Chapter 3: The Withdrawal Agreement
The draft texts
59.The European Commission published a first draft text of the proposed Withdrawal Agreement on 28 February 2018. A revised draft text was sent to the Government on 15 March and a further text, in which the articles agreed in principle by the negotiating teams were highlighted in green, was published by the Commission on 19 March.41
60.The purpose of the Withdrawal Agreement is to translate into legally binding form the December 2017 Joint Report,42 in which the UK and EU negotiators set out their agreement in principle on the key ‘phase 1’ issues,43 as well as other necessary separation provisions.
Analysis of the draft text
61.This Chapter will consider the draft of the Withdrawal Agreement published on 19 March. It will first examine the special regime that the draft Withdrawal Agreement would create for citizens’ rights, and then consider the wider ranging institutional dispute resolution provisions which would apply to the remainder of the Withdrawal Agreement.
A special regime for citizens’ rights
62.Notably, the draft Withdrawal Agreement makes special provision for the enforcement of the citizens’ rights provisions after Brexit. The main provisions are contained in Part Two of the draft Withdrawal Agreement. They broadly reflect the agreement contained in the Joint Report of December 2017 and have been agreed in principle.
63.Article 4 of the draft Withdrawal Agreement, only part of which has been agreed, makes provision for what it describes as “methods and principles relating to the effect, the implementation and the application of the Agreement”. It provides that where the Agreement calls for the application of Union law in the UK “it shall produce … the same legal effects as those which it produces within the Union and its Member States”. It goes on to indicate that this means that the UK and EU nationals should be able to rely directly on the provisions contained or referred to in Part Two of the Agreement, and that “any provisions inconsistent or incompatible with that Part shall be disapplied”.
64.Article 4 is a novel constitutional provision. It would be tantamount to continuing the supremacy of EU law in respect of the relevant provisions even after the transitional period has ended. At present this is deemed to occur by virtue of the European Communities Act 1972 and associated CJEU and domestic caselaw. As noted above, the European Union (Withdrawal) Bill would repeal the 1972 Act, ending direct effect and the supremacy of EU law.
65.The Government has indicated that Article 4 of the draft Withdrawal Agreement would be implemented via a future Withdrawal and Implementation Bill. Paragraph 36 of the Joint Report states that the necessary effect would be achieved by providing, in that Bill, that the provisions on citizens’ rights would “have effect in primary legislation and will prevail over inconsistent or incompatible legislation, unless Parliament repeals this Act in the future”. We have corresponded with the Home Office as to the precise meaning of this proposed provision (and whether it would mean that it would not be possible to repeal expressly the provisions relating to citizens’ rights without repealing the entire Act).44 We have not received a satisfactory answer to this question.45 Such a provision would be an unusual constitutional innovation, and, should it be included in a future Bill, might be of some interest to the House of Lords Constitution Committee.
66.Part Six of the draft Withdrawal Agreement would also allow for continued references to the CJEU for eight years following the end of the transition period (Article 151). This would require an amendment to the European Union (Withdrawal) Bill currently before Parliament, Clause 6 of which, as introduced in the House of Lords, provides, inter alia, that:
“(1) A court or tribunal—
(a) is not bound by any principles laid down, or any decisions made, on or after exit day by the European Court, and
(b) cannot refer any matter to the European Court on or after exit day.”
67.Article 152 of the draft Withdrawal Agreement would require the UK to set up an Independent Authority to monitor the implementation and application of the citizens’ rights provisions contained in Part Two. That Authority would have a complaints investigation function and would have the right to bring proceedings in the UK courts and to discuss such actions with the European Commission.
68.Certain of the provisions relating to dispute resolution on citizens’ rights were criticised by Martin Howe QC. He indicated that he was “very concerned” about “what has been agreed in principle by the Government in their negotiations with the European Union in Article 4(1) of the draft transitional agreement”.46 In a report published on 14 March 2018, entitled EU Withdrawal: Transitional provisions and dispute resolution, the House of Commons European Scrutiny Committee also expressed concerns about the proposed implementation of the draft Withdrawal Agreement. It said that it had asked for “an explanation from the Secretary of State for Exiting the EU as to how it is proposed to entrench in UK law the citizens’ rights provisions of the Withdrawal Agreement and his assessment of how robust that will be if challenged”.47
69.From the detailed evidence we took during our inquiry into citizens’ rights48, we recognise the fears of EU citizens residing in the UK who will have a desire for certainty about their future legal rights. We raised this in correspondence with the Immigration Minister in December 2017.49 The provision to allow references to the CJEU for eight years after the end of the transition period may offer some reassurance to EU nationals (particularly those who will not immediately qualify for permanent residency). It also reflects the concern of the EU 27 that a future Parliament could seek to alter the rights of those EU nationals who remain in the UK after Brexit.
Northern Ireland
70.At present, the Withdrawal Agreement contains a separate Protocol on Northern Ireland/Ireland which would have the effect of establishing a “common regulatory area” between those territories. This Protocol has not been agreed by the Government. It is currently being described as a ‘fall-back’ position while the Commission awaits proposals from the UK as to how a frictionless border might be established between Ireland and Northern Ireland.50
71.The Protocol makes provision for the CJEU to have jurisdiction over its application. We have not taken evidence on this issue, as the Protocol remains at this stage no more than a fall-back. If the Government succeeds in negotiating arrangements for Northern Ireland/Ireland as part of the agreement on the future relationship with the EU, as the Joint Report anticipates, that agreement, rather than the Withdrawal Agreement, will provide for appropriate enforcement and dispute resolution.
The Institutional provisions
72.We turn now to the general institutional provisions contained in the draft Withdrawal Agreement. The most relevant provisions are contained in Articles 157–165. Article 157 (which has been agreed by the UK) establishes a Joint Committee, co-chaired by the UK and EU, which will be responsible for the implementation and application of the Agreement. Article 162 (which has not yet been agreed), sets out the Commission’s view that any disputes in relation to the Withdrawal Agreement that cannot be resolved politically by the Joint Committee structure will ultimately be settled by the CJEU.
73.Articles 4(4) and 4(5) are also relevant. These state that the provisions of the Agreement which refer to Union law (or concepts or provisions thereof) shall be interpreted in conformity with the relevant case-law of the CJEU handed down before the end of the transition period; and that, in the interpretation of the Agreement, the UK’s judicial and administrative authorities “shall have due regard to” relevant case-law of the CJEU handed down after the end of the transition period.
The Joint Committee
74.The role of the Joint Committee will be important. Under Article 159, the Joint Committee would have the power to adopt decisions which would be “binding on the Union and the United Kingdom”. All decisions by the Joint Committee would be made by mutual consent. The draft Withdrawal Agreement also establishes specialised committees, on citizens’ rights, “other separation provisions”, the island of Ireland, Sovereign Base Areas, and on the financial provisions. Recommendations by the specialised committees would be referred for adoption to the Joint Committee.
The Commission’s proposed role for the CJEU
75.Articles 162–165 provide for the settlement of disputes by the CJEU. In particular, Article 163 makes clear that any intractable disputes, which have not been settled within three months, may be submitted to the CJEU by either party, that the CJEU would have jurisdiction over such cases, and that “its rulings shall be binding on the Union and the United Kingdom”.
76.If the CJEU’s ruling in such a case was not complied with, the CJEU could be asked to rule again, and it would have the power to impose a fine (Article 163(1)). The draft Withdrawal Agreement also provides for the possibility of either side imposing sanctions on the other (Article 163(2)). The proposed procedural rules and powers are contained in an Annex (Annex y+3), which has not yet been published.
77.Articles 162–165 have yet to be agreed, but if they are, an institution that is part and parcel of the EU would, for an indefinite period, determine the UK’s obligations towards the EU.
78.There is some logic to this approach, in that the act of withdrawal is being undertaken by the UK as an EU Member State, under the terms of Article 50 TEU, and any obligations the UK enters into will flow ultimately from that source. Nevertheless, Article 50(3) TEU provides that the Treaties “shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement”.
Should the CJEU have jurisdiction over the Withdrawal Agreement?
79.The IfG argued that it was “probably undesirable” for the CJEU to be the arbiter of any disputes between the UK and the EU concerning the Withdrawal Agreement:
“As the CJEU itself argued in Opinion 1/91, ‘the Court of Justice has to secure observance of a particular legal order and to foster its development with a view to achieving the objectives set out in particular in Articles 2, 8a and 102a of the EEC Treaty and to attaining a European Union among the Member States’. The court’s role is, in part, to achieve the objectives of the EU treaties. After Brexit, the UK will no longer be a signatory to those treaties. The UK’s own objectives could even depart from those of the EU treaties. The court might, therefore, struggle to approach disputes between the EU and a third party in an entirely neutral way. In order to allay precisely this worry, the vast majority of judicial and quasi-judicial dispute resolution mechanisms provide for the states (or, as the case may be, groups of states) on both sides of any dispute to be represented among the adjudicators.”51
80.Hugh Mercer QC argued that “lack of neutrality is not a charge that you could make against the Court of Justice of the European Union”,52 but several other witnesses cast doubt on whether the CJEU could be seen as a fair arbiter of what has sometimes been referred to as the ‘divorce bill’. Professor Graham Gee told us that the EU’s approach was “at first blush an extraordinary and unprecedented requirement”. He said:
“The international practice is that international treaties commonly provide for dispute resolution through binding adjudication, but sovereign states generally do not agree in an international treaty to submit to adjudication by a court to another party to that international treaty. The reason is simply stated: any state so agreeing would be at the mercy of the other party. Instead … you would normally have the relevant international tribunal or arbitral body constituted in such a way as to be neutral and evenly balanced between the parties.”53
81.Sir Richard Aikens also argued that:
“so far as the withdrawal agreement is concerned, plainly the CJEU should not have jurisdiction over it … If you are going to have some kind of dispute resolution mechanism for any disputes that arise in connection with the withdrawal agreement, you have to have some independent body.”54
Martin Howe QC expanded on this point:
“The Court of Justice of the European Union sees itself as developing the European Union and promoting European integration in the judgments it reaches. It is not neutral, and it would be even more lopsided in its approach if it were adjudicating between the EU and a departed United Kingdom.”55
82.Professor Catherine Barnard believed that the CJEU would “do the best it could”, while recognising that “the reality of course is that if it sees this as EU law, which it would be because it is under Article 50, it will borrow doctrines of EU law and use EU tools of interpretation”. She continued: “Of course, the EU understanding is the integrity of the internal market and all the other pillars of EU law protection, and it will of course interpret it against that background.”56
83.The Law Society of England and Wales recognised that there was an issue insofar as the Withdrawal Agreement, as an act of the EU, would be subject to the supreme autonomy of the CJEU in its interpretation and compliance with EU law. However, it argued that “when the UK-EU’s final agreement comes into force, the direct jurisdiction of the CJEU in the UK should end. The UK would no longer have judges at the Court and the UK legal profession would not have the right to plead in front of it”.57
84.The question therefore is whether it is reasonable for the dispute resolution provisions to be subject to the courts of one of the parties to the agreement. It has long been recognised that a perception of bias can be equally as powerful as demonstrable bias.58 There is also a longstanding acceptance that “a man shall not be a judge in his own cause” (nemo judex in sua causa).59 And it is a famous and longstanding maxim of English law that “justice should not only be done, but should manifestly and undoubtedly be seen to be done”.60
85.An indefinite role for the CJEU would also appear to contradict both the Government’s red line in respect of CJEU jurisdiction and, more broadly, part of the basic rationale for Brexit, which is that the UK should cease to be part of the EU, or subject to the obligations of EU membership.
86.Moreover, given that any disputes which arise in respect of the Withdrawal Agreement will already have gone through a political process, via the Joint Committee, it is likely that any dispute that is still unresolved will be both contentious and sufficiently serious to generate political concern.
87.Liabilities and obligations under the Withdrawal Agreement may arise for many years after the UK has left the EU. For example, in its Economic and Fiscal Outlook, published in March 2018, the Office for Budget Responsibility estimated that while the bulk of the “divorce bill” will be paid in the first five years, the final payment under the financial settlement may not be made until 2064.61 Meanwhile, some of the citizens’ rights provisions will apply to the children of EU nationals in the UK. Thus legal obligations could extend for a longer period than the UK was a member of the European Union.
Might the Withdrawal Agreement be referred to the CJEU?
88.There are specific risks in seeking to exclude the CJEU from the Withdrawal Agreement entirely. There are two reasons for this. The first is the argument that the ‘legal autonomy of the Union’, as defined by the CJEU in past cases, demands that only the CJEU have the final say on the interpretation of EU law.
89.The IfG’s written submission suggested that this principle might apply only in respect of “EU actors”; but even this means that where the Withdrawal Agreement contains provisions identical in substance to EU law, the EU will demand that the CJEU has the final say on the meaning of those provisions for EU actors.62
90.The second reason is that, beyond the general power of review63, under Article 218 TFEU the CJEU may be asked for an opinion on the agreements between the UK and the EU prior to ratification. Article 218(11) provides that:
“A Member State, the European Parliament, the Council or the Commission may obtain the opinion of the Court of Justice as to whether an agreement envisaged is compatible with the Treaties. Where the opinion of the Court is adverse, the agreement envisaged may not enter into force unless it is amended or the Treaties are revised.”
Thus even if the UK and the Commission were to seek to exclude the jurisdiction of the CJEU, that might not be an end to the matter.
91.We first flagged this risk in our report Brexit: deal or no deal, published on 7 December 2017. We noted that issues relating to the legality of both the Withdrawal Agreement and any transitional arrangements might “fall to be determined by the CJEU, following references by the European Parliament or by a Member State, before withdrawal takes effect”.64
92.We discussed the risk of referral to the CJEU with several witnesses. Professor Christa Tobler told us that “it is most likely that these agreements will be sent to the Court of Justice for an opinion under Article 218 TFEU”. She suggested that the CJEU could rule that “if there is any sort of system that is not in line with its doctrine of the autonomy of Union law, the agreement cannot go through”. This potential legal challenge was “quite independent of all political realities and sensible approaches”.65
93.Professor Gee also commented on this risk:
“There are a handful of occasions where the Court of Justice has been jealous of the adjudicatory arrangements in agreements that the EU has sought to undertake. We mentioned Opinion 1/91 on what was to be the predecessor of the EFTA Court, and we should look also at the draft accession agreement to the European Convention on Human Rights and the unified patent court litigation. So, it is a real, not just theoretical, risk.”66
Nevertheless, Professor Gee took the view that if the Withdrawal Agreement had been agreed by the European Council and the European Parliament, the CJEU would probably “balk at the idea of finding the agreement incompatible”.67
The Government’s view
94.In her Florence speech of 22 September 2017, the Prime Minister was clear that while it was vital that any agreement reached would have to be interpreted in the same way by the European Union and the United Kingdom, “This could not mean the European Court of Justice—or indeed UK courts—being the arbiter of disputes about the implementation of the agreement between the UK and the EU.” In particular, she argued: “It wouldn’t be right for one party’s court to have jurisdiction over the other. But I am confident we can find an appropriate mechanism for resolving disputes.”68
95.The DExEU Minister, Suella Fernandes MP, reinforced this view. When it was put to her that the Withdrawal Agreement currently envisaged disputes being settled by the CJEU, she said that the UK “does not agree with that proposition from the EU”. She indicated that the Government objected for two reasons:
“First, it is very rare for the highest court of one party to an international agreement to be the final arbiter of disputes under that agreement where another nation state is involved … Secondly, this will mean that there will be a bias or a steer towards EU interpretation of EU laws, EU principles, EU tools when it comes to resolving questions. Those principles would pertain to the integrity of the internal market and the pillars of EU law, which would be very different from what would be required in an international agreement between the EU and a third country such as the UK.”69
96.She went on to acknowledge that some aspects of the Withdrawal Agreement might contain some elements of EU law: “From the EU’s perspective, of course it would have aspects of EU law when it comes to the position of EU citizens. That is very much flavoured and informed by principles of EU law and ECJ jurisprudence, as would the financial settlement, for example.”
97.As noted above, the Government has agreed the limited jurisdiction of the CJEU in relation to citizens’ rights.70 And it appears from Article 153 of the draft Withdrawal Agreement (parts of which are coded ‘green’ to signify agreement) that the Government has also acceded to the CJEU retaining jurisdiction on the applicable EU law referred to in relation to the parts of the financial settlement contained in Articles 129 and 131(1) and (2) of the draft Agreement.71
98.The Secretary of State for Exiting the EU, Rt Hon David Davis MP, wrote to the EU Select Committee on 19 April 2018 that “for specific areas of the financial settlement, we have agreed that existing enforcement mechanisms will apply—but only in relation to budget contributions made up to 2020 and to programmes the UK participated in during the 2014–2020 period, and not to the financial settlement as it relates to the period after implementation”.72
99.But with these specific exceptions, the Government proposes that there should be no ultimate, impartial, dispute resolution mechanism in respect of the Withdrawal Agreement. Suella Fernandes MP told us that the Government’s view was that the proposed Joint Committee would have to deal at a political level with any disputes:
“Our position is that there should be a joint committee that provides the dispute resolution mechanism. That is set out in quite a lot of detail in Article 157 of the agreement. It is a mechanism that is common to many international agreements whereby a committee, comprising representatives of the Union and the UK, will meet to resolve disputes.”73
100.This leaves it far from clear what would occur if an intractable dispute were to arise in respect of the Withdrawal Agreement. With no judicial or quasi-judicial mechanism for dispute resolution, reliance upon the Joint Committee would potentially lead to political deadlock.
101.The Minister was unconcerned by the possibility that the Withdrawal Agreement itself might be referred to the CJEU. On the question of a reference for an opinion under Article 218 TFEU she told us:
“That is always a possibility, yes. It is always possible to legally challenge an agreement in court. However, I consider that to be very unlikely, for one main reason: assuming that we proceed as planned and intended, the agreement will receive the approval and agreement of the EU and the UK. In practice, that means that it will have the agreement of the Council, of the Parliament and of the Commission, which all have to expressly endorse this agreement. The member states have to be part of that decision-making process. It would be quite surprising, if we initially get that agreement after considerable involvement from all those various parties at the European Union level, for one of those parties then to turn around and legally challenge it.
“There is also a time pressure inherent in this process, of which all parties are aware. I am very confident that there is immense good will, on both sides of the channel, to strike an agreement and implement it.”74
Some potential ways forward
102.This section briefly examines the available options for establishing a neutral judicial or quasi-judicial mechanism for binding dispute resolution.
Borrowing the EFTA Court to interpret the Withdrawal Agreement
103.Marina Wheeler QC asked whether it might be possible “to borrow” the EFTA Court as a dispute resolution mechanism for the Withdrawal Agreement. She suggested an “ad hoc arrangement”, arguing that there was a significant advantage in using a Court as opposed to an arbitration panel, in that “decision-making is transparent, and a body of accessible, precedent setting judgments can be developed”.75
104.The IfG also claimed that docking to the EFTA Court for the purpose of interpreting the Withdrawal Agreement had “a number of advantages”. These are broadly summarised at paragraph 42.76 Hugh Mercer QC put it most bluntly, when he said “the risk if we do not adopt something like the EFTA Court solution is that you get to the end, you have all your agreements, you are trying to implement them, and then suddenly the Court of Justice says, ‘Hang on, no’”.77
105.In spite of these perceived advantages, highlighted above, the Government has not supported this option. It argues that the EFTA Court is not currently a forum that would accept these types of disputes. On that basis it does not appear to have asked the EU 27 whether it would accept the EFTA Court as a neutral arbiter for disputes about the Withdrawal Agreement. If this option is to be explored further, it will have to be tabled by the parties with some urgency.
Arbitration
106.In its Future Partnership Paper, the Government noted that while joint committees can be the sole route for resolving disputes, in respect of some elements of agreements, additional binding mechanisms “may be appropriate or desirable”. Arbitration panels can be seen in free trade agreements such as EU-Canada Comprehensive Economic Trade Agreement (CETA).78 But the Paper acknowledges that such an arbitration panel cannot adjudicate on the interpretation of EU law so as to bind the EU and its member states.79
107.A recent example of this difficulty is demonstrated by the judgment of the CJEU in the case of Slovak Republic v Achmea.80 In that case, despite a contrary opinion by the Advocate General in the case,81 the CJEU ruled that an arbitration clause contained in the Netherlands-Slovakia bilateral investment treaty had an adverse effect on the autonomy of EU law and was therefore incompatible with EU law. The CJEU considered that the arbitral tribunal might be called on to interpret or apply EU law. It took account of the fact that the arbitral tribunal had no power to make a reference to the CJEU for a preliminary ruling, and that the decision of the arbitral tribunal was, in principle, final.
108.While the case related to an arbitration agreement between Member States on a bilateral investment treaty, there has been speculation that the judgment might have more far reaching effects.82
109.There are other agreements (for example the Moldova, Ukraine and Georgia Association Agreements)83 which make provision for an arbitration panel which can then make references to the CJEU where specific questions of EU law arise.84 Such an option, while it would satisfy the objections of the CJEU, and would be one step removed from asking the CJEU to adjudicate on the Withdrawal Agreement itself, might still give rise to concerns on the UK side.
110.Another commonly expressed concern about arbitration is that it is usually conducted in private. This means that not only is it not transparent, but the decisions taken do not create the sort of clear binding precedent that emerges following the public judgment of a court. Raphael Hogarth summarised these concerns: “Some people worry that arbitration is not as good at promoting the rule of law as a court-based system, because it might be less transparent and less good at ensuring that the law is interpreted consistently across time.”85 In contrast, Lord Neuberger of Abbotsbury saw no reason why arbitration should not be “open and in public”.86 If the UK presses for an arbitration agreement, the Government should explore the options for public access to any arbitration process.
An international treaties court
111.A group called Lawyers for Britain, in a paper entitled ‘Adjudicating Treaty Rights in Post-Brexit Britain’, has proposed the idea of an international treaties court as part of the UK domestic legal order’.87 The paper suggests that an international treaties court, staffed by UK judges and operating under UK law, should be set up to act as a central point giving guidance to non-specialist courts and tribunals throughout the UK on the interpretation of the UK legislation which implements the Withdrawal Agreement.
112.On the EU side, the Group suggests that “the CJEU could act as a central point of reference for interpreting the treaty rights of UK nationals when cases are referred to it from the courts of the EU 27 Member States, without this needing to be included in any international agreement”. The authors argue that under this jurisdiction the CJEU interpretations “would be binding within the EU but would not bind the UK or its courts … This would create a symmetrical system between the EU and the UK, where each would have a central court … reaching decisions in individual cases on the interpretation of the agreed treaty provisions on the rights of EU citizens in the UK and UK citizens in the EU27”.88
113.To deal with any divergence between the two regimes, Lawyers for Britain propose “a bilateral international arbitral body which would sit ad hoc when required”. Martin Howe QC, the Chair of Lawyers for Britain, spoke to this paper when he gave oral evidence. He contended unlike the proposed EEA Court, which was rejected by the CJEU, an international treaties court and associated arbitral body would not cause a difficulty:
“The European court will accept both itself and the European Union as a whole being bound by an external treaty court or arbitral body under an international agreement … What [the CJEU] will not accept is external bodies dictating to it on the administration of internal European Union law under the EU treaties. That is where the proposed EEA court foundered, because it would involve the EEA court being a structure on top of and binding the Luxembourg court and interpreting the rules of the EU internal market in a way that would have affected the ECJ’s internal jurisprudence.”89
114.Martin Howe’s view was echoed by Sir Richard Aiken, the former President of Lawyers for Britain. He argued that although the CJEU had to be the master of the internal legal order of the EU, “If you have another legal order that is an external legal order because it is something between the EU and an external sovereign entity, then with respect to the CJEU it does not have, and nor should it have any, control of that.”90
115.These arguments seem to be predicated on the basis that this new structure would deal primarily with disputes originating in individual cases on the interpretation of the agreed treaty provisions on the rights of EU citizens in the UK and UK citizens in the EU 27:
“Our proposals involve giving to the bilateral international body the power to make binding rulings on the rights of EU citizens in the UK and the rights of UK citizens in the EU. Those rights will arise under the withdrawal agreement and will not be rights under EU law, even if many aspects of those rights are likely to be based on the rights enjoyed by EU citizens at the date of the UK’s withdrawal.”91
116.Such an arrangement would not appear to deal with the other disputes which might arise under the Withdrawal Agreement (for example relating to the financial settlement and other separation issues)—although the authors contend that it could “readily be extended to cover other international treaty-derived rights”.
117.Even if this were agreed, it is hard to see how the proposed ad hoc arbitral body would avoid the problem of an international body other than the CJEU seeking to rule on EU-derived laws. It is also worth recalling that the Government has already conceded that the UK courts will continue to be able to make references to the CJEU for some years after Brexit on the question of citizens’ rights.
The CJEU
118.Professor Anthony Arnull (University of Birmingham) argued that the UK should simply accept that the CJEU was best placed to ensure that that “any withdrawal agreement is interpreted and applied in a uniform manner”. Rather than seeking to exclude the jurisdiction of the CJEU, the Government should instead seek the right to nominate “an ad hoc judge or Advocate General to sit on cases concerning the interpretation or application of Brexit law”; and it should try to ensure that the UK retained a capacity to influence the development of the CJEU’s case law by, for, example, seeking continued rights to intervene in all cases before the Court.92
Conclusions
119.Given that Article 50 TEU provides explicitly that the Treaties shall cease to apply to the UK on exit, there is a legitimate argument that disputes arising under the Withdrawal Agreement, if they cannot be resolved politically by the Joint Committee, should be referred to a neutral court, or for arbitration. We share the Government’s concern that the interpretation of the Withdrawal Agreement should not be left to the CJEU, which is a Court associated with one of the parties to the Agreement. Whether or not the CJEU is objectively neutral, even a mere perception of bias should be avoided.
120.However, the Government and Parliament will need to be mindful that the legal autonomy of the Union, as defined by the CJEU in past cases, demands that only the CJEU have the final say on the interpretation of EU law. Moreover, the final Withdrawal Agreement may be referred to the CJEU to determine whether it is compatible with the Treaties. From past precedent, innovative solutions can prove problematic and could well be deemed incompatible with EU law.
121.We are unconvinced by the Government’s suggestion that all disputes relating to the Withdrawal Agreement can simply be settled politically by the Joint Committee. It is possible that intractable disputes may arise under the Withdrawal Agreement. These should not be left as potentially insoluble for reasons of short-term expediency: the Government and the EU will have to reach a sensible and pragmatic compromise on this question.
122.As we have previously noted, time is now very short: over the next few months the UK and the EU must finalise the remaining articles of the Withdrawal Agreement. If the Government and the EU do not bring forward pragmatic proposals, it will be too late. The risk is that the Commission will shape the terms of the negotiations, or there will be no Withdrawal Agreement.
123.If the Government does wish to avail itself of the suggested option of docking with the EFTA court, simply for the purpose of settling disputes arising from the Withdrawal Agreement, it will have to commence negotiations with both the EU 27 and the EEA/EFTA states as a matter of urgency.
41 European Commission and HM Government, Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (19 March 2018): https://ec.europa.eu/commission/sites/beta-political/files/draft_agreement_coloured.pdf [accessed 30 April 2018]
42 European Commission and HM Government, Joint Report on progress during phase 1 of negotiations under Article 50 TEU on the UK’s orderly withdrawal from the EU (8 December 2017): https://ec.europa.eu/commission/sites/beta-political/files/joint_report.pdf [accessed 30 April 2018]
43 Protecting the rights of Union citizens in the UK and UK citizens in the Union; the framework for addressing the unique circumstances in Northern Ireland and the financial settlement.
44. Letter from Lord Boswell of Aynho to Rt Hon Caroline Nokes MP, Minister of State for Immigration, 27 February 2018: https://www.parliament.uk/documents/lords-committees/eu-justice-subcommittee/Brexit-AcquiredRights/citizens-rights-letter-from-committee-270218.pdf [accessed 18 April 2018]
45. Letter from Rt Hon Caroline Nokes MP, Minister of State for Immigration to Lord Boswell of Aynho, 13 March 2018: https://www.parliament.uk/documents/lords-committees/eu-justice-subcommittee/Brexit-AcquiredRights/citizens-rights-letter-from-committee130318.pdf [accessed 18 April 2018]
47 European Scrutiny Committee, EU Withdrawal: Transitional provisions and dispute resolution, (Nineteenth Report, Session 2017–19, HC 763), para 161
48 House of Lords EU Justice Sub-Committee, ‘Brexit: citizens’ rights inquiry’: https://www.parliament.uk/business/committees/committees-a-z/lords-select/eu-justice-subcommittee/inquiries/parliament-2017/brexit-citizens-rights/ [accessed 30 April 2018]
49 Letter from Lord Boswell of Aynho to the Rt Hon Brandon Lewis MP, Minister of State for Immigration, 19 December 2017: https://www.parliament.uk/documents/lords-committees/eu-justice-subcommittee/Brexit-AcquiredRights/N_A%20-%20Citizens’rights-lettertoImmigrationMinister%20-%2019.12.17_.pdf [accessed 19 April 2018]
50 European Commission and HM Government, Joint Report on progress during phase 1 of negotiations under Article 50 TEU on the UK’s orderly withdrawal from the EU (8 December 2017), paras 49 and 50: https://ec.europa.eu/commission/sites/beta-political/files/joint_report.pdf [accessed 20 April 2018]
58 In the domestic context, the text for the appearance of bias was set out in the case of Porter v Magill [2002] 2 AC 357. In a well-known judgment, Lord Hope of Craighead observed that “The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”
59 R v Bow Street Metropolitan Stipendiary Magistrate, ex parte Pinochet Ugarte (No 2) [1999] UKHL 1, [2000] 1 AC 119: https://publications.parliament.uk/pa/ld199899/ldjudgmt/jd990115/pino01.htm Dimes v. Grand Junction Canal (1852) 3 H.L.C. 759, 793, per Lord Campbell.
60 R v Sussex Justices, ex parte McCarthy [1924] 1 KB 256
61 Office for Budget Responsibility, Economic and fiscal outlook: March 2018, Cm 9572, 13 March 2018, p 18: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/689581/CCS207_CCS0318157642-1_OBR_EFO_March_2018_Accessible.pdf [accessed 18 April 2018]. The total “divorce bill” is estimated at £37.1 billion (€41.4 billion), payable between 2019–2064.
62 Written evidence from Marina Wheeler QC (BED0020). Marina Wheeler QC was one of the few witnesses to question this doctrine. She argued that while many commentators and witnesses present the autonomy of the EU legal order as a “legal reality”, which constrains the options available to the EU, in her view it was “a policy choice”. See: written evidence from Marina Wheeler QC (BED0020), para 14.
63 Article 263, Treaty on the Functioning of the European Union
64 European Union Committee, Deal or No Deal, (7th Report, Session 2017–19, HL Paper 46)
67 Ibid.
68. The Rt Hon Theresa May MP, Prime Minister, Speech on ‘A new era of cooperation and partnership between the UK and the EU’, 22 September 2017: https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-and-partnership-between-the-uk-and-the-eu [accessed 18 April 2018]
70 See paragraph 65.
71 Namely the provisions which relate to ‘Provisions applicable after 31 December 2020 in relation to own resources’ and ‘Union law applicable after 31 December 2020 in relation to the UK’s participation in the implementation of the Union programmes and activities committed under the MFF 2014–2020 or previous financial perspectives’.
72 Letter from Rt Hon David Davis MP, Secretary of State for Exiting the European Union to Lord Boswell of Aynho, 19 April 2018: https://www.parliament.uk/documents/lords-committees/eu-select/scrutiny-brexit-negotiations/david-davis-withdrawal-letter-reply.pdf [accessed 27 April 2018]
78 CETA provides an arbitration process, in which parties mediate and, only if the case is not resolved within a specific time, is a reference for arbitration then made. The CETA investment dispute settlement system applies only to investment disputes and does not apply to the entirety of the CETA Agreement. (See: written evidence from The Law Society (BED0014)).
79 Department for Exiting the European Union, Enforcement and dispute resolution: a future partnership paper (2017) paras 34, 35 and 38: https://www.gov.uk/government/publications/enforcement-and-dispute-resolution-a-future-partnership-paper [accessed 18 April 2018]
80 Case C-284/16, (6 March 2018): [accessed 30 April 2018]
81 Opinion of Advocate General Wathelet, (19 September 2017): [accessed 20 April 2018]
82 See for example Clément Fouchard and Marc Kristin, ‘The judgment of the CJEU in Slovak Republic v Achmea: A loud clap of thunder on the intra-EU BIT sky’, Kluwer Arbitration Blog (7 March 2018): http://arbitrationblog.kluwerarbitration.com/2018/03/07/the-judgment-of-the-cjeu-in-slovak-republic-v-achmea/ [accessed 27 April 2018] and Joerg. Risse and Max Oehm, ‘The European Court of Justice stops investment arbitration in intro-EU disputes’, Lexology.com (7 March 2018): https://www.lexology.com/library/detail.aspx?g=4b933d32-d9ee-43c8-bff4-7aa39a2faa88 [accessed 27 April 2018].
83 For further details of the dispute resolution mechanisms used in the association agreements with Ukraine, Moldova and Georgia, see written evidence from the Institute for Government (BED0005), para 43.
87 Martin Howe QC, Francis Hoar, Dr Gunnar Beck, Adjudicating Treaty Rights in Post-Brexit Britain, 2nd Edition, November 2017: http://www.lawyersforbritain.org/files/adjudicating-treaty-rights-after-brexit.pdf [accessed 18 April 2018]
88 Ibid.
90 Ibid.
91 Martin Howe QC, Francis Hoar, Dr Gunnar Beck, Adjudicating Treaty Rights in Post-Brexit Britain, 2nd Edition, November 2017: http://www.lawyersforbritain.org/files/adjudicating-treaty-rights-after-brexit.pdf [accessed 18 April 2018]