Notification and negotiation: the mechanics of Article 50 and future mechanisms of dispute resolution between the UK and the EU

The Prime Minister’s self-imposed deadline of the end of March 2017 to make an Article 50 TEU notification is fast approaching. While the Government has declared that the UK intends to leave the Single Market, the UK is also a Contracting Party to the EEA Agreement. The EEA Agreement is incorporated into domestic law through the European Economic Area Act 1993, which amended the European Communities Act 1972. It extends the Single Market to three EFTA States: Iceland, Liechtenstein and Norway. The EEA Agreement contains an exit provision, Article 127 EEA, which is similar to Article 50 TEU: it provides for a notice period of 12 months to be followed by an international conference. However, the bill currently before Parliament does not authorise the Prime Minister to make an Article 127 EEA notification. In Yalland and Wilding v Secretary of State, the Divisional Court dismissed as premature the ‘Article 127 EEA’ litigation which followed on the coattails of Miller. Nevertheless, as a standalone and independent treaty it is reasonable that the UK must make an Article 127 EEA notification or be in breach of its international obligations.

The Supreme Court in Miller did not assess whether an Article 50 TEU notification is revocable and the question remains unresolved. In the so-called ‘Three Knights’ Opinion,’ Sir David Edward KCMG PC QC, Sir Francis Jacobs KCMG PC QC, Sir Jeremy Lever KCMG QC, Helen Mountfield QC and Gerry Facenna QC advise that, if Parliament were to refuse to give legal effect to the terms of a withdrawal agreement negotiated with the EU, or were to refuse to authorise withdrawal in the absence of any agreement, the notification given by the UK of its intention to leave the EU could be treated as having lapsed (since the constitutional requirements would not have been met). Notification could even be unilaterally withdrawn, as - according to that opinion - Article 50 TEU cannot have the effect of ejecting a Member State from the EU contrary to its constitutional requirements. Remarkably, an action has been brought before the High Court in Dublin, seeking a reference to be made to the CJEU to determine whether, as a matter of EU law, an Article 50 TEU notification is revocable.

Once the UK has notified the European Council of its intention to leave the EU, the EU will convene a summit to determine its negotiating guidelines. The President of the European Council, Donald Tusk, has indicated that he will reply to the notification, presumably by letter, within 48 hours. The Commission will then promulgate a negotiation directive, which will require the Council’s approval. Optimistically, it will take two months before the remainder of the EU (‘rEU’) will be prepared to negotiate. The withdrawal agreement shall be negotiated in accordance with Article 218(3) TFEU, being concluded on behalf of the EU by the Council (acting by qualified majority) after obtaining the consent of the European Parliament, and will take account of the framework for the UK’s future relationship with the EU. The EU Treaties shall cease to apply to the UK from the date of entry into force of the withdrawal agreement or, failing that, after two years unless that period is unanimously extended. While impending elections in the Netherlands, France, Germany, and potentially Italy, as well as a second Scottish independence referendum, could transform the nature of negotiations altogether, the rEU’s strongest card in the negotiations is the two-year window. The unanimity requirement makes it unlikely this window will be extended, unless a draft agreement is ready, but has been referred to the CJEU. However, even if the two year window would overrun, negotiations may encounter additional difficulties as they will overlap with the May/June 2019 European Parliament elections.

The UK intends to deliver Brexit in a ‘smooth orderly’ manner with a ‘comprehensive free trade agreement’ being ‘reached’ within the two-year period followed by a phased process of implementation. The UK is most unlikely to achieve a perfectly bespoke agreement with the rEU. Rather, it is likely to be ‘made to measure’: based on an existing model relationship with the EU, but altered to take account of the parties’ preferences and particularities. The greater the variations the less probable it is that the agreement will be ‘reached’ within a two-year period. Also, the rEU may insist on negotiating an ‘exit’ agreement prior to any trade negotiations, addressing the UK’s assets and ongoing liabilities.

It is important to note that Brexit creates, as a matter of EU law, a new category of country – a former EU Member State – and that the negotiations will form a precedent. Professor Kalypso Nicolaïdis has argued cogently that the rEU must treat a former Member State in a manner superior to all other non-EU Member States, because of the rEU’s national self-interests should they ever seek to leave the EU, and because the exiting Member State is fully compliant with the acquis. Understandably, the rEU will seek to minimise damage to the ‘EU project’; this is demonstrated by the Commission’s new white paper setting out that the EU will continue to integrate although possibly at different speeds. The UK could embrace this notion by ensuring that if it seeks a bilateral relationship with the rEU, that this be open to accession by other countries.

Looking forward to the resolution of the negotiations, it is important that serious consideration be given to ensure that individuals and companies are able to enforce their rights under the intended partnership agreement with the rEU. The UK has emphasised its determination to no longer be subject to the jurisdiction of the CJEU. Annex A to the UK Government’s white paper indicates that the Government may prefer that any disputes be adjudicated through arbitration or diplomatic committees rather than before a court. Arbitration on such a scale would be extremely expensive, and it is questionable if the UK would want CETA-style investor-State arbitration.

Whether arbitration would be acceptable to the EU, however, is more than doubtful; Article 111(4) EEA, for example, states that no question of interpretation of provisions of EEA law that are identical in substance to provisions of EU law may be dealt with in arbitration procedures. Even were the EU to agree, which would require it to abandon its position taken vis-à-vis Switzerland since 2008 (and most recently expressed in the Council Conclusions of 28 February 2017), it would make the intended relationship rather amorphous, as the structures which would allow the agreement to function in practice would be lacking.

The experience of the EEA/EFTA States has been that it is of great advantage to have an ‘own court.’ A court provides a gateway to justice for companies and individuals that State-to-State arbitration cannot, as a party who considers that its rights have been infringed requires political support in order to bring its case. Indeed, the strength of the EEA Agreement lies in its robust institutions, most recently demonstrated in the EFTA Court’s Case E-21/16 Pascal Nobile. The Order of the President of 20 February 2017 in that case made explicit that ‘the Court assumes an essential role in the EEA legal order and the proper composition of the Court is key to the observance of the rights and obligations flowing from the EEA Agreement. Without an independent court, the purpose of the Agreement would be rendered nugatory and the EFTA States would fail to safeguard the protection of the rights of individuals and economic operators. To maintain the independence of the judiciary is not a privilege for judges, but a guarantee for the respect of these rights and a bulwark of the democratic order.’

The UK could propose the creation of a new UK-rEU court to resolve disputes under the future agreement. While institutions take time to achieve maturity, a purely bilateral new court could fall foul immediately of the ECJ’s Opinion 1/91. The UK could potentially, as the EU has proposed to Switzerland, to accede to, or ‘dock’ to the EFTA EEA institutions: the EFTA Surveillance Authority, and the EFTA Court, with UK personnel working at those institutions and with a UK judge sitting on the EFTA Court bench for UK-rEU agreement cases. The EFTA Court is completely independent of the CJEU. It is a robust, mature, efficient and respected institution whose working language is English. The EFTA Court is the only court of general jurisdiction that the CJEU regularly cites - there are around 160 references to EFTA Court jurisprudence.

It is difficult to predict the outcome of the impending negotiations. Both sides must be positive, rational, and show understanding in order to achieve, in the Prime Minister’s words, a ‘mature, cooperative relationship’ to the benefit of all.

Michael-James Clifton is a barrister and the chef de cabinet of the President of the EFTA Court, Carl Baudenbacher.

He obtained his LL.B. (EU) from the University of Leicester and his LL.M. Adv. from Leiden University cum laude and Valedictorian. Called to the Bar in 2009, he was formerly an Associate at VVGB in Brussels and stagiaire to Advocate General Eleanor Sharpston. From 2012 He was a Legal Secretary in the Chambers of President Baudenbacher. He completed his pupillage at Monckton Chambers. He is Co-Chair of the Procedural Law module on the Executive M.B.L. programme at St. Gallen University. He is also Editor-in-Chief of the European Law Reporter.

All views expressed are personal and cannot be attributed to his employer.