The Windsor Framework: limiting the scope of EU law in Northern Ireland in practice, though not in theory (part 1)

 

 

Professor Steve Peers, University of Essex

 

Photo by David Iliff - License: CC BY-SA 3.0

 

Introduction

 

After many months of on-off negotiations and three Prime Ministers on the UK side, the UK and EU have agreed another Brexit deal: the so-called Windsor Framework, which amends the controversial Northern Ireland protocol (or as we must soon call it, the Protocol Formerly Known as Northern Irish), and includes a number of other legal texts. This blog post is in two parts: this first post is an overview of the Windsor Framework as a whole, while a second part looks in more detail at a specific issue: the ‘Stormont Brake’ on amendments or replacements to EU legislation within the scope of the protocol.

 

Background

 

At present, the current Northern Ireland protocol is attached to the withdrawal agreement (which I summarised here; I have updated my summary of the protocol for this section of this blog post). (On the current legal framework overall, see also my working paper on the withdrawal agreement, and the Yearbook of European Law article based on that working paper).

The Protocol is the one part of the withdrawal agreement that was changed after the UK Parliament refused to ratify it; among other things the provisions emphasising that the Protocol is meant to be temporary were dropped from the version of the protocol which had been negotiated by Theresa May and the EU. However, the possibility of replacing the Protocol by future UK/EU trade arrangements was maintained.

Article 1 of the Protocol refers to the UK’s territorial integrity; it is clear that the EU has not ‘annexed’ Northern Ireland, as some have claimed. Next, Article 2 and 3 of the Protocol refer to equality/existing rights and the common travel area between the UK and Ireland. These issues were never controversial, and the existing rights provisions have since been litigated: see Colin Murray’s analysis of the first judgment.

The current Protocol then dropped the previous UK-wide customs union backstop found in the Theresa May version. This text had linked to Annexes on: a) trade in goods between EU/UK/non-EU states; b) customs cooperation; and c) a ‘level playing field’, which meant some degree of continued harmonisation of law relating to tax, the environment, labour law, state aid, competition, and public companies/monopolies.

In place of the UK/EU customs union backstop, in the current Protocol Article 4 first specifies that Northern Ireland is part of the UK’s customs territory for international trade purposes. Article 5 then regulates trade between Great Britain and Northern Ireland. No customs duties are charged on goods moved from Great Britain to Northern Ireland, unless there is a risk that the goods may be sold in the EU. The further definition of what that means had to be worked out by the Joint Committee established by the withdrawal agreement by the end of the transition period, ie the end of 2020. In practice, the Joint Committee agreed several measures to implement the protocol by the end of that year. There is an exemption for personal property.

An Annex applies a long list of EU laws on customs, trade and goods regulation to Northern Ireland – although in the previous version some of these laws would have applied to the whole UK.  The Protocol also includes provisions on the UK internal market, as well as lists of specific EU laws that apply in Northern Ireland: product regulation, VAT and excise tax, a single electricity market, and State aids.

The institutional provisions of the Protocol include the proviso that EU bodies, including the CJEU, have competence to apply or interpret certain provisions of the Protocol. It is also possible for the UK to object to new (as distinct from amended or replaced) EU laws becoming applicable in Northern Ireland; this will be discussed along with the new provisions in the Windsor Framework on objecting to amended or replaced EU laws in part 2 of this blog post.

A provision on ‘consent’ specifies that the Northern Ireland Assembly can, under certain conditions, terminate the customs and other economic provisions of the Protocol. There’s also a unilateral UK declaration related to this. (The absence of a power to end the previous backstop unilaterally had been controversial). This is the only part of the withdrawal agreement subject to the possibility of unilateral termination by one side; on the issue of terminating the agreement generally, see my discussion here.

The UK government’s implementation of the consent provisions had formed the basis of a legal challenge by unionist politicians and others which in effect tried to argue that the very existence of the protocol was unlawful in the UK. This challenge lost at every level including (recently) the UK Supreme Court (on that judgment, see Colin Murray and Anurag Deb).

Finally, the Protocol included a safeguard clause, Article 16:

1.    If the application of this Protocol leads to serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade, the Union or the United Kingdom may unilaterally take appropriate safeguard measures. Such safeguard measures shall be restricted with regard to their scope and duration to what is strictly necessary in order to remedy the situation. Priority shall be given to such measures as will least disturb the functioning of this Protocol.

There are provisions for the other party to retaliate proportionately if one party used Article 16, and an annex which sets out procedural rules. In the event, despite much discussion, neither party has invoked Article 16; the EU Commission reversed its intention to use it to provide for possible restriction of vaccine exports before that law entered into force, and a legal challenge to the Commission on this point was unsuccessful, because in effect there was nothing to challenge.

Despite pitching the withdrawal agreement as an ‘oven ready deal’, it soon became apparent that the UK government – like the unionist community in Northern Ireland – had huge objections to the deal that it had championed, approved in Parliament, and ratified. The government first tabled an Internal Market Bill that they admitted would have been a breach of the protocol, although the offending clauses of that bill were dropped once the UK and EU reached agreement on Joint Committee decisions implementing the protocol in December 2020 (as referred to above).

Subsequently, in 2022 the government tabled another bill – the Northern Ireland protocol bill – which would arguably breach the protocol, although the government claimed that any breach would be justified by the ‘doctrine of necessity’ in international law (for a criticism of this defence, see Professor Mark Elliott’s analysis; see also Colin Murray’s analysis on this blog). For its part, believing that the UK was not fully implementing the protocol in practice, the EU Commission began infringement proceedings against the UK (on the basis of the provisions in the protocol which give the CJEU jurisdiction over much of it).

The Windsor Framework

Joint Committee decision

The core of the new Brexit deal is a draft Joint Committee decision, which would first of all amend the Protocol itself. This would be done on the basis of the Joint Committee powers, set out in the withdrawal agreement, to:

except in relation to Parts One, Four and Six, until the end of the fourth year following the end of the transition period, adopt decisions amending this Agreement, provided that such amendments are necessary to correct errors, to address omissions or other deficiencies, or to address situations unforeseen when this Agreement was signed, and provided that such decisions may not amend the essential elements of this Agreement;

The amendments to the protocol entail first an amendment to Article 6(2) of the protocol, concerning UK internal trade (new provision underlined):

Having regard to Northern Ireland's integral place in the United Kingdom's internal market, the Union and the United Kingdom shall use their best endeavours to facilitate the trade between Northern Ireland and other parts of the United Kingdom, in accordance with applicable legislation and taking into account their respective regulatory regimes as well as the implementation thereof. This includes specific arrangements for the movement of goods within the United Kingdom’s internal market, consistent with Northern Ireland’s position as part of the customs territory of the United Kingdom in accordance with this Protocol, where the goods are destined for final consumption or final use in Northern Ireland and where the necessary safeguards are in place to protect the integrity of the Union’s internal market and customs union. The Joint Committee shall keep the application of this paragraph under constant review and shall adopt appropriate recommendations with a view to avoiding controls at the ports and airports of Northern Ireland to the extent possible.

This is not so much a substantive change in itself, as a description of the changes made elsewhere in the Joint Committee Decision (see discussion below), although it might address any argument that might be made that those changes in the Decision are incompatible with the Protocol.

Secondly, an amendment to Article 13 of the protocol will add the "Stormont brake" on amended or replaced EU law. An annex to the Joint Committee decision will set out the text of a unilateral UK government statement on this process. As noted already, I will discuss the Stormont brake in part 2 of this blog post.

Next, as regards VAT and excise taxes, Article 8 of the protocol will not be amended. It reads as follows:

The provisions of Union law listed in Annex 3 to this Protocol concerning goods shall apply to and in the United Kingdom in respect of Northern Ireland.

 

In respect of Northern Ireland, the authorities of the United Kingdom shall be responsible for the application and the implementation of the provisions listed in Annex 3 to this Protocol, including the collection of VAT and excise duties. Under the conditions set out in those provisions, revenues resulting from transactions taxable in Northern Ireland shall not be remitted to the Union.

 

By way of derogation from the first paragraph, the United Kingdom may apply to supplies of goods taxable in Northern Ireland VAT exemptions and reduced rates that are applicable in Ireland in accordance with provisions listed in Annex 3 to this Protocol.

 

The Joint Committee shall regularly discuss the implementation of this Article, including as concerns the reductions and exemptions provided for in the provisions referred to in the first paragraph, and shall, where appropriate, adopt measures for its proper application, as necessary.

 

The Joint Committee may review the application of this Article, taking into account Northern Ireland's integral place in the United Kingdom's internal market, and may adopt appropriate measures as necessary.

However, the Joint Committee decision will amend Annex 3 to the protocol, which is referred to in Article 8 and which sets out the UK’s current obligations as regards VAT and excise tax in Northern Ireland in more detail. In particular, a new note added to that annex will set out several derogations from the EU’s main VAT Directive: a) for ‘goods supplied and installed in immovable property located in Northern Ireland by taxable persons’, there can be a reduced rate, a rate below 5%, or an exemption; b) the UK can have more reduced rates or rates lower than 5% or an exemption than EU Member States are allowed, going beyond a recent amendment to EU law to give more flexibility on reduced rates; and c) the UK can apply different rules on small businesses.

As regards excise tax, Annex 3 will be amended to state that the UK, as regards Northern Ireland, is exempt from certain rules in the Directive on the structure of alcohol tax, a) so it ‘may therefore apply excise duty rates on alcohol and alcoholic beverages always on the basis of alcoholic strength and may apply reduced duty rates to alcoholic beverages packaged in large draught containers served for immediate consumption in hospitality venues’, and b) ‘may therefore define small producers and set reduced duty rates to alcohol and alcoholic beverages produced by small producers, provided that such reduced duty rates are in no case, even after any applicable relief’, although in each case the minimum duty calculated under the Directive must still be charged. There are no exemptions added to the Directives on taxation of tobacco and petrol.

The Joint Committee also refers to the possibility of adding more notes to indicate how VAT and excise tax laws will apply in Northern Ireland, provided that those ‘notes shall ensure that there is no negative impact on the Union’s internal market in the form of fiscal fraud risks nor any potential distortion of competition.’

The biggest part of the Joint Committee decision will replace a previous Joint Committee decision. This is the part that will reduce checks on goods going from Great Britain to Northern Ireland, by setting out new rules indicating when a good is at risk of going to the EU as distinct from staying in Northern Ireland (following the distinction set out in the Protocol). It first defines what goods do not raise that risk because they will not be subject to commercial processing, including goods to be used in construction in Northern Ireland, the sale of food to a consumer in the UK, provision of food as part of health or care services in Northern Ireland, or animal feed. Unlike the previous Joint Committee decision, which only permitted several of these exemptions if the good was used by the importer, the new Decision allows the exemptions if the importer sells the good once to one other entity. Also a smaller business exemption has been widened from £500k to £2 million in turnover; the UK government states that this will bring about 80% of manufacturing and processing companies in Northern Ireland that trade with Great Britain within the scope of the exception. A new provision adds parcels to the list of goods movements which do not pose risks of further movement to the UK.

As for the rest of the Decision, there are new provisions on consultation as regards VAT and excise tax. Some of the new provisions will not apply until September 2023 or September 2024, in order (among other things) to ensure that the UK is supplying data, and (in the latter case) to give time for the EU to pass unilateral legislation (discussed below) relevant to the protocol – although those dates could be brought forward.

Other parts of the Windsor Framework

The other parts of the Framework are a mix of unilateral or joint measures which are mainly non-binding ‘soft law’. Crucially, though, there are also unilateral proposals for EU law, discussed further below.

A Joint Declaration states that the whole protocol should be called the ‘Windsor Framework’ from now on. There is a Joint Committee recommendation and a Joint Declaration on what happens if the UK pulls the Stormont brake and arbitrators rule against it (to be discussed in part 2).

The only other binding measure jointly agreed is a change to the rules of procedure of a working group, to involve more stakeholders from Northern Ireland in discussions. Along the same lines, there is a joint declaration on involving stakeholders in the work of the committees.

There is then a unilateral UK declaration on review of the ‘consent’ process on the future existence of the protocol (Article 18 of the protocol, discussed above); but this does not alter the consent process as such.

Next, a recommendation of the Joint Committee and a unilateral declaration by the UK address the issue of ‘market surveillance and enforcement’ – ie the prospect of cross-border smuggling.

A unilateral declaration by the UK addresses when export rules of EU law will apply to goods moving from Northern Ireland to Great Britain – although it should be recalled that most of the rules in the protocol apply to the movement of goods the other way around, because of the EU’s concerns about goods entering its internal market via Northern Ireland to Ireland without being checked. (The UK is obviously less bothered about the parallel prospect as regards its own internal market).

Another unilateral UK declaration concerns parcels moving from Great Britain to Northern Ireland, and is applicable until the new Joint Committee decision fully takes effect.  A Joint Declaration notes the possibility of negotiating further amendments to VAT law in future, as regards reduced rates and refunds.

Finally, on two further controversial issues, the law stays the same. First, this applies to the current rules on State aid – where EU State aid rules apply to Northern Ireland, as enforced by the Commission – although there is now a joint declaration interpreting this provision of the protocol.

The law also stays the same as regards the jurisdiction of the CJEU on the protocol, although the effect of the Windsor Framework is to reduce the application of EU law in practice to Northern Ireland, therefore in principle reducing the number of possible cases where the CJEU might be asked to rule because EU law applies. (In practice, the CJEU has not yet exercised its jurisdiction as regards the protocol). 

Finally, a joint political declaration of the EU Commission and the UK summarises the contents of the agreement, and includes commitments to drop the Northern Ireland protocol bill on the UK side, and the infringement proceedings pending on the EU side on the other. (Each had been paused pending negotiations). They also agreed that the Joint Committee would meet soon to adopt the legal texts. 

EU unilateral measures

The EU Commission has also tabled proposals for EU legislation as regards medicine, food and animal checks (including movement of pets), and tariff quotas, as well as a secondary Commission measure on ‘high-risk plants’, and position papers on customs, food and animal checks, and  on engagement with Northern Ireland stakeholders. In effect this legislation, while not explicitly disapplying the application of EU law to Northern Ireland in accordance with the protocol, will create a special regime (lex specialis) as regards the movement to or sale of many products there.

Other stuff

Not exactly part of the Windsor Framework package, but worth noting, are (on the UK side) a UK government command paper which summarises and defends the package, along with a statement of the UK government legal position (which pours cold water on the proposed Northern Ireland protocol bill). On the EU side, there is a press release and a list of Q and As on the deal that indicate what the EU’s interpretation of it is. The explanatory memorandum to the proposal for the EU Council to agree the EU’s support for the Joint Committee decision also includes some background on the EU Commission’s views. The UK government has also announced an intention to amend the Northern Ireland Act; the content of that amendment remains to be seen.

Comments

The Windsor Framework does not alter the fundamental legal framework of the Northern Ireland protocol. However, it does address its implementation in practice – notably by simplifying somewhat the movement of products between Great Britain and Northern Ireland, taking together the new Joint Committee decision and proposed EU legislation. It also scales back – again without fully disapplying as such – the application of EU tax law to the UK, in order to permit some recent changes to UK law to apply fully to Northern Ireland. So while it is technically inaccurate for the UK government to claim that the agreement ‘scraps’ 1700 pages of EU law from applying to Northern Ireland, it is fair to say that in many cases that law will no longer apply de facto, even if it applies de jure.   

Some of the changes in the package will be implemented by unilateral acts by the EU, rather than jointly agreed text as between the UK and the EU, raising the possibility either that the proposals might not be adopted as proposed by the Commission, or that the EU might unilaterally amend or repeal them later – although presumably the Stormont brake would kick in if the latter happened. Likewise some of the changes depend on the EU side trusting the UK’s application and implementation of its own legislation – although there are possibilities of the EU side reacting in the event of UK failure to do so. It might also be queried whether the Joint Committee decision goes outside the limits set by the withdrawal agreement on the capacity of the Joint Committee to amend that agreement, and of whether the changes to the annexes on tax are consistent with the provisions of the protocol requiring consistency with what Ireland does on VAT.

On these points, it might have been simpler to amend the protocol in the ordinary way, which would also have provided an opportunity to amend the rules on State aid (there being little reason for the original rules, now that the Trade and Cooperation Agreement has rules on subsidies, plus the UK has passed a Subsidy Control Act), as well as curtailing the rule of the CJEU – limiting it to being asked questions about EU law by dispute settlement arbitrators, which is the minimum implicitly required by prior CJEU case law.

It is striking that the agreement is focussed very much on specific issues that have been the subject of day-to-day concern for businesses and consumers in Northern Ireland – the movement of plants such as trees and seed potatoes, pets, products for supermarkets, and parcels, for instance – as well as the application of specific changes in UK tax law. Its critics sometimes depict the EU as saying “that’s fine in practice, but will it work in theory?” But those who object that the new agreement will still retain the application of EU law in principle, even though it will more often not apply in practice, have fallen into the same trap.

With this pragmatic problem-solving approach, the Prime Minister conveys an image of being a competent manager brought in to save a failing hotel – who immediately assesses the need to wash the towels before the guests arrive and have hot rolls ready to eat with breakfast in the morning, and swiftly negotiates with staff and suppliers to get it done. Such sensible managerialism might sound dull – until you remember the Fawltyesque chaos when the previous hotel manager was in charge. And the less said about the interim hotel manager, who nearly bankrupted the whole hotel chain during her six week stint in between the two, the better.

 

Further reading: other analyses of the Windsor Framework

Anton Spisak

David Henig

Institute for Government

Colin Murray

Anna Jerzewska

Chris Grey

KPMG

Sam Lowe

Viviane Gravey and Lisa Claire Whitten (on goods movement)

Michael Dougan

Alexander Horne (also for UK in a Changing Europe)

Harry Gillow, for Conservative Home

John Larkin KC, for Centre for the Union

Richard Bullick (thread with links to different analyses)

Graphic on the Windsor Framework, by Simon Usherwood

House of Commons Library analysis

 

 *This blog post was amended on 5 March 2023, to add more links to other analyses, and to clarify the final sentence. It was amended again on 6 and 8 March 2023 to add additional links to other analyses. 

Analysis 5 of the Brexit Deal: Environment and Climate Provisions

 

 

Markus W. Gehring, University of Cambridge; J.S.D. (Yale), LL.M. (Yale), Dr jur. (Hamburg), MA (Cantab). This short piece shares thoughts with the Marios Tokas and Markus W. Gehring, Briefing 4: The UK’s Draft Position - Exploring the basis for negotiation with the EU, CISDL Legal Brief 2020

 

Introduction

 

With the beginning of the new year, the relationship between the UK and the EU was fundamentally reset as the Brexit transition period ended and the new EU-UK Trade and Cooperation Agreement (TCA) came provisionally into force. This blog post looks at the provisions of the TCA on environment and climate change, following on from four earlier analyses on this blog, on: an overview of the TCA; the social security provisions; human rights; and dispute settlement. (Updated April 28 2021 to refer also to the final Article numbering of the TCA).

 

This new agreement is not just the first ‘less free trade’ agreement, but also contains a number of important innovations that are not normally found in free trade agreements (FTAs). This paper offers an initial, tentative review of the TCA and compares it with the UK and EU draft agreement texts on matters relating to the environment, particularly climate change.

 

It is worth noting that the TCA leaves the (limited) climate cooperation in the Withdrawal Agreement untouched. The Withdrawal Agreement recognised the need for close climate cooperation, particularly in the Ireland/Northern Ireland Protocol (Backstop) and includes a carbon price as an important element. However, it does not mandate the full participation of Northern Ireland in the EU Emissions Trading System outside the energy sector.

 

Despite the Political Declaration mandating no more than a discussion about climate cooperation, “both Parties could choose to safeguard strong climate legislation within a side agreement or a chapter of a new UK-EU trade deal.” As we indicated in 2019, much inspiration could be drawn from existing FTAs through ‘[a] combination of the most robust provisions – that ensure full compliance with the Paris Agreement and the highest level of ambition”, which could have the “potential to blaze a trail for deep climate cooperation in future free trade agreements, potentially for all Paris Agreement Parties around the world.” (Markus Gehring and Freedom-Kai Phillips, ‘Legal Options for Post-Brexit Climate Change and Energy Provisions in a Future UK-EU Trade Agreement’ (European Climate Foundation Paper, 2019)) The resulting set of TCA provisions is innovative in that it constitutes the “first trade agreement to make the climate crisis a ‘make-or-break issue” (See my comments to The Independent)

 

Preambles

 

Environmental protection and climate change feature prominently in the TCA Preamble. While the text of the preamble is similar to that of other EU FTAs, the TCA is the first EU FTA to immediately elevate climate change as an essential element of the agreement:

 

“REAFFIRMING their commitment to democratic principles, to the rule of law, to human rights, to countering proliferation of weapons of mass destruction and to the fight against climate change, which constitute essential elements of this and supplementing agreements”

 

Due to its prominence in the preambular text, reneging on climate commitments by either party could lead to a material breach of the treaty and a subsequent suspension or termination. Notably, the three dimensions of sustainable development, namely the economic, social, and environmental dimensions, as underlined in the preamble are resonant of both the EU treaties and previous FTAs. The second relevant preambular paragraph is a new addition and uses language agreed to in the Withdrawal Agreement Political Declaration, underlining high levels of environmental protection and climate change ambition as priorities, while ensuring a level playing field for “open and fair competition and sustainable development”. Preambular language has proven to be a significant element of trade agreements, particularly in light of the WTO DSB in the US-Shrimp dispute, where preambular language was used to add colour and shading to their interpretation of Art. XX GATT.

 

Material Breach

 

Article 764 (previously COMPROV.5) declares the fight against climate change as a one of the bases for cooperation alongside democracy, the rule of law, human rights and the non-proliferation of WMDs. Further, Article 771 (previously COMPROV.12) affirms that Article 764(1) (previously COMPROV.5(1)) is an essential element of the partnership established by the TCA as well as “any supplementing agreement.”

 

In the May 2020 EU Draft, the collective goal of combating climate change was elevated to a guiding principle, informing the operation of the entire treaty and was consequently placed at its beginning. This strongly worded provision, with mandatory language, was left almost unchanged in the TCA; the only slight change incorporated the gender-neutral language of “human-caused” climate change, as opposed to “man-made climate change” found in the EU draft, with no difference to its material meaning.

 

The language is one of the strongest found in any trade agreement, declaring that “climate change represents an existential threat to humanity”, requiring each Party to “respect the Paris Agreement and the process set up by the UNFCCC and refrain from acts or omissions that would materially defeat the object and purpose of the Paris Agreement.” Both trading partners also commit to be advocates of the fight against climate change in international fora.

 

Essential elements are important when determining suspension or termination of a treaty in international law. The TCA contains also Article 772 (previously INST.35) on the fulfilment of obligations described as “essential elements”: a provision that displaces in part the customary principles contained in the Vienna Convention on the Law of Treaties. It allows either party to suspend or terminate the TCA or any subsequent agreement in whole or in part after a specific process which mandates consultations and qualifies the invocation of a breach of an essential element. The provision singles out the Paris Agreement and helpfully clarifies that “an act or omission which materially defeats the object and purpose of the Paris Agreement shall always be considered as a serious and substantial failure for the purposes of this Article” meaning that it makes it somewhat easier to invoke the provisions when the object and purpose of the Paris Agreement is breached.  The TCA has thus become the first instance in which climate change is an essential element of a trade treaty. While the issue might be seen as essential for association agreements leading to EU Membership, this could potentially be the first agreement, provisionally in force, to contain climate change as an essential element, that is, a make-or-break issue.

 

Level playing field

 

Under ‘Title XI: Level Playing Field for Open and Fair Competition and Sustainable Development’, environment, climate change, and sustainable development more broadly, play a key role. The title is a slight misnomer as the obligations in these fields consist of non-regression obligations rather than any form of dynamic alignment, or indeed level playing field. The TCA, however, contains a quasi-unilateral set of measures that the Parties could adopt if divergence in these fields becomes too great in terms of ‘rebalancing measures’, subject to dispute settlement provisions.

 

Three different chapters of the level playing field title are relevant: the non-regression rules (chapter 7), the rebalancing rules (chapter 9), and the sustainability rules (chapter 8).

 

Environment and climate (Chapter 7)

 

This chapter groups some of the provisions on climate change and emission trading that the EU had proposed, subject to consultation, a panel of experts and, more importantly, a Panel of experts for non-regression areas.

 

It delineates the areas of law that determine the “environmental levels of protection”, to include laws in the majority of the most significant areas of current EU legislation such as industrial emissions, air quality, nature and biodiversity conservation, waste management, marine and aquatic environment, chemicals, agricultural environmental impacts. Non-EU laws are only included if they are ‘common’ to the Member States meaning that not the highest level found in any of the Member States will be used but rather the UK would have to prove that a Member State law is common which might be very difficult to prove in the expert or arbitration process.  

 

There is a separate definition of the “climate level of protection”, somewhat controversially defined in part as the reduction and removal of greenhouse gases emissions: “for the Union, the 40 % economy-wide 2030 target, including the Union’s system of carbon pricing [and] for the United Kingdom, the UK’s economy-wide share of this 2030 target, including the United Kingdom’s system of carbon pricing.” In law, that means a 37% reduction by 2030 based on 2005 levels for the UK.

 

Neither of these definitions reflects the new ambitions agreed within the EU of 55% reduction, nor do they align with the announced 68% reduction from 1990 levels for the UK. Evidently, this leaves some room for discretion for both trading partners with regard to their 2030 targets. Unfortunately, the 2050 objective is currently described in Art. 355(3) (previously 1.1.3) of Title XXI (Level Playing Field) as just an ambition: “Each Party reaffirms its ambition of achieving economy-wide climate neutrality by 2050”. The climate change definition also includes “the phase-out of ozone depleting substances”.

 

Article 391(2) (previously 7.2.2) contains one of the strictest formulations of a non-regression provision by adopting mandatory language prohibiting the weakening or reduction of levels of environmental or climate protection as defined in Art. 390(1) (previously 7.1) “below the levels that are in place at the end of the transition period”, including “by failing to effectively enforce its environmental law or climate level of protection”, with the sole caveat that this regression shall not occur “in a manner affecting trade or investment.”

 

In my view this is a strong provision, despite the nominal caveat, as WTO panels have repeatedly interpreted “affecting trade” in the GATT and GATS as having an economic impact without any qualitative level beyond de minimis, for example in cases like China – Publications and Audiovisual Products:

 

“The word 'affecting' covers not only measures which directly regulate or govern the sale of domestic and imported like products, but also measures which create incentives or disincentives with respect to the sale, offering for sale, purchase, and use of an imported product 'affect' those activities.” Panel Report, China – Publications and Audiovisual Products, para. 7.1450.

 

 

or EC – Bananas III:

 

“[t]he ordinary meaning of the word 'affecting' implies a measure that has 'an effect on', which indicates a broad scope of application. This interpretation is further reinforced by the conclusions of previous panels that the term "affecting" in the context of Article III of the GATT is wider in scope than such terms as 'regulating' or 'governing'.217 (emphasis added, footnote omitted).” Appellate Body report, EC — Bananas III, para. 220.

 

Art. 392 (previously 7.3) obligates both parties to “have in place an effective system of carbon pricing” and suggests that they give serious thought on linking their respective carbon pricing systems to preserve the system’s integrity and possibly increase its effectiveness. It is worth highlighting that both sides are now committed to a carbon price for “from electricity generation, heat generation, industry and aviation.” This commitment could support the ICAO CORSIA implementation or indeed domestic carbon pricing of aviation between both parties. It does not include shipping but then the EU discussions on expansion of the ETS to shipping are still ongoing but could start in 2023.

 

In keeping with the aim of not wanting to be bound by EU law, the parties agreed to be bound instead by “the internationally recognised environmental principles” (Article 393): principles to which they are committed through various multilateral environmental agreements: Particularly, “(a) the principle that environmental protection should be integrated into the making of policies, including through impact assessments; (b) the principle of preventative action to avert environmental damage; (c) the precautionary approach referred to in Article 356(2) (previously 1.2(2) [Right to regulate, precautionary approach and scientific and technical information]); (d) the principle that environmental damage should as a priority be rectified at source; and (e) the polluter pays principle.” The final provision could be interpreted as a stronger formulation of the TFEU’s “polluter pays” formulation, which simply states that the “polluter should pay”. 

 

Non-regression obligations include enforcement of environmental laws, including the obligation of each Party to ensure that “domestic authorities competent to enforce the relevant law with regard to environment and climate give due consideration to alleged violations of such law that come to their attention” and that “those authorities shall have adequate and effective remedies available to them, including injunctive relief as well as proportionate and dissuasive sanctions, if appropriate; and national administrative or judicial proceedings are available to natural and legal persons with a sufficient interest to bring actions against violations of such law and to seek effective remedies including injunctive relief, and that the proceedings are not prohibitively costly and are conducted in a fair, equitable and transparent way.” (Article 394, previously 7.5) These commitments are similar to the boarder Aarhus Convention access to justice obligations but include injunctive relief, costs and include the administrative not just the judicial process. The previous proposals about the independence of the Office for the Environment in the EU draft text was also dropped.

 

The enforcement of level playing field provisions follows a special panel process. The special rule on dispute settlement (Article 396, previously 7.7) highlights that in place of the general dispute settlement rules, Articles 408-410 (previously 9.1 to 9.3) of the level playing field provisions apply, which still includes the possibility of trade retaliation if the non-regression rule is breached.

 

Rebalancing

 

What makes these provisions particularly significant is the inclusion of the level playing field provisions, now called “Article 411 (previously 9.4): Rebalancing”. While both parties recognise that each Party has the right to determine its own “future policies and priorities with respect to labour and social, environmental or climate protection, or with respect to subsidy control, in a manner consistent with each Party’s international commitments, including those under this Agreement,” they also acknowledge that “significant divergences in these areas can be capable of impacting trade or investment between the Parties in a manner that changes the circumstances that have formed the basis for the conclusion of this Agreement”, as similarly stated in the Political Declaration.

 

If “material impacts on trade or investment are arising as a result of significant divergences between the Parties”, Art. 411(2) (previously 9.4.2) gives each Party the right to take rebalancing measures that are strictly necessary and proportionate to address such a situation.  Even though this instrument is predominantly relevant for future divergence and does not considerably affect the non-regression obligations, it ensures that if one Parties goes further than the other it could adopt “rebalancing” measures in the future. While these would be automatic, they are reviewable by an arbitration process. It should be highlighted that “material impacts” should be seen as a relatively high barrier, meaning that every future divergence will not necessarily qualify for rebalancing measures. On the other hand, and given that there is an arbitration process available, any significant departure in the fields of labour and social, environmental or climate protection, or with respect to subsidy control could, in the future, qualify for “rebalancing measures.”

 

Environment and Sustainable Development (Chapter 8)

 

Unlike chapter 7 of the LPF provisions or the rebalancing rules, this Chapter is not subject to normal dispute settlement. It should be noted, however, that it is subject to both consultation and the well-known EU ‘panel of experts’ process, which several other EU FTAs have introduced. Generally, we should not underestimate the latter in its ability to shine a light on environmental shortcomings, as it can be quite important in practical terms.

The trade and environment provisions in the TCA in Chapter 8 are extensive. While the UK draft text was essentially not used, its influence is evident in the formulation of the provision on forests where present and future generations are mentioned:

 

“Article 403 (previously 8.7): Trade and forests

 

1. The Parties recognise the importance of conservation and sustainable forest management for providing environmental functions and economic and social opportunities for present and future generations, and the role of trade in pursuing that objective.“

 

The provisions which integrate the sustainable development goals into the objectives of the “Chapter 8 on Sustainable Development” follows the EU Draft closely in its provisions on forests, biodiversity and climate change. A blackline reveals that the parties of the TCA weakened the language compared to the EU draft text by introducing in the provision of 8.5 on “Trade and Climate Change”:

 

Similarly, the provision on trade and biodiversity was changed, employing less binding and more optional language.

 

 

A dedicated provision in the main agreement, recognizing the importance of climate change, was derived from Art 2.42 of the EU Draft, as well as paragraphs 18, 75, and 76 of the Political Declaration, to a lesser extent. Like many other EU FTAs, the EU Draft would have committed both parties to “effectively implement the United Nations Framework Conventions on Climate Change, and the Paris Agreement of 2015 adopted thereunder.” This content can be traced to the EU-Japan Agreement, which was the first FTA to contain a comprehensive commitment to implementing the Paris Agreement. Under EU-Japan, each party commits to work together to realise UNFCCC aims, take steps to meet the objectives of the Paris Agreement, and promote trade as a means of reducing greenhouse gas (GHG) emissions and achieving climate-resilient development. Similarly, the EU Draft provision also envisioned a transition to a low GHG economy and climate resilient development. In addition, the Draft employed innovative language, extending climate commitments to encompass EU-UK cooperation on:

 

“Trade-related aspects of climate change policies and measures bilaterally, regionally and in international fora, as appropriate, including in the UNFCCC, the WTO, the Montreal Protocol on Substances that Deplete the Ozone Layer, the International Maritime Organisation (IMO) and the International Civil Aviation organization (ICAO)” (Art. 2.42 para. 3 EU Draft).

 

Article 403(3) (previously 8.5.3) does not mandate cooperation as such but now obligates the Parties to ‘work together to strengthen their cooperation’; but all EU proposed fora for climate cooperation were included in the TCA.

 

Conclusions

 

In sum, TCA contains the most far-reaching commitments toward sustainable development beyond broad facilitation and cooperation provisions, going considerably further than the more recent EU FTAs. The combination of elevating climate change to an essential element of the treaty, strong non-regression provisions and future balancing measures mean that in this field the TCA is trailblazing.

Barnard & Peers: chapter 22, chapter 26

Photo credit: MichealisScientists, via Wikimedia Commons

Analysis 4 of the Brexit deal: Dispute settlement and the EU/UK Trade and Cooperation Agreement

 

Professor Steve Peers, University of Essex

Introduction and overview

A key part of the ‘Brexit deal’ – officially known as the EU/UK Trade and Cooperation Agreement (TCA) – is the issue of dispute settlement. This blog post is a detailed annotation of the treaty’s dispute settlement rules. I have also provided this summary of the blog post at the outset. (The blog post was also updated on April 29 2021 to refer also to the final Article numbers of the TCA)

This blog post is the fourth in the series of analyses of the TCA – following on from my overview of the TCA, Professor Tamara Hervey’s analysis of the social security provisions, and my analysis of the links between the TCA and human rights. (Update: a later blog post covers environment and climate change)

As a reminder, the TCA is a separate treaty from the withdrawal agreement, which continues to apply between the UK and the EU. The withdrawal agreement has its own rules on dispute settlement, which I discussed in a detailed annotation here. I have used them as a point of comparison for the TCA dispute settlement rules. (As we’ll see, there’s also a link between the two treaties: a failure to comply with a ruling relating to the withdrawal agreement can lead to retaliation under the TCA).

Like the withdrawal agreement dispute settlement rules, the TCA rules have the same basic structure as WTO dispute settlement. I’ve explored that comparison in more detail in the blog post on withdrawal agreement dispute settlement, but the basic idea is that if the parties have a complaint, they first of all enter into consultations. If the consultations don’t lead to agreement, either side can trigger arbitration. If the arbitrators rule that one side has breached the agreement, in principle that side has to comply with the ruling within a reasonable period. If it doesn’t comply by the deadline, the winning side can invoke proportionate retaliation against the losing side by withdrawing benefits under the agreement. If the losing side later complies with the ruling, the winning side has to stop suspending those benefits. If there’s a dispute about whether the losing side has fully complied with the ruling, or whether the retaliation by the winning side was proportionate, or what is a reasonable time to comply with the ruling, the arbitrators can decide that too.

Unlike the WTO system, there’s no appeal body under either the withdrawal agreement or the TCA (this is the part of the WTO system that’s been blocked by Trump; the EU and several other WTO Members – apparently not including the UK yet – have devised a ‘work-around’ the Trump block, and it remains to be seen if the incoming Biden administration continues Trump’s approach).

One key point of difference between the withdrawal agreement and TCA as regards dispute settlement is the role of the CJEU. In the withdrawal agreement, the CJEU had its usual jurisdiction regarding the UK during the transition period. Now that period has ended, the dispute settlement rules start to apply, but the CJEU still retains some limited jurisdiction. Moreover, dispute settlement and the CJEU are linked – because the dispute settlement arbitrators have to ask the CJEU questions about the interpretation of EU law in the event that a dispute which reaches them concerns a ‘concept or provision’ of EU law.

The TCA, on the other hand, provides for CJEU jurisdiction only as regards UK participation in EU programmes – and that’s it. The TCA arbitrators don’t need to ask the CJEU any questions about EU law, because there’s no other direct reference to EU law in the TCA. (It is, however, possible that the CJEU will be involved with disputes concerning the TCA on the EU side – but its rulings won’t bind the UK, except as regards participation in EU programmes).

 A second key point of difference is the complexity of the main dispute settlement system. Leaving aside the overlap with CJEU jurisdiction and links to the CJEU, the withdrawal agreement provides for a single dispute settlement system with no variations or exclusions. The TCA, on the other hand, provides for multiple variations upon the dispute settlement system and exclusions from its scope – including some entirely different forms of dispute settlement for certain issues.

Some of these special rules are set out in the text of the dispute settlement rules, annotated in this blog post, and some of them appear separately in the TCA. For the latter, I have added two additional annexes which examine the details of those rules – which concern the ‘level playing field’ and fisheries. I have not examined the separate dispute settlement rules on criminal law, because they provide for a purely political form of dispute settlement, with no recourse to arbitration.

In practice, on the one hand, the EU prefers to avoid formally using dispute settlement systems set up under its FTAs with non-EU countries; but on the other hand, it makes frequent use of the WTO dispute settlement system, as both ‘plaintiff’ and ‘defendant’. It remains to be seen whether the EU/UK relationship resembles the informal political dispute settlement process that characterises EU FTAs, or the more litigious environment that exemplifies the EU’s WTO membership.  Lawyers (and law professors) might salivate at the prospect of the latter, but international relations specialists might argue that the former is more stable – pointing to the Trump saga by way of example. 

 

Annex I: the general dispute settlement rules

PART SIX: DISPUTE SETTLEMENT AND HORIZONTAL PROVISIONS

 TITLE I: DISPUTE SETTLEMENT

Chapter 1: General provisions

Article 734 (ex-INST.9): Objective

The objective of this Title is to establish an effective and efficient mechanism for avoiding and settling disputes between the Parties concerning the interpretation and application of this Agreement and supplementing agreements, with a view to reaching, where possible, a mutually agreed solution.

Note: this is similar, but not quite identical, to the purpose of the withdrawal agreement dispute settlement provisions (see Article 167 of that agreement).

Article 735 (ex-INST.10): Scope

1. This Title applies, subject to paragraphs 2, 3, 4 and 5, to disputes between the Parties concerning the interpretation and application of the provisions of this Agreement or of any supplementing agreement (“covered provisions”).

2. The covered provisions shall include all provisions of this Agreement and of any supplementing agreement with the exception of:

(a) Article 32(1) to (6) and Article 36 (ex-paragraphs 1 to 6 of Article GOODS.17 [Trade remedies] and Article GOODS.21 [Cultural property] of Title I of Heading One Part Two);

(b) Annex 12 (ex-TBT-X [Medicinal products]);

(c) Title VII [Small and medium sized enterprises] of Heading one of Part Two;

(d) Title X [Good regulatory practices and regulatory cooperation] of Heading One of Part Two;

(e) Article 355(1), (2) and (4) (ex-paragraphs 1, 2 and 4 of Article LPFS.1.1 [Principles and objectives]) Article 356(1) and (3) (ex-paragraphs 1 and 3 of Article LPFS.1.2 [Right to regulate, precautionary approach and scientific and technical information] of Chapter 1 [General provisions]), Chapter 2  of Title XI of Heading One of Part Two [Competition policy], Articles 371 and 372 (ex-LPFS.3.9 [Independent authority or body and cooperation] and LPFS.3.10 [Courts and tribunals] of Chapter 2 [Subsidy control]), Chapter 5 of Title XI of Heading One of Part Two [Taxation - Level Playing Field] , and Article 411(4) to (9) (ex-paragraphs 4 to 9 of Article LPFS.9.4 [Rebalancing] of Chapter 9 [Horizontal and institutional provisions] of Title XI [Level playing field for open and fair competition and sustainable development] of Heading One of Part Two);

(f) Part Three [Law enforcement and judicial cooperation in criminal matters], including when applying in relation to situations governed by other provisions of this Agreement;

(g) Part Four [Thematic cooperation];

(h) Title II [Basis for cooperation] of Part Six [Dispute settlement and horizontal provisions];

(i) Article 782 (ex-FINPROV.10A [Interim provision for transmission of personal data to the United Kingdom] of Part Seven); and

(j) the Agreement on security procedures for exchanging and protecting classified information; 

3. The Partnership Council may be seized by a Party with a view to resolving a dispute with respect to obligations arising from the provisions referred to in paragraph 2.

4. Article 736 (ex-INST.11 [Exclusivity]) shall apply to the provisions referred to in paragraph 2.

5. Notwithstanding paragraphs 1 and 2, this Title shall not apply with respect to disputes concerning the interpretation and application of the provisions of the Protocol on Social Security Coordination or its annexes in individual cases.

Note: there is no equivalent provision in the withdrawal agreement, as it has a single set of dispute settlement provisions (leaving aside the overlap with the CJEU’s remaining jurisdiction in that agreement).

The first exclusion relates to the bulk of the provision on trade remedies – ie anti-dumping law, anti-subsidy rules and economic safeguards, where there is a cross-reference to WTO law (so WTO dispute settlement would be available instead). However, note that the TCA also has its own rules on two of these issues (subsidies and safeguards), which are subject to TCA dispute settlement, albeit with some different rules in the case of subsidies.

It also excludes the provisions on cultural goods from dispute settlement. Note that these rules only apply to cultural goods taken after 1993 – so would not, for instance, apply to the Parthenon marbles. There is no alternative dispute settlement process here.

The second exclusion concerns the annex on medical products (which was actually Annex TBT-2, not TBT-X, in the previous numbering). There is no alternative dispute settlement process there.

The third exclusion concerns the rather vague rules on small and medium-sized business in the trade heading. There is no alternative dispute settlement process here either.

The fourth exclusion concerns the somewhat more concrete title on regulatory cooperation, which also forms part of the trade heading. Again, there is no alternative dispute settlement process.

The fifth exclusion concerns various aspects of the level playing field (LPF) rules: some introductory rules, competition law, some parts of the subsidies rules, taxation, and the ‘future review’ part of the rebalancing clause on future divergences on labour, environmental and subsidies law. This means that the rest of the dispute settlement clauses apply in principle to the LPF clauses – but note that there are variations from the normal dispute settlement rules for those LPF issues either in the dispute settlement part of the treaty or in the LPF part of the treaty, discussed below and in Annex II. For the LPF issues excluded entirely from the dispute settlement rules, there is no alternative dispute settlement process.

The sixth exclusion is the whole of part Three of the agreement, on criminal law. This Part has its own dispute settlement rules, which are essentially political. 

The seventh exclusion is the whole of part Four of the agreement, on health security and ‘cyber’ issues. It does not have its own dispute settlement rules.

The eighth exclusion is the list of issues on which the EU/UK relationship is based. However, the process for addressing some of the issues concerned – described as ‘essential elements’ of the relationship – is not excluded from the dispute settlement rules.

The ninth exclusion is the short-term transition period – lasting only a maximum of six months – in which EU data protection law still applies to the UK while the EU Commission considers adopting an ‘adequacy decision’.

Finally, the tenth exclusion relates to the separate UK/EU treaty on the exchange of classified information, which provides for settlement of disputes via consultations (Article 18). There is no express reference to the separate UK/Euratom treaty: note that it has its own simplified form of dispute settlement, including possible recourse to arbitration (Article 21).

Note that political dispute settlement is still possible as regards these excluded issues (para 3). Moreover, the parties cannot settle their disputes about these excluded provisions in any other dispute settlement system outside the scope of the TCA (para 4): they are limited to discussing these disputes in the Partnership Council or using the alternative dispute settlement rules that exist in the treaty itself (regarding criminal law, for instance).

A different form of exclusion applies as regards social security (para 5). The social security rules as such are not outside the scope of dispute settlement; but the dispute settlement system cannot be used to resolve ‘individual cases’. 

Note that, as discussed below, it is not possible to retaliate for a breach of (for instance) the trade provisions as regards any of the areas excluded from the scope of the dispute settlement rules.

Article 736 (ex-INST.11): Exclusivity

The Parties undertake not to submit a dispute between them regarding the interpretation or application of provisions of this Agreement or of any supplementing agreement to a mechanism of settlement other than those provided for in this Agreement.

Note: the wording is slightly different, but this is essentially the same rule as found in Article 168 of the withdrawal agreement.

Article 737 (ex-INST.12): Choice of forum in case of a substantially equivalent obligation under another international agreement

1. If a dispute arises regarding a measure allegedly in breach of an obligation under this Agreement or any supplementing agreement and of a substantially equivalent obligation under another international agreement to which both Parties are party, including the WTO Agreement, the Party seeking redress shall select the forum in which to settle the dispute.

2. Once a Party has selected the forum and initiated dispute settlement procedures either under this Title or under another international agreement, that Party shall not initiate such procedures under the other international agreement with respect to the particular measure referred to in paragraph 1, unless the forum selected first fails to make findings for procedural or jurisdictional reasons.

3. For the purposes of this Article:

(a) dispute settlement procedures under this Title are deemed to be initiated by a Party's request for the establishment of an arbitration tribunal under Article 739 (ex-INST.14 [Arbitration procedures]);

(b) dispute settlement procedures under the WTO Agreement are deemed to be initiated by a Party’s request for the establishment of a panel under Article 6 of the Understanding on Rules and Procedure Governing the Settlement of Disputes of the WTO; and

(c) dispute settlement procedures under any other agreement are deemed to be initiated if they are initiated in accordance with the relevant provisions of that agreement.

4. Without prejudice to paragraph 2, nothing in this Agreement or any supplementing agreement shall preclude a Party from suspending obligations authorised by the Dispute Settlement Body of the WTO or authorised under the dispute settlement procedures of another international agreement to which the Parties are party. The WTO Agreement or any other international agreement between the Parties shall not be invoked to preclude a Party from suspending obligations under this Title.

Note: there is no equivalent provision in the withdrawal agreement, and it is not explicit whether this provision applies to disputes which might fall within the scope of both the withdrawal agreement and the TCA (relating to goods trade or State aid as regards the earlier treaty’s Northern Ireland protocol, for instance). At first sight, the withdrawal agreement is ‘another international agreement to which both Parties are party’. However, since there is a link anyway between the withdrawal agreement dispute settlement system and retaliation on the basis of the TCA, as discussed further below, the distinction may not matter that much in practice.

Para 1 gives the party seeking a remedy the option of which dispute settlement system to use in the event of overlapping arguments under multiple treaties. To avoid infringing the exclusivity clause, a party which invoked a system other than the TCA would have to take care that it explicitly makes its arguments in that other dispute settlement system without referring to the TCA. The WTO is expressly envisaged as one example of an overlapping system, but the wording is not exhaustive (‘including’). The most obvious example of an overlapping argument would be cases where the trade in goods provisions of the TCA expressly incorporate a WTO provision.

Para 2 prevents the complaining party from bringing multiple proceedings under different systems: once it has made its choice of forum, it must stick with it. That party can, however, bring a multiple complaint if the first forum it chose refuses to rule on the merits of its complaints. Para 3 defines how this rule applies. Presumably this prevents not only multiple proceedings brought roughly simultaneously, but also an attempt to bring a complaint to Forum B after Forum A has rejected the essentially identical complaint on the merits.

Para 4 means that the existence of the TCA does not stand in the way of either side suspending its obligations after using the WTO dispute settlement process or another treaty (such as the replacement agreement for the WTO appellate body – if the UK joins the EU as a party to it). This is equally true in reverse: the WTO dispute settlement process does not stand in the way of either side suspending its obligations pursuant to the TCA dispute settlement rules.

 

Chapter 2: Procedure

Article 738 (ex-INST.13): Consultations

1. If a Party (“the complaining Party”) considers that the other Party (“the respondent Party”) has breached an obligation under this Agreement or under any supplementing agreement, the Parties shall endeavour to resolve the matter by entering into consultations in good faith, with the aim of reaching a mutually agreed solution.

2. The complaining Party may seek consultations by means of a written request delivered to the respondent Party. The complaining Party shall specify in its written request the reasons for the request, including the identification of the measures at issue and the legal basis for the request, and the covered provisions it considers applicable.

3. The respondent Party shall reply to the request promptly, and in any case no later than 10 days after the date of its delivery. Consultations shall be held within 30 days of the date of delivery of the request in person or by any other means of communication agreed by the Parties. If held in person, consultations shall take place in the territory of the respondent Party, unless the Parties agree otherwise.

4. The consultations shall be deemed concluded within 30 days of the date of delivery of the request, unless the Parties agree to continue consultations.

5. Consultations on matters of urgency, including those regarding perishable goods or seasonal goods or services, shall be held within 20 days of the date of delivery of the request. The consultations shall be deemed concluded within those 20 days unless the Parties agree to continue consultations.

6. Each Party shall provide sufficient factual information to allow a complete examination of the measure at issue, including an examination of how that measure could affect the application of this Agreement or any supplementing agreement. Each Party shall endeavour to ensure the participation of personnel of their competent authorities who have expertise in the matter subject to the consultations.

7. For any dispute concerning an area other than Titles I to VII, Chapter 4 [Energy and raw materials] of Title VIII, Titles IX to XII of Heading One or Heading Six of Part Two, at the request of the complaining Party, the consultations referred to in paragraph 3 of this Article shall be held in the framework of a Specialised Committee or of the Partnership Council. The Specialised Committee may at any time decide to refer the matter to the Partnership Council. The Partnership Council may also seize itself of the matter. The Specialised Committee, or, as the case may be, the Partnership Council, may resolve the dispute by a decision. The time periods referred to in paragraph 3 of this Article shall apply. The venue of meetings shall be governed by the rules of procedure of the Specialised Committee or, as the case may be, the Partnership Council.

8. Consultations, and in particular all information designated as confidential and positions taken by the Parties during consultations, shall be confidential, and shall be without prejudice to the rights of either Party in any further proceedings.

Note: para 1 is very similar to Article 169 of the withdrawal agreement. The following paras are, however, far more detailed than the withdrawal agreement. The time period for consultations (deemed to be concluded after 30 days, or 20 days in urgent cases, unless the Parties agree to continue them) is shorter than under Article 170 of the withdrawal agreement, which provides for three months of talks before arbitration can be triggered unilaterally.

Article 739 (ex-INST.14): Arbitration procedure

1. The complaining Party may request the establishment of an arbitration tribunal if:

(a) the respondent Party does not respond to the request for consultations within 10 days of the date of its delivery;

(b) consultations are not held within the time periods referred to in Article 738(3), (4) or (5) (ex-INST.13(3), (4) or (5) [Consultations]);

(c) the Parties agree not to have consultations; or

(d) consultations have been concluded without a mutually agreed solution having been reached.

2. The request for the establishment of the arbitration tribunal shall be made by means of a written request delivered to the respondent Party. In its request, the complaining Party shall explicitly identify the measure at issue and explain how that measure constitutes a breach of the covered provisions in a manner sufficient to present the legal basis for the complaint clearly.

Note: as noted above, the time frames for triggering arbitration (ie, the cross-references in para 1) are shorter than the three months under the withdrawal agreement. Para 2 is similar, but not identical, to part of Article 170(1) of the withdrawal agreement. One difference (which cuts across the whole TCA dispute settlement process) is that the TCA, unlike the withdrawal agreement, makes no provision for the logistical support of the Permanent Court of Arbitration in the Hague.

Article 740 (ex-INST.15): Establishment of an arbitration tribunal

1. An arbitration tribunal shall be composed of three arbitrators.

2. No later than 10 days after the date of delivery of the request for the establishment of an arbitration tribunal, the Parties shall consult with a view to agreeing on the composition of the arbitration tribunal.

3. If the Parties do not agree on the composition of the arbitration tribunal within the time period provided for in paragraph 2, each Party shall appoint an arbitrator from the sub-list for that Party established pursuant to Article 752 (ex-INST.27 [Lists of arbitrators]) no later than five days after the expiry of the time period provided for in paragraph 2 of this Article. If a Party fails to appoint an arbitrator from its sub-list within that time period, the co-chair of the Partnership Council from the complaining Party shall select, no later than five days after the expiry of that time period, an arbitrator by lot from the sub-list of the Party that has failed to appoint an arbitrator. The co-chair of the Partnership Council from the complaining Party may delegate such selection by lot of the arbitrator.

4. If the Parties do not agree on the chairperson of the arbitration tribunal within the time period provided for in paragraph 2 of this Article, the co-chair of the Partnership Council from the complaining Party shall select, no later than five days after the expiry of that time period, the chairperson of the arbitration tribunal by lot from the sub-list of chairpersons established pursuant to Article 752 (ex-INST.27 [Lists of arbitrators]). The co-chair of the Partnership Council from the complaining Party may delegate such selection by lot of the chairperson of the arbitration tribunal.

5. Should any of the lists provided for in Article 752 (ex-INST.27 [Lists of arbitrators]) not be established or not contain sufficient names at the time a selection is made pursuant to paragraphs 3 or 4 of this Article, the arbitrators shall be selected by lot from the individuals who have been formally proposed by one Party or both Parties in accordance with Annex 48 (ex-INST-X [Rules of procedure]).

6. The date of establishment of the arbitration tribunal shall be the date on which the last of the three arbitrators has notified to the Parties the acceptance of his or her appointment in accordance with Annex 48.

Note: Three arbitrators will serve on a TCA arbitration tribunal, compared to five under the withdrawal agreement (para 1, compared to Article 171(3) of the withdrawal agreement). The withdrawal agreement provides for a panel to be set up within 15 days (Article 171(4) of the withdrawal agreement), rather than consultation within 10 days under the TCA (para 2). The TCA then provides for a process of setting up the tribunal quickly if the parties don’t agree on its members (paras 3 and 4). Under the TCA, the default if the list of arbitrators has not yet been decided is to take names from the proposed list by one or both parties (para 5). It is not clear what happens if one party tries to frustrate the process by not proposing any candidates: does this block the arbitration process because there must always be a member from each party, or does the arbitration go ahead with a second member from the other party? That prospect would certainly be a deterrent to trying to block the process.

Note that the default under the withdrawal agreement is to involve the Permanent Court of Arbitration in selecting the arbitrators, if the parties cannot agree or do not suggest arbitrators (Article 171(5) to (9) of the withdrawal agreement). In practice, the list of arbitrators for that agreement has now been adopted by a Joint Committee decision.

There are fast-track rules derogating from this clause in certain cases: see Article 760 (ex-INST.34B), discussed below.

Article 741 (ex-INST.16): Requirements for arbitrators

1. All arbitrators shall:

(a) have demonstrated expertise in law and international trade, including on specific matters covered by Titles I to VII, Chapter 4 [Energy and raw materials] of Title VIII, Titles IX to XII of Heading One [Trade] of Part Two or Heading Six [Other provisions] of Part Two, or in law and any other matter covered by this Agreement or by any supplementing agreement and, in the case of a chairperson, also have experience in dispute settlement procedures;

(b) not be affiliated with or take instructions from either Party;

(c) serve in their individual capacities and not take instructions from any organisation or government with regard to matters related to the dispute; and

(d) comply with Annex 49 (ex-INST-X [Code of Conduct]).

2. All arbitrators shall be persons whose independence is beyond doubt, who possess the qualifications required for appointment to high judicial office in their respective countries or who are jurisconsults of recognised competence.

3. In view of the subject-matter of a particular dispute, the Parties may agree to derogate from the requirements listed in point (a) of paragraph 1.

Note: this Article is similar, but not identical to, Article 171(2) of the withdrawal agreement, which referred more generally to expertise in EU law and public international law. See also Article 181(1) of the withdrawal agreement, on requirements for independence.

Article 742 (ex-INST.17): Functions of the arbitration tribunal

The arbitration tribunal:

(a) shall make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of, and conformity of the measures at issue with, the covered provisions;

(b) shall set out, in its decisions and rulings, the findings of facts and law and the rationale behind any findings that it makes; and

(c) should consult regularly with the Parties and provide adequate opportunities for the development of a mutually agreed solution.

Article 743 (ex-INST.18): Terms of reference

1. Unless the Parties agree otherwise no later than five days after the date of the establishment of the arbitration tribunal, the terms of reference of the arbitration tribunal shall be:

"to examine, in the light of the relevant covered provisions of this Agreement or of a supplementing agreement, the matter referred to in the request for the establishment of the arbitration tribunal, to decide on the conformity of the measure at issue with the provisions referred to in Article 735 (ex-INST.10 [Scope]) and to issue a ruling in accordance with Article 745 (ex-INST.20 [Ruling of the arbitration tribunal])".

2. If the Parties agree on terms of reference other than those referred to in paragraph 1, they shall notify the agreed terms of reference to the arbitration tribunal within the time period referred to in paragraph 1.

Article 744 (ex-INST.19): Urgent proceedings

1. If a Party so requests, the arbitration tribunal shall decide, no later than 10 days after the date of its establishment, whether the case concerns matters of urgency.

2. In cases of urgency, the applicable time periods set out in Article 745 (ex-INST.20 [Ruling of the Arbitration Tribunal]) shall be half the time prescribed therein.

Note: this compares to Article 173 of the withdrawal agreement, in which the usual deadline of 12 months for a ruling is cut to 6 months for urgent cases. Under the TCA, the final deadline of 160 days is cut to 80 days for urgent cases. The tribunal has 10 days to decide on whether the case is urgent (the withdrawal agreement provides for 15 days for this). 

 Article 745 (ex-INST.20): Ruling of the arbitration tribunal

1. The arbitration tribunal shall deliver an interim report to the Parties within 100 days after the date of establishment of the arbitration tribunal. If the arbitration tribunal considers that this deadline cannot be met, the chairperson of the arbitration tribunal shall notify the Parties in writing, stating the reasons for the delay and the date on which the arbitration tribunal plans to deliver its interim report. The arbitration tribunal shall not deliver its interim report later than 130 days after the date of establishment of the arbitration tribunal under any circumstances.

2. Each Party may deliver to the arbitration tribunal a written request to review precise aspects of the interim report within 14 days of its delivery. A Party may comment on the other Party's request within six days of the delivery of the request.

3. If no written request to review precise aspects of the interim report is delivered within the time period referred to in paragraph 2, the interim report shall become the ruling of the arbitration tribunal.

4. The arbitration tribunal shall deliver its ruling to the Parties within 130 days of the date of establishment of the arbitration tribunal. When the arbitration tribunal considers that that deadline cannot be met, its chairperson shall notify the Parties in writing, stating the reasons for the delay and the date on which the arbitration tribunal plans to deliver its ruling. The arbitration tribunal shall not deliver its ruling later than 160 days after the date of establishment of the arbitration tribunal under any circumstances.

5. The ruling shall include a discussion of any written request by the Parties on the interim report and clearly address the comments of the Parties.

6. For greater certainty, a ‘ruling’ or ‘rulings’ as referred to in Articles 742, 743 and 753 (ex-INST.17 [Functions of the arbitration tribunal], INST.18 [Terms of reference], INST.28 [Replacement of arbitrators]) and Article 754 (ex-INST.29) (1), (3), (4) and (6) [Arbitration tribunal rulings and decisions] shall be understood to refer also to the interim report of the arbitration tribunal.

Note: as noted above, this compares to Article 173 of the withdrawal agreement, which has a usual deadline of 12 months for a ruling. Under the TCA, the final deadline is 160 days. Unlike the withdrawal agreement, the TCA process includes circulation of an interim ruling which the parties can comment on.

There are fast-track rules derogating from this clause in certain cases: see Article 760 (ex-INST 34B), discussed below.

 

Chapter 3: Compliance

Article 746 (ex-INST.21): Compliance measures

1. If, in its ruling referred to in Article 745(4) (ex-INST.20(1) [Ruling of the arbitration tribunal]), the arbitration tribunal finds that the respondent Party has breached an obligation under this Agreement or under any supplementing agreement, that Party shall take the necessary measures to comply immediately with the ruling of the arbitration tribunal in order to bring itself in compliance with the covered provisions.

2. The respondent Party, no later than 30 days after delivery of the ruling, shall deliver a notification to the complaining Party of the measures which it has taken or which it envisages to take in order to comply.

Note: this is similar to the obligation to comply with an arbitration ruling set out in Article 175 of the withdrawal agreement.

Article 747 (ex-INST.22): Reasonable Period of Time

1. If immediate compliance is not possible, the respondent Party, no later than 30 days after delivery of the ruling referred to in Article 745(4) (ex-INST.20(1) [Ruling of the arbitration tribunal]), shall deliver a notification to the complaining Party of the length of the reasonable period of time it will require for compliance with the ruling referred to in Article 745(4). The Parties shall endeavour to agree on the length of the reasonable period of time to comply.

2. If the Parties have not agreed on the length of the reasonable period of time, the complaining Party may, at the earliest 20 days after the delivery of the notification referred to in paragraph 1, request in writing that the original arbitration tribunal determines the length of the reasonable period of time. The arbitration tribunal shall deliver its decision to the Parties within 20 days of the date of delivery of the request.

3. The respondent Party shall deliver a written notification of its progress in complying with the ruling referred to in Article 745(4) to the complaining Party at least one month before the expiry of the reasonable period of time.

4. The Parties may agree to extend the reasonable period of time.

Note: this is nearly identical in substance to Article 176 of the withdrawal agreement, except the process is speeded up. The 30-day period for the losing party to indicate how long it thinks it will need to comply matches the withdrawal agreement (para 1; Article 176(1) of the withdrawal agreement). Unlike the withdrawal agreement, there is a minimum period of 20 days for the winning party to dispute the losing party’s proposed timetable (para 2; Article 176(2) of the withdrawal agreement sets a 40-day maximum). Arbitration on this issue is quicker than under the withdrawal agreement (20 days under para 2; 40 or 60 days under Article 176(2) and (3) of the withdrawal agreement). The rule on the losing party notifying how it is getting on with compliance one month before the deadline is the same in both treaties (para 3; Article 176(4) of the withdrawal agreement). Both treaties allow for joint agreement to extend the reasonable period of time (para 4; Article 176(5) of the withdrawal agreement).

Article 748 (ex-INST.23): Compliance Review

1. The respondent Party shall, no later than the date of expiry of the reasonable period of time, deliver a notification to the complaining Party of any measure that it has taken to comply with the ruling referred to in Article 745(4) (ex-INST.20(1) [Ruling of the arbitration tribunal]).

2. When the Parties disagree on the existence of, or the consistency with the covered provisions of, any measure taken to comply, the complaining Party may deliver a request, which shall be in writing, to the original arbitration tribunal to decide on the matter. The request shall identify any measure at issue and explain how that measure constitutes a breach of the covered provisions in a manner sufficient to present the legal basis for the complaint clearly. The arbitration tribunal shall deliver its decision to the Parties within 45 days of the date of delivery of the request.

Note: this is essentially identical to Article 177 of the withdrawal agreement, except that the time period for arbitrators to rule on whether the losing party has complied with the ruling is 45 days under the TCA, whereas it is 90 days under the withdrawal agreement.

There are fast-track rules derogating from this clause in certain cases: see Article INST 34B, discussed below.

Article 749 (ex-INST.24): Temporary Remedies

1. The respondent Party shall, at the request of and after consultations with the complaining Party, present an offer for temporary compensation if:

(a) the respondent Party delivers a notification to the complaining Party that it is not possible to comply with the ruling referred to in Article 745(4) (ex-INST.20(1) [Ruling of the arbitration tribunal]); or

(b) the respondent Party fails to deliver a notification of any measure taken to comply within the deadline referred to in Article 746 (ex-INST.21 [Compliance Measures]) or before the date of expiry of the reasonable period of time; or

(c) the arbitration tribunal finds that no measure taken to comply exists or that the measure taken to comply is inconsistent with the covered provisions.

2. In any of the conditions referred to in points (a), (b) and (c) of paragraph 1, the complaining Party may deliver a written notification to the respondent Party that it intends to suspend the application of obligations under the covered provisions if:

(a) the complaining Party decides not to make a request under paragraph 1; or

(b) the Parties do not agree on the temporary compensation within 20 days after the expiry of the reasonable period of time or the delivery of the arbitration tribunal decision under Article 748 (ex-INST.23 [Compliance Review]) if a request under paragraph 1 is made. The notification shall specify the level of intended suspension of obligations.

3. Suspension of obligations shall be subject to the following conditions:

(a) Obligations under Heading Four [Social security coordination and visas for short-term visits]of Part Two, the Protocol on Social Security Coordination or its annexes or Part Five [Union programmes] may not be suspended under this Article;

(b) By derogation from point (a), obligations under Part Five [Union programmes] may be suspended only where the ruling referred to in Article 745(4) (ex-INST.20(1) [Ruling of the arbitration tribunal] )concerns the interpretation and implementation of Part Five [Union programmes];

(c) Obligations outside Part Five [Union programmes] may not be suspended where the ruling referred to in Article 745(4) concerns the interpretation and implementation of Part Five [Union programmes]; and

(d) Obligations under Title II [Services and Investment] of Heading One of Part Two in respect of financial services may not be suspended under this Article, unless the ruling referred to in Article 745(4) concerns the interpretation and application of obligations under Title II [Services and Investment] of Heading One of Part Two in respect of financial services.

4. Where a Party persists in not complying with a ruling of an arbitration panel established under an earlier agreement concluded between the Parties, the other Party may suspend obligations under the covered provisions referred to in Article 735 (ex-INST.10 [Scope]). With the exception of the rule in point (a) of paragraph 3, all rules relating to temporary remedies in case of non-compliance and to review of any such measures shall be governed by the earlier agreement.

5. The suspension of obligations shall not exceed the level equivalent to the nullification or impairment caused by the violation.

6. If the arbitration tribunal has found the violation in Heading One [Trade] or Heading Three [Road] of Part Two, the suspension may be applied in another Title of the same Heading as that in which the tribunal has found the violation, in particular if the complaining party is of the view that such suspension is effective in inducing compliance.

7. If the arbitration tribunal has found the violation in Heading Two [Aviation]:

(a) the complaining party should first seek to suspend obligations in the same Title as that in which the arbitration tribunal has found the violation;

(b) if the complaining party considers that it is not practicable or effective to suspend obligations with respect to the same Title as that in which the tribunal has found the violation, it may seek to suspend obligations in the other Title under the same Heading.

8. If the arbitration tribunal has found the violation in Heading One [Trade], Heading Two [Aviation], Heading Three [Road] or Heading Five [Fisheries] of Part Two, and if the complaining party considers that it is not practicable or effective to suspend obligations within the same Heading as that in which the arbitration tribunal has found the violation, and that the circumstances are serious enough, it may seek to suspend obligations under other covered provisions.

9. In the case of point (b) of paragraph 7 and paragraph 8, the complaining Party shall state the reasons for its decision.

10. The complaining Party may suspend the obligations 10 days after the date of delivery of the notification referred to in paragraph 2 unless the respondent Party made a request under paragraph 11.

11. If the respondent Party considers that the notified level of suspension of obligations exceeds the level equivalent to the nullification or impairment caused by the violation or that the principles and procedures set forth in point (b) of paragraph 7, paragraph 8 or paragraph 9 have not been followed, it may deliver a written request to the original arbitration tribunal before the expiry of the 10 day period set out in paragraph 10 to decide on the matter. The arbitration tribunal shall deliver its decision on the level of the suspension of obligations to the Parties within 30 days of the date of the request. Obligations shall not be suspended until the arbitration tribunal has delivered its decision. The suspension of obligations shall be consistent with that decision.

12. The arbitration tribunal acting pursuant to paragraph 11 shall not examine the nature of the obligations to be suspended but shall determine whether the level of such suspension exceeds the level equivalent to the nullification or impairment caused by the violation. However, if the matter referred to arbitration includes a claim that the principles and procedures set forth in point (b) of paragraph 7, paragraph 8 or paragraph 9 have not been followed, the arbitration tribunal shall examine that claim. In the event the arbitration tribunal determines that those principles and procedures have not been followed, the complaining party shall apply them consistently with point (b) of paragraph 7, paragraph 8 and paragraph 9. The parties shall accept the arbitration tribunal's decision as final and shall not seek a second arbitration procedure. This paragraph shall under no circumstances delay the date as of which the complaining Party is entitled to suspend obligations under this Article.

13. The suspension of obligations or the compensation referred to in this Article shall be temporary and shall not be applied after:

(a) the Parties have reached a mutually agreed solution pursuant to Article 756 (ex-INST.31 [Mutually agreed solution]);

(b) the Parties have agreed that the measure taken to comply brings the respondent Party into compliance with the covered provisions; or

(c) any measure taken to comply which the arbitration tribunal has found to be inconsistent with the covered provisions has been withdrawn or amended so as to bring the respondent Party into compliance with those covered provisions.

Note: Unlike the withdrawal agreement (Article 178(1)), there is no prospect of imposing fines upon a losing party that has not complied with its obligation to comply with a ruling within a reasonable period of time. Instead, the only remedy, in the absence of agreed compensation (para 1), is suspension of obligations under the TCA, ie retaliation, which is also a possibility under certain circumstances under the withdrawal agreement (Article 178(2)). This difference means that the retaliation can occur more quickly under the TCA than under the withdrawal agreement.

The TCA also has more complex limits on retaliation than under the withdrawal agreement – which only prohibits retaliation as regards citizens’ rights (Article 178(2)(a)). First of all, retaliation can only take place as regards the ‘covered provisions’ of the TCA (para 2) – which means that it can only apply to the parts of the TCA covered by the main dispute settlement rules (see the definition of ‘covered provisions’ in Article INST.10, discussed above). For instance, this means that a breach of the treaty regarding trade cannot lead to suspension of the provisions regarding criminal law, because the latter are not part of the ‘covered provisions’.

Secondly, the provisions on social security and visas and on EU programmes cannot be suspended (para 3(a)). (This is, in a way, consistent with the withdrawal agreement exclusion of retaliatin on citizens’ rights, which also means that no retaliation is possible regarding social security under the withdrawal agreement).

However, participation in EU programmes can be suspended if the dispute concerns the issue of EU programmes (para 3(b)), and conversely retaliation where the dispute concerns EU programmes can only concern EU programmes (ie, not on trade) (para 3(c)). In other words, as far as retaliation is concerned, the provisions on EU programmes are self-contained.

Thirdly (and similarly), financial services obligations cannot be suspended unless the arbitration ruling concerns financial services (para 3(d)). It should, however, be recalled that the TCA has limited provisions on financial services.

Next, if there is a breach of the TCA as regards trade or road transport, retaliation can occur in another title of the same heading of the economic part of the treaty, ‘in particular if the complaining party is of the view that such suspension is effective in inducing compliance’ (para 6). This is a non-exhaustive test, and it is apparently up to the winning party to determine how to apply it. This means, for instance that a breach relating to trade in goods or the level playing field can be sanctioned by retaliation as regards services, digital trade, capital, intellectual property, public procurement, or energy (subject to some special rules on the level playing field discussed below, and some parts of the rules on trade not being ‘covered provisions’ for dispute settlement). For road transport, this means that there can be cross-retaliation between goods and passenger transport.

A similar rule applies to breaches regarding air transport (para 7): the winning party ‘should first seek’ to apply retaliation in the same title (the two titles are air transport and aviation safety), but may ‘seek’ to cross-retaliate against the other aviation title if it ‘considers that it is not practicable or effective to suspend obligations with respect to the same Title’.

Also, where the breach concerns trade, aviation, road transport or fisheries, the winning party can cross-retaliate as regards any covered provisions, ‘if the complaining party considers that it is not practicable or effective to suspend obligations within the same Heading as that in which the arbitration tribunal has found the violation, and that the circumstances are serious enough’ (para 8). Presumably the limits on cross-retaliation set out in para 3 continue to apply.

More broadly there is also a proportionality rule: ‘The suspension of obligations shall not exceed the level equivalent to the nullification or impairment caused by the violation.’ (para 5). Note that in the specific contexts of subsidies and fisheries, there are more detailed rules on this issue: see Article INST.34C, discussed below.

The retaliation then goes ahead unless the losing party objects that the proportionality rule is infringed by the severity of the retaliation, or that the ‘principles and procedures’ relating to cross-retaliation have not been followed (para 11), within ten days after the winning party’s notification of its intention to retaliate. This is similar to the possible review of proportionality of retaliation under the withdrawal agreement (Article 178(3), which also sets a ten-day deadline to object). Under both treaties, the request to review the retaliation has suspensive effect. As usual, the TCA provides for a shorter deadline for the arbitrators to rule on this than under the withdrawal agreement (30 days, compared to 60 days).

Under the TCA, the arbitrators can rule on whether the retaliation is excessive, whereas under the withdrawal agreement they rule on proportionality; it is not clear whether that actually means a different legal test. Also under the TCA, the winning party must adjust its planned retaliation if the arbitrators rule that it would be breaching the cross-retaliation rules (para 12). But note that the wording of the cross-retaliation rules includes a degree of discretion for the winning party; it is not clear whether the arbitrators will undertake a review of the exercise of this discretion. Remember that if the winning party is prevented from cross-retaliation by the arbitrators, it can always retaliate in a different way instead.

Under both the TCA and the withdrawal agreement, retaliation is ‘temporary’ until the original ruling of breach is complied with or the parties have otherwise agreed to settle the issue (para 13; compared to Article 178(5) of the withdrawal agreement). But there is no actual time limit so in practice ‘temporary’ could mean a long time.

Finally, note that para 4 provides for retaliation under the covered provisions of the TCA in the event of a breach of an ‘earlier agreement’. This can only refer to the withdrawal agreement, and indeed Article 178(2)(b) of that agreement foresaw this possibility. In practical terms, this means that breaches of the withdrawal agreement (in the event of non-compliance with arbitration rulings under that agreement within a reasonable time) can be sanctioned by imposing trade or other sanctions under the TCA – making the withdrawal agreement potentially easier to enforce indirectly (on the assumption that retaliation, or the prospect of it, has an impact on whether a party breaches the treaty, or keeps breaching it).

The details of that retaliation, and any review of it, are otherwise addressed in the withdrawal agreement – except that the rule against retaliating as regards social security and visa rules in the TCA also applies as regards breaches of the withdrawal agreement.

Fun fact: since dispute settlement rulings under the withdrawal agreement may have been based on the CJEU’s interpretation of EU law (see Article 174 of the withdrawal agreement), it is implicitly possible that a CJEU ruling could ultimately (but only in these specific circumstances) be the basis of trade or other retaliation under the TCA.

Article 750 (ex-INST.25): Review of any measure taken to comply after the adoption of temporary remedies

1. The respondent Party shall deliver a notification to the complaining Party of any measure it has taken to comply following the suspension of obligations or following the application of temporary compensation, as the case may be. With the exception of cases under paragraph 2, the complaining Party shall terminate the suspension of obligations within 30 days from the delivery of the notification. In cases where compensation has been applied, with the exception of cases under paragraph 2, the respondent Party may terminate the application of such compensation within 30 days from the delivery of its notification that it has complied.

2. If the Parties do not reach an agreement on whether the notified measure brings the respondent Party into compliance with the covered provisions within 30 days of the date of delivery of the notification, the complaining Party shall deliver a written request to the original arbitration tribunal to decide on the matter. The arbitration tribunal shall deliver its decision to the Parties within 46 days of the date of the delivery of the request. If the arbitration tribunal finds that the measure taken to comply is in conformity with the covered provisions, the suspension of obligations or compensation, as the case may be, shall be terminated. When relevant, the level of suspension of obligations or of compensation shall be adjusted in light of the arbitration tribunal decision.

Note: This clause provides for the arbitrators to decide whether the losing party, having been subject to retaliation, has subsequently complied with its obligations. If it has, then the retaliation has to end. It is similar to Article 179 of the withdrawal agreement. The difference is, as usual, that the TCA provides for shorter time periods: 30 days (instead of 45) to request the arbitrators to review the measure taken to comply with the ruling, and 46 days (instead of 75) for the arbitrators to rule on the issue.

 

Chapter 4: Common procedural provisions

Article 751 (ex-INST.26): Receipt of information

1. On request of a Party, or on its own initiative, the arbitration tribunal may seek from the Parties relevant information it considers necessary and appropriate. The Parties shall respond promptly and fully to any request by the arbitration tribunal for such information.

2. On request of a Party, or on its own initiative, the arbitration tribunal may seek from any source any information it considers appropriate. The arbitration tribunal may also seek the opinion of experts as it considers appropriate and subject to any terms and conditions agreed by the Parties, where applicable.

3. The arbitration tribunal shall consider amicus curiae submissions from natural persons of a Party or legal persons established in a Party in accordance with Annex 48 (ex-INST-X [Rules of Procedure]).

4. Any information obtained by the arbitration tribunal under this Article shall be made available to the Parties and the Parties may submit comments on that information to the arbitration tribunal.

Note: there is no equivalent clause in the withdrawal agreement. The TCA is potentially open to hear arguments from third parties and experts, although third parties are not parties to proceedings as such. 

Article 752 (ex-INST.27): Lists of arbitrators

1. The Partnership Council shall, no later than 180 days after the date of entry into force of this Agreement, establish a list of individuals with expertise in specific sectors covered by this Agreement or its supplementing agreements who are willing and able to serve as members of an arbitration tribunal. The list shall comprise at least 15 persons and shall be composed of three sub-lists:

(a) one sub-list of individuals established on the basis of proposals by the Union;

(b) one sub-list of individuals established on the basis of proposals by the United Kingdom; and

(c) one sub-list of individuals who are not nationals of either Party who shall serve as chairperson to the arbitration tribunal. Each sub-list shall include at least five individuals. The Partnership Council shall ensure that the list is always maintained at this minimum number of individuals.

2. The Partnership Council may establish additional lists of individuals with expertise in specific sectors covered by this Agreement or by any supplementing agreement. Subject to the agreement of the Parties, such additional lists may be used to compose the arbitration tribunal in accordance with the procedure set out in Article 740 (ex-INST.15) (3) and (5) [Establishment of an arbitration tribunal]. Additional lists shall be composed of two sub-lists:

(a) one sub-list of individuals established on the basis of proposals by the Union; and

(b) one sub-list of individuals established on the basis of proposals by the United Kingdom.

3. The lists referred to in paragraphs 1 and 2 shall not comprise persons who are members, officials or other servants of the Union institutions, of the Government of a Member State, or of the Government of the United Kingdom.

Note: the process of appointing arbitrators is comparable to Article 171(1) of the withdrawal agreement, although under the TCA the list of arbitrators is shorter and there are possibly specialised arbitrators. The deadline for the Partnership Council to adopt the list is late June; there are no provisions for what happens if a dispute is lodged in the meantime. 

Article 753 (ex-INST.28): Replacement of arbitrators

If during dispute settlement procedures under this Title, an arbitrator is unable to participate, withdraws, or needs to be replaced because that arbitrator does not comply with the requirements of the Code of Conduct, the procedure set out in Article 740 (ex-INST.15 [Establishment of the arbitration tribunal]) shall apply. The time period for the delivery of the ruling or decision shall be extended for the time necessary for the appointment of the new arbitrator.

Article 754 (ex-INST.29): Arbitration tribunal decisions and rulings

1. The deliberations of the arbitration tribunal shall be kept confidential. The arbitration tribunal shall make every effort to draft rulings and take decisions by consensus. If this is not possible, the arbitration tribunal shall decide the matter by majority vote. In no case shall separate opinions of arbitrators be disclosed.

2. The decisions and rulings of the arbitration tribunal shall be binding on the Union and on the United Kingdom. They shall not create any rights or obligations with respect to natural or legal persons.

3. Decisions and rulings of the arbitration tribunal cannot add to or diminish the rights and obligations of the Parties under this Agreement or under any supplementing agreement.

4. For greater certainty, the arbitration tribunal shall have no jurisdiction to determine the legality of a measure alleged to constitute a breach of this Agreement or of any supplementing agreement, under the domestic law of a Party. No finding made by the arbitration tribunal when ruling on a dispute between the Parties shall bind the domestic courts or tribunals of either Party as to the meaning to be given to the domestic law of that Party.

5 (ex-4A). For greater certainty, the courts of each Party shall have no jurisdiction in the resolution of disputes between the Parties under this Agreement.

6 (ex-5). Each Party shall make the rulings and decisions of the arbitration tribunal publicly available, subject to the protection of confidential information.

7 (ex-6). The information submitted by the Parties to the arbitration tribunal shall be treated in accordance with the confidentiality rules laid down in Annex 48 (ex-ANNEX-INST-X [Rules of procedure]).

Note: the provisions in paras 1, 2, and 6 – majority voting, no dissenting opinions, binding effect, rulings published – are very similar to Article 180 of the withdrawal agreement. However, the express statement that the rulings create no rights or obligations for individuals is new, as are the provisions in paras 3, 4 and 5: no ‘judicial activism’ by arbitrators, no impact on domestic law or domestic courts, no jurisdiction of the parties’ courts to resolve resolution of disputes between the parties. This is a strongly ‘dualist’ approach to the dispute settlement process – binding at international level, but not in domestic law – which reflects the UK side’s approach to sovereignty (although note that the CJEU also rejects the domestic effect of WTO dispute settlement rulings within the EU legal order).

Article 755 (ex-INST.30): Suspension and termination of the arbitration proceedings

At the request of both Parties, the arbitration tribunal shall suspend its work at any time for a period agreed by the Parties and not exceeding 12 consecutive months. The arbitration tribunal shall resume its work before the end of the suspension period at the written request of both Parties, or at the end of the suspension period at the written request of either Party. The requesting Party shall deliver a notification to the other Party accordingly. If a Party does not request the resumption of the arbitration tribunal’s work at the expiry of the suspension period, the authority of the arbitration tribunal shall lapse and the dispute settlement procedure shall be terminated. In the event of a suspension of the work of the arbitration tribunal, the relevant time periods shall be extended by the same time period for which the work of the arbitration tribunal was suspended.

Note: the strict time deadlines for arbitration can be suspended for up to 12 months if both sides agree, presumably to allow an opportunity to negotiate a diplomatic solution to a dispute instead. If the arbitrators resume their work, the clock starts ticking on the deadlines again.

Article 756 (ex-INST.31): Mutually agreed solution

1. The Parties may at any time reach a mutually agreed solution with respect to any dispute referred to in Article 735 (ex-INST.10 [Scope]).

2. If a mutually agreed solution is reached during panel proceedings, the Parties shall jointly notify the agreed solution to the chairperson of the arbitration tribunal. Upon such notification, the arbitration proceedings shall be terminated.

3. The solution may be adopted by means of a decision of the Partnership Council. Mutually agreed solutions shall be made publicly available. The version disclosed to the public shall not contain any information either Party has designated as confidential.

4. Each Party shall take the measures necessary to implement the mutually agreed solution within the agreed time period.

5. No later than the date of expiry of the agreed time period, the implementing Party shall inform the other Party in writing of any measures thus taken to implement the mutually agreed solution. 

Note: similarly to the previous provision, the TCA allows for a compromise settlement of a dispute. The withdrawal agreement alludes to this too, but does not go into detail on the process.

Article 757 (ex-INST.32): Time Periods

1. All time periods laid down in this Title shall be counted in days from the day following the act to which they refer.

2. Any time period referred to in this Title may be modified by mutual agreement of the Parties.

3. The arbitration tribunal may at any time propose to the Parties to modify any time period referred to in this Title, stating the reasons for the proposal.

Note: the strict deadlines are not as strict as they first appear, as the parties have the power to amend them (if both sides agree). This is on top of the possibility to suspend the process, as discussed above.  

Article 758 (ex-INST.34): Costs

1. Each Party shall bear its own expenses derived from the participation in the arbitration tribunal procedure.

 2. The Parties shall share jointly and equally the expenses derived from organisational matters, including the remuneration and expenses of the members of the arbitration tribunal. The remuneration of the arbitrators shall be in accordance with Annex 48 (ex-INST-ANNEX-X [Rules of procedure]).

Note: costs are not awarded to the winning party; rather, each side bears its own costs regardless of the outcome.

Article 759 (ex-INST.34A): Annexes

1. Dispute settlement procedures set out in this Title shall be governed by the rules of procedure set out in Annex 48 (ex-ANNEX INST-X [Rules of Procedure]) and conducted in accordance with Annex 49 (ex-ANNEX INST-X [Code of Conduct]).

2. The Partnership Council may amend Annexes 48 and 49. .

Note: the withdrawal agreement also has provisions on the rules of procedure and code of conduct for arbitration, which can likewise be amended by the Joint Committee (Articles 172 and 181 of the agreement).

 

Chapter 5: Specific arrangements for unilateral measures

Article 760 (ex-INST.34B): Special procedures for remedial measures and rebalancing

1. For the purposes of Article 374 and Article 411(2) and (3) (ex-3.12 [Remedial measures] of Chapter 3 [Subsidy control] and Article 9.4(2) and (3) [Rebalancing] of Chapter 9 [Institutional provisions] of Title XI [Level playing field for open and fair competition and sustainable development] of Heading One of Part Two), this Title applies with the modifications set out in this Article.

2. By derogation from Article 740 (ex-INST.15 [Establishment of an arbitration tribunal]) and Annex  48 (ex-INST-X [Rules of procedure for dispute settlement]), if the Parties do not agree on the composition of the arbitration tribunal within two days, the co-chair of the Partnership Council from the complaining Party shall select, no later than one day after the expiry of the two-day time period, an arbitrator by lot from the sub-list of each Party and the chairperson of the arbitration tribunal by lot from the sub-list of chairpersons established pursuant to Article 752 (ex-INST.27 [Lists of arbitrators]). The co-chair of the Partnership Council from the complaining Party may delegate such selection by lot of the arbitrator or chairperson. Each individual shall confirm his or her availability to both Parties within two days from the date on which he or she was informed of his or her appointment. The organisational meeting referred to in Rule 10 of Annex 48 shall take place within 2 days from the establishment of the arbitration tribunal.

3. By derogation from Rule 11 of Annex 48 the complaining Party shall deliver its written submission no later than seven days after the date of establishment of the arbitration tribunal. The respondent Party shall deliver its written submission no later than seven days after the date of delivery of the written submission of the complaining Party. The arbitration tribunal shall adjust any other relevant time periods of the dispute settlement procedure as necessary to ensure the timely delivery of the report.

4. Article 745 (ex-INST.20 [Ruling of the arbitration tribunal]) does not apply and references to the ruling in this Title shall be read as references to the ruling referred to in Article 374(10 or point (c) or Article 411(3) (ex-(a) paragraph 10 of Article 3.12 [Remedial measures] of Chapter 3 [Subsidy control] of Title XI [Level playing field for open and fair competition and sustainable development]; or (b) point (c) of Article 9.4(3) [Rebalancing]).

5. By derogation from Article 748(2) (ex-INST.23(2) [Compliance review]), the arbitration tribunal shall deliver its decision to the Parties within 30 days from the date of delivery of the request.

Note: disputes about subsidies and ‘rebalancing’ (divergences in future labour, environment or subsidies legislation) are subject to special fast-track rules. To summarise what these cross-references mean: there are two days to decide on the composition of the tribunal (rather than ten days). There are quicker rules to serve submissions (seven days rather than 20 days). The usual deadline of 160 days to deliver a ruling is cut to 30 days.  Finally, if compliance with a ruling is disputed before retaliation can be authorised, the tribunal must rule within 30 days (rather than 45 days). There are further special rules on subsidies and rebalancing, discussed in Annex II.

Article 761 (ex-INST.34C): Suspension of obligations for the purposes of Article 374(12), Article 501(5) and Article 506(7) (ex-LPFS.3.12(12), Article FISH.9(5) and Article FISH.14(7))

1. The level of suspension of obligations shall not exceed the level equivalent to the nullification or impairment of benefits under this Agreement or under a supplementing agreement that is directly caused by the remedial measures from the date the remedial measures enter into effect until the date of the delivery of the arbitration ruling.

2. The level of suspension of obligations requested by the complaining Party and the determination of the level of suspension of obligations by the arbitration tribunal shall be based on facts demonstrating that the nullification or impairment arises directly from the application of the remedial measure and affects specific goods, service suppliers, investors or other economic actors and not merely on allegation, conjecture or remote possibility.

3. The level of nullified or impaired benefits requested by the complaining Party or determined by the arbitration tribunal:

(a) shall not include punitive damages, interest or hypothetical losses of profits or business opportunities;

(b) shall be reduced by any prior refunds of duties, indemnification of damages or other forms of compensation already received by the concerned operators or the concerned Party; and

(c) shall not include the contribution to the nullification or impairment by wilful or negligent action or omission of the concerned Party or any person or entity in relation to whom remedies are sought pursuant to the intended suspension of obligations.

Note: this provision sets out detailed rules to calculate how much damage has been suffered for the purposes of retaliation as regards fisheries and subsidies disputes. There are further special rules on subsidies and rebalancing, discussed in Annex II.

Article 762 (ex-INST.34D): Conditions for rebalancing, remedial, compensatory and safeguard measures

Where a Party takes a measure under Articles 374, Article 411, Article 469, Article 501, Article 506 or Article 773 (ex-Article 3.12 [Remedial measures] of Chapter three [Subsidy control] or Article 9.4 [Rebalancing] of Chapter nine [Institutional provisions] of Title XI [Level playing field for open and fair competition and sustainable development] of Heading One [Trade], Article ROAD.11 [Remedial measures] of Heading Three [Road transport], Article FISH.9 [Compensatory measures in case of withdrawal or reduction of access] or Article FISH.14 [Remedial measures and  dispute resolution] of Heading Five of Part Two or Article INST.36 [Safeguards] of Title III of Part Six), that measure shall only be applied in respect of covered provisions within the meaning of Article 735 (ex-INST.10 [Scope]) and shall comply, mutatis mutandis, with the conditions set out in Article 749(3) (ex-INST.24(3) [Temporary remedies]).

Note: this provision clarifies that various forms of retaliation – as regards subsidies, rebalancing, road transport and fisheries (as well as economic safeguards) – can only applied to the ‘covered provisions’ within the scope of the general dispute settlement rules, and are also subject to the various limits on cross-retaliation discussed above. There are further special rules on subsidies and rebalancing, discussed in Annex II.

Annex II: Dispute settlement and LPF

As noted above, for some aspects of the ‘level playing field’, the usual dispute settlement rules are fully excluded (some of the general rules; competition; some of the subsidy rules; taxation).  Some LPF aspects are fully subject to the usual rules: Article 355(2) (ex-1.2(2)) of the LPF rules (precautionary approach), and the rules on state-owned bodies (chapter 4). Other LPF aspects are subject to a modified version of the usual rules, as set out in Article 760 (ex-INST.34B), discussed above. And other LPF aspects are subject to a various modified dispute settlement rules set out in the LPF provisions themselves; this will not be obvious to those who read only the dispute settlement rules. So the following sets out those special LPF rules.

One special set of LPF rules apply to:

-          Article Article 355(3) (ex-1.1(3)) of the LPF rules, which states: “3. Each Party reaffirms its ambition of achieving economy-wide climate neutrality by 2050”;

-          the rules on labour and environmental standards in chapters 6 and 7 (including, but not only, the non-regression rule); and

-          the ‘sustainable development’ rules in chapter 8, which concern not only environmental but also some labour standards.

These special rules consist first of all of a special consultation procedure (Article 408, ex-9.1, of the LPF provisions). Then there is a special panel of experts (Article 409, ex-9.2, of the LPF provisions), in place of arbitrators. However, some of the dispute settlement rules are ‘switched back on’ as regards these experts, namely (para 19):

Except as otherwise provided for in this Article, Article 739(1), Article 740 and Articles 753 to 758, as well as Annexes 48 and 49 (ex-INST.14(1) [Arbitration procedure], Article INST.29 [Arbitration tribunal decisions and rulings], Article INST.30 [Suspension and termination of the arbitration proceedings], Article INST.31 [Mutually agreed solution], Article INST.32 [Time periods], Article INST.34 [Costs], Article INST.15 [Establishment of an arbitration tribunal], or Article INST.28 [Replacement of arbitrators] as well as ANNEX INST [Rules of Procedure for Dispute Settlement] and ANNEX INST-X [Code of Conduct for Arbitrators]), shall apply mutatis mutandis.

This is where disputes on the first and fourth issues listed above (on climate change and sustainable development) end. However, disputes on the labour and environmental chapters (which in practice will cross over with the climate change and sustainable development provisions) are subject to additional dispute settlement rules (Article 410, ex-9.3, of the LPF provisions):

2. For the purposes of such disputes, in addition to the Articles listed in Article 409(19) (ex-9.2(19) [Panel of experts]), Article 749 and 750 (ex-INST.24 [Temporary remedies] and Article INST.25 [Review of any measure taken to comply after the adoption of temporary remedies]) shall apply mutatis mutandis.

Thus, there is the possibility of retaliation where a panel report rules there is a breach of the non-regression clause, or other aspects of the labour and environment chapters. As with the usual cases of retaliation, there is also a review of whether the losing party ultimately has complied with the panel report, in which case the retaliation has to be ended.

The next special set of LPF rules applies to subsidies. The dispute settlement system cannot rule on subsidies in individual cases (except in certain circumstances), or on the recovery of subsidies in individual cases. This limit is not spelled out in Article 735 (ex-INST.10) (unlike the similar limit relating to social security disputes), but is instead set out in Article 375(2) (ex-3.13) of the LPF provisions:

2. An arbitration tribunal shall have no jurisdiction regarding:

(a) an individual subsidy, including whether such a subsidy has respected the principles set out in  Article 366(1) (ex-paragraph 1 of Article 3.4 [Principles]), other than with regard to the conditions set out in Article 367(2), Article 367(3), (4) and (5), Article 367(8) to (11) and Article 367(12) (ex-3.5(2) [Unlimited state guarantees], (3) to (5) [Rescue and restructuring], (8) to (11) [Export subsidies] and (12) [Subsidies contingent upon the use of domestic content]); and

(b) whether the recovery remedy within the meaning of Article 373 (ex-3.11 [Recovery]) has been correctly applied in any individual case.

Another set of special rules is set out in the subsidies LPF clauses (but again, is not reflected in the main dispute settlement rules). If a subsidy has allegedly caused a ‘significant negative effect on trade or investment’ (or there is a ‘serious risk’ that it may do so), the complaining party, following consultations, can retaliate without prior approval by the arbitrators (Article 374, ex-3.12, of the LPF clauses). However, this retaliation can then be challenged on a fast-track basis, although the arbitrators can only examine its compatibility with some of the rules in the subsidies section (para 9, Article 374). This challenge must be brought within five days, and has no suspensive effect; further consultation is not necessary. There are also special rules expressly allowing ‘return retaliation’ if the arbitrators rule that the initial retaliation is in breach of the rules, but it has not been rescinded. ‘Double retaliation’ on the basis of both the subsidies and rebalancing clauses is ruled out.

Yet another set of modified dispute settlement rules applies as regards ‘rebalancing’ (divergences in future labour, environment or subsidies legislation). ‘If material impacts on trade or investment between the Parties are arising as a result of significant divergences’ in these areas, proportionate ‘rebalancing’ retaliation can be imposed (Article 411, ex-9.4, of the LPF rules). The TCA provides that ‘assessment of these impacts shall be based on reliable evidence and not merely on conjecture or remote possibility.’

The intended retaliation must be notified to the other side. Consultations then take place for 14 days, rather than 30 under the usual rules. In the absence of an agreement, the rebalancing retaliation can be imposed; notice that there is no prior requirement that arbitrators find a breach of the TCA, with a reasonable time to comply, before this retaliation can take place. However, within five days the other side can ask arbitrators to rule on whether the retaliation is consistent with the TCA’s rules on rebalancing, summarised above. The arbitrators must rule within 30 days. If they rule against the retaliation, it must be discontinued; if it is not, ‘return retaliation’ is expressly possible. In addition to this, there are some additional special rules set out in Article 760, ex-INST.34B, above, on composition of the tribunal, serving of submissions, and time periods for rulings.

Annex III: Dispute settlement and Fisheries

Dispute settlement and fisheries is subject first of all to the special rules in Article 501, ex-FISH.9, on compensatory measures for withdrawal of access to waters. The basic rule is set out in para 1:

1. Following a notification by a Party (“host Party”) under Article 500(5) (ex-FISH.8(5)[Access to waters]), the other Party (“fishing Party”) may take compensatory measures commensurate to the economic and societal impact of the change in the level and conditions of access to waters. Such impact shall be measured on the basis of reliable evidence and not merely on conjecture and remote possibility. Giving priority to those compensatory measures which will least disturb the functioning of this Agreement, the fishing Party may suspend, in whole or in part, access to its waters and the preferential tariff treatment granted to fishery products under Article 21 (ex-GOODS.5[Prohibition and customs duties]).

Note that the retaliation concerns both access to waters and tariffs on fish, and is subject to a proportionality rule. Para 2 is a rule on timing, and para 3 is a rule on arbitration:

3. After the notification of the compensatory measures in accordance with paragraph 2, the host Party may request the establishment of an arbitration tribunal pursuant to Article 739 (ex-INST.14 [Arbitration procedure] of Title I [Dispute settlement] of Part Six), without having recourse to consultations in accordance with Article 738 (ex-INST.13 [Consultations]). The arbitration tribunal may only review the conformity of the compensatory measures with paragraph 1. The arbitration tribunal shall treat the issue as a case of urgency for the purpose of Article 744 (ex-INST.19 [Urgent proceedings] of Title I [Dispute settlement] of Part Six).

Note that consultations are skipped, the proceedings are urgent (see discussion above), and the arbitrators are limited to assessing whether the sanctions are consistent with the limits in para 1.

Furthermore, if the ‘fishing Party’ (most likely the EU) loses this case, the ‘host Party’ (most likely the UK) can expressly impose ‘return retaliation’ against the retaliation measures taken by the fishing Party, subject to proportionality, if the inconsistency is ‘significant’, subject to the arbitrators agreeing:

5. Following a finding against the fishing Party in the procedure referred to in paragraph 3, the host Party may request the arbitration tribunal, within 30 days from its ruling, to determine a level of suspension of obligations under this Agreement not exceeding the level equivalent to the nullification or impairment caused by the application of the compensatory measures, if it finds that the inconsistency of the compensatory measures with paragraph 1 is significant. The request shall propose a level of suspension in accordance with the principles set out in paragraph 1 and any relevant principles set out in Article 761 (ex-INST.34C [Suspension of obligations for the purposes of LPFS.3.12(12), Article FISH.9(5) and Article FISH.14(7)]). The host Party may apply the level of suspension of obligations under this Agreement in accordance with the level of suspension determined by the arbitration tribunal, no sooner than 15 days following such ruling.

Note the cross-reference back to Article 761, ex-INST.34C, discussed above, which includes a specific rule on calculation of the amount of the permitted return retaliation.

Secondly, dispute settlement on fisheries is subject to a special rule in Article 506, ex-FISH.14, which refers to breaches of the fisheries rules in general. The complaining party may, after giving notice (para 1):

(a) suspend, in whole or in part, access to its waters and the preferential tariff treatment granted to fishery products under Article 21 (ex-GOODS.5[Prohibition of customs duties]); and

(b) if it considers that the suspension referred to in point (a) is not commensurate to the economic and societal impact of the alleged failure, it may suspend, in whole or in part, the preferential tariff treatment of other goods under Article 21; and

(c) if it considers that the suspension referred to in points (a) and (b) is not commensurate to the economic and societal impact of the alleged failure, it may suspend, in whole or in part, obligations under Heading One [Trade] of Part Two [Economic Partnership] with the exception of Title XI [Level Playing Field for open and fair competition and sustainable development]. If Heading One [Trade] is suspended in whole, Heading Three [Road Transport] is also suspended.

There is a special rule if the dispute concerns fisheries as regards the Channel Islands or Isle of Man (para 2).

Any retaliation ‘shall be proportionate to the alleged failure by the respondent Party and the economic and societal impact thereof’ (para 3). A complaining party is obliged to enter into brief consultations (para 4), and to trigger the dispute settlement process within 14 days (para 5); the arbitrators must rule urgently. If the arbitrators rule against the complaining party’s retaliation, it must cease (para 6). Again, return retaliation is expressly allowed (para 7), subject to arbitration, with a cross-reference to the rules on calculation of damage in Article 761, ex-INST.34C.

Given the relative size of the fisheries industry, it is presumably unlikely (to say the least) that arbitrators would find the suspension of all of the trade and road transport provisions of the TCA was a proportionate reaction to the breach of the fisheries provisions.  

Barnard & Peers: chapter 27

Photo credit: Adrian Jack Bunsby, via Wikimedia commons