Brexit update: private international law, Covid-19 & trade negotiations

Private International Law

On 4th May 2020  the House of Lords Constitution Committee published a report recommending that Clause 2 of that Private International Law (Implementation of Agreements) Bill be deleted.

The Bill itself has become necessary in order to enable the UK to fill the gap left by Brexit in the regime of private international law agreements and treaties to which the UK has been party by virtue of its EU membership.

Clause 2 of the Bill would enable the UK Government to introduce such international agreements and treaties into UK domestic law without proper UK Parliamentary scrutiny, according to the House of Lords report. This is through the use of so-called “Henry VIII” powers in the Clause enabling Government Ministers to change UK domestic law by statutory instrument without having to get Parliamentary approval to the enactment of a new Act or Acts of Parliament changing the law to implement the relevant international agreements and treaties into UK domestic law.

One of the big issues relating to the complex implementation into UK domestic law of new provisions to replace provisions formerly adopted at EU level has been the degree of domestic oversight to which such implementation provisions should be subject. This is likely to be an issue that will run throughout the Brexit implementation process.

A separate development on the private international law front has been the publication on 4th May 2020 by the UK Law Societies’ Joint Brussels Office of a paper advocating that the  UK signs up to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters which was concluded on 2nd July 2019 but is not yet in force. So far, only the Ukraine and Uruguay have signed up to the Convention and the EU is still considering its position. The UK Law Societies believe, however, that though the Hague Convention is not as comprehensive in its scope as the 2007 Lugano Convention (to which the UK has applied to adhere with the support of three of the EFTA states, Iceland, Switzerland and Norway but is still awaiting the response of the EU), signing up to the 2019 Hague Convention would enhance the UK’s role as an internationally recognised venue for civil jurisdiction judgments without prejudicing its application to adhere to the 2007 Lugano Convention.

Brexit, Covid-19 and Economic and Legal impacts

The devastating impact of Covid-19 on European economies, both within the UK and within the EU, has complicated the UK-EU discussions for a new post-Brexit relationship following the end of the transition period (currently due to expire on 31st December 2020).

The Law has also had its impact because, for instance, as further described later in this article, the German Constitutional Court has given a ruling in the week ending 9th May 2020 requiring the European Central Bank (ECB) to provide within three months  a fuller explanation of its bond-buying programme – on pain of excluding the German Bundesbank from one of its key stimulus packages.  The relationship between the German Constitutional Court and the European Court of Justice in claiming oversight over the activities of the ECB is proving to be a matter of contention in this regard. Internal turmoil within the EU does not portend well for the EU’s ability to reach agreement with the UK on their post-Brexit relationship.

Such domestic upheavals might, however, possibly encourage both the UK and the EU negotiating teams to take a more pragmatic approach towards reaching agreement on the new post-Brexit relationship. Paul Drechsler, former President of the Confederation of British Industry and current Chairman of London First, is reported by The Sunday Times of 10th May 2020 to have said in the light of the current economic crisis: “What the economies of Europe and the UK have in common is the need for the best possible economic growth in the short to medium term. They should work together to support growth and avoid any actions that would add friction.” We shall have to see what happens!

Meanwhile, one area of UK-EU co-operation which can be reported is that on 11th May 2020 the European Commission announced that it had approved, under EU state aid rules in force in the UK in the current transition period, the UK scheme to support the self-employed and members of partnerships affected by the coronavirus outbreak.

A Further Round of Brexit Talks

The third round of negotiations between the UK and the EU for a new post-Brexit relationship took place by video-conference from 11th to 15th May 2020. The agenda for this round published separately by both sides on 8th May 2020 showed that there were to be separate sessions on a broad range of topics, including Trade in Goods, Trade in Services and Investment “and Other Issues”, Level Playing Field discussions for Open and Fair Competition, Transport (including Aviation and Roads) and Law Enforcement Co-operation. On Fisheries, also a topic for a separate discussion, the UK side was reported to have drafted a fisheries treaty for consideration by the EU but the parties are believed to be far apart on the question of EU access to British waters following the end of the Brexit transition period (currently due to occur on 31st December 2020).

Unfortunately, the press statements issued by both sides at the end of this third round of negotiations were not encouraging and were united only in showing that the two sides remained far apart – in particular on the question of the so-called “level playing field “ for open and fair competition but also on fisheries and on the role of the European Court of Justice in interpreting EU law for the purposes of any treaty concluded between the UK and EU in respect of their hoped for new relationship. Both sides claim that they are following the line set out in the non-binding Political Declaration and each side accuses the other (very politely) of being out of step with the Political Declaration. Where will it all end? Has the real discussion even begun? The fourth round of negotiations which is due to start on 1st June 2020 is no doubt awaited with bated breath!

The UK side has now at least said that it will publish for all to see the draft legal texts (including on fisheries) that it has sought to negotiate with the EU. The EU side has already published its own draft treaty agreement (although with a number of gaps). At least, the negotiating process is becoming more transparent.

The failure to make progress on the substantive negotiations brings into sharper focus the question of whether the transition period under the UK-EU Withdrawal Agreement, which is presently due to expire on 31st December 2020, will be extended for up to two years by agreement of the UK and the EU so as to give more time for the parties to negotiate their post-Brexit relationship. The UK side is reported to be fearful that if it agrees to such an extension it will be locked into an avalanche of new EU legislation designed to enable the recovery of EU member states without having the possibility of voting on such legislation. The EU side appears to think that the present time-frame for negotiations is just unrealistic. (Interestingly, and perhaps somewhat unexpectedly, the UK Labour Party Leader and as such the Leader of the Opposition in the UK House of Commons, Sir Keir Starmer, was reported by The Times of 12th May 2020 to have come out on the side of the UK Government in not supporting the idea of an extension of the transition period  – whether this is mere political brinkmanship on the part of the Labour Party designed to put pressure on the UK Government to get a new post-Brexit relationship agreed with the EU within the current time frame of the transition period or whether it reflects a deeper concern on his part about the implications of not getting a deal done within that time frame is a matter for speculation at this stage.)

The transition period extension issue is a tricky one but perhaps the two sides can agree on an interim solution which will permit some kind of extension of the benefits of the transition period to the UK and EU (in particular single market access to both sides) for a further period of up to two years without imposing on the UK the burden or financial consequences of new EU legislation which may be enacted during that further period. Life is, however, unlikely to be that simple.

Trade Negotiations and Continuity Agreements

On 13th May 2020, the UK Government issued an updated announcement confirming it continues to seek trade agreements with its major trading partners, which would take effect following the end of the transition period (currently 31st December 2020).

The announcement distinguishes between “continuity agreements” (where the UK simply seeks to replicate trade agreements which the EU already has with third countries so that, in their application to the UK, the UK would effectively replace the EU as the contacting party under the relevant EU trade agreements with third countries following the end of the transition period  – without any other significant change to the terms of those trade agreements) and new trade agreements which  the UK would effectively negotiate afresh with third countries.

As far as new trade agreements are concerned, the updated announcement states that “the UK’s priority is to launch negotiations with the EU, the US, Australia, New Zealand and Japan”. A number of these negotiations have clearly already started.

The updated announcement also states that the UK Government on behalf of the UK is considering joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

There is clearly quite a lot happening on the trade negotiations front between the UK and non-EU states .

A German Court Challenge to the Primacy of EU law

The decision of the German constitutional court in May 2020 that, unless the European Central Bank (effectively the central bank of the eurozone) explains by August 2020 how its €2 trillion stimulus measure is “proportionate” to its limited monetary policy objectives, the German Bundesbank must stop participating in that stimulus programme, has raised shock waves at EU level since it appears to challenge the primacy of EU law over the national laws of EU member states. It may also appear to challenge the role of the European Court of Justice (ECJ) as the final judicial arbiter on matters of interpretation of EU law.

According to The Times of 15th May 2020, Ursula von der Leyen, herself German but more importantly in this context the current President of the European Commission, has threatened legal action to overrule and gag the German constitutional court on this issue. “The final word on EU law is always spoken in Luxembourg”, she is reported as saying, referring to the ECJ.

This is of relevance to  the current UK-EU discussions for a new post-Brexit relationship, not least because of the unresolved disagreement between the two sides on the role of the ECJ in the interpretation of EU law under the terms of any new UK- EU treaty which emerges from those discussions to govern the new post-Brexit relationship between the two sides.

There is some irony in the prospect that the judicial role of the ECJ may end up being limited from within the EU rather than as result of pressure from the UK  in relation to its own position as a result of Brexit

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David Glass

Specialist in Business & Corporate, Commercial Contracts
& Insolvency & Corporate Recovery

E: [email protected]
T: +44 (0)845 257 9449