Insight from Tim Oliver: UK's Dispute Resolution proposals all about domestic politics.

Insight Summary

  • The UK government has recognised that the European Court of Justice (ECJ) will continue to play a role in British life after March 2019.

  • The proposals have not been made with the EU in mind, but reflect internal UK government division over how to face the practical reality of Brexit.

  • The EU will welcome the UK’s change but remains wary of UK plans to create a ‘one European economic space, two systems’ setup designed for just itself.

Take control’ was the catchy and ultimately winning line for the Leave campaigns in the EU referendum. But it’s never been entirely clear what that should mean in practice. For Theresa May, speaking earlier this year, it meant, amongst other things, ending the jurisdiction of the European Court of Justice. But if the UK wants to remain as close to the EU’s Single Market as May herself said she wants, that requires some mechanism to settle disputes between the two. The ECJ is Europe’s lodestar for such matters. Some role for it was unavoidable, something the rest of the EU have made clear from the start.

The UK government’s latest position paper on Enforcement and Dispute Resolutions is Britain’s attempt to take control of this topic. It proposes to end “direct” ECJ jurisdiction, but leaves the field open for a lot of “indirect” ECJ involvement.

In the paper, the UK government admits that without some solid and comprehensive dispute mechanism the UK-EU ‘deep and special partnership’ it seeks could not operate smoothly because laws would diverge and implementation vary, leading to a slow loss of trust and shared understandings.

It has therefore accepted that despite the end of “direct” jurisdiction, the ECJ will still shape how UK-EU relations are managed and disputes settled. It has also conceded that the role of the ECJ will vary in the three deals necessary to make Brexit happen: the divorce deal (not least over the rights of EU citizens), a transition deal, and the new relationship deal.

What it means in practice

Though it outlines various options in the paper, the UK government betrays UK Cabinet divisions by not settling on the single model it prefers. The final arrangements will need to deal with politically sensitive matters including state aid rules for industry, non-tariff trade barriers disguised as regulations, security cooperation, and the rights of EU citizens in the UK.

This leaves the UK government with a lot to do in order to prepare for March 2019. It will need to ensure that on that date UK and EU businesses, consumers, citizens, government departments and agencies have the necessary certainty over such matters as legal status, rights and obligations. Providing such predictability means the UK will need to seek a transition period of some kind.

Whether this position paper will help diplomatically in the Brexit negotiations hangs on what the rest of the EU thinks. So far, the reception has been frosty, in large part because the EU wants to be discussing the exit deal and not a new relationship. Some have seen this and other position papers as a late attempt by the UK to do some strategic thinking about Brexit. Others, including the German newspaper Die Welt, make the acerbic observation that proposals involving minimal change to the relationship appear more more like a plan to join the EU than leave it.

In any event, the UK hopes to make some headway by using the dispute resolution mechanisms the EU already operates through EFTA, the EEA and trade deals as a precedent. And by acknowledging the idea of some role for the ECJ, the UK has diluted the red line May set down of cutting it out completely. While that will come as a relief to many in Brussels, the UK’s domestic political debate still conveys the impression that the country can forge a sort of ‘one European economic space, two systems’ approach for itself.

Not only does this rely on the questionable assumption that the EU will agree to such a deal, it also overlooks that for the EU Brexit is not just about the UK. A new UK-EU arrangement would have major implications for EFTA and the EEA, thus shaping the EU’s relationships with the rest of non-EU Europe. Indeed, for the EU, Brexit has never been as all consuming as it is for Britain. It is rather one aspect of a changing EU in a changing Europe where the future of the Eurozone and Schengen weigh more heavily on decision-makers minds.

That the UK Government has overlooked the views of the rest of the EU is because this paper is more about winning a battle within UK government and the governing Conservative party over how to face the practical realities of defining and implementing Brexit. It may be that Eurosceptic Conservative ministers and backbenchers can accept a role for the ECJ, at least in the short-term. How sustainable this will be in the longer-run remains to be seen. A lot will rest on what happens when the first dispute arises where the UK loses. Might Eurosceptics try to pass legislation to override the new procedure? How the EU reacts to such manoeuvres will have a decisive effect on the future EU-UK relationship.

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