Former European Court President: UK Government White Paper shows unrealistic hopes

Britain is panicking and it shows

July 12, 2018
Former President of the EFTA Court Carl Baudenbacher
Former President of the EFTA Court Carl Baudenbacher

Not only footballers become anxious when time starts running out. Both the Chequers Plan and the White Paper on the UK’s future relationship with the European Union confirm that.

Trade agreements require mechanisms to make the deal work. On this, the White Paper provides that in case of a dispute both Britain and the EU should have the option of referring the issue to an “independent arbitration panel” which would include arbitrators from both sides. The decision of the panel would be binding on the parties. Where the UK and the EU had agreed to retain a “common rulebook,” the UK would recognise that the European Court of Justice is supreme on the interpretation of EU law, and thus in these instances there should be the option to refer questions to the ECJ, either by mutual consent from a “Joint Committee,” or from the arbitration panel. The dispute would then be resolved by the committee or panel in a way that is consistent with the ECJ’s interpretation.

At first glance, this proposal is as surprising as it is original. Anyone who takes a close look, however, will see that this largely corresponds to an approach that the Swiss government is currently trying out. In fact, late last year, the EU Commission proposed an arbitration mechanism to Switzerland. The Swiss would like to improve their relationship with the EU, and are in a similar situation to post-Brexit Britain as regards dispute resolution.

However, the Swiss have the luxury that they are still playing in regular time. Their network of bilateral agreements with the EU stands. In 2008, the EU informed Switzerland that going forward it must accept a non-national supervisory and court mechanism. Negotiations began only in early 2014, but since no solution has been found, no new market access agreement has yet been concluded.

Both the proposal by the Swiss government and the UK White Paper appear to be modelled on the mechanisms found in the EU’s Association Agreements with Ukraine and Moldova. According to these two treaties, a dispute shall be resolved by a binding decision from a panel of three arbitrators. If, however, the dispute concerns the interpretation and application of a provision relating to “regulatory approximation,” i.e. technical barriers to trade, customs facilitation, public procurement or competition, or which otherwise imposes upon a party an obligation defined by reference to a provision of EU law, the arbitrators shall not decide the question but request that the ECJ give a binding ruling on it.
"The EFTA Court could offer a solution for both the UK and Switzerland"
In both countries, the Ukraine/Moldova mechanism is taken as the starting point, but the governments think that it can be changed in their favour. The Swiss Foreign Ministry has, for example spread the word that the arbitrators on an EU-Switzerland panel would be free to decide whether and what to refer to the ECJ. These hopes are unlikely to materialise. It is hard to imagine that the EU—and in particular the ECJ—will be prepared to weaken, from its perspective, the Ukraine/Moldova model.

On the contrary, there is evidence to suggest that the EU has already reached or exceeded its limits with the Ukraine/Moldova approach. Even if important substantive questions must be referred to the ECJ for a binding preliminary ruling, the fact remains that the arbitrators could disregard the obligation to refer or refuse to follow the ECJ’s judgment.

The Ukraine and Moldova Agreements have never been referred to the ECJ for approval. Whether they would have obtained the EU Court’s blessing is an open question. Future agreements between the EU and Switzerland or the UK would certainly be put before the ECJ. Whether they would pass the test may be doubted, in particular if the Ukraine/Moldova approach were to be amended in favour of the non-EU members.

Keeping calm as the final minutes tick down, practicalities also matter. From a practical viewpoint it must be borne in mind that British people and businesses have enjoyed access to a European Court, the ECJ, for the last 45 years. The Ukraine/Moldova approach would cut that off. Whether a dispute would go to arbitration would be a matter for HM Government to decide. The British people and British businesses would be patronised.

Negotiators should draw the consequences and go for a safe solution. The European Free Trade Association Court was accepted by the ECJ in April 1992. It could, possibly in an amended form, offer a solution for both the UK and Switzerland. The EFTA Court would give people and businesses access to a European court. It has its own voice and it has already upheld values such as free trade, competition and fair taxation that are important for Britain. With one or two British judges, this orientation could become even stronger. The current EFTA states should be brave and—with no ifs or buts—invite the British to join the EFTA and EEA.



Carl Baudenbacher is a former President of the EFTA Court and is now at Monckton Chambers