Trade & Investment update: China, amending the Protocol and Hague Judgments Convention

Trade with China

The UK press is full of concerns about the UK’s allegedly growing economic dependence on China, particularly in the light of Brexit.

An article in The Sunday Times of 11th July 2021 focuses on the recent takeover of a UK semiconductor design and manufacturing business, Newport Wafer Fab ( NWF) by Netherlands Company, Nexperia, a company controlled by the China state-backed entity, Wingtech. There are demands from some quarters that this take-over be challenged on national security grounds.

According to The Sunday Times article, Taiwan and South Korea dominate semiconductor microchip manufacturing world-wide, accounting for 83 per cent of global production, according to research firm TS Lombard. With increasing tensions in the Far East over China’s territorial claims on Taiwan, and hostile responses from Japan as well as the USA to Chinese actions in that regard, The Sunday Times reports that “Some say Britain should team up with the EU to reduce its reliance on Taiwan”. The same Sunday Times article reports that the EU wants to inject €145 billion (£125 billion) into reviving semiconductor microchip manufacturing in the EU, with a goal of producing 20 per cent of the world’s semiconductor microchips by 2030, up from 10 per cent now. (The USA also is reported to be rethinking its own semiconductor microchip manufacturing capacity, with US President Biden said to be calling for US $50 billion (£35 billion) of initial funding to help build up its own semiconductor microchip manufacturing industry).

Whilst some in the UK fear Chinese influence, others, particularly so-called “globalists in the UK Conservative party”, believe (according to The Sunday Times article) that Chinese investment in the UK economy is crucial following Brexit and that the UK must be careful not to be too confrontational with China over Far East–centric political issues. Hence, the title to The Sunday Times article is “China and the chip factory – Johnson’s high-tech dilemma”.

In world terms, Brexit may be a small issue –  the UK needs to decide how to manage it in that context.

UK Government Proposals to Amend the Ireland/Northern Ireland Protocol (“the Protocol”)

On 21st July 2021, the UK Government published a Command Paper setting out its proposals to amend the Protocol.

The proposals include:-

  • UK traders moving goods from Great Britain to Northern Ireland should declare the final destination and only goods intended for Ireland should be subject to checks;
  • Goods that meet UK rules should be allowed to be sold in Northern Ireland even if they do not meet EU rules;
  • The role of the EU Court of Justice in enforcing the Protocol should be replaced by international arbitration;
  • The EU system of subsidy control should no longer apply in Northern Ireland, although some enhanced processes for any subsidies on a significant scale may still be appropriate;
  • Removal of all medicines from the scope of the Protocol entirely; and
  • Greater flexibility for the UK to set VAT and excise rates and structures in Northern Ireland, subject to clear safeguards where changes would introduce significant distortions on the island of Ireland;

The UK Government’s Command Paper did talk about the UK Government’s ability to trigger the provisions of Article 16 of the Protocol to suspend the Protocol’s operations but expressed the view that it was better to sort out problems of the Protocol consensually at the present time.

The Command Paper was phrased in polite terms and the press release issued by EU Vice President Maros Sefcovic was equally polite, even though on the face of it the parties are poles apart. The essential difference appears to be that, whilst the EU (according to Mr Sefcovic)  is “ready to continue to seek creative solutions, within the framework of the Protocol, in the interest of all communities in Northern Ireland” , the EU will not agree to a renegotiation of the Protocol, which contrasts with the UK’s wish to change material provisions of the Protocol.

It may be that these differences of approach are more apparent than real and that agreed steps on at least some aspects will be arrived at (as suggested by Mr Sefcovic in his press release) through joint action in the joint bodies established by the UK-EU Withdrawal Agreement 2019, of which the Protocol forms part.

Hague Judgments Convention 2019

On 16th July 2021, the European Commission adopted a proposal for a Council Decision on EU accession to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters 2019 (the Hague Judgments Convention 2019).

Accession by the EU to this Convention would facilitate the recognition and enforcement of civil or commercial judgments between the EU and third countries and, if the UK were to adhere to the Convention, the UK would be such a third country.

Analysis needs to be made of the extent to which accession by the EU and the UK to the Hague Judgments Convention 2019 would make it unnecessary for the UK to join the 2007 Lugano Convention (UK membership of which the EU Commission is currently opposing) but the general view so far seems to be that UK membership of the 2019 Convention would not entirely render unnecessary UK membership of the 2007 Convention. In this context, the UK is  now regarded as a third country from an EU perspective, following Brexit.

The UK and EU may at least seem to be drawing a little closer towards resolving these recognition and enforcement issues, if only through membership of non-EU specific international conventions

As far the as EU membership of the 2019 Convention is concerned, the Council Decision would be adopted under a non-legislative consent procedure requiring the European Parliament to approve the act before it can be adopted formally.