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Sunday, 24 September 2017

Bridge over troubled legal water? Legal issues of the Brexit transition period



Professor Steve Peers*

Compared to famous Florentines, Theresa May’s recent speech on the UK’s Brexit plans inevitably owed more to Machiavelli than Leonardo da Vinci. Nevertheless, it gave a rough indication of the basic legal architecture that the UK government would like to govern its relationship with the EU for a transition period after Brexit Day. I have previously summarised and commented upon the main points of the Florence speech, but there is more to say on this legal framework – and also on the rules which would apply to EU27 citizens in the UK during the transition period.

Legal framework

First of all, is a transition period after Brexit Day even legally possible? If so, what provision of EU law would apply?

Article 50 TEU, which sets out the basic rules on Member States’ withdrawal from EU membership, is silent on the issue of any transitional period after the withdrawal date. However, it might be noted that Article 49 TEU, governing accession, is equally silent on transitional periods after joining the EU; nevertheless such periods are an established feature of the accession process.

In its negotiating guidelines on the Brexit withdrawal agreement, the European Council (EU27 States’ leaders) stated that:

To the extent necessary and legally possible, the negotiations may also seek to determine transitional arrangements which are in the interest of the Union and, as appropriate, to provide for bridges towards the foreseeable framework for the future relationship in the light of the progress made. Any such transitional arrangements must be clearly defined, limited in time, and subject to effective enforcement mechanisms. Should a time-limited prolongation of Union acquis be considered, this would require existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply.

These principles are set out again in the negotiation directives on the agreement, handed down to the European Commission by the Council (EU27 States’ ministers) at paragraph 19. Those negotiation directives go into no further detail on the transition period issue for now; instead, there will be further negotiation directives in future, once the EU27 side has decided that there has been ‘sufficient progress’ on its priority issues (EU27 and UK citizens’ rights, financial issues, Northern Ireland) during the Brexit talks. 

For the UK’s part, the Florence speech states that on Brexit Day, the UK will cease to participate in the EU political institutions. The period must be ‘strictly time limited’, suggesting ‘around two years’;  but the two sides ‘could also agree to bring forward’ aspects, such as a new dispute settlement system. The latter point implies that the ECJ will apply until that point.

Substantively, during the transitional period, ‘access to one another’s markets should continue on current terms’; the UK will ‘continue to take part in existing security measures’; and the ‘framework’ will be ‘the existing structure of EU rules and regulations’.  There would be no change to other Member States’ payments and contributions during the current funding cycle (ending in 2020), implying that EU laws on funding and spending continue without amendment until then.

EU citizens can still come to live and work during this period, but they will be registered; but as I noted in the previous blog post, such registration is allowed under the EU citizens’ Directive. (More on that below). Finally, the speech referred to one substantive difference in law: the UK would hold its own trade negotiations, and would ‘no longer directly benefit’ from the EU’s trade negotiations.

Moreover, the speech made comments on another aspect of the withdrawal agreement – maintaining EU27 citizens’ rights – that may be relevant by analogy to transition issues. The Prime Minister said that the UK would ‘incorporate our agreement [on citizens’ rights] fully into UK law and make sure the UK courts can refer directly to it’; and that UK courts must be ‘able to take into account’ relevant ECJ case law.

Comparing the UK to the EU27 position on the transitional period, there are lots of similarities. Both sides are willing to contemplate such a period (the EU27’s ‘legally possible’ caveat is considered below). Both sides want it to be for a limited time. The Florence speech states that the transitional rules would be linked with the future permanent UK/EU relationship (‘a bridge from where we are now to where we want to be’), matching the EU27 position. (Note there’s no need to define the future relationship in detail in the withdrawal deal: Article 50 refers only to defining a ‘framework’ for that relationship, and the EU negotiation position refers only to bridges towards the foreseeable future framework).

The greatest difficulties may come with the issues of post-Brexit EU legislation, and the legal effect of EU law. At present the European Communities Act provides for the adoption of new EU law into the UK’s legal order. It gives that law direct effect and supremacy, and gives effect to ECJ rulings in domestic law. However, the proposed EU Withdrawal Bill would remove all these provisions, instead retaining pre-Brexit EU rules and ECJ judgments in force pending potential amendment by government or Parliament. Pre-Brexit ECJ judgments would retain their force subject to such amendments or overruling by the UK Supreme Court, and UK courts would have an option to take post-Brexit ECJ case law into account. The Bill would also remove the principle of damages liability for breach of EU law, and would not keep the EU Charter of Fundamental Rights as part of retained EU law in the UK (on the latter point, see discussion here).

Technically, anything which the UK agrees to in the Withdrawal Agreement can be incorporated into UK law easily enough, since clause 9 of the Withdrawal Bill would give the UK government unlimited power to amend any UK laws to give effect to that Agreement. (Note, however, that the Bill could be amended in Parliament as regards any of these points before it becomes an Act of Parliament). So the issue is not the capability of the UK government to give effect to the Withdrawal Agreement, but its willingness to negotiate on these issues.

After her speech, the Prime Minister deliberately avoided answering a question about whether the UK would apply post-Brexit EU law during the transition period, saying it was a matter for negotiation. In fact, there is some flexibility on this, since the EU27 negotiation position does not take any view on that point. (Remember that the EU27 negotiation position on transitional issues will be enlarged later). In the meantime, UK cabinet members have tried to rule this prospect out. (Note that the speech refers to keeping ‘existing’ and ‘current’ EU law in force).

There is less flexibility as regards the legal effect of EU law, where – to recall – the EU27 position is that ‘existing EU regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures’ should apply. The combined reference to ‘judiciary’ and ‘enforcement’ structures suggest that the ECJ’s current jurisdiction, and the current legal effect of EU law in the UK, should apply. While the Prime Minister obliquely referred to the ECJ, she hoped that its role could be terminated early as regards the UK; and the UK government’s position on the legal status of EU27 citizens (no ECJ role; option to take account of ECJ rulings; incorporation of Withdrawal Agreement into UK law but no special status), if extended to the transitional rules in the Withdrawal Agreement, would fall short of the EU27 position. Equally, while it is not expressly mentioned in the current negotiation position, the EU27 might, when amending that position, argue that the EU Charter should still apply to the UK during the transitional period. (Note that the Charter does not apply to all actions of Member States, but only applies to Member States when they implement EU law). 

Three further points. First, what happens to the position of non-EU countries as regards the UK? They are parties to some treaties with the EU alone, and to some treaties with the EU together with its Member States. The legal issues arising in this respect during the transitional period will have to be addressed.

Secondly, what happens after the end of the transitional period? In particular, what if it is deemed desirable on both sides to continue the arrangement, in whole or part? In that case, the special decision-making rule applying to Article 50 (see next point) will have expired, and so the normal decision-making rules of EU law will apply. Depending on the content of what is carried forward then, this may require some unanimous voting and even ratification by all Member States, although it should be recalled that the EU side can decide to apply treaties provisionally pending national ratification.

That brings us to the most fundamental legal issue: can the EU27 side include a transitional deal within the scope of Article 50 in the first place? The words ‘[t]o the extent…legally possible’ hint at some doubt on this point, presumably because of an argument that Article 50 cannot extend to the regulation of legal relationships that are created after Brexit Day, but only to the regulation and/or termination of those created before that date. However, while little is certain now about how the ECJ might interpret Article 50, in my view that interpretation is too narrow, given that Article 50 refers to taking account of the framework for future relations with the withdrawing state, and Article 8 TEU refers to maintaining strong relationships with neighbouring non-EU countries. If this is correct, it follows that as long as the transitional deal is limited in time and linked to the future framework for relations – as both the EU27 and UK side intend – there should not be a legal problem. (On the other hand, there is nothing in Article 50 to require that anything in the withdrawal agreement must be subject to ECJ jurisdiction, besides the usual rule that only the ECJ can rule definitively on how to interpret EU law for EU Member States).

The importance of this is that the Article 50 agreement needs only a qualified majority vote to be approved by the EU27, without national ratification by Member States (as confirmed in the negotiation directives). But the EU27 and UK should prepare a ‘Plan B’ in the event that some Eurosceptic devoted to a ‘WTO-only’ and/or ‘no deal’ relationship between the UK and EU brings a legal challenge. If such a challenge were successful, the ECJ might anyway maintain the problematic parts of the treaty in force temporarily due to legal certainty; and the UK and EU should aim to agree the impugned parts of the Withdrawal Agreement on the correct legal basis as soon as possible, applying that new treaty provisionally.

Extension of the Article 50 period

Some have suggested extending the negotiation period for the Brexit talks instead – as Article 50 expressly allows for – arguing that a transition phase is no different from extending the negotiation period anyway.  It’s true that legally the extension of the negotiation period would be simple: it requires only a unanimous vote of the EU27 Member States (with no national ratification) required, plus the UK government, with no role for the European Parliament. As a matter of domestic UK law, arguably an Act of Parliament would be required to this end (note that the European Union (Notification of Withdrawal) Act, which gave the government power to invoke Article 50 pursuant to the Miller judgment, does not mention the issue of extension).

But an extension to the negotiation period would be politically difficult. It’s not known whether the EU27 would give their unanimous consent, particularly given the awkward consequence that the UK would then end up participating in the 2019 European Parliament elections. And within the UK, announcing an intention to delay Brexit would likely mean that Theresa May would immediately be the centrepiece of a modern version of Da Vinci’s Last Supper – followed swiftly by the political resurrection of Nigel Farage.

Furthermore, it’s false to say that there is really no difference between a negotiation extension and a transition period. First of all, during a negotiation extension the UK would still participate in the EU’s political institutions. Secondly, it’s certain that there would be no change in the legal effect of EU law in the UK or the substance of EU laws in the UK, and that new EU laws and new ECJ judgments would continue to apply, in the event of a negotiation extension – whereas those issues may, as discussed above and below, be addressed differently during a transition period.

Thirdly, in the event of a change of mind in the UK on Brexit, remaining within the EU on the basis of a negotiation extension may be different from rejoining the EU after having left. This depends (a) on the resolution of some legal issues concerning Article 50 (Can the withdrawal notice be rescinded? If so, must the EU consent? If so, can the EU attach conditions? Or can the Article 50 period simply be extended indefinitely, with no further negotiation taking place?) and (b) on the extent to which the UK could rejoin on the same terms (Would the EU have already removed the UK’s opt-outs from the Treaties? Would the UK rebate on the EU budget have been rescinded yet?).

EU27 citizens

As noted already, the UK government’s intention to require EU citizens to register if they come to the UK during the transitional period is consistent with the EU citizens’ Directive, which allows registration for stays longer than three months. Indeed, the Commission has reported that almost all EU states register citizens from other EU Member States. But a failure to register can only be punished by proportionate penalties, not expulsion or detention (see the ECJ ruling in Watson and Bellman, concerning a prior version of this law). According to the ECJ ruling in Huber, Member States may include information on EU citizens in a database, but this can only be used for the purpose of administering EU free movement law; if they put information on EU citizens in a criminal database, they must be treated equally with nationals of that Member State.

The Directive goes on to say that Member States cannot insist that registration certificates must be the sole method of checking entitlement to reside or any other right, since other forms of proving identity are possible; and that Member States can only penalise EU citizens for not carrying their registration certificates if they penalise their own citizens the same way for not carrying ID cards (see also the ECJ judgment in Oulane). It follows that as long as the UK doesn’t have an ID card system, it could not penalise EU citizens for not carrying registration certificates.

So while registration of EU citizens is permissible, the limits set out in the legislation and case law put the more general questions about ‘transition law’ raised in this blog post in a particular context. It would not be credible for the EU27 to insist that the UK not register EU citizens at all, particularly given that most of them do the same thing themselves. But will the important limits on registration apply? It’s an important question given the tendency of the UK Home Office to create a ‘hostile environment’ for EU and non-EU citizens alike, and the risk that absent the application of EU case law and legislation to this issue, there could be fines, detention, expulsion or other refusals of rights for EU citizens who didn’t register, lost their registration certificate or forgot to carry it. (All the same issues arise if the UK extends – as it could – the registration obligation to EU citizens who were present before Brexit Day).

If the EU27 and UK agree that the existing EU law still applies and the pre-Brexit ECJ case law remains binding, in principle the issue is resolved, at least during the transitional period. But what if the UK breaches this agreement, or if there is some question about how the UK applies the requirement, or if there is some new relevant ECJ case law? Then the important questions will be whether the existing EU law remedies (direct effect, supremacy, damages) are still available; whether UK courts can still ask the ECJ questions; and whether the UK courts are obliged to follow post-Brexit ECJ case law.

This issue, important as it would be for many EU citizens resident in the UK, is only a microcosm of the legal issues raised by the transition period – and which the UK and EU27 will hopefully have time to consider properly.

Barnard & Peers: chapter 27

Photo credit: Thousand Wonders

* *This blog post was supported by an ESRC Priority Brexit Grant on 'Brexit and UK and EU Immigration Policy'

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