Brexit: Another Day, Another Letter: EU threatens legal action against the UK
When the history of Brexit is written, much will be made about the letters which have travelled between Brussels and London.
On 29 March 2017, the "Article 50 Letter" from the then UK Prime Minister (Theresa May) to the then President of the European Council (Donald Tusk) was carried by two UK civil servants on Eurostar (travelling First Class) at a cost of £985.50. The ultimate cost of that letter – to notify the EU that the UK intended to leave the world's largest trading bloc – will be much higher.
Today, on 1 October 2020, a letter was sent from Brussels to London giving formal notice to the UK that the European Commission believes the UK is in breach of the EU-UK Withdrawal Agreement – an agreement which only entered into force on 1 February 2020. The ultimate cost and implications of this letter could also be very high in setting the tone of the relationship between the divorced partners in the coming years.
The EU is clearly concerned about doing another deal with the Johnson Government when the Johnson Government is seeking to undo the very agreement which it had negotiated and then endorsed in the last UK General Election as "oven-ready". No one wants to be seen as the turkey in this fight over the oven-ready agreement.
It is now more likely than ever that the post-Brexit relationship between the parties will be characterised by law suits and court cases in various courts and forums whether they be in the EU or the likes of the World Trade Organization.
The background to today's letter is the UK's "United Kingdom Internal Market Bill" – proposed legislation currently going through the UK Parliament - which would, the EU believes, undermine the EU/UK Withdrawal Agreement.
The EU has a point. The UK's Secretary of State for Northern Ireland admitted in the UK's House of Commons on 8 September 2020 that some provisions of the Bill would "break international law in a very specific and limited way".
If there is a breach of EU law then the European Commission is the institution which brings the case – it is the so-called "guardian" of the treaties.
Today, the European Commission has said that the UK's Bill "if adopted, would flagrantly violate the Protocol on Ireland/Northern Ireland, as it would allow the UK authorities to disregard the legal effect of the Protocol's substantive provisions under the Withdrawal Agreement".
The European Commission goes on to say that representatives "of the UK government have acknowledged this violation, stating that its purpose was to allow it to depart in a permanent way from the obligations stemming from the Protocol. The UK government has failed to withdraw the contentious parts of the Bill, despite requests by the European Union."
The European Commission believes that the UK is in breach of the commitments which the UK gave in that agreement.
The European Commission is largely relying on Article 5 ("Good Faith") of the Withdrawal Agreement. This article states the EU and the UK must deal with matters in "good faith" and refrain from any measures to jeopardise attaining the objectives of the Agreement. Specifically, article 5 states:
"The Union and the United Kingdom shall, in full mutual respect and good faith, assist each other in carrying out tasks which flow from this Agreement.
They shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising from this Agreement and shall refrain from any measures which could jeopardise the attainment of the objectives of this Agreement.
This Article is without prejudice to the application of Union law pursuant to this Agreement, in particular the principle of sincere cooperation."
The UK has one month to reply to this formal notice. The Commission could then issue a "Reasoned Opinion". Ultimately, it could go before the Court of Justice of the European Union (CJEU).
The UK might even – as strange as it might seem – refuse to participate in the court proceedings but that would be a very serious step indeed. The UK might argue that it has not breached the Agreement at all because the UK legislation has not yet been passed and it has certainly not entered into force so the EU was premature in its actions (i.e. arguing that the EU has acted prematurely in what might be termed an "anticipatory breach").
The case would ordinarily be heard before the EU's CJEU. It would be unprecedented in that the UK would have left the EU but would still be subject to the jurisdiction of the court. There are also procedures under the Withdrawal Agreement. Ultimately, it may be resolved politically through negotiations between EU and the UK. One could hardly see the EU agreeing easily to yet another agreement with the Johnson Government given the doubt hanging over a breach of another recent agreement. One could hear Michel Barnier adding to his "clock is ticking" repertoire by saying "once bitten, twice shy".
In a weak hand, proposing the Bill gives the UK something extra to bargain with in the negotiations but it comes at a very high price. The UK might ultimately drop the offending provisions of the Bill as part of a negotiated outcome.
If the parties do not climb down then expect the case to intensify. The EU could take a further case on the basis of Articles 5 and 10 of the Protocol on Ireland/Northern Ireland. Article 5 of the Protocol relates to Customs and the Movement of Goods. Article 10 relates to State aid. There could also be breaches of Articles 4 and 184 of the Withdrawal Agreement.
The bottom line for businesses and everyone watching this Brexit process is that we are now entering a new phase – the dispute phase. The world has seen trade wars and spats before the likes of the World Trade Organization between nations and unless a line is drawn shortly, we could see the same type of activity between the UK and the EU. This would be very unfortunate for all.
For more information on this topic please contact Dr Vincent Power, Partner or any member of A&L Goodbody's EU, Competition & Procurement team.
Date published: 1 October 2020