The Government must either back the European Free Trade Association (EFTA) Court model or bring forward proposals for an inventive and untested new dispute resolution system for the withdrawal agreement. Dispute Resolution after Brexit cautions against giving in to current EU demands to give the European Court of Justice (ECJ) the final say over the withdrawal agreement, as it will not be neutral in disputes between the UK and the EU.
The report also warns, however, that if the Government tries to insulate the UK from any ECJ influence it could end up with no deal. Any dispute resolution system that challenges the ECJ’s role as final arbiter of EU law would be difficult to negotiate and would likely be struck down by the court.
The report sets out options for dispute resolution which both the UK and the EU should be able to accept as compatible with their ‘red lines’:
- Sign up to the EFTA Court, with British judges added. This would allow the UK to leave the single market, but it would mean accepting some influence from the European Court after Brexit.
- Create a UK-only version of the EFTA Court. This could be legally acceptable to the EU, but Brussels may see this option as the UK ‘marking its own homework’, since it would involve only UK judges.
- An ‘arbitration arrangement’, as suggested by David Davis. This would be workable for a trade deal but a legal and political minefield for the withdrawal deal, since the EU has strict rules about who interprets EU law. The report therefore suggests a range of innovative add-ons that might make arbitration for the withdrawal agreement more acceptable to the EU.
- A joint court to interpret the agreement for both sides. The European Court is not likely to accept this option as it already rejected a proposal for a joint EU-EFTA court.
- ‘Swiss-style’ dispute resolution by committee. This would likely be struck down as illegal under EU law and would not be an effective way of enforcing any UK-EU deal.
- The WTO dispute system. The UK may well use this system for trade disputes – but it won’t work as a way of enforcing the non-trade elements of the agreements, like citizens’ rights and the divorce bill.
Finally, the report calls on the Government to build on its progress in last week’s talks by committing to implement the EU withdrawal agreement with an Act of Parliament, rather than through secondary legislation as provided for in the Withdrawal Bill. This would entrench citizens’ rights and would be an easy win in negotiations – though still falling short of the guarantees the EU is seeking.