LPF Principles and Precedents

EU Guidelines

The EU’s negotiation slides in relation to level playing field requirements refer to the EU Council’s guidelines of 2017 2018 and its conclusions of December 2019.

The fundamental principle is that any agreement with the UK must be based on a balance of rights and obligations and ensure a level playing field. There is a commitment to an ambitious free-trade agreement ‘is insofar as there are sufficient guarantees for a level playing field provisions. The EU insists on guarantees which ensure and enforce a level playing field.

The aim should be to prevent unfair competitive advantage which the UK could enjoy by undercutting levels of protection in relation to competition state aids tax social environmental and regulatory measures and practices. The EU approach will be to require a combination of rules aligned with those of the EU and International standards, and mechanisms to ensure effective implementation domestically, enforcement and dispute settlement mechanisms and remedies that are commensurate with the depth and breadth of the economic connectedness.

EU UK Political Declaration

The political declaration states that

The Parties should uphold the common high standards applicable in the Union and the United Kingdom at the end of the transition period in the areas of state aid, competition, social and employment standards, environment, climate change, and relevant tax matters.The Parties should, in particular, maintain:

• a robust and comprehensive framework for competition and state aid control that prevents undue distortion of trade and competition;
• commit to the principles of good governance in the area of taxation and to the curbing of harmful tax practices;
• maintain environmental, social and employment standards at the current high levels provided by the existing common standards.

In so doing, they should rely on appropriate and relevant Union and international standards and include appropriate mechanisms to ensure effective implementation domestically, enforcement and dispute settlement.

The future relationship should also promote adherence to, and the effective implementation of relevant internationally agreed principles and rules in these areas, including the Paris Agreement.The economic partnership should recognise that sustainable development is an overarching objective of the EU and the UK. The Parties should cooperate bilaterally and internationally to ensure fishing at sustainable levels, promote resource conservation, and foster a clean, healthy and productive marine environment.

The -parties will promote sustainable development and will continue to support the implementation of the United Nations Sustainable Development Goals and the European Consensus on Development.

The Parties recognise the importance of global cooperation to address issues of shared economic, environmental and social interest. As such, while preserving their decision-making autonomy, the Parties should cooperate in international fora, such as the G7 and the G20, where it is in their mutual interest, including in the areas of […] – climate change; – sustainable development; – cross-border pollution.

The EU indicates that the agreement should uphold high EU and international standards in certain areas. The EU and UK should continue to improve their respective levels of protection with the goal of ensuring high levels of protection. The rules would cover competition, including state aid to private business, taxation labour and social, environmental fight against climate change. In addition, there would be additional commitments in certain sectors.

There must be effective implementation domestically. There must be effective enforcement and dispute settlement arrangements between the EU and UK, including rights for the EU to act unilaterally by way of interim measures to disruptions of the level playing conditions in relevant areas.

The joint committee of the EU and UK should be empowered to modify commitments over time to lay down higher standards and include additional areas.

CETA (EU Canada) Article 24.5

Upholding levels of protection

1. The Parties recognise that it is inappropriate to encourage trade or investment by weakening or reducing the levels of protection afforded in their environmental law.
2. A Party shall not waive or otherwise derogate from, or offer to waive or otherwise derogate from, its environmental law, to encourage trade or the establishment, acquisition, expansion or retention of an investment in its territory.
3. A Party shall not, through a sustained or recurring course of action or inaction, fail to effectively enforce its environmental law to encourage trade or investment.

EU/Korea Article 13.7

Upholding levels of protection in the application and enforcement of laws, regulations or standards

1. A Party shall not fail to effectively enforce its environmental and labour laws, through a sustained or recurring course of action or inaction, in a manner affecting trade or investment between the Parties.
2. A Party shall not weaken or reduce the environmental or labour protections afforded in its laws to encourage trade or investment, by waiving or otherwise derogating from, or offering to waive or otherwise derogate from, its laws, regulations or standards, in a manner affecting trade or investment between the Parties.

EU/Japan Article

16.2 Right to regulate and levels of protection

1. Recognising the right of each party to determine its sustainable development policies and priorities, to establish its own levels of domestic environmental and labour protection, and to adopt or modify accordingly its relevant laws and regulations, consistently with its commitments to the internationally recognised standards and international agreements to which the party is party, each party shall strive to ensure that its laws, regulations and related policies provide high levels of environmental and labour protection and shall strive to continue to improve those laws and regulations and their underlying levels of protection.
2. The Parties shall not encourage trade or investment by relaxing or lowering the level of protection provided by their respective environmental or labour laws and regulations. To that effect, the Parties shall not waive or otherwise derogate from those laws and regulations or fail to effectively enforce them through a sustained or recurring course of action or inaction in a manner affecting trade or investment between the Parties.

TTIP

The EU’s position paper on the Trade and Sustainable Development chapter contained the following explanatory text:

“IV. Trade and Sustainable Development – horizontal issues

1. Upholding levels of protection This article would include the following key elements:

1) the recognition that it is inappropriate to attract trade or investment by weakening or reducing the levels of protection embodied in domestic environmental or labour laws;

2) the commitment by each party not to waive or derogate, or offer to do so, from the domestic environmental and labour laws it has set, in a manner that affects, or with a view to encouraging, trade or investment;

3) the commitment by each party not to fail, through a sustained or recurring course of action or inaction, to effectively enforce the domestic environmental and labour laws it has set, in a manner that affects, or with a view to encouraging, trade or investment.”

UK Chequers White Paper

In its July 2018 White Paper, the UK proposed a common rulebook in some areas in which the UK would align itself with EU legislation. In relation to these areas, it would update rules to reflect EU legislation as it changed over time. This is sometimes referred to as dynamic alignment. Similar questions on the scope and enforcement would arise as in the case of non-regression.

However, it seems unlikely that the UK would be willing to commit to a common rulebook and an ongoing basis in view of its published positions. It would require ongoing discussion in the joint committee regarding upcoming UK and EU rules. Questions would arise as to whether the new rules would be incorporated into the UK EU relationship. If the parties disagreed rebalancing measures would be required, including by way of penalties. Equally and ultimately the agreement might be suspended in whole or in part if the equivalence was not maintained.