that individuals can invoke before a domestic court.

The EU wishes to replicate this in Britain's exit deal. It argues that individuals should be able to rely on the provisions of the withdrawal agreement before a domestic court, if necessary overriding any domestic implementing legislation.

The UK rejects this, arguing the concept of direct effect is redundant outside the EU.

Instead, the government argues in a technical note that the "same substantive result" could be created by granting rights through domestic legislation that are enforceable in the domestic courts (see here). The UK would be obliged to implement this legislation through the withdrawal agreement, which would be binding international law.

This, the British note observes, is precisely how the EEA agreement works.

Under a principle dubbed "quasi-direct effect," participating states agree to implement EEA law in their domestic legal order, by passing legislation that takes precedence over domestic statute. But this contractual relationship falls short of transferring sovereign lawmaking powers to supranational institutions.

"The EEA agreement does not require the non-EU states to implement it using the concept of direct effect," the British paper says. "They may choose to implement it using a domestic concept that has the same consequences as direct effect, but that is their decision."

Old or new?

This presents a choice: the UK and the EU could take these principles and create a new body to oversee the withdrawal agreement. A bespoke deal appears to be the UK's preference.

But there's also pressure for the UK simply to "dock" into the EFTA Court, with British judges sitting alongside Norwegian, Iceland and Liechtensteinian colleagues.

EU negotiators are mindful that the EU Court of Justice jealously guards its status as the ultimate arbiter of the bloc's law, and has struck down plans to create new rival courts — including in 1991, with the first draft of the EEA agreement. Doing so would spell havoc for the tight Brexit timetable.

EFTA Court president Carl Baudenbacher would welcome UK participation.

This would be open even if the UK's withdrawal agreement differed in content from the EEA accord. By way of precedent, in 2010 the European Commission proposed that Switzerland should "dock" with the EFTA Court and surveillance authority to oversee its sectoral agreement, ditching a system of political arbitration panels.

But this route would raise further questions for the British side.

Individuals and companies can bring cases before the EFTA Court. The UK, by contrast, appears to favor a state-to-state mechanism that doesn't give individuals standing.

Another important principle of the EEA agreement is state liability, under which claims can be brought against governments for damages arising from a failure to implement EU law. This acts as a counterweight to the weaker provisions on direct effect.

But the UK's EU (Withdrawal) Bill proposes scrapping the Francovich principle, arguing the concept is redundant outside the EU's legal order. A rethink may be necessary.

Brexit Special Report