The ‘Norway’ model for the UK after Brexit

Mads Andenas and Carl Baudenbacher

Could the EEA be a model for EU-British relations after Brexit? Would the EEA/EFTA States accept the UK? What are the advantages and disadvantages?

Both the Icelandic and the Norwegian governments have signalled their openness to the UK joining the EEA/EFTA. Iceland did so from the outset and Norway after some reluctance. Liechtenstein will not disagree.

Of the seven EFTA countries which took part in the EEA negotiations 1989-1991, Norway, Austria, Finland and Sweden went on to apply for EU membership. Austria, Finland and Sweden joined the EU after a year in EEA/EFTA. As a consequence of a negative referendum in late 1994, Norway remained in the EEA/EFTA, together with Iceland and Liechtenstein. In Switzerland, participation in the EEA on the EFTA side was rejected in a referendum in 1992. The Swiss then decided to negotiate bilateral arrangements with the EU, without institutions and with only limited access to the Single Market.

Norway comfortable in the EEA

After some difficulties, Norway is quite comfortable in the EFTA pillar of the EEA. In the first 25 years of its existence, the EFTA pillar (like the whole EEA) has functioned well. After the gradual completion of the Single Market, the principles and key rules are established; the reasons for political strain on the EEA few.

UK entry would change the current balance. Including the UK on the EFTA side of the EEA may not be in the narrow short-term self-interest of the current EEA/EFTA states. But if the UK and the EU side were to agree, the EEA/EFTA states would be unlikely to stand in the way of a new EU-UK institutional solution. UK membership would also add bargaining power.

Mum’s the word

Theresa May’s government has not so far wished to draw any attention to the EEA. The EU team was initially quite favourable, but now seems to have much else to address and didn’t want to complicate things for Mrs May. The same applies to the Norwegian government; it, too, has wished not to interfere in domestic British politics. The Icelanders were more outspoken.

Advantages for the UK

The benefits of EEA/EFTA membership are plain.

The EEA Agreement is a trade agreement and does not aim at an ‘ever-closer union’. British industry, including the City of London, would have access to the Single Market.
Britain would win back its sovereignty (‘take back control’) in foreign policy and foreign trade, agriculture and fisheries. It could strike its own trade deals. The EEA could provide the framework for cooperation that the UK wants in the fields of Justice and Home Affairs and Security and Defence.

Britain would no longer be subject to the jurisdiction of the ECJ, but of the EFTA Court with one or two British judges. The EFTA Court is a Single Market court distinguished by its market orientation and its reluctance to succumb to neo-mercantilist temptations.

The co-decision problem

The EEA/EFTA States have a ‘co-determination’ right in the enactment of new legislation; they do not have a ‘co-decision’ right. With the Single Market much closer to completion today than in the beginning of the 1990s this may, however, be less important than it once was. The ‘rule taker’ mantra doesn’t stand up to closer scrutiny. Britain’s heft could count for more as a member of the EEA/EFTA than it has in the past in the EU.

At all events, this ‘co-determination’ could be modified. When the EEA project was launched in 1989, Commission President Jacques Delors offered the EFTA States more than ‘co-determination’. He spoke of ‘common decision-making and administrative institutions’. With the exception of Switzerland, most of the EFTA States did not have strong feelings about this. They saw the EEA as a short transitional phase on their way to EU membership. Delors withdrew the offer; but, in the context of UK participation, it could be put back on the table. In fact the Brussels based Bruegel think tank made such proposals in August 2016.

Free movement of persons

In the EEA/EFTA there is currently free movement, but no European citizenship.
There is a safeguard clause, and to have its own court in the EFTA pillar provides another guarantee for British sovereignty.

EFTA Court preferable to “arbitration”

The arbitration mechanism in the current text of the withdrawal agreement is highly unusual. It is a mechanism for complete and formal subjugation to the ECJ, which has been taken from the EU’s association agreements with the former Soviet Republics Georgia, Moldova and Ukraine. Hardly any important question will be for the arbitration panel to decide without the interference of the ECJ. In today’s language, it is a fake arbitration court. The only negotiation victory from the point of view of the UK is that the proceedings will be in held in the language of Shakespeare.

The EFTA Court, on the other hand, is tried and tested. It is well established, works well, and the UK will know what it signs up to. It is under no obligation whatever to refer questions to the ECJ. Differences in case law have in the past 25 years been resolved by judicial dialogue, the EFTA Court in many cases influencing the ECJ.

The UK must want it

Until the vote in Parliament on the withdrawal agreement, the EU and the EEA/EFTA governments will lend no active support to the EEA and the Norway model. Nor will they be pressed upon the UK at any later stage.

The UK must want it – as the best, second best, or the only realistic way to go. It remains there as a viable alternative. A second structure in Europe consisting of friendly countries interested in economic integration which leave political questions to intergovernmental cooperation should also be acceptable to the EU. At the end of the day this could even be the solution to the Swiss conundrum.

Mads Andenas is a Professor at the University of Oslo and the former Director of the Centre of European Law, King’s College, London, and of the British Institute of international and Comparative Law. He is a door tenant at Brick Court Chambers, London.

Carl Baudenbacher was a Judge of the EFTA Court 1995-2018 and its President 2003-2017. He is now an independent arbitrator and consultant and a door tenant at Monckton Chambers, London.

ECJ confirms that Article 50 is unilaterally revocable by the United Kingdom

Maya Lester QC

The full court of the European Court of Justice has confirmed this morning that a Member State may revoke notification of its intention to withdraw from the European Union under Article 50 of the TEU unilaterally, without having to seek the unanimous agreement of the other Member States.  Case C-621/18 Wightman.

The ECJ’s expedited judgment states that the revocation of intention must be unequivocal and unconditional, decided on following a democratic process in accordance with national constitutional requirements, and must be communicated in writing to the European Council. Provided that occurs, a Member State retains its sovereign right to decide whether to withdraw from the EU. It may withdraw at any time until a withdrawal agreement has entered into force or, if no agreement has been reached, during the two-year period for negotiation (or any agreed extension).  In the mean time, the UK will stay in the EU on current terms.

The Court states that it would be inconsistent with the EU Treaties’ purpose of creating an “ever closer union among the peoples of Europe” to require unanimous approval of the Council, as the Commission and Council had proposed; that could force the withdrawal of a Member State which decides to revoke the notification of its intention through a democratic process, would transform a unilateral sovereign right into a conditional right, and would be incompatible with the principle that a Member State cannot be forced to leave the European Union against its will.

The Court also rejected the UK’s argument that the ECJ should not answer this question referred to it by the Scottish Court of Session because the question is hypothetical; as the ECJ judgment states, it is far from hypothetical and clarifies the options now open to MPs who will vote on ratification of the withdrawal agreement.

The judgment is here.

Maya Lester QC acts for the petitioner MPs, instructed by the Good Law Project.  Their arguments were accepted in full.

Court of Justice rules on the effect of Brexit on trade marks

Nicholas Saunders QC

The General Court and Court of Justice hear a number of trade mark appeals relating to decisions of the EU Intellectual Property Office. In Case C-340/17P Alcohol Countermeasure Systems v EU IPO, the appellant raised what it called a ‘public order’ ground of appeal from a decision of the General Court relating to the Brexit referendum.

The Appellant argued that a UK earlier trade mark right could no longer be relied upon to invalidate an EU trade mark as a result of the Article 50 notification given by the United Kingdom. It was argued that permitting such an invalidation would create unnecessary and disproportionate obstacles to unitary trade mark protection given that the United Kingdom will no longer be part of the EU unitary trade mark system. It was argued that the General Court violated the territoriality principle recognized by the 1883 Paris Convention and Article 17 of the Charter of Fundamental Rights of the European Union.

The United Kingdom intervened in the appeal and argued that this Brexit related ground of appeal was both inadmissible and unfounded.

The Court (Judges Jürimäe, Lycourgos, and Vajda) and AG Sharpston declined to rule on whether or not this ground of appeal was inadmissible, but went on to dismiss it on the merits. They held that there was no requirement for the Court to stay the proceedings before it as a result of the vote to leave the EU or the Article 50 notification, and that there was no retroactive effect of those measures.

The Court further held that a mere notification given by a Member State under Article 50 does not have the effect of suspending the application of EU law until the time of its actual withdrawl from the European Union. It followed that the ground of appeal was rejected.

The judgment is here.

Nicholas Saunders QC appeared for the United Kingdom instructed by the Department for Exiting the EU.

EU Advocate General says UK’s Article 50 notice of intention to leave EU can be unilaterally revoked

The Spanish Advocate General Campos Sánchez-Bordona today published his opinion in in Case C-621/18 Wightman and Others v Secretary of State for Exiting the European Union. Opinion here and press release here.

The Advocate General agreed with the petitioners (who are mainly Members of Parliament) that when a Member State has notified the European Council of its intention to withdraw from the European Union, Article 50 of the Treaty on European Union allows the unilateral revocation of that notification, up until the withdrawal agreement is concluded. This is so provided that the revocation has been decided upon in accordance with that Member State’s constitutional requirements, formally notified to the Council, and does not involve an abuse of the right.  He rejected the argument of the EU institutions (the Council and Commission) that all the other Member States would have to agree (in a unanimous Council decision) for there to be a valid revocation of an intention to withdraw.

The Advocate General rejected the UK Government’s position that the ECJ should decline to answer the question referred to it by the Scottish Court of Session for a preliminary ruling on the proper interpretation of Article 50.  The UK said the issue was hypothetical and theoretical.  The Opinion disagrees and says the practical consequences of the case are “undeniable”; a decision by the UK to remain in the EU “in the face of an unsatisfactory Brexit” is a valid option in EU law and the case will clarify options for MPs when they vote. This Opinion does not bind the ECJ, which will deliver its judgment soon.

Maya Lester QC acted for Wightman and the other petitioners, instructed by the Good Law Project.

General Court rejects challenge to EU decision opening Brexit negotiations as inadmissible

Maya Lester QC‘s case analysis of Shindler v Council of the European Union can be found here.

This article was first published by Lexis®PSL on 28 November 2018.

European Court to decide if UK can unilaterally revoke Article 50

Maya Lester QC is acting for the petitioners (MPs) in the expedited reference to the European Court of Justice from the Scottish Court of Session in Wightman and others v Secretary of State for Exiting the European Union.  The hearing is on Tuesday 27 November before the full court of the CJEU. The issue is whether the UK can revoke the notification of its intention to withdraw from the EU under Article 50 of the Treaty if there is a democratic decision to remain in the EU before the end of the two year negotiating period in March 2019, or whether it needs the unanimous consent of the 27 other Member States to do so.

Sanctions after Brexit

This event explores the impact of Brexit on economic sanctions from different perspectives – law, policy, and industry.  The first panel will discuss the new legal framework in the UK, the second will look at policy implications and sanctions relationships between the UK and the rest of the world (including the EU, UN and USA), and the third panel will examine the impact on industry and trade, including compliance and licensing.  Please come with questions – the evening will be largely conversational and (we hope!) lively Q&A with our enormously experienced panelists, continued at a drinks reception afterwards.

This event will also discuss the brand new Sanctions & AML Act 2018 that has just received royal assent and become UK law.

Time: 4.30 PM – 7 PM then a drinks reception

Date: Thursday, 21st June 2018

Venue: The Lancaster Room
The Savoy (The River Entrance via Savoy Place off Victoria Embankment)
London
WC2R 0BP

LAW
Chair: Maya Lester QC, Brick Court Chambers
Mike Atkins, Deputy Director, Sanctions and Illicit Finance, HM Treasury
Miriam Gonzalez, Partner and Co-Chair of the International Trade and Government Regulation Practice, Dechert LLP
Nicky Smith, Deputy Director, Foreign & Commonwealth Office Legal Directorate
Chloe Cina, Lawyer and Sanctions Expert, former UK Head of Sanctions at HSBC
David Mortlock, Partner, Chair of Global Trade & Investment Group, Wilkie Farr & Gallagher LLP
David Heaton, Brick Court Chambers

POLICY
Chair: Sir David Anderson KBE QC, Brick Court Chambers
Sir John Sawers, former Chief of the Secret Intelligence Service (MI6)
Harold Hongju Koh, Former Legal Adviser of the US Department of State
Kimberly Prost, Canadian Judge on the International Criminal Court, former Ombudsperson for the UN Security Council Al-Qaeda Sanctions Committee
Qudsi Rasheed, Deputy Director Sanctions, Foreign & Commonwealth Office
Manuel Lafont Rapnouil, Head of the Paris office and Senior Policy Fellow, European Council on Foreign Relations
Dr Erica Moret, Senior Researcher at the Global Governance Centre at the Graduate Institute of International and Development Studies

INDUSTRY
Chair: Maya Lester QC, Brick Court Chambers
Susan Lake, Head of Compliance Reinsurance EMEA, Swiss Re
Andy Wragg, Global Chief Compliance Officer, AXA Corporate Solutions
Che Sidanius, Global Head of Regulation & Industry Affairs, Thomson Reuters
William Dodsworth, Head of Financial Crime Policy, Barclays
Tom Keatinge, Director, RUSI’s Centre for Financial Crime & Security Studies
Rena Lalgie, Head of the Office of Financial Sanctions Implementation

Please click here to register.

Brexit: competition and State aid

Daniel Jowell QC

The House of Lords EU Internal Market Sub-Committee has published its report on Brexit: Competition and State aid.  Amongst the Committee’s conclusions and recommendations are:

  • The “UK may wish, over time, to depart from EU competition case law, particularly as the Single Market imperative underpinning it may no longer be relevant to the UK. Brexit also offers an opportunity to diverge from the EU in terms of enforcement decisions on some antitrust cases and merger reviews. With the repatriation of responsibility in this area, the UK will be free to take a more innovative and responsive approach to tackling global competition enforcement challenges, including fast-moving digital markets and dominant online platforms.”
  • “Although Brexit does not necessitate a fundamental revision of the UK’s well-established domestic competition framework, the ‘consistency principle’ under section 60 of the Competition Act 1998 will no longer be appropriate in its current form after the UK leaves the EU and EU law no longer has primacy. It would be desirable to replace section 60 with a softer duty, whereby UK authorities might ‘have regard to’ EU law and precedent, although such an approach may not be appropriate in the longer-term.”
  • A “comprehensive competition cooperation agreement” should be negotiated by the UK Government to facilitate extensive cooperation between the national competition authorities of Member States, and the European Commission, on investigations and enforcement actions.
  • “It is likely that the EU will insist on some form of State aid controls in any UK-EU Free Trade Agreement (FTA). If this is not case, the World Trade Organization’s (WTO) Agreement on Subsidies and Countervailing Measures (ASCM) would not represent an adequate alternative” as it has no domestic application. As introduced, the EU (Withdrawal) Bill would preserve a general prohibition on State aid without specifying what body would assume the Commission’s current role of reviewing and approving compatible measures. The Committee urges “the Government to address this omission as soon as possible and clarify whether State aid responsibilities will be assumed by an existing, or new, authority.”
  • “A number of factors have enabled the UK, and London in particular, to develop into Europe’s foremost jurisdiction for private damages actions resulting from breaches of competition law. Many of these features are likely to endure beyond Brexit, but uncertainty surrounding the future status of EU antitrust prohibitions and Commission decisions could put this leading status at risk. The Government should take this into account when it decides whether to repeal or amend the legislative basis for ‘follow on’ claims in the Competition Act 1998, and whether to allow UK bodies to continue to accept final Commission decisions.”

The complete report is here.

House of Lords Constitution Committee Report on the EU (Withdrawal) Bill

The House of Lords Constitution Committee has today published its long-awaited report on the EU Withdrawal Bill which it described as ‘constitutionally unacceptable’.  The Bill is fundamentally flawed and needs to be rewritten in several ways, peers have said, as the House of Lords prepares to debate the legislation this week.

The committee said that the bill as it currently stands risked “undermining legal certainty” and should be substantially changed, even though it has already been voted through the House of Commons.

Richard Gordon QC gave oral evidence to the committee alongside Lord Neuberger of Abbotsbury. The report can be accessed here.