Thursday, 31 December 2020

Analysis 2 of the Brexit deal: EU/UK Trade and Cooperation Agreement – overview

 


Professor Steve Peers, University of Essex

Introduction

On 1 January 2021, the transition period in the Brexit withdrawal agreement (discussed here) comes an end. Relations between the UK and EU are then governed in part by the remaining withdrawal agreement (as further discussed in this Twitter thread) and in part by the newly agreed Trade and Cooperation Agreement (TCA) between the EU and the UK. (There are also two other newly agreed treaties, on security information and Euratom).

This blog post is a summary and overview of the TCA, and is based on my Twitter thread first reading the agreement (I’ve included direct links to the tweets with screenshots of the relevant parts of the TCA text). It is not a comprehensive analysis of every provision of the agreement; it has been and will be supplemented by more detailed analyses on specific provisions of the agreement. An analysis of the social security provisions by Professor Tamara Hervey has already been published on this blog. At the end of this blog post, I’ve attached links to further reading on the treaty. (Update: later blog posts cover human rightsdispute settlement and environment and climate change).

Basic legal issues

The EU and UK have agreed to apply the TCA provisionally (this is common in international law). This ends on February 28, 2021, but the parties can agree to amend that date in the Partnership Council (which is made up of representatives of both parties).  This is to give the European Parliament time to look at the treaty closely before deciding whether to give its consent. By contrast, the UK Parliament has already passed the EU (Future Relationship) Act to give effect in domestic law to the treaty. On the EU side, some provisions for implementation appear in the Council decision on signing the treaty. The treaty is between the UK and the EU only, ie not (as is often the case) between a non-EU country and the EU and its Member States. This issue is further addressed in some of the EU institutions’ and Member States’ statements on signing the treaty, which is an ‘association agreement’ on the EU side, despite its title. The current text of the treaty is provisional and will be replaced by a ‘scrubbed’ version by the end of April 2021.

There are a number of joint declarations to the treaty, which include a reference to the possibility of the UK holding bilateral talks with Member States about return of non-EU citizens. This confirms that the EU was not willing to agree to the UK’s proposed treaty on readmission (discussed here) or child asylum seekers; and that the Dublin system (discussed here) on responsibility for asylum seekers ceases to apply to the UK. At least for now, then, the UK government’s claims that Brexit would make it easier to return non-EU citizens to the EU has proven false: it will be harder to do so. The joint declarations also include the agreed text of a protocol on UK participation in some EU programmes: mainly research-related, plus the peace programme relating to Northern Ireland.

Either side can give notice to terminate the agreement; it will end 12 months later. There are also many provisions on the termination or suspension of specific parts of the treaty. This is different from the withdrawal agreement, which contains no provision on termination of the whole treaty, but only provisions on termination of the protocol on Northern Ireland (for more on breach and termination of the withdrawal treaty, see discussion here).  Unfortunately an immediate ‘Euromyth’ has taken hold that the whole TCA terminates automatically if the UK leaves the European Convention on Human Rights (ECHR). This is not true, although it would be optional (not automatic) for either side to terminate the criminal law part of the treaty on a fast-track basis if the UK or a Member State left the ECHR.

The UK will be consulted over new countries applying to join the EU. However, this is not a veto; so the UK could not, for instance, stop Scotland joining the EU. The agreement could be amended in light of EU enlargement; but there are often amendments to EU treaties with non-EU countries when a new Member State joins the EU. Conversely, there are no provisions on what happens if more countries leave the EU, or if the UK breaks apart, or both. On the break up of the UK, it should be noted that the CJEU takes a flexible approach to the international law of state succession to treaties, so it cannot be assumed that, at least as far as the TCA is concerned, there would be no successor party to the UK.

There is a short transition period for data protection – four months, possibly extended to six months, when the UK is fully covered by EU data protection law as long as it does not make major changes to UK law on this issue. This is to give the EU Commission time to consider an adequacy decision which would simplify data flows between the UK and EU.

On the territorial scope of the agreement, certain parts apply to the Channel Islands and Isle of Man. However there are no provisions on the UK’s overseas territories (as the UK government later confirmed), and a separate treaty was being negotiated with Gibraltar (which was apparently agreed in principle on New Year’s Eve).

The TCA is governed by the basic principles of international law, with no rights for individuals except as regards social security and (on the EU side) the criminal law provisions. The CJEU only has a role as regards litigation over EU programmes. On both points, the treaty is quite different in nature from the withdrawal agreement.

Economic cooperation

Part Two of the TCA begins by noting that it establishes a free trade area for goods and services, in accordance with the WTO. WTO case law must be taken into account where relevant. (Note that a free trade agreement falls short of participation in the single market).

On trade in goods, the core rules are zero tariffs (although customs charges are possible), non-discrimination in tax and regulation, and freedom of transit. The latter two rules incorporate WTO law. The ban on quotas also incorporates WTO law. Both sides can apply trade remedies: anti-dumping duties (a purely economic concept; ‘social dumping’ is considered separately below as part of the ‘level playing field’), anti-subsidy duties and economic safeguards – which is again different from being an EU Member State. This is usual for free trade agreements.

There’s a lot of detail on rules of origin, which are necessary to show that a good originates in the EU or UK respectively. These rules are necessary because the UK left the customs union. (There’s a temporary simplification). Contrary to the Prime Minister’s false claim in Parliament, tariff-free access to the other market is dependent upon compliance with the rules of origin (see the government’s own information).

There are detailed rules on sanitary and phyto-sanitary measures, including a vague commitment to animal welfare. Also there are number of provisions on customs cooperation and technical barriers.

As for services, it’s inaccurate to say that the treaty provides for nothing on this issue; but it’s fair to say that it’s less far-reaching than the single market. There are exclusions for audio-visual and some transport services. This includes rules on admission of business visitors of various types, subject to detailed definitions and conditions. Nothing is agreed on recognition of qualifications for now (although the issue may be discussed later; and note that the withdrawal agreement secures recognition of qualifications for those who already have recognition, or who applied for it by the end of 2020). There are specific provisions on certain services, such as telecoms, delivery services and legal services; but not much on financial services, and the text on mobile roaming is a green light to charge for it.

On intellectual property, there are detailed obligations that build on WTO law as regards various types of IP (see the text on copyright, for instance). But this is different from being an EU Member State, as the detailed EU laws (subject to frequent litigation at the CJEU) on many specific IP rights will no longer apply to the UK.  There are also special sections on public procurement and energy.

On the so-called ‘level playing field’ designed to ensure perceived fair competition between the two sides, the provisions in different areas include different approaches. For competition law, there is an obligation to have and enforce a system, but no dispute settlement.  On State aid/subsidies there is a compromise: less than the EU wanted (which was full application of EU law, including references to the CJEU), but more than the UK wanted (which was a brief statement of basic rules). There are basic principles on subsidies, which are further fleshed out. On enforcement, there must be access to the courts and an independent enforcement body. Remedies must include clawing back a subsidy. If the UK and EU argue about a subsidy, there’s fast track retaliation against a subsidy, fast track arbitration on the retaliation, but limits on what the arbitrators can review.

On taxation, there’s a vague reference to international standards, a more concrete standstill, but no dispute settlement. Employment law obligations have a broad scope, and include a non-regression clause, which applies where a party drops its standards “in a manner likely to affect trade or investment”. This is a lower threshold than the test applying to divergences of future legislation. There’s also an obligation to enforce labour law effectively. Although the non-regression obligation is subject to a special type of dispute settlement, this still includes the possibility of retaliation (ie by raising tariffs) in the event of a breach.

The environmental law level playing field rules have a broad scope, with a specific definition of climate change. The non-regression rule applies the same way as for employment law; the domestic enforcement rule is vaguer, but the possibility of retaliation works the same way. There are also some general commitments to international labour and environmental law principles, but these lack the possibility of retaliation.

When it comes to divergences as regards future legislation on labour, the environment, or subsidy control, the threshold for retaliation is a ‘significant divergence’ with a ‘material impact on trade or investment’. There is no suggestion that this is the same thing as a ‘material breach’ of the treaty – ie the general international law rules relating to termination of treaties.

There are detailed rules on air and road transport, as well as fisheries, and a protocol on social security, discussed here.  The provisions on tourist visas refer to matching unilateral visa waivers for short-term visits (for discussion of the EU law, see here).

Criminal law cooperation

Part Three of the treaty is based on protection of human rights, including in the ECHR, along with data protection standards. These are enforceable by either a general power of termination of the criminal law part with nine months’ notice (on any grounds), or an option to terminate it more quickly in the event that the UK or a Member State denounces the ECHR or its first, 6th or 13th protocols (the latter two concern abolition of the death penalty). This part can also be suspended temporarily on grounds of human rights, the rule of law or data protection. There is a purely political dispute settlement process for the whole criminal law part, instead of arbitration.

As for specific rules, the UK will still be involved in transfers of data on DNA, fingerprints, vehicle registration, passenger name records, exchange of operational information, cooperation with Europol and Eurojust, extradition, transfer of evidence, money laundering, and freezing and confiscation measures.

Dispute settlement rules

The general provisions on dispute settlement broadly resemble the withdrawal agreement rules (discussed here) but with some differences. For instance, there’s no involvement of the CJEU, either directly (other than for EU programmes) or via references from the arbitrators asking it questions about EU law. There are also exclusions from the scope of dispute settlement, as well as some variations on the rules (partly discussed above).

Basically, a dispute goes to consultation. If the parties can’t agree it goes to arbitration. The arbitrators give their ruling (there are stricter deadlines for many issues as compared to the withdrawal agreement). If a party is found to have breached its obligations it has a period of time to comply. The arbitrators might have to rule on how long that is. If there’s no compliance on time the parties can agree compensation, or the parties can suspend some obligations. (This retaliation can’t apply to social security or visa rules). There can also be retaliation under the TCA for breaches of the withdrawal agreement. Suspension has to be proportionate, and arbitrators can rule on the issue of proportionality (ie it wouldn’t be proportionate to suspend the whole treaty in retaliation to a divergence of labour standards, for instance). Cross-retaliation (ie suspending services obligation in retaliation for a breach of the rules on goods) is allowed, with some limits.

Comments

Obviously the impact of the TCA, as compared to EU membership, remains to be seen. Some aspects of membership (such as zero tariffs) are retained but there are undoubtedly new trade barriers. The UK’s relationship with the EU is now on an international law footing, without involvement of the CJEU (leaving aside the closer relationship which applies within the scope of the withdrawal agreement). This essential trade off between market access and departure from the EU integration process is at the heart of the new treaty.

However, some ties – and some capacity for dispute settlement – are still retained. While the EU often settles disputes with trading partners politically (except in the WTO), the UK may prove to be different – given the scope of obligations, the extent of the trading relationship, and the fractiousness of the politics involved. The treaty contains many off ramps leading to a further disintegration of relations – not only via retaliation following dispute settlement, but via means of the many suspension and termination clauses festooned across it. But it simultaneously provides for possibilities of joining the faster lanes of association with the EU, via strengthening the relationship. Time will tell in which direction the EU/UK dynamic will develop.  

 

Further reading: Nicole Sykes on sectoral industry impact; Matt Bevington on fisheries; Edward Grange on extradition; Mark Elliott on sovereignty; George Riddell on services; Tamara Hervey on social security; Lewis Silkin solicitors on employment law; Raoul Ruparel on services; the UK State Aid Law Association on subsidy control; Michael Dougan for an overview; Gemma Davies on security cooperation; the Commons FREU Committee; the Commons Library; Katy Hayward on Northern Ireland; the House of Lords constitution committee; Catherine Barnard for an overview; Alessandro Marongiu on the car industry; the Trade Justice Movement; the ‘ERG Star Chamber’ (summary here); Joe Marshall on national implementation; M-J Clifton on arbitration; David Lidington on future relations; the Food and Drink Federation; Anna Jerzewska on customs; Alberto Nardelli on cheese; a collection of Catherine Barnard on committees, Sam Lowe on business travel and David Henig on climate change; Kim Sanderson on translation and interpretation services; Peter Foster on the fashion industry; Anna Isaac on the overall deal; Emily Rees on sanitary and phytosanitary issues; George Peretz QC on subsidy control; a collection from UK in a Changing Europe (Anand Menon, Jill Rutter, Bryce Stewart, Tim Bale and Sarah Hall); Simon Usherwood (comparison to starting positions); Sam Lowe (overview); David Allen Green (initial analysis); Simon Lester on the level playing field; James Webber on subsidies; the Institute for Government; Chris Grey (overview); Ian Dunt (overview); Aodhan Michael Connelly (Northern Ireland); Emma Gledhill (interpretation and translation services); Peter Ungphakorn (geographical indications); Jeremy Godfrey (telecoms); and Clifford Chance (overview).

 

Photo credit: Christoph Scholz, via Wikimedia commons

Barnard & Peers: chapter 27

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