Source: https://iclg.com/cdr/disputes/7809-december-deal-paves-way-for-more-brexit-battles
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December deal paves way for more Brexit battles | ICLG
ICLG.com > Commercial Dispute Resolution > December deal paves way for more Brexit battles
Published by: Ben Rigby at 11/12/2017
The United Kingdom government has agreed a deal with the European Union to proceed to the next round of B...
After a long bruising series of negotiations, United Kingdom Prime Minister Theresa May has agreed a preliminary Brexit deal with the European Union, following final negotiations with the European Commission and talks with the president of the European Council, Donald Tusk.
May met on Friday with European Commission president Jean-Claude Junker, to announce the deal in Brussels, which included details on the Irish border, and the future regulatory status of those arrangements, the cost of Brexit, now estimated at anywhere between GBP 40 billion to GBP 60 billion, and the legal status of British and EU citizens’ rights – including access to the EU courts.
In a 15-page document, both sides revealed their agreement on the respective positions on those issues, including – in the absence of any final agreement – a fall-back of regulatory ‘alignment’ between Northern Ireland and the Republic of Ireland, so as to avoid a ‘hard border’.
The agreement paves the way for agreement on a two-year transition deal after Brexit occurs in March 2019, and a framework for future trade relationships.
“We’ve woken up to news of a breakthrough – this is to be welcomed. But the real complexity of the task will now become clear as we try to forge a new deal which works for all parties,” said Law Society of England & Wales vice president Christina Blacklaws, in a statement.
NO DEAL TO BE AVOIDED
Prior to the agreement, Blacklaws argued the then-looming ‘no deal’ scenario should be avoided at all costs, reflecting the chaotic nature of the negotiations which were nearly derailed earlier in the week, following disagreements with May’s Northern Irish unionist allies, who support her minority government.
“The confusion caused by severing all ties with the EU will have a significant impact on our legal system,” Blacklaws said, warning of “a tremendous volume of litigation as companies challenge government and other agencies in the courts to obtain clarity on their legal rights”.
Blacklaws added: “Any scenario which clogs our court system will lead to international corporations looking elsewhere to solve disputes.”
In the end, the UK government agreed the “constitutional and economic integrity of the United Kingdom” would be maintained, while advancing fall-back provisions for future British and Irish relations, and guaranteeing the absence of a hard border, while the respective rights of EU citizens and UK citizens to live work, and study in either jurisdiction were guaranteed and protected.
One key deliverable was the agreement that, for eight years following Brexit, the UK courts will be able to refer cases involving EU nationals to the Court of Justice for the European Union (CJEU) for interpretation, while also preserving – indefinitely – the rights of the UK courts to have ‘due regard’ to CJEU principles on those rights being heard in the UK courts.
There was also an acknowledgement that concerns over mutual recognition issues, a subject discussed at both CDR’s recent Autumn Arbitration Symposium and Summer Litigation Symposium, should be swiftly addressed.
The deal said there was an “agreement to provide legal certainty as to the circumstances under which union law on jurisdiction, recognition and enforcement of judgements will continue to apply, and that judicial cooperation procedures should be finalised”.
Explicit recognition of the need for such a deal was underscored by a prior statement released by DG Justice, which warned that “preparing for the withdrawal is not just a matter for the Commission and national judicial authorities but also for private parties”, and reminding them of “legal repercussions” should no deal eventuate.
As Professor Jonathan Harris QC (Hon) of Serle Court said, that was “a timely reminder” that the UK government’s Brexit Bill, currently before Parliament, would “not be able to preserve the status quo entirely” on cross-border disputes.
Harris noted: “Without an agreement with the EU, the existing harmonised jurisdiction rules will largely cease to be applied by the member states in respect of UK domiciled defendants and there will cease to be almost automatic enforcement of UK judgments in the EU.”
He added: “The parallel jurisdiction and enforcement rules between the EU, Norway, Iceland and Switzerland will also cease to apply in the UK without an international agreement. This uncertainty, in turn, could affect the drafting of international contracts and the decision whether to subject any disputes arising to the English courts.”
The agreement therefore reflects an early desire to ensure transitional provisions can be agreed so that existing rules would apply to proceedings commenced in England, prior to Brexit, and vice versa, alongside post-Brexit agreement on the applicability of The Hague Convention on Choice of Court Agreements between the UK and EU.
Ed Crosse, of Simmons & Simmons, the president of the London Solicitors Litigation Association, noted: “It benefits both the courts of the UK and the EU27 for there to continue to be reciprocal arrangements for the mutual recognition and enforcement of civil judgments. Similarly, there needs to be certainty about where parties can sue, or be sued.”
“The arrangements currently in place with the EU in this regard will be lost post-Brexit unless new and equivalent arrangements are negotiated by the UK,” added Crosse.
While the news that the direct jurisdiction of the CJEU would cease, was welcomed by some politicians, particularly leading Brexiteers in the Conservative Party, including former Lord Chancellor, Michael Gove, others pointed to a more nuanced, and flexible, approach by the UK government, presaging what some media commentators labelled a ‘softer Brexit’.
The eight years in which the UK government had agreed to allow the courts to refer cases involving EU nationals to the CJEU for interpretation, alongside an additional agreement to pay ‘due regard’ to accumulated EU case law in this area, for an indefinite period, was seen as a significant concession.
Prior to the agreement, the EU had made it explicitly clear that Britain should submit to the direct jurisdiction of the EU courts, without the presence of either British judges or an advocate-general, a prospect which was politically untenable to the UK government, although less so to those advocating judicial as well as legal alignment to the current status quo.
The judiciary, through speeches made by former senior judges like Lord Neuberger, had made its views clear in advocating as clear a way forward as could be reached by agreement, while concerns were raised to senior parliamentarians in evidence given by Neuberger and Lord Thomas, who recently retired as Lord Chief Justice, to the House of Lords.
David Greene, senior partner of Edwin Coe, and a committee member of the Law Society’s Brexit committee, noted in advance of the agreement, “the red line struck through the CJEU by the government in its Brexit stance undoubtedly [caused] practical problems particularly in the short term”.
Greene added: “Initial political slogans such as the red line through the CJEU belie the complexities in law of putting such a policy into effect,” and he noted “a pragmatic approach to EU exit that sometimes does not sit well with the authors of the slogans”.
He continued: “In practical terms, after Brexit the courts are bound to have high regard for CJEU decisions on similar legislation, such as existing EU law. It gives certainty and avoids wide divergence between jurisdictions. In due course our courts will take a pragmatic approach.”
The concession on citizens’ rights made therefore, allows for compromise in giving the CJEU “significant, if not absolute, influence for many years after Brexit”, as Greene put it. Given the equal need for agreement on mutual recognition of judgments, the existence of a continuing influential role for the EU courts may forge the way for other concessions.
As Crosse told CDR in September, there was a need for “recognition of the fact that certain issues do still need to be referred to and determined by the European courts if we are to benefit from the reciprocal arrangements that are currently in place in relation to the administration of civil justice”.
While Michel Barnier, the EU’s chief negotiator, acknowledged, in the press conference announcing the deal, “it will be British judges who [will] say what the law in the United Kingdom is”, many litigators will feel happier that those judges will deal with the subtleties behind the slogans, in parallel with EU jurisprudence, rather than being totally removed from it.
Next to be agreed, however, will be the question of a transition period, offered by the prime minister in her Florence speech in September, something which had been welcomed by lawyers at the time.
Charles Brasted, a partner at Hogan Lovells, said then the proposal for a transition period, which would maintain UK membership of the single market, and acceptance of CJEU jurisprudence, for a two-year period after 2019, provided “valuable certainty”, although he warned that “words and ambitions are not enough”, in calling for “a collaborative, pragmatic approach on both sides”.
Blacklaws welcomed the transitional phase, saying “the complexity of our relationship with the EU means that negotiations must be given adequate breathing space to achieve the best possible deal for the UK and the EU”, in stressing the value of the legal sector to the UK.
She added: “In the interest of ensuring legal certainty it is vital the UK government manages as orderly an approach to Brexit as possible,” saying it favoured "a phased approach – a ‘no deal’ scenario would be the worst possible outcome of the negotiations.”
For their part, the Bar Council offered their solution in the latest series of research papers on how such a trade deal might be agreed.
In a statement, the chair of the Brexit working group, Hugh Mercer QC said: “By building on the legal framework covering the UK’s existing opt-outs, the government could solve some of the most difficult issues in the current talks while keeping the power to negotiate bi-lateral deals, which would end the CJEU’s jurisdiction in those areas.”
Mercer added that “an overhaul of the scope and role of the CJEU so far as the UK is concerned” was clearly possible, leaving its jurisdiction “significantly reduced”, in future talks.
That prospect, the role of legal services in future trade talks, as well as agreements on litigation and arbitration, remain to be finalised, on the principle that “nothing is agreed unless everything is agreed”.
The scope of dispute resolution between the EU and UK under such a deal remains to be discussed, as does the UK’s own definition of what kind of trade deal it wants. A significant expansion of the EU-Canada trade agreement, for example, has been mooted, with its consequential dispute resolution provisions further circumscribing the role of investor-state dispute settlement (ISDS), albeit at the possible expense of the CJEU itself. That, however, will now be for 2018 to decide.