Resolving EU-UK disputes post-Brexit

Posted in Dispute resolution and litigation International arbitration WTO and international trade

A year ago, in the blog piece Alphabet Soup, we examined the Government’s presentation of different dispute resolution models contained in free trade agreements, considering potential different approaches to resolving UK-EU disputes after Brexit. Now, in the more recent Government White Paper on “The Future Relationship Between the United Kingdom and the European Union” (the White Paper), the UK Government has to an extent clarified how it envisages that disputes in the post-Brexit era should be resolved.

The White Paper certainly articulates the Government’s determination “to build a new relationship that works for the both the UK and the EU”. The White Paper envisages creating a free trade area and a unique relationship that is to be “broader in scope than any other that exists between the EU and a third country”.

Resolving Disputes

However, the White Paper also acknowledges the potential for disputes to emerge from any future agreement between the UK and the EU, and takes the UK’s vision for what mechanics should exist for resolving such disputes (at least a little) further.

In short, the White Paper summarily describes a three-step approach, without exactly prescribing the role or constitution of the dispute resolution model at each stage.

Firstly, friendly dialogue amongst leaders and experts is encouraged in case of any disputes: “different types of dialogue between leaders and experts should ensure that cooperation is maintained without issues arising”. However, as with most things Brexit, little detail has yet emerged as to precisely what “different types of dialogue” are envisaged.

Secondly, where dialogue is unable to resolve the issue, the White Paper envisages the matter being raised in a proposed “Joint Committee”. The UK Government’s over-arching vision is for a new free trade area between the UK and EU, with a governing body overseeing a new institutional framework. The Joint Committee is intended to report to that governing body, however once again, there is little specificity as to the proposed make-up, role or powers of the Joint Committee. It may be simply a forum for UK and EU representatives to further negotiate an amicable resolution. Alternatively, it is also conceivable (although not clear) that the Joint Committee might be expected to reach a decision on the dispute and provide an opinion on its resolution (whether binding or not).

Thirdly, the White Paper suggests that “it would make sense in some cases” if in the event that the Joint Committee was unable to resolve the matter after “a defined period of time” (again unspecified), either party would have the option to refer the matter to international arbitration, for “fair, prompt and independent” resolution, with the arbitrator’s decision being final and binding. Little further detail is given, other than to specify that an arbitration panel should include members from both parties and “might include specialist expertise such as where a dispute required detailed sectoral knowledge”.

Potentially highlighting the lack of clear and precise thinking about a clear and coherent dispute resolution mechanism that gives certainty as to process and procedure, the White Paper in fact states that “the merits of whether [arbitration] should be an option should be assessed on a case-by-case basis across different forms of cooperation”.

Unlike the August 2017 negotiating paper, the White Paper does not elaborate further, and there is no direct comparison with current dispute resolution mechanisms in FTAs, economic cooperation agreements such as Canada Comprehensive Economic and Trade Agreement (CETA) or the World Trade Organisation dispute resolution mechanism.

Role of the CJEU

As an aside, the White Paper makes interesting observations with respect to the future role of the CJEU in post-Brexit disputes. Generally, the UK has proposed for a post-Brexit deal to reflect that the UK is no longer part of the EU. The White Paper states that “EU institutions, including the Court of Justice of the European Union (CJEU), will no longer have the power to make laws for the UK and the principles of direct effect and supremacy of EU law will no longer apply in the UK”.

However, the White Paper acknowledges that only the Court of Justice of European Union (CJEU) is able to bind the EU on any interpretation of EU law. As a result, the White Paper recognises (again without clarity) that the CJEU may still play a key role in determining disputes between the UK and EU, wherever such dispute requires an interpretation of any EU rules to which the UK agrees to adhere as a matter of international law (i.e. outside of the existing EU Treaties from which the UK will withdraw) as part of a Brexit deal. The White Paper states that in such circumstances, the CJEU’s rulings will still be critical when determining the proper interpretation of such EU rules. The White Paper suggests that, where this is the case, the Joint Committee or arbitration panel would have to proceed to resolve the dispute in a manner consistent with the CJEU’s interpretation.

Since this puts significant emphasis on the CJEU’s interpretation of EU rules, it is at present difficult to see how this acknowledgment of the CJEU’s continuing role can be reconciled with the later statement contained in the White Paper that this would “respect the principle that the court of one party cannot resolve disputes between the two”. As with all things Brexit we will, for the time being at least, have to wait for further clarity to emerge.

Brexit: planning for the future as negotiations continue

We have created this Brexit blog to provide up to date analysis and legal commentary as the new Brexit landscape evolves, addressing key questions and topics of interest to our clients across the different industry sectors in which they operate.

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