The institutional framework should prevent disputes arising but in the unlikely event that they did, it should be designed in a way that facilitates dialogue. But where international agreements include binding commitments on the parties, it is important that they include provisions to ensure that formal disputes over these commitments can be resolved quickly and fairly. To provide as much legal certainty as possible, the future relationship should also outline the potential implications of a party not complying with these commitments. Further, to ensure that both parties can respond to unforeseen shocks, whether economic, social, environmental or security-related, the future relationship should include provisions for how the agreements would allow both the UK and the EU to respond.
The mechanisms for resolving disputes
The different types of dialogue between leaders and experts should ensure that cooperation is maintained without issues arising. However, in those few circumstances where informal discussions did not resolve a particular issue, a formal dispute would be raised in the Joint Committee.
Should efforts to resolve a dispute by negotiation fail after a defined period of time, it would make sense in some cases for either party to have the option of referring the issue to an independent arbitration panel, which would include members from both parties. In some instances, the arbitration panel might include specialist expertise such as where a dispute required detailed sectoral knowledge. This would ensure that there was a fair, prompt and independent resolution, with the decision of the panel binding on the parties. The merits of whether this should be an option should be assessed on a case by case basis across different forms of cooperation.
Where the UK and the EU had agreed to retain a common rulebook, it is possible that a dispute could relate to whether these rules had been interpreted correctly. The UK recognises that only the CJEU can bind the EU on the interpretation of EU law, and therefore in these instances, there should be the option for a referral to the CJEU for an interpretation, either by mutual consent from the Joint Committee or from the arbitration panel.
The CJEU would only have a role in relation to the interpretation of those EU rules to which the UK had agreed to adhere as a matter of international law. The Joint Committee or arbitration panel would have to resolve the dispute in a way that was consistent with this interpretation. This would respect the principle that the court of one party cannot resolve disputes between the two.
This process would be separate to other routes the parties might have for resolving disputes in other international agreements. For instance, the parties could choose whether to raise a dispute through the WTO, where relevant, or through the process set out above.
Dealing with non-compliance
Once an agreement is reached between the UK and the EU on the shape of the future relationship, there is no reason to expect that either party will break the commitments the UK and the EU have made to each other. However, as is normal in international agreements, the UK and the EU will still need to agree on what should happen if one party is in breach of the agreements. Of course in parts of the future relationship where the UK does not make binding commitments, non-compliance would not be relevant.
There are two main scenarios where non-compliance might happen. First, if a dispute was not resolved by the Joint Committee within a defined period of time and the agreement did not provide the option for the dispute to be passed to independent arbitration. Second, if either the UK or the EU considered that the other party had not complied with a decision made by the Joint Committee or arbitration panel within a reasonable period of time.
In either of these situations, the complaining party should be able to take measures to mitigate any harm caused by the breach. To ensure that they are fair, and do not unnecessarily disrupt cooperation, these measures should be:
- proportionate to the scale of the breach;
- temporary, and only in effect for, or related to, the period of non-compliance; and
- localised to the extent possible to the area of the future relationship that the dispute concerned.
The type of measures that could be imposed for different sorts of breaches would be technical but could include financial penalties or suspension of specific obligations. The proportionality and duration of such temporary measures should be subject to challenge through independent arbitration.
If the offending party failed to comply with the finding of the independent arbitration panel, the only option available to the complaining party would be to suspend parts of the future relationship on a temporary basis. This should only be considered as a last resort.
The parties should commit to giving priority to those measures which cause the least damage to the functioning of the future relationship, as this would be in the interests of citizens and businesses across the UK and the EU.
By way of example, the US has included financial compensation in eleven free trade agreements, including US-Australia, and the EEA Agreement has a provision for suspension. Consideration should also be given to whether defined consequences could be included within the agreements, such as predetermined reductions in market access where the UK relied on a provision in the agreements allowing it not to apply every aspect of EU rules.
Safeguarding against shocks
The UK and the EU are expected to maintain the commitments that they make in the future relationship. However, there may be times where unexpected events mean that the parties need to respond quickly, and with provisions that would otherwise be in breach of the agreements. This would apply in circumstances of significant economic, societal or environmental difficulties.
It will be important for the future relationship to recognise that in these circumstances, there should be provision for temporary action to be taken, without breaching the relevant agreement. But to ensure that the future relationship is still fair, if the action resulted in one party gaining an undue competitive advantage, the other party would have the right to take steps to rebalance the agreement. Any measures would be subject to challenge through independent arbitration.
This Article draws on the White Paper The Future Relationship between the United Kingdom and the European Union Presented to Parliament by the Prime Minister July 2018 Cm 9593. UK public sector information is reproduced pursuant to the Open Government Licence The Legal Materials contain UK public sector information licensed under the Open Government Licence v3.0. The Licence is available at http://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/ (the UK Licence).