UK will struggle to extend EU court fix to competition, IP, other disputes

4 June 2018 12:01pm

31 May 2018 by Matthew Holehouse

A thorny question looms for Brexit negotiators as they approach the closing stages of the divorce talks: How long should British judges look to the EU's top court for answers on interpreting the bloc’s law?

In a speech on Saturday, the EU’s chief negotiator, Michel Barnier, stressed an “urgent” need for agreement on a dispute resolution mechanism to save the whole withdrawal negotiations from collapse.

The UK's draft withdrawal agreement binds it to upholding dozens of pieces of EU law for decades in fields ranging from pensions to nuclear waste and data transfers.

One of the bloc’s basic constitutional principles is that EU law is interpreted by courts consistently, even outside its borders. This strains against Prime Minister Theresa May’s hopes of weakening the UK's link to the EU Court of Justice in Luxembourg.

An interim agreement struck in December on citizens’ rights hints at a possible solution for the rest of the deal. At the time, both sides agreed that UK courts would continue to ask the EU court for guidance in these matters until 2028.

But applying this time limitation to the rest of the deal — for instance in competition, state aid and intellectual-property disputes — might go too far for the bloc.

— Citizens' rights provision —

Under the December agreement, questions over the rights of EU citizens living in the UK will be addressed by UK courts. National judges will be bound by case law of the EU Court of Justice that predates Brexit and be obliged to pay “due regard” to judgments made after Brexit.

UK courts will continue to seek so-called preliminary rulings over unclear areas of EU law from the Luxembourg court for up to eight years after the end of the transition period that starts next March.

In addition, the UK agreed that its courts could ask for preliminary rulings indefinitely on questions relating to its EU budget liabilities arising from the 2014-2020 spending round. The European Commission would also be able to bring cases against the UK to the court.

— Wider application? —

Now, negotiators must settle the role of the EU court in a wider range of separation issues, contained in Part III of the draft agreement.

These include winding down the UK’s participation in EU rules on goods and customs, intellectual property, police cooperation, public procurement, nuclear material and EU probes into competition and state aid. It’s fertile ground for disputes to arise years or even decades into the future.

The commission’s draft text proposes that in these areas, UK courts would continue to send questions to the EU Court of Justice indefinitely. Furthermore, the commission would continue to be able to bring cases against the UK to the court, which would be able to levy fines.

The UK hasn’t yet agreed to these terms.

A key question for negotiators, of course, is whether it would be feasible for the eight-year compromise for citizens’ rights to be applied more widely.

In his speech last week, Barnier appeared to consider it possible. He acknowledged the precedent and said his “respect and faith in British judges” was reflected in the eight-year arrangement.

“This mechanism will ensure over time the uniform interpretation of the Withdrawal Agreement on both sides of the Channel. This objective, which is now guaranteed for the rights of citizens, still needs to be reached for the rest of the agreement,” he said.

— Limits —

Barnier’s remarks notwithstanding, there are doubts on the EU side. For now, the commission is sticking to its position that the reference mechanism must be permanent.

Also, the December deal was viewed by some member states — particularly France — as too lenient on the UK.

The main sticking point remains the evolving nature of EU law.

Both sides agree that the withdrawal agreement covers not only EU laws operating in the UK on exit day, but the future iterations of those laws as the bloc steadily revises its rulebook. Each development will generate new questions for judges in the UK and the EU, strengthening the case for an indefinite dynamic link.

While the provision was deemed acceptable for the citizens’ rights package even though the social security legislation it covers will continue to evolve, extending this principle more widely could be unacceptable for the bloc. With the clock ticking, the UK is likely to face an uphill battle to convince negotiators to repeat December’s compromise.

Brexit Special Report