Will dispute resolution mechanisms post-Brexit be the angels of sovereignty and mercy that the government depicts?
The Brexit white paper deserves all our attention. Others have pointed out inconsistencies. I will focus on Chapter 2, ‘Taking control of our own laws’: ‘We will take control of our own affairs, as those who voted in their millions to leave the EU demanded we must, and bring an end to the jurisdiction in the UK of the Court of Justice of the European Union (CJEU).’
There is further text about our laws from now on being made in London, Edinburgh, Cardiff and Belfast, based on the specific interests and values of the UK. Hurray! If you read yet further, you will see a recognition that there will have to be some sort of dispute resolution mechanism between us and the EU after all. Oh no! And presumably, even just using the headings from the white paper itself, the areas of possible dispute will cover a very wide and contentious area – trade, immigration, criminal justice and more.
You have to go to the back, to Annex A, to obtain any detail about how some of the current principal dispute resolution mechanisms work.
The government reassures us that ‘Unlike decisions made by the CJEU, dispute resolution in these agreements does not have direct effect in UK law’ and ‘Any arrangements must be ones that respect UK sovereignty, protect the role of our courts and maximise legal certainty’. But how do these dispute mechanisms work, and are they indeed the angels of sovereignty and mercy that the government paints?
First, will they be British decisions made by British judges and arbitrators? No. It is clear from the one mentioned first in Annex A, and on which it spends by far the most space - the EU-Canada Comprehensive Economic and Trade Agreement (CETA) - that foreigners will not only be involved, but will doubtless make up the majority of the decision-makers in each case.
Under CETA, if the parties cannot agree on arbitrators - and will the EU agree to a panel made up entirely of British arbitrators? - then there is to be a selection from a list of 15 arbitrators, made up of five from the jurisdictions of each party to the dispute, and five from third countries, to choose a panel of three – that is, one from the UK, one from the EU and one from a third country. It is the third country national who is to chair the panel. The same principle applies to the tribunal to be set up for investment disputes.
It is simple maths to work out that the one UK member is outnumbered by two not from the UK, with a non-UK member in the chair.
As for respecting sovereignty, you must have lived in a vacuum over the last few years not to realise the accusations made against the anti-sovereignty effects of investor-state dispute resolution (ISDS), which is part of CETA and other deals. The recent EU-US free trade negotiations, now presumably dead, were widely disrupted by people who believed that ISDS allows companies to overturn environmental, health and other regulatory efforts of a democratic government.
I cannot improve on this long quotation taken from a publication on the topic by the American trade union AFL-CIO, an opponent of ISDS: ‘ISDS allows the foreign property owner to skip domestic courts, administrative procedures, city hall hearings and the like (all the processes that home-grown property owners use) … Not only that but the foreign property owners don’t lose access to the domestic US processes – they can “double dip” to get what they want.
‘The risk is that foreign property owners can use this system of “corporate courts” to challenge anything from plain packaging rules for cigarettes to denials of permits for toxic waste dumps to increases in the minimum wage. For any law, regulation or other government decision that the foreign investor does not like, all it has to do is think of an argument for why the decision somehow violated its right to “fair and equitable treatment” or why it might reduce its expected profits and it’s got a case. And, sometimes, just threatening the case is enough for the proposed law or regulation to be withdrawn…
‘See, these decisions don’t, by themselves, “overturn” the law, regulation or decision that was challenged. But if the country loses a case and wants to keep the decision that was challenged, it has to pay a fine (sometimes a substantial fine: Ecuador was recently ordered to pay more than $2bn to Occidental Petroleum). And many countries will just change the rule instead of paying the fine.’
So is this the way that the government proposes to take back control of our laws, to protect sovereignty and our courts? Did those who voted in their millions to leave the EU demand it?
Jonathan Goldsmith is a consultant and former secretary-general at the Council of Bars and Law Societies of Europe, which represents around a million European lawyers through its member bars and law societies. He blogs weekly for the Gazette on European affairs