EU/UK Dispute resolution post-Brexit in the light of the White Paper

Catherine Barnard
and Emilija Leinarte*

*Professor of EU
law, University of Cambridge and PhD student, University of Cambridge. This
research has received support from the ESRC’s UK in a Changing Europe

The recent report
published by UK in a Changing Europe discussed different governance structures
that could potentially regulate UK-EU relations post-Brexit. The now published White
provides insight into the sort of institutional framework the UK will
seek from the EU upon its withdrawal. Is there merit in the UK’s proposals? Are
there alternatives? We look into the options for the dispute resolution
mechanism post-Brexit.

Institutional arrangements

The White Paper
suggests that the governance of the UK-UK relations could be laid down in an association
(AA). The agreement would provide an overarching institutional
structure which would cover the majority of the individual agreements for
different elements of economic, security and cross-cutting cooperation. The form
of economic cooperation is likely to be concluded in the form of a mixed free trade
agreement (FTA).

The White Paper
suggests governance through two main institutions:

a Governing Body which would set
the general direction for the future relationship and,

a Joint Committee which would be
directed by the Governing Body and would manage the implementation of the

Member States will
be given authority through the Governing Body, which would consist of the heads
of states and the presidents of the EU institutions and would meet at least
biannually. Ad hoc meetings at ministerial level would also be held. The Joint
Committee would consist of officials from the EU and the UK. In addition, the
UK Parliament and the European Parliament would maintain a regular and formal

The overall
structure proposed in the White Paper is hybrid (see p. 21 of the report)
because Member States of the EU as well as EU institutions would have authority
in the governance of the relationship. This is different to other EU
association agreements where Member States do not have a direct role in the
supervision and implementation of the agreement. For example, under both the
EU-Ukraine AA and the EU-Moldova AA the Association Council plays a role
similar to that of the Governing Body. The Association Council consists, on the
EU’s part, of members of the Council of the European Union and members of the
European Commission. The structure of the EU’s AAs is commonly supranational
because representatives from the EU institutions rather than member states are given
the task of overseeing the implementation of the agreements.

Dispute resolution

The White Paper also
proposes a framework for dispute resolution between the parties to the AA. The
suggested mechanism would cover binding commitments between the parties, such
as trade obligations. Protection of private rights is not covered and so
British individuals or companies who consider their rights under the AA to have
been infringed would only be able to enforce their rights in the UK through the
UK courts and in the EU by the EU courts (para. 33 of the White Paper). This is
typical of the EU’s AAs. For example, Article 402 of the EU-Moldova AA also
excludes private rights from dispute resolution. The Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP), which replaced the
Trans-Pacific Partnership (TPP) when the US withdrew from negotiations last
year, also expressly excludes private action against the contracting parties
(Article 28.22).

Private rights are
also excluded from the dispute resolution mechanism under the Agreement on the
European Economic Area (EEA Agreement) between the EU and members of the
European Free Trade Area (EFTA) Norway, Liechtenstein and Iceland. To fill the
gap, the European Commission, on the EU’s side, and the EFTA Surveillance, on
the EFTA side, can receive complaints concerning the application of the EEA
Agreement (Article 109(3) of the EEA Agreement) and may impose a fine on
private persons if they breach the EEA Agreement (Article 110 of the EEA

The EU’s recently
concluded FTAs, such as the EU-Canada Comprehensive Economic and Trade
Agreement (CETA), establishes a separate mechanism for investor claims and
disputes arising in the financial services sector. Compensation awarded to
investors is the primary remedy for such claims. The White Paper does not
discuss this option. It is unclear whether the UK-EU FTA will contain an
investment protection chapter.

Dispute resolution body

The White Paper says
that disputes between the EU and the UK must be raised in the Joint Committee. Intermediation
by an executive body is common to dispute resolution under the EU’s AAs. For
example, under the EU-Moldova AA consultations are sought by sending a written
request to the other party, copied to the Association Committee in Trade
configuration (equivalent to a trade subcommittee of the Joint Committee). A
similar arrangement for filing trade disputes is provided in the EU-Ukraine AA (Article

If negotiations
fail after a reasonable period of time, either of the parties may refer the
dispute to an independent arbitration panel. Dispute resolution by independent
arbitration panels is also typical in the EU’s AAs, including the EU-Moldova AA
(Article 385) and the EU-Ukraine AA (Article 306). State-to-state dispute
resolution under the EEA Agreement is different in this respect as it does not
provide for the establishment of independent arbitration and instead gives the
judicial function to an executive body (Article 111(2)).

The composition and
process for appointment of an arbitration panel are not laid down in the White
Paper, nor are the criteria for access to it, nor whether its findings will be
published. All that is known so far is that the panel would include members
from both parties. To this end, Article 28.9 of the CPTPP may serve as a
template as it provides detailed rules on the composition of panels.


The White Paper
provides that in case of non-compliance, a complaining party may take measures
to mitigate harm caused by the breach. These measures may include financial
penalties or suspension of specific obligations (i.e. retaliation). As is
common with trade regimes such as the WTO and CETA, such measures must be
temporary and proportionate. Compensation and suspension of obligations for
violations of trade obligations is typical to the EU’s AAs and are provided in
both the EU-Moldova AA (Article 393) and the EU-Ukraine AA (Article 315).

In relation to
suspension of obligations, WTO law allows a complaining party to
cross-retaliate against any economic sector of the non-compliant state. In case
of non-compliance by the EU, the so-called ‘carousel’ principle applies – goods
and member states which are targeted by cross-retaliation rotate so that
consequences are not concentrated in one member state and with respect to one
product. The White Paper does not consider whether the same principle should apply
to the UK-EU relationship. It only notes that suspension of obligations should
be localised to the extent possible to the area of the future relationship that
the dispute concerned (para. 46 of the White Paper). This is likely to be
interpreted as meaning that in case of breach of trade obligations, suspension
of obligations should be limited to trade.

In sum, the dispute
resolution mechanism outlined in the White Paper is a mix of common features
found in other EU association agreements as well as some innovative features.
The proposal is up for negotiation with the EU, but it is Westminster rather
than Brussels that will likely subject the proposal to most intense scrutiny
and criticism.

The role of the CJEU

The influence of
the Court of Justice of the European Union (CJEU) over the judicial system of
the United Kingdom was, according to the Prime Minister, one of the key reasons
which led to the Brexit vote. The Government has repeated time and time again
that leaving the EU means leaving the jurisdiction of the EU Court. This has
been a government red line. Yet, both in her Florence speech delivered on 22
September 2017 as well as in her Mansion House speech of 2 March, Theresa May
suggested that judgments of the CJEU could be taken into account by the UK
courts to ensure consistent interpretation of relevant EU law. This particular
red line has already shown a pinkish hue.

So what exactly
does it mean to leave the jurisdiction of a court but take its judgments into

intentionally, the White Paper does not provide a straightforward answer to
such a fundamental question. The document does suggest that the CJEU could have
a dual role post-Brexit: (1) in relation to the UK courts when enforcing
private rights stemming from the future relationship, and (2) in relation to
the state-to-state dispute resolution mechanism. This is different to the EU’s
recently negotiated FTAs, such as CETA where the CJEU has no role whatsoever.
It is, however, typical in the EU’s AAs, perhaps because the aim of AAs is to
lead to membership in the EU (this is not the case for economic cooperation
under the FTAs). What the White Paper does demonstrate is that the sloughing of
the CJEU skin is considerably more difficult than many Brexiters liked to

Let us address the
dual role of the CJEU suggested in the White Paper.

The role of the CJEU in domestic cases

An obligation for
the UK courts to follow the CJEU’s case-law differs depending on whether the
dispute concerns the ‘common rulebook’ or other binding commitments under the
future agreements. A ‘common rulebook’ is a customs arrangement proposed in the
White Paper which effectively means that the UK would maintain the same rules
for trade in goods as those of the EU in order to maintain frictionless trade
and avoid Ireland/Northern Ireland border. It is not clear whether the UK
intends to update its rules in line with changes in EU law.

The White Paper also
suggests that when the UK courts enforce private rights stemming from
commitments other than those related to the common rulebook, they ‘could’ take
into account the relevant case law of the CJEU. This broadly confirms the
language of s.6(2) of the recently adopted EU
(Withdrawal) Act 2018
which provides ‘a court or tribunal may have regard
to anything done on or after exit day by the European Court … so far as it is
relevant to any matter before the court or tribunal.’

In addition, the
White Paper opens a backdoor to the CJEU’s case law. In case of ‘significant’
divergence between the interpretation of the agreements by the EU and UK
courts, the Joint Committee (the governing body for the future relationship) ‘could
be empowered to act to preserve the consistent interpretation’ (para. 34 of the
White paper). The practicalities of indirectly giving such unprecedented power
over domestic courts to an executive body are not detailed.

An obligation for
the UK courts to follow the CJEU’s case-law is stronger in relation to the
common rulebook: the UK ‘would’ commit to its courts paying due regard to the
CJEU’s case law. This effectively means that the CJEU’s interpretation of rules
governing trade in goods would be binding on UK courts. Neither the EU-Moldova,
nor the EU-Ukraine AAs set such obligation, perhaps because the EU does not
have a common rulebook with them. Instead, they commit themselves to
progressive legislative approximation, that is making their laws similar to
those of the EU. In the process of legislative approximation, due regard must
be given the case-law of the CJEU (e.g. Article 153 of the EU-Ukraine AA on the
approximation of public procurement rules) but that is different from directly
binding domestic courts to follow the CJEU’s case-law.

On the other hand,
the implementation of rights and obligations stemming from the EU-Turkey
Customs Union
, in so far as they are identical to corresponding provisions
of EU Treaties, must be interpreted in conformity to CJEU’s case-law (Article
66 of Decision No 1/95 of the EC-Turkey Association Council). Unlike
association with Moldova and Ukraine which do not have a customs union with the
EU, Turkey must ensure that its trade policies are compatible with those of the
EU in order to maintain frictionless trade.
The UK courts would
not, however, be able to make a preliminary ruling to the CJEU to ask for the
CJEU’s interpretation on a certain aspect of EU law (para. 35 of the White
Paper). However, the draft Withdrawal
, which governs the UK’s exiting from the EU as well as matters
related to the transitional relationship (i.e. post 29 March 2019 until 31
December 2020), does allow EU citizens to ask UK courts to make a reference to
the Court of Justice. Article 151(1) of the Withdrawal Agreement states that
when dealing with cases concerning citizens’ rights which were commenced within
8 years from the end of the transition period, the UK courts will be able to
request the preliminary ruling (i.e. decision on interpretation) from the CJEU
(without the presence of a British judge). The time-limits of the transition
period are not (yet) known, but it may be extended for some years.

So, in answer to
the question, has the UK been set free from the CJEU, the answer must be: not
as much as many might like.

The role of the CJEU in dispute resolution between the

The White Paper
also discusses resolution of disputes between the UK and the EU, as opposed to
cases in the UK courts enforcing private rights.

between the UK and the EU over the common rulebook for trade in goods would
have to be resolved consistently with the CJEU’s case law. The Joint Committee
(by mutual consent) or the arbitration panel would be able to make a
preliminary reference to the CJEU. The CJEU’s interpretation of points of EU
law would be binding on the Joint Committee and the arbitration panel (para. 42
of the White Paper).

This is not novel.
Article 403 of the EU-Moldova AA provides that the CJEU’s rulings are binding
on matters of EU law in disputes between the EU and Moldova (this would cover
the common rulebook). Similarly, Article 322 of the EU-Ukraine AA provides that
where a dispute raises a question of EU law, the arbitration panel must request
the CJEU’s ruling which would be binding on the arbitration panel.

The approach
adopted under the EEA Agreement is different. Reference to the CJEU is neither
mandatory nor automatic – only if the dispute has not been settled within three
months after it has been brought before the EEA Joint Committee, the parties
‘may’ agree to request the CJEU to give a ruling on interpretation of relevant
points of EU law (Article 111(3) of the EEA Agreement).

In sum, the degree
of influence of the EU Court over the UK’s judiciary will to a large extent
depend on how much EU law will be let into the domestic system: the deeper the
relationship, the bigger the role for the EU Court. A full stop to the
jurisdiction of the CJEU would be a reality in case of a ‘no deal’ Brexit, and
even in this situation the Withdrawal Act makes clear that the British courts
may still take account of the case law of the Court of Justice because given
the volume of EU law which is incorporated into UK law, the case law of the
Court will have influence for decades to come.

Barnard &
Peers: chapter 27

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