3International and EU dispute resolution
International dispute resolution
61.Dispute resolution comprises a number of key elements. Because the UK will be a third country from the perspective of the EU and its continuing Member States, it is helpful to outline these key elements, against the backdrop of international law in the first instance. One or more of these elements crop up in any international dispute resolution mechanisms:
- Are disputes to be settled by diplomatic means or is there a decision-making body in the form of a court or an arbitration panel?33
- Is the dispute resolution procedure compulsory; and if so can it be triggered by one or the parties or must all agree; and are other forms of recourse excluded?
- How is the court or arbitration panel constituted?
- Is there transparency in the dispute resolution process?
- Which particular matters are subject to the dispute resolution procedure (bearing in mind that different matters can be made subject to different procedures)?
- Are the decisions of the court or arbitration panel binding and what enforcement mechanisms are in place?
- Who may bring a matter to the dispute resolution procedure and who, in addition may make representations?
- Is there a requirement to remedy any specific breach that is found against a party?34
- Is an adverse decision of a court or arbitration panel backed by an enforcement mechanism such as a fine, or other penalty, or termination of the agreement in whole or in part?
62.At the international law level, dispute resolution is generally a matter limited to state parties to the agreement. This means that if a national of state A has a grievance based on state B’s failure to comply with an international agreement, the national of state A can try to get the grievance redressed in one of two ways:
a)through the courts of state B. This depends on state B having domestic laws properly reflecting the international agreement and giving a right of redress; or
b)by persuading state A to take the matter up in any state to state dispute resolution provided by the agreement
63.The significant exception to state to state dispute resolution is an “Investor State Dispute Settlement” (“ISDS”) procedure included in many bilateral Investment Treaties and as an adjunct to the investment provisions of broader Free Trade Agreements. This can take a variety of forms but enables investors to seek redress through arbitration if they consider that the state in which they have invested has not complied with obligations set out in the relevant international agreement.35
64.There are concerns about ISDS and its impact on democracy, human rights and the rule of law.
EU dispute resolution: Court of Justice of the European Union
65.Given the repeal of the European Communities Act 1972 and the triggering of Article 50, it is clear that the European Court of Justice cannot have exclusive or sole jurisdiction as a dispute resolution process post-Brexit. But it is right to acknowledge that for Member States, the EU has a well-developed dispute resolution process. It is court-based, rather than arbitration-based, and has many characteristics of a domestic civil justice system. For Member States this means that there is an effective dispute resolution procedure. Its essential characteristics are:
- Recourse to the CJEU is compulsory36 for settling disputes connected to the EU Treaties;37 and it is given exclusive jurisdiction to settle them. This will not be consistent with the repeal of the European Communities Act 1972 in respect to the United Kingdom;
- Its membership is comprised of one judge from each Member State;
- In principle, it operates in public;
- There is broad access: “Privileged” litigants such as Member States and EU institutions have broad access; natural and legal persons have more restricted access,38 although this limitation is alleviated by the preliminary reference procedure whereby national courts (which must uphold EU law) can ask the CJEU to answer questions as to the interpretation of EU law and the validity of EU legislation;39
- Its rulings are binding and there is an obligation to comply with them, to the extent that it can impose a fine upon Member States for failing to do so;40 and
- The Commission acts as “guardian of the Treaties” and can bring perceived breaches to adjudication by the Court.
66.The CJEU is not confined to consideration of the wording of EU Treaties alone. Article 19 provides that “It shall ensure that in the interpretation and application of the Treaties the law is observed”. It therefore not only takes a less literal approach to the text of legislation by seeking to ensure the effectiveness of EU law, but also applies, where appropriate, general principles including respect for fundamental rights.41
67.With respect to the all these matters given the repeal of the European Communities Act 1972, there is no reason for the European Court of Justice to have exclusive or sole jurisdiction, a matter which we raised with the Secretary of State for Exiting the EU.42
33 A search for a diplomatic solution often precedes arbitration for example in the Comprehensive Economic and Trade Agreement (“CETA”) between the EU and its Member States, and Canada. If a diplomatic solution proves impossible to achieve there may be a provision for some or all of the agreement to be suspended e.g. the EU, Iceland, Norway Agreement on surrender (equivalent to the European Arrest Warrant) provides for a diplomatic solution to be sought to any dispute within six months; this is backed by (a) an obligation to monitor case-law developments in each of the parties and (b) an ability of a party to terminate the agreement on six months’ notice.
34 It is a significant feature of the WTO dispute resolution procedure that a state against whom an adverse finding is made is not required to remedy that fault but may provide compensatory measures.
35 The ISDS provisions in CETA have attracted particular notoriety.
36 Article 344 TFEU.
37 Interpretation of the EU Treaties and legislation made under them and related matters (Articles, 267 and 273 TFEU); failure to comply with the Treaties or legislation made under them (Articles 258 and 259 TFEU) ; compatibility of EU legislation with the Treaties (Article 263); compatibility of international agreements made by the EU with the Treaties (Article 218(11)); review of the actions and omissions of the EU institutions (Articles 263 and 265 TFEU); non-contractual liability of the EU institutions (Article 268 TFEU); interpretation of contracts pursuant to any arbitration clause they may contain which confers this jurisdiction (Article 272 TFEU).
38 They must be directly and individually concerned, or a party to the litigation in which a preliminary reference to the CJEU is made.
39 Article 263 TFEU
40 Articles 258 and 264 TFEU
41 Article 6 TEU
Published: 20 March 2018