Brexit: Dispute Resolution and Enforcement (European Union Committee Report) - Motion to Take Note

Part of the debate – in the House of Lords at 3:37 pm on 17th October 2018.

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Photo of Baroness Kennedy of The Shaws Baroness Kennedy of The Shaws Chair, EU Justice Sub-Committee 3:37 pm, 17th October 2018

My Lords, this report was prepared by the Justice Sub-Committee of the European Union Committee, which I chair. I should like to start by thanking the members of this committee, who have been conscientious at all times, the staff, who have been exceptional in their dedication to this work, and all those who gave evidence to us.

Our report was published on 3 May this year. It focused on four distinct matters: first, enforcement of any withdrawal agreement concluded under Article 50 of the Treaty on European Union; secondly, arrangements during the proposed transition period; thirdly, the dispute resolution system that will be implemented under any agreement on future relations between the European Union and the UK; and, fourthly, the related question of how to deal with justice co-operation issues in civil, family and criminal law.

The Government’s position has always been that they would seek to end the jurisdiction of the Court of Justice of the European Union. Whether this is a “blood-red line” or is cast in a rather pinker hue, the Government have been consistent in saying that in leaving the European Union we will bring about an end to the direct jurisdiction of the Court of Justice of the European Union. As we reach the sharp end of the negotiations with the European Union, the question arises as to what this means in practice for individuals, businesses and the enforcement of rights and obligations.

The potential for this issue to cause disagreement between the United Kingdom and the European Union is sometimes underestimated, particularly in the press, due to the current focus on the Irish border. However, during the European Union Committee’s most recent visit to Brussels, which took place following the publication of the Government’s Brexit White Paper in July, Michel Barnier described the question of dispute resolution as “the second most difficult point after Ireland”, so it should concern us here in this House.

We received the Government’s response to our report on 5 July 2018, and I was glad to see it describe the committee’s analysis as a “welcome contribution”. Unfortunately, it was really little more than warm words. The Government recognised that,

“there needs to be a clear mechanism for governing and enforcing our Withdrawal Agreement with the EU – as there is in any international agreement”,

and that they would,

“continue to engage constructively … in the negotiations”.

Their response reiterated the fact that the UK had,

“no plans to dock to the EFTA Court”— that is, to access it by a side door, although not being part of EFTA—and that that mechanism for settling disputes would not be appropriate for us. It concluded that,

“Using the EFTA Court … for this purpose would not be a simple or straightforward solution”.

However, on the specific issues that we raised, the response contained little new information and did not address my committee’s conclusions comprehensively. The response was published before the White Paper and so much of its content has been superseded by that document. Therefore, I shall concentrate on the White Paper.

Notably, the White Paper contains a chapter on institutional arrangements. This suggests that in circumstances where a dispute could not be resolved politically by the United Kingdom and the European Union in the proposed joint committee,

“it would make sense in some cases for either party to have the option of referring the issue to an independent arbitration panel”— hold that thought—

“which would include members from both parties”.

Although this demonstrates some progress since the future partnership paper published last August, which merely set out a range of options, it still falls some way short of offering precise governance arrangements to cover both the withdrawal agreement and our future relationship.

The chapter on institutional arrangements also seeks to address how disputes over the proposed common rule book for goods might be determined. It says:

The UK recognises that only the CJEU can bind the EU on the interpretation of EU law, and therefore in these instances, there should be the option for a referral to the CJEU for an interpretation, either by mutual consent from the Joint Committee”— of the European Union and the UK—

“or from the arbitration panel”.

This concession appears to be very similar to what is called the Ukraine model. A lot of people do not view a reference to a Ukraine model as one that we would be very charmed by, but that model of dispute resolution under an association agreement is mainly an arbitration process, with a reference mechanism to the European Court of Justice to rule on technical issues of European Union law and a final determination going back to the arbitration panel.

That pragmatic model has the benefit of being supported by some precedent, as it is used not just in Ukraine but in Moldova and, I think, somewhere else, but it may be seen as further blurring the Government’s red line on the role of the European Court of Justice. We understand that such an arbitration model is also under discussion with the Swiss authorities, which are having similar discussions about the governance of their treaties with the European Union. Perhaps, going forward, it might sound more appealing if we were to refer to such a proposal as the Swiss model.

However, my first question is: will this model of arbitration, with a reference procedure, be utilised as a governance mechanism for the withdrawal agreement and for other aspects of dispute resolution after Brexit? The method at the moment is being put forward as dealing with disputes that might arise out of the common rulebook, so my question is: would it also be used for the withdrawal agreement and other aspects of dispute resolution once we have left?

In response to the committee’s recommendation that any future,

“enforcement and dispute resolution system established under the future relationship should be accessible to citizens and businesses”,

the Government agreed that,

“it is in the interests of both the UK and the EU that the rights and obligations agreed between us can be relied upon and enforced by individuals and businesses”,

yet the Government’s response provides no information about how this might be facilitated. Should the Government settle upon arbitration as the main mechanism for dispute resolution, we assume that this would therefore exclude participation by individual litigants and businesses—it would be Government to Government. In circumstances where there are disputes about any future common rulebook, particularly between parties based in the UK, we ask the Government to explain how individuals and businesses would be able to seek a judicial remedy in circumstances where there was no ability for the individual or the business to request a reference to the European Court of Justice. The evidence we received during the course of our inquiry was that state-to-state models of dispute resolution does not tend to favour small businesses since, as the Institute for Government has pointed out in its evidence to us,

“as far as government is concerned it is worth kicking up a fuss only when quite a lot of money is at stake”.

What will this mean for small businesses?

On the issue of participation in the European Union agencies, the White Paper acknowledges that if the United Kingdom wishes to participate, for example, in the European Medicines Agency or the aviation agency, it would,

“respect the remit of the CJEU such that if there was a challenge to a decision made by an agency that affected the UK, this could be resolved by the CJEU, noting that this would not involve giving the CJEU jurisdiction over the UK”.

In the light of this clear concession from the UK Government, I ask for an update on the negotiations with the European Union on the question of participation in the agencies: how far are we getting with that and other relevant mechanisms? As a criminal lawyer, I am particularly concerned about the European arrest warrant, which concerns criminal justice, and what happens on Brexit day in our arrangements and relationships with Interpol and Eurojust—our relationships that enable the arrest of people involved in cross-border crime using the European arrest warrant. There is a need for a court that deals with that; it is not a process that is appropriately dealt with by arbitration.

On the question of cases before the CJEU, I note that, while the Government have proposed that pending UK cases before that court at the end of the transition period should continue through to a binding judgment, the Government agree with the committee that there needs to be a “longstop”—a limitation period—for cases based on facts arising before the end of the transition period. Given that we are rapidly approaching the date by which these issues should be agreed in the withdrawal agreement, I wonder what guidance the Government can offer potential litigants on that question.

Finally, our report also touched on the significant ramifications of Brexit for the UK’s continued participation in the so-called Brussels suite of EU regulations facilitating judicial co-operation in civil and family law matters. My committee has taken a keen interest in this subject matter since the result of the referendum, and we published a report in March 2017 entitled Brexit: Justice for Families, Individuals and Businesses? Earlier this year, as promised in our dispute resolution report, we followed up that work. We did so because this is the stuff that is about the human condition—the relationships between people and how they are affected in terms of their livelihoods, relationships and children. We took evidence from highly regarded civil and family law practitioners and we also had a session with the Government. Yesterday, my committee agreed a lengthy letter to the Lord Chancellor setting out our deep concerns about the current state of the negotiations on this important aspect of Brexit and the Government’s plans for a no-deal scenario. Law is about more than mere technicalities and the black letter; it is about blood, sweat and tears and all those things that are part of our humanity. I invite interested parties to read the letter we have sent to the Lord Chancellor, a copy of which is on the sub-committee’s web page. We are looking forward to his response. I beg to move.