Stalemate, State Aid, Fisheries and December 31st. An insider into and some thoughts on the current Brexit Negotiations
By: Enyi Okpara
Tags: Brexit, Law, UK Politics, European Union, Public Law

In 2017, we were told that this deal would be the “easiest” free-trade agreement in human history.[1] This time last year, we were promised an “oven ready” Brexit deal. As we have seen over the last year, the ease at which such negotiations can be conducted has been hugely overstated. Today is Monday 7th December 2020, 24 days from the 31st December deadline, and yet we still do not know whether a deal will be in place from 1st January 2021 concerning the future relationship between the United Kingdom and the European Union. An ‘Australia type’ Free Trade Agreement (the government’s euphemism for a No-Deal Brexit) would see the United Kingdom revert to World Trade Organisation rules set out in the UK’s adopted tariff schedules. George Eustice, the Secretary of State for Environment, Food and Rural Affairs, conceded today that this is likely to drive up food prices by 2%[2] whilst a recent analysis by the London School of Economics puts the long-term economic hit from a no-deal Brexit at 8% of GDP.[3] As David Allen Green correctly observes: “a complex problem has been treated as if it were a simple problem.”[4]

Michel Barnier, the EU’s chief negotiator for Brexit, today highlighted three points of contention at this point of the negotiations; governance, the “level playing field,” and fisheries. Governance refers to dispute resolution and who should have the final say in a dispute over any future trade deal between the UK and the EU. Section 30 of the European Union (Withdrawal Agreement) Act 2020 dictates that such disputes should first be resolved by a joint committee. If the committee are unable to agree then either party can request an arbitration panel. The only time during which the European Court of Justice (ECJ) can involve itself in dispute settlements would be if the dispute relates to the interpretation of EU law, thus reflecting the role of the ECJ as an arbitrator for disputes under EU law[5]. The United Kingdom, however, has insisted that the ECJ plays no role and that the dispute resolution mechanism respects the autonomy of the EU and UK legal systems.

The level playing field describes a set of common rules to ensure “open and fair” competition and prevent businesses in one country gaining a competitive advantage over those operating in other countries. The European Union has said that it will only agree to a zero tariff/zero quota trade deal if the United Kingdom agrees to a level playing field in the areas of state aid, competition, tax, workers’ rights, environmental protection, and climate change. This means that the United Kingdom and European Union have to agree to a set of equivalent rules and standards that ensure fair competition between trading partners.[6] I would like to draw particular attention to the issue of state aid and competition, due to its prevalence in the negotiations and recent media and because the EU has highlighted this as one of the main concerns among the level playing field obligations.[7]

State aid denotes the extent to which governments can subsidise businesses. The aim of EU state aid rules is to prevent governments from unfairly subsidising businesses to the disadvantage of competitors. Under Article 107 TFEU, state aid is prohibited if it “distorts or threatens to distort competition”[8] between member states. These rules are a fundamental component of the European Single Market, as they prevent governments from choosing businesses as “national champions.” Article 10 of the Northern Ireland Protocol (later enacted into the European Union (Withdrawal Agreement) Act 2020 and signed as a treaty between the UK and EU) dictates that EU state aid laws “shall apply to the United Kingdom”[9] even after the transition period ends. State aid has played a controversial role during the negotiations in September following the introduction of government’s Internal Market Bill. Clause 45 of the Internal Market bill disapplies this international provision, stating that regulations under section 43(1) — section 43(1) deals explicitly with Article 10 of the Northern Ireland protocol — are “not to be regarded as unlawful on the grounds of any incompatibility or inconsistency with relevant international or domestic law.”[10] These extraordinary and unlawful provisions were key in the UK-EU negotiations. The Secretary of State for Northern Ireland, Brandon Lewis even admitted that clause 45 would allow the UK to break international law in a “specific and limited way,” thereby undermining the fundamental constitutional principle that is the rule of law. The European Commission sent a letter of formal notice to the UK government for breaching obligations under the withdrawal agreement — an agreement signed by the UK and EU, thus an international treaty. Part 5 of the Bill, from which Clause 45 hails, was also spectacularly voted down in the House of Lords on 20th October 2020 by 395 votes to 169. To achieve any glimmer of a level playing field, it is my view that the government would need to remove these provisions immediately. The obligations under the Withdrawal Act were a precursor to any subsequent negotiations due to occur. To even believe that an oven-ready Brexit deal existed in December 2019 would have meant following through with Article 10 of the Northern Ireland Protocol.

The negotiating position regarding fisheries is, I believe, relatively minor in the grand scheme of things. As it stands, the United Kingdom is bound by the Common Fisheries Policy. This means that fishing fleets of every EU country have access to each other’s waters, apart from the first 14 miles out from the coast. Post Brexit, the United Kingdom will control an exclusive economic zone (EEZ), stretching up to over 200 miles into the North Atlantic Ocean. The UK want to hold annual talks to EU/UK waters using a system that works out the share based on the percentage of each species of fish in the EEZ.[11] The EU, however, want the UK to grant “significant access” to avoid EU fishermen who have traditionally fished in UK waters having to fish elsewhere. Whilst this is a sensitive issue, with a significant proportion of the fishing community being strong proponents of the campaign to leave the EU, fishing amounts for only 0.1% of the UK economy. Figures from the Office for National Statistics show fishing was worth £784m to the UK economy compared to the financial services industry being worth £132bn. Therefore, a disagreement on fisheries alone is unlikely to prevent a deal from being reached.

So, where does this leave us over the next coming days and weeks in the run up to the December 31st deadline. Three things are now clear. Firstly, this government has overpromised and underdelivered since the 2016 Referendum. Slogans such as “Take Back Control” and “Get Brexit done” have done well to conceal the both the political and economic complexities of leaving a trading bloc after forty-seven years of membership. We were promised the easiest trade deal in human history. Yet, significant red lines remain twenty-four days before Exit Day. The second thing is that the government has not made it easy for itself. Its stubborn approach, demonstrated for example, by the Internal Market Bill has only served to strain the UK-EU relationship and its negotiating position on state aid. Finally, no one knows how this saga will end. Its clear that both parties want a deal. It is in the interest of both parties to reach a deal. But the rigid red lines imposed by both parties suggest the events in the run-up to the December 31st deadline will be interesting to say the least.

[1] Matthew Weaver, ‘Liam Fox: EU trade deal after Brexit should be ‘easiest in history’ to get’ The Guardian (London, 20th July 2017)

[2] Francis Elliott, ‘No-deal Brexit would drive up food prices, George Eustice admits’ The Times (London, 6th December 2020)

[3] Thomas Simpson, ‘The UK economy: Brexit vs Covid-19’ (UK in a Changing Europe, 24th August 2020) < https://ukandeu.ac.uk/the-uk-economy-brexit-vs-covid-19/>

[4] David Allen Green, ‘Brexit, deal, no deal, and the politics of easy answers’ (The Law and Policy Blog, 6th December 2020) < https://davidallengreen.com/2020/12/brexit-deal-no-deal-and-the-politics-of-easy-answers/>

[5] European Union (Withdrawal Agreement) Act 2020, s.30

[6] Alex Stojanovic, ‘UK-EU future relationship: level playing field’ (Institute for Government, 17th February 2020) < https://www.instituteforgovernment.org.uk/explainers/future-relationship-level-playing-field>

[7] The UK-EU future relationship negotiations: Level Playing field (Briefing Paper, CBP 8852, 2020) ch 2.1

[8] Treaty of the Functioning of the European Union, Article 107(1)

[9] Protocol on Ireland/Northern Ireland, Article 10

[10] Internal Market Bill 2020, S.45(2)(a)

[11] Chris Morris, ‘Fishing: Why is fishing important in Brexit Trade Talks?’ BBC News (6th December 2020)