2. Sovereignty and law

Section contents

 

  • UK has been sovereign throughout its EU membership
    • Minority of policy areas (or ‘competences’) determined exclusively at EU level
    • Majority of UK law is determined by UK – not by EU
    • UK has had a strong influence in the EU and has shaped and voted for the majority of EU law
    • Each member state has a right of veto over major decisions
    • Lisbon Treaty means that national parliaments are better able to express views on draft EU legislation
  • In 2014, a UK government review identified areas for EU to improve, such as democratic accountability and application of subsidiarity
  • EU has issues to address and is debating its own reform agenda on issues such as eurozone and further reform of the CAP
  • UK came before ECJ less frequently than most member states
  • UK remains subject to EU law during the transition period

Click here for summary of Brexit FactBase.

Search
Generic filters

UK sovereignty and EU law


 

UK sovereignty

“Whilst Parliament has remained sovereign throughout our membership of the EU, it has not always felt like that.”  White Paper, Exit From Europe, Feb 2017 – page 13.

The UK is a sovereign nation. Sovereignty means a nation’s ability to take its own decisions and, if it wishes, reverse them. In joining the European Community, the UK decided to pool some of its sovereignty with other sovereign nations to gain mutual benefits. In doing so, the UK believed it could achieve its national objectives better through the greater power, influence and prosperity that cooperation with other EEC, now EU, nations brings.

Since joining in 1973, the UK, as a major EU economy, has had a strong influence over EU development, policies and legislation (for example the development of the Single Market and financial services regulation). The UK has also agreed with most EU legislation.

  • At the EU level, the UK has voted for proposals 97% of the time (2004 – 2015). In other words, the UK voted for the vast majority of EU legislation.
  • In terms of the total volume of EU laws passed, the UK has been on the “losing side” only about 2% of times since 1999. In recent years the UK has been losing a higher proportion of votes than other members.
Sources: Full Fact and LSE, Simon Hix, Sara Hagemann, Doru Frantescu: Would Brexit matter? The UK’s voting record in the Council and the European Parliament, April 2016.

 

Voter perception

Many UK voters do not appreciate the facts of national sovereignty as an EU member. Domestic political expediency and misleading UK media coverage have influenced voter perceptions of the position of the UK in the EU.

Sections of the British media persistently purvey Euro-myths (straight bananas etc.) In 2016, the Economist analysed Euro-myths (1994-2016) and found that the worst culprits were the Daily Mail, Daily Telegraph, Express, Times and Sun. The Economist noted a marked increase in myths 2010-2015 with about 30 each year.

The European Commission has established a blog to repudiate the Euro-myths created by the British media. Unfortunately, corrections have less impact than myths.

It is true that politicians in other member states sometimes blame the EU to deflect attention from themselves, but the media of no other EU country has earned its own ‘repudiation blog’.

Source: Economist, Debunking years of tabloid claims about Europe, 22 June 2016  

 

EU and member state competences

The EU treaties define the competencies of the EU. These describe what policies may be determined at EU level and what at member-state level. The table below summarises who is responsible for what. The EU determines a minority of competences. Member states, either on their own or jointly with the EU, determine the majority.

Sources: Europa, EU competences; EU law; Chatham House

 

Types of EU law

Table 2.1 summarises the different types of EU law and the legislative process. EU member states formulate their own laws to implement EU directives. EU regulations, once agreed, become binding on member states who must change their national laws to avoid conflicts.

 

Unanimity

All EU countries, when meeting within the European Council, have to vote unanimously on matters which the member states consider to be sufficiently sensitive. In other areas, qualified majority voting (QMV) applies. Other matters require a simple majority.

Unanimity means that each member state has a veto. For example, some states (such as Austria and Cyprus) have said that they would veto Turkey’s accession to the EU (currently suspended due to the Erdogan regime’s actions). In another example, Spain effectively has a veto over the future relationship between Gibraltar and the EU after the UK leaves the bloc.

Unanimity is required for:

  • Common foreign and security policy (except for certain clearly defined cases which require qualified majority, e.g. appointment of a special representative);
  • Citizenship (the granting of new rights to EU citizens);
  • EU membership (accession of new countries or withdrawals);
  • EU trade agreements;
  • Harmonisation of national legislation on indirect taxation;
  • EU finances (own resources, the multiannual financial framework);
  • Certain provisions in the field of justice and home affairs (the European prosecutor, family law, operational police cooperation, etc.);
  • Harmonisation of national legislation in the field of social security and social protection.

 

Example: constitutional rules for approving a European Army

  • Each member state would have to approve its participation unilaterally (that is, EU could not force a member state to join the army);
  • National institutions would need to ratify the decision (for the UK, this means Parliamentary approval);
  • Under the European Act 2011, a national referendum in the UK would be needed to approve a European Army.
Source: European Council, voting system
Michael Dougan, Professor of European Law and Jean Monnet Chair in EU Law, at the University of Liverpool

 

Subsidiarity and proportionality

 
Subsidiarity

The principle of subsidiarity applies to EU actions. It means that the EU only acts where EU-wide action will be more effective than at national level (examples might be the Single Market, or environmental measures). Where the treaties give exclusive powers to the EU, this is considered to be the case, but otherwise it is a judgment made for each new law.

National parliaments monitor the correct application of this principle in EU decision-making. They are able to express their views on draft legislative acts as well as on other matters of particular interest to them. To enable parliaments to carry out subsidiarity checks, the Commission sends draft legislation to national parliaments at the same time as to the EU legislature (the European Parliament and the Council).

Since 2006, the Commission has been transmitting all new legislative proposals to national parliaments, and has replied to their opinions. From 2009, the Lisbon Treaty clearly sets out the EU rights and duties of national parliaments.

Proportionality

The other key principle is proportionality – the content and scope of EU action may not go beyond what is necessary to achieve the objectives of the treaties.

There are several safeguards to ensure that, wherever possible, the national level takes decisions rather than European level. These include existing ‘yellow card’ and ‘orange card’ measures. The red card measure was agreed in Cameron’s package (and has not come into being because of the referendum result).

Source: Fullfact, Explaining the EU deal – the ‘red card’, February 2016

 

How much UK law comes from Brussels?

 
Counting laws

In 2010, the House of Commons Library estimated what proportions of UK law the UK Parliament and the EU generate.  They did this by simply counting laws and regulations. This is one method but it does not give a good measure of EU influence on the UK. (A better solution would probably be to ask ‘which EU laws do we want to change?’).

The HoC Library warned that “there is no totally accurate, rational or useful way of calculating the percentage of national laws based on or influenced by the EU.”  Nevertheless, the HoC Library concluded that the UK generates 86% of UK law (see Figure 2.1).

The EU has greatest influence in those areas of law where the EU has exclusive competence, such as trade. Nevertheless, through its EU membership, the UK has had significant influence over the formulation of EU laws.

In other important areas of UK policy—for example, welfare and social security, education, criminal law, family law and the NHS—the EU has had very limited direct influence.

Limitations

The HoC Library noted limitations in the counting of laws:

  • Laws include many minor regulations with an immaterial impact on UK citizens (applies to the 53%/47% figures).
  • At EU level, the UK voted for proposals 87% of the time, that is for the vast majority of EU legislation.
    • Between 1993 and 2014 (a different period to Figure 2.1), Parliament passed 945 Acts of which 231 (24%) implemented EU obligations. Over the same period, it passed 33,160 Statutory Instruments, 4,283 (13%) of which implemented EU obligations. Combined, the EU component accounts for 13% of passed laws.
  • Between 1993 and 2014, about 62% of all the new regulations, Acts of Parliament, and Statutory Instruments implemented EU obligations. However, the 62% figure significantly overstates the EU proportion because:
    • It treats all EU regulations as part of the UK’s body of laws when they may not apply to the UK (e.g. in relation to Schengen) or simply do not have any real impact on the UK (e.g. in relation to tobacco production or olive oil).
    • The number of laws that remain in force is lower than the number passed. Many EU regulations only apply for a short time. For example, each working day there are new regulations on fruit and vegetable imports into the Single Market that apply for days. These temporary regulations are in the 62% figure, although they no longer apply.
  • The UK government and its officials tend to ‘gold-plate’ EU law and regulation.
Sources: House of Commons Briefing Paper 07092, 10 June 2015, EU obligations: UK implementing legislation since 1993
FullFact, UK law: What proportion is influenced by the EU?, June 2016

 

Balance of competences review

Between 2012  and 2014, the UK government reviewed the balance of competences between the EU and the UK. The government published 32 individual reports covering 32 areas of competence.

Surprisingly, the referendum campaigns rarely referred to this authoritative and extensive piece of work. The government did not produce an overarching summary, but identified six main themes:

  • Subsidiarity and proportionality have been insufficiently implemented. The government pointed to EU action which they considered unnecessary, overly harmonising or resulting in disproportionate costs to business or governments.
  • Greater democratic accountability of EU institutions required. Some argued that the ECJ had too wide a margin over interpretation of competence. They thought improved accountability would result from giving national parliaments a greater role.
  • UK has often been successful in shaping the EU agenda.
  • Reduce and improve EU regulation with more effective implementation and enforcement of existing legislation.
  • Protect the rights of all EU member states as the Eurozone integrates further, to ensure integrity of the Single Market.
  • The EU should focus on the areas where it adds genuine value. Member states should retain the ability to take actions appropriate to national circumstances, in recognition that one size does not always fit all. This was particularly true in areas with questions over how far the Single Market provided a rationale for action.

Philip Hammond, Foreign Secretary at the time, concluded: “These reports provide further evidence of the need for a change in Britain’s relationship with the EU”.

Source: Final reports in review of EU competences published, 18 December 2014

 

David Cameron’s renegotiation with the EU

 
Aims

David Cameron announced his intention for renegotiation in 2013 and it was part of the Conservative Party manifesto for the May 2015 general election. The negotiations began in the summer of 2015 and incorporated extensive discussions with member states as well the EU.

In November 2015, before the final phase of negotiations, Cameron put forward his proposals in a letter to Donald Tusk, the President of the European Council.

David Cameron’s gave a comprehensive speech on Europe at Chatham House on 10 November 2015. In it he identified four main aims:

  • Protect the single market for Britain and others outside the Eurozone.
  • Write competitiveness into the DNA of the whole European Union.
  • Exempt Britain from an ‘ever closer union’ and bolster national parliaments.
  • Tackle abuses of the right to free movement, and enable us to control migration from the EU.

After the negotiations, the EU27 leaders approved the package of negotiation outcomes at the European Council on 18–19 February 2016. The European Commission would prepare legislation and, following an expected vote for remain in the referendum, the changes would take effect. Due to the referendum result, the changes have not been implemented.

Outcomes

Sovereignty

  • Ever closer union is compatible with different paths to integration.
  • Recognises that UK not committed to further integration and reference to closer union will exclude the UK. The UK’s special status would be enshrined in the next EU treaties.
  • It is possibile for member states to stop unwanted law if enough member states agree (more than 14) – the ‘red card’ safety valve to address subsidiarity concerns

Comment: this was seen as a major win for Cameron.

Euro

  • Recognition that EU has more than one currency.
  • Non-Euro countries cannot impeded further integration of Eurozone countries but are not responsible for bail-outs.
  • There would be a single rulebook for financial regulation to ensure level playing field within single market.
  • A single non-Eurozone country can request Council discussions on Euro-related laws that may affect financial stability.

Comment: this was seen as a win for Cameron.

Immigration

  • Child benefits indexed to conditions where child resides for new migrants. From 2020 all exported child benefit can be indexed.
  • ‘Safeguard mechanism’ to restrict in-work benefits in exceptional circumstances. Bans benefits for 4 years and in place for 7 years, no extension.

Comment: this was seen as a small win for Cameron and was difficult to explain to voters. It also had the unintended effect of highlighting that he had not succeeded in limiting numbers of migrants.  Although in practice most EU citizens come to the UK to work, not to seek benefits.

Competition

  • All members states are to fully implement and strengthen internal market.
  • Concrete steps to be taken to lower the administrative burden to help internal market function better.

Comment: this was seen as rather vague and reflecting actions that the EU would be taking anyway.

Sources: Prime Minister’s speech on Europe, November 2015
EU reform deal: What Cameron wanted and what he got, BBC website, February 2016

Regulation


 

UK level of regulation

Interestingly, Britain has one of the most lightly-regulated economies in the OECD. The National Audit Office published a Short Guide to Regulation in 2017, which provides a concise summary of regulation in the UK. The NAO identified 90 regulatory bodies in the UK and 34 EU regulatory organisations whose frameworks affect the UK. Their report cites work by the Organisation for Economic Co-operation and Development (OECD)

The OECD assessed the extent of regulation in its 47 member states in 2013. The analysis showed that the UK has relatively low levels of regulation compared with other member states.  The OECD analysis splits the economy into network sectors (telecoms, electricity, gas, post, rail, air passenger transport, and road) and a series of product markets.

According to the OECD the UK has:

  • the most deregulated network sectors when considering criteria such as barriers to entry, extent of public ownership, vertical integration and market structure;
  • low barriers to competition in product markets compared with most other OECD nations, and less prescriptive ‘command and control’ regulation;
  • comparatively complex regulation relative to other nations.

Figure 2.2 from the NAO provides a summary of the OECD’s assessment.

Source: National Audit Office, A Short Guide to Regulation, September 2017

 

Trade-related regulation

Since regulations can act as barriers to trade, the EU sets the common minimum standards that are necessary for mutual recognition within the EU. This was the founding principle for Europe’s single market for goods. Landmark court cases, notably over a German import ban on the liqueur Cassis, established that products approved in one country can be sold in all EU member states.

Underpinning the regime are the EU institutions that enforce standards and adjudicate disputes with powers to override national governments. Ultimately this includes the ECJ (see below).

Services markets tend to be more highly regulated than markets in goods. This is because consumers find it more difficult to assess the quality of services (e.g. those provided by a lawyer) than goods (e.g. an apple) before they buy, so regulations intervene to ensure that, for example, legal standards are high. Member states do not allow other member states or third countries to provide services to their citizens without meeting the common EU standards.

The purpose of EU trade-related regulation is to reduce trade barriers and maintain standards to protect citizens and consumers. This means, for example, that exporters do not have to comply with different standards, workers avoid discrimination, and capital is free to move. If post-Brexit Britain wants to continue to trade with the EU, it would need to continue to meet EU regulatory requirements.

Need for rules post-Brexit

Even if the EU did not exist, member states would still have to make their own rules. It is therefore misleading to imply that Brexit would cause all the regulatory costs (and benefits) associated with EU legislation to disappear. UK banking regulation would still be tough. The regulatory burden on banks would remain high because the UK wants its financial system to be safe (current UK banking regulation is already stricter than EU rules).

International forums outside the EU set the rules for some sectors. Examples include the maritime industry, waste and environmental services, and broadcasting and creative industries. Even so, EU has a major input to the global standards set by other bodies. In others the EU leads the world in setting global rules, from cosmetics to rules for data flows.

While international rules are increasingly important to businesses, a close regulatory relationship with the EU will continue to be essential for the UK. The EU is by far the most important market for leading UK industries like aerospace, automotive, life sciences, haulage, food and drink. As a result, post-Brexit convergence in regulation to ensure smooth trade with the EU will be a priority. It is no surprise that most businesses simply want regulatory continuity and certainty.

Mutual recognition and equivalence

 
Mutual recognition

When both sides recognising each other’s standards or regulatory regimes, this is termed ‘mutual recognition’.

International trade agreements usually include a more limited form of mutual recognition than member states enjoy in the EU Single Market. Standard mutual recognition agreements (‘MRAs’) permit conformity checks and testing to ease trade without compromising standards.

For instance, under an MRA, a UK regulator could be trusted to test whether a product has been made to EU standards. This would ensure that the product needs to be tested only once. However, it would not harmonise cross-border rules nor involve the EU recognising different UK standards as adequate.

Equivalence

When only one side recognises the other’s standards or regulatory regimes, this is termed ‘equivalence’.

An equivalence decision smooths the way for sales of goods and services between two jurisdictions with different rules. It aims to check whether their regulations achieve the same outcome — for instance in monitoring financial risk, or ensuring a product is safe.

Equivalence decisions are unilateral. Each side sets its own criteria for approval and the terms of access. This increases uncertainty for business, since equivalence decisions can be changed at short notice. In 2015, the ECJ found data equivalence with the US to be invalid following a challenge by an Austrian citizen through the Irish High Court. Shortly after, the EU put in place a new, more restricted equivalence decision

Equivalence is a riskier basis for trade than mutual recognition. If the EU granted equivalence to the UK in a specific area, the EU could decide unilaterally to withdraw the equivalence. To facilitate trade with third countries, the EU has equivalence provisions in many regulations, ranging from financial markets to data adequacy. But these do not cover many other areas, including important sectors such as chemicals.

Sources: Brexit and EU regulation: A bonfire of the vanities?, John Springford, CER, February 2016
UK-EU trade hinges on choice between mutual recognition and equivalence, Alex Barker, 7 March 2018 FT
 

European Court of Justice


 

EU courts

The Court of Justice of the European Union (CJEU) is the supreme judicial authority on EU law, it comprises three separate courts:

  1. Court of Justice (the European Court of Justice or ECJ) comprises one judge from each EU country plus 11 Advocates General.
    • The number of judges in the Court of Justice is set to double to 56 over the next four years in response to the increasing case load.
    • There were 1270 pending cases in November 2015.
    • See below for its activities.
  2. General Court comprises one judge from each EU country
    • Considers cases brought by companies and individuals against the EU institutions.
    • Considers cases brought by member states against the European Commission or the ECB.
    • Its most important work is in the field of competition, intellectual property and external trade law.
  3. Civil Service Tribunal comprises seven judges
    • Hears disputes involving employees of the EU institutions.

 

ECJ rulings

The ECJ rules on questions of EU law (EU treaties and other EU legislation). Its decisions are binding on EU institutions and member states. The ECJ has four main activities:

  • Hears challenges to EU legislation brought by member states (for example, the UK government’s challenge on bankers’ bonuses).
  • Clarifies points of European law at the request of courts in member states.
  • Settles disputes between EU institutions.
  • Determines whether a member state is in breach of EU law (in response to a complaint from the European Commission).

EU law has three main sources:

  • Primary law: the Treaties establishing the European Union.
  • Secondary law: regulations and directives which are based on the Treaties. The EU legislature comprises the European Parliament and the Council of the European Union, which, under the Treaties, may establish secondary law to pursue the objectives set out in the Treaties.
  • Supplementary law: case law by the ECJ, international law and general principles of EU law.

The courts of the member states and the ECJ apply EU law.

  • EU law has supremacy over laws of member states where it applies (i.e.this is limited to EU competences).
  • A member state may be taken to the ECJ for failing to meet its obligations under EU law.
  • Big fines may be imposed for non-compliance with the court’s rulings.

 

Criticisms of the ECJ

A common criticism of the ECJ is that it engages in ‘activist’ rulings aimed at increasing its own power as an institution. However, the ECJ often makes rulings because of conflicts between different EU objectives. In addition, many EU decisions (and supporting EU laws) are deliberately left politically unclear on the assumption that the ECJ will ‘fill in the blanks’ later.

Unclear or ambiguous EU law will inevitably give rise to cases for the ECJ to resolve. As a result, ECJ decisions may be seen as having political consequences. Inevitably, some cases brought to the ECJ reflect problems with the overall nature of EU decision-making or unresolved political differences.

UK and the ECJ

The UK tends to end up less frequently in court with the ECJ than other member states, according to the Institute for Government (2003-2016 – see Figure 2.3).  The UK usually prefers to settle matters before they come to court. Indeed, the number of cases brought by the ECJ against member states declined steadily over the period.

UK citizens have taken cases to the ECJ against the UK government or UK-based organisations. This may why the UK government criticises the ECJ. However, the ECJ provides a safety valve for UK citizens and businesses when avenues within UK law are exhausted. Examples include:

  • Williams v British Airways plc (protection of an employee’s right to holiday pay).
  • Where the UK has failed to follow EU law (e.g. in relation to air pollution laws).
  • In the 1990’s, the UK had initially failed to implement the Working Time Directive (which provides protections to workers), but the ECJ upheld that the UK had to implement it.

 

Source: Institute for Government, Who’s afraid of the ECJ?, December 2017

Articles 50 and 127


 

Article 50 of the Lisbon Treaty

The legislators did no expect Article 50 to be used, so it is not very detailed. It leaves room for interpreting how far the ‘future framework’ should be included in the negotiations and the final withdrawal agreement. Article 218(3) requires unanimous agreement on certain elements of the negotiation.

The initial two-year timeframe set out in Article 50 ended on 29 March 2019. It was extended three times by unanimous agreement of the Member States and the UK. The final extension ended on 31 January 2020.

On 10 December 2018, the ECJ ruled that the UK was free to revoke Article 50 unilaterally, provided a Withdrawal Agreement had not been concluded. Such a revocation would have had the effect that the UK remained in the EU as a Member State.  This meant that the UK’s budget rebate and existing UK opt outs regarding Schengen and the Euro would have been maintained.

Source: Lisbon Treaty
Court of Justice of the European Union, Press Release No 191/18, Luxembourg, 10 December 2018

 

Article 127 of the EEA Agreement

Why does Article 127 matter? Article 127 of the EEA Agreement states that “Each Contracting Party may withdraw from this Agreement provided it gives at least twelve months’ notice in writing to the other Contracting Parties. Immediately after the notification of the intended withdrawal, the other Contracting Parties shall convene a diplomatic conference in order to envisage the necessary modifications to bring to the Agreement.”

It is not clear whether the UK needs to trigger article 127 to terminate its membership of the EEA. Article 127 can be understood as the Single Market equivalent of Article 50.

The Single Market Justice (SMJ) campaign, led by Adrian Yalland and Peter Wilding, argued that because the UK is a separate contracting party to the EEA Agreement, it would not leave the Single Market even after it left the EU. They say that to exit the Single Market, the government will have to trigger a separate exit process, as set out in Article 127. SMJ argued that, since the UK’s EEA membership is part of UK law under Parliament’s 1993 EEA Agreement Act, triggering Article 127 would require parliamentary approval.

However there is an opposing view. Jean Claude Piris, former head of the European Commission’s legal service, has said:

“The UK’s withdrawal from EU will mean an automatic cessation of its membership of EEA as an EEA-EU member”.

His position derives from Article 126 (1) of the EEA agreement:

“The Agreement shall apply to the territories to which the Treaty establishing the European Economic Community is applied and under the conditions laid down in that Treaty, and to the territories of Iceland, the Principality of Liechtenstein and the Kingdom of Norway.”

In this case, the UK is a member of the EEA only in its capacity as an EU member. Therefore, leaving the EU means an automatic exit from the EEA, and the UK will not need to trigger Article 127.

The Government’s position appears to be that even if EU exit does not automatically terminate the EEA agreement in law, any continued signature to the EEA Agreement would not equate to functional Single Market membership. The government does not think it needs to trigger Article 127, which would require parliamentary approval.

The door seems to be open for future legal challenges against the government on this issue.

Source: Institute for Government, Article 127 and the Single Market, June 2017

 

Brexit impact


 

Sovereignty

Sovereignty and ‘power and influence’ are different, but related. The former means a nation’s ability to take its own decisions and, if it wishes, reverse them. The latter means a nation’s ability to achieve its goals through its relationships with other nations.

The government has stated that the UK is sovereign as a member state of the EU. It is therefore difficult to see how Brexit improves UK sovereignty. However, Brexit means that the UK will no longer pool sovereignty with EU member states to influence EU policy and regulatory outcomes in the UK’s favour.

Once the UK became a third country (like any other non-EU country) it left the treaties of the EU. It is only able to have a new relationship with the EU through new legal agreements with its institutions, regulatory bodies and programmes. In parallel, the EU is determined to retain the integrity of the Single Market and not undermine the EU’s rules-based framework.

Within the UK, there was an issue of how to re-establish the sovereignty of parliament following the referendum. (See Appendix A for analysis of the 2016 referendum result). Some believed that a ‘final say’ should have been offered to the public to express its view on the outcome of the negotiations. Others believed that parliament should have reasserted its authority. The current Johnson government has a large parliamentary majority, which gives the executive great power.

The 2007 Lugano Convention is an international treaty negotiated by the EU on behalf of its member states (by Denmark separately because it has an opt-out) and with, subsequently, Iceland, Norway and Switzerland. It attempts to clarify which national courts have jurisdiction in cross-border civil and commercial disputes and ensure that judgements taken in such disputes can be enforced across borders. The 2007 Lugano Convention applied to the UK during the transition period, but ceased to apply in the UK after 31 December 2020, except in relation to proceedings in process.

In January 2020, the UK applied (with the support of Iceland, Norway and initially Switzerland) to accede to the Lugano Convention as an independent member after leaving EU. However this requires the agreement of all signatories, which was not forthcoming (as at 13 April 2021).

Weakened UK power

There are several ways in which Brexit is likely to reduce or weaken the UK’s power and influence and, thereby, its sovereignty:

  • The UK will have little influence over the future policies, rules and regulations of the EU, its closest and biggest trading partner.  After Brexit, the UK will need to comply with many EU rules and standards in order to trade with EU member states.
    • For example, Switzerland, which is not an EU member, takes many EU laws on to its statute books to facilitate access to the Single Market.
  • Internationally, UK influence will be reduced because the UK will no longer have the weight of the EU behind it or be able to influence the EU27 from within.
    • For example, the UK is one of the five members of the United Nations Security Council and the US has looked to the UK as a power broker to influence the rest of the EU. This role will be diminished: the US will look to France to be the main influencer over the EU.
  • After Brexit, the UK would like to continue to pool its sovereign power selectively in the EU to help design integrated EU responses to policy issues that the UK cannot resolve on its own.
    • For example: challenges of energy efficiency and sustainability; energy security; data security and the internet; and, terrorism.
    • However, it will be challenging to do this when the UK no longer has a seat at many inter-related EU27 tables.
  • As an external third country, the UK will be in a weaker negotiating position on trade (for example, in relation to financial services) with the EU27 than it is as a member. The UK will also be in a weaker position to negotiate trade deals with non-EU countries. In trade negotiations, size matters.
  • After Brexit, the UK will continue to be subject to external international authorities.
    • For example. if the UK successfully negotiates free trade agreements with other countries, any disputes will be subject to independent arbitration. The World Trade Organisation resolves disputes for its members (which include the EU).
    • Similarly, if the UK becomes an independent member of EFTA, it would be subject to the EFTA Court of Justice. In relation to trade, this court  plays a role comparable to that of the ECJ,

 

Regulatory considerations

At the level of detailed regulatory standards, the UK has hopes that there can be agreement on the mutual recognition of standards or regulatory regimes, either in general or in specific sectors. For example, the UK has called for mutual recognition of data protection frameworks in order to allow the free flow of data after Brexit. However, the EU says that mutual recognition will not be possible. As a result, the UK will need to rely on equivalence decisions, in areas where EU legislation allows this.

Equivalence decisions are not subject to negotiation. They are in in the sole gift of the EU for the UK (and vice-versa).

Because the UK has been a member of the Single Market, it might be possible to agree equivalence in areas beyond those currently provided to third countries. This would require new EU legislation or a treaty. Free trade agreements can require an equivalence assessment to be made, but they cannot mandate the outcome, or guarantee that equivalence continues.

Equivalence decisions can be made rapidly, as in the case of US data equivalence. In other cases, they can take several years, particularly as part of wider trade negotiations (which is likely to apply to the UK). In the Solvency II legislation to harmonise insurance regulation, the EU provided equivalence to several third countries pre-emptively. This could be a useful model for the Brexit negotiations.

 

Last updated on 27th June 2021 by Richard Barfield