A government position paper on enforcement and dispute resolution post-Brexit outlines its aim to enter into a free trade agreement (FTA)with the EU. This envisages that individuals and businesses will be able to enforce, before national courts, rights and obligations created by the Withdrawal Agreement and any FTA negotiated between the UK and EU.
If the government succeeds in negotiating an ambitious and comprehensive FTA, then many of its provisions could be very similar to existing EU law governing the free movement of goods, services and capital (though not persons). This means the UK will give effect to these rights and obligations in UK law and they will be enforced by UK courts. It also expects EU member states to grant UK individuals and businesses the same rights.
A key difference between the current position under EU treaties and the government’s proposals is that these rights will be enforced through national legislation, and not through the principle of direct effect. Accordingly, under EU law, if a business claims a member state has unlawfully restricted its free movement rights, that business can challenge the restriction in a national court. For example, if a member state introduces a restriction on imports, contrary to Article 34 TFEU which provides for the free movement of goods, then an importer can rely on the direct effect of this article to challenge the restriction. If there is existing case law from the Court of Justice of the European Union (CJEU) on the topic, then the national court must apply it in reaching its decision.
If the national court is uncertain about the interpretation of the relevant EU law, it can ask the CJEU for an interpretation which it must then follow. This helps to ensure consistent interpretation and application of EU law across all member states.
Post-Brexit, if a business claims UK legislation has unlawfully breached its rights under an FTA (for example, by restricting imports) it will have the right to enforce its rights before UK courts. The latter, and ultimately the Supreme Court, will be responsible for enforcing the relevant provisions of the FTA that should have been incorporated into domestic UK legislation.
However, if the domestic legislation is deficient in implementing the FTA, the UK courts would still apply the domestic legislation and the importer would have no remedy under UK law. Similarly, if an EU member state’s legislation were deficient in implementing the FTA, then an importer into this state would be left without a remedy under its domestic law. As a result, disputes could arise from improper implementation of the FTA post-Brexit.
UK courts hearing a challenge to restrictions on imports would have to interpret the relevant provisions of the FTA. If a similar case arose in, say, Germany, the German courts (possibly with the assistance of the CJEU) would be responsible for interpreting the relevant provisions of the FTA and could reach a different interpretation to the Supreme Court.
The government position paper recognises the possibility of disputes arising out of improper implementation of the FTA or diverging interpretations. Accordingly, it envisages some form of supervisory mechanism that would deal with such disputes, possibly an independent body on the lines of the EFTA Surveillance Authority.
The paper also suggests a range of options for dispute resolution. One is an arbitration panel to resolve a dispute arising from diverging interpretations of the FTA that could make a voluntary reference to the CJEU for an interpretation of the relevant rules where these rules are in substance identical to corresponding EU rules. In some very limited situations, therefore, the CJEU could be the final arbiter concerning the interpretation of the FTA, and indeed also of the Withdrawal Agreement.
As Brexit negotiations continue, agreeing what the FTA will look like when the divorce is final should be a priority at the negotiating table – and now more than ever.
Trevor Tayleur is associate professor at The University of Law