Following Brexit – Which arrangements for the future UK-EU relationship?

In the following an attempt is made very briefly to explain why Mr. Barnier’s conclusions are fully correct, as long as Ms. May’s red lines, expressed in her Lancaster House speech and in the Government’s White Paper, are maintained. The first two imply that for the new arrangements with the EU there will no longer be any direct applicability/effect or role for the interpretation of the CJEU in the UK.

The particular constitutional character of the EU

First of all, it is vital to keep in mind the unique and particular character of the EU as a Union of law, where the guarantees for legal certainty and non-discrimination are particularly strong, not only for the EU Member States but also for their nationals and economic operators. This extends to the point that a citizen of a third country, with which the EU has an agreement, may use the EU Court of Justice (CJEU) to guarantee that his rights under the Agreement are respected. Respect for the autonomy of the EU and its legal order, including the role of the CJEU is fundamental for the EU, as also recalled by the European Council in its Art. 50 guidelines of 29 April 2017. This sets the limits for how far the EU may go in concluding an international treaty. A non-respect thereof will risk the CJEU finding a deal concluded incompatible with the EU Treaties and thus annulled.

The EEA precedent

The most far-reaching Agreement ever concluded by the EU is the European Economic Area (EEA) Agreement, which came into force on 1 January 1994 between the EU and it’s then 12 Member States, on the one hand, and five EFTA States, on the other.

The objective of the EEA is to achieve the fullest possible realisation of the free movement of goods, services, capital and persons with the relevant acquis communautaire as a common legal basis. This means that the full acquis is taken over in all areas of the Internal Market of relevance for the EEA. This applies also in the future to new EU acts or amendments to the acquis. The EEA Agreement creates a parallel legal order to the EU one, EEA law, that mirrors EU law and which in areas covered by both orders, delivers the same result as EU law, to the benefit of individuals and economic operators within the whole of the EEA. Thus, in practice the Single Market has been widened to encompass also the EEA EFTA States.

Obviously, the legal guarantees to securing a dynamic and homogeneous (the two for EEA characterizing adjectives)EEA were decisive for the conclusion of the EEA. While the EC had special supranational institutions for monitoring the application of Treaty rules (the Commission) and for their interpretation (the ECJ), the EFTA side had nothing similar. Most EFTA States also followed a dualistic legal tradition as to international treaties and national law. The ECJ had shown that the 1972 Free Trade Agreements (FTAs) between the EC and the EFTA States as forming part of Community law were directly applicable. Sufficiently precise and clear provisions could also produce direct effect in the EC, if invoked by EFTA individuals and economic operators. This legal imbalance could not be acceptedin a future more elaborated relationship with EFTA. National courts or institutions could never replicate the supranational institutions of the EC. This led to the creation of the EFTA Court and the EFTA Surveillance Authority for the EFTA pillar in the EEA.

The EU Council has repeatedly, and most recently on 28 August 2017, expressed dissatisfaction with the state of affairs with Switzerland and recalled that, in order to ensure homogeneity and legal certainty for citizens and businesses, a precondition for further developing the sectoral approach is the establishment of a common institutional framework for existing and future agreements, through which Switzerland participates in the EU’s Single Market. The conclusion of such an agreement would allow the EU-Swiss comprehensive partnership to develop to its full potential.

Conclusions

Today the EU Internal Market, 25 years after the completion of the Delors Commission White Paper program, has become comprehensive and complex in a way that is without precedent. The areas of the four freedoms are now so interdependent that, apart from full EU Membership, participation in the Single Market can only be granted if sufficient legal and institutional guarantees for homogeneity and legal certainty are given. Of the different arrangements listed by Mr. Barnier, only the EEA has the necessary institutional mechanisms to allow participation in the EU Internal Market on equal and non-discriminatory conditions. Since Switzerland, that is closest to the EEA, does not offer the guarantees for legal certainty and non-discrimination, the EU has put a break on further developments. Even if, as in the Swiss case, the ambitions as to the scope of participation in the Single Market would be more limited than in the EEA, credible institutions and guarantees for equal treatment and non-discrimination are needed in order to prevent a legal imbalance in relation to the EU. The Canada and South Korea examples are much less advanced both as to substance and institutionally. Disputes are settled between Contracting Parties either by WTO or special arbitration panels. Individuals or economic operators have no direct access to Courts.

As to which arrangements that may be possible for the UK-EU relations after BREXIT, given the UK red lines it is clear that the Canada and South Korea FTAs provide the most advanced models. The answer could also be expressed by modifying the famous quote from Bill Clinton’s 1992 presidential campaign to: “It’s the institutions stupid!”