Arbitration tribunal decisions and rulings in the UK-EU Trade and Cooperation Agreement: an initial examination

This post, written by Michael-James Clifton (Chef de Cabinet, Chambers of Judge Bernd Hammermann, EFTA Court ), provides a detailed assessment of the Arbitration Tribunal procedures in the UK-EU Trade and Cooperation Agreement.

Introduction

On Christmas Eve, the EU and UK finally reached an agreement for their intended new relationship. The governance mechanism of the future relationship agreement was one of the three main areas of contention during the negotiations. The UK and EU have chosen a standard form of international arbitration rather than the so-called ‘Ukraine-style’ arbitration found in the Withdrawal Agreement and Political Declaration, and which is included in the unsigned “framework agreement” between the EU and Switzerland of 2018 (as recently discussed by the author here).

Although the UK-EU Trade and Cooperation Agreement (the “TCA”) has been agreed in principle, it has yet to be ratified. Parliament will be recalled on 30 December 2020: the House of Commons at 9.30am, and the House of Lords at midday. On the EU side, COREPER approved the provisional application of the TCA on 28 December 2020. Politico reports that official approval is expected on 29 December 2020 as some countries, such as Sweden, still need to consult their national parliament. The deadline for sending a note of consent to the Council is 29 December at 3 p.m. The TCA is intended to be provisionally applied from 1 January 2021 (Article FINPROV.11 (2) TCA) “provided that prior to that date [the Parties] have notified each other that their respective internal requirements and procedures necessary for provisional application have been completed.” However, the treaty does not appear to have gone through the process of language-washing as some of the wording does not appear to have been polished (e.g. Article INST.24(8) TCA “… and that the circumstances are serious enough…” (With thanks to Dr. Garvan Walshe for his observation.)).

This blog post provides an initial examination of Article INST.29 TCA on “Arbitration tribunal decisions and rulings” in the version dated 25 December 2020. Other TCA provisions are examined in that context, beginning by looking at the formation of the arbitration tribunal and its membership before going through each paragraph of Article INST.29 TCA in turn.

At the outset, it is useful to note that the TCA provides for ad hoc, but structured, arbitration, and proceedings before the arbitration tribunal shall be in English (ANNEX INST: Rules of Procedure for Dispute Settlement, paragraph 43). However, as will be seen, the extent of that structure has yet to be determined. It appears that inspiration has been drawn from a number of international dispute settlement systems including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) e.g. Articles INST 11, 12, and 18 TCA. As the TCA is designed from a ‘WTO plus’ basis, the dispute settlement mechanism including consultations followed by arbitration is reminiscent of that found in Mercosur: see  Baudenbacher/Clifton, Courts of Regional Economic and Political Integration Agreements, in: The Oxford Handbook of International Adjudication, Oxford University Press, 2014.

The arbitration tribunal, its membership and operation

“An arbitration tribunal shall be composed of three arbitrators” (Article INST.15(1) TCA). “Arbitration tribunal” is also defined in its rules of procedure as meaning “a tribunal established under Article INST.15 [Establishment of an arbitration tribunal] of Title I [Dispute Settlement] of Part Six of this Agreement” (ANNEX INST: Rules of Procedure for Dispute Settlement paragraph 1(c)). Of these three arbitrators, one shall sit as “chairperson”.

Determining the composition of the arbitration panel is complex. The composition of the arbitration panel shall be established by agreement between the Parties within 10 days after the date of delivery of the request for the establishment of an arbitration tribunal (Article INST.15(2) TCA). However: –

“3. If the Parties do not agree on the composition of the arbitration tribunal within the time period provided for in paragraph 2, each Party shall appoint an arbitrator from the sub-list for that Party established pursuant to Article INST.27 [Lists of arbitrators] no later than five days after the expiry of the time period provided for in paragraph 2 of this Article. If a Party fails to appoint an arbitrator from its sub-list within that time period, the co-chair of the Partnership Council from the complaining Party shall select, no later than five days after the expiry of that time period, an arbitrator by lot from the sub-list of the Party that has failed to appoint an arbitrator. The co-chair of the Partnership Council from the complaining Party may delegate such selection by lot of the arbitrator.

4. If the Parties do not agree on the chairperson of the arbitration tribunal within the time period provided for in paragraph 2 of this Article, the co-chair of the Partnership Council from the complaining Party shall select, no later than five days after the expiry of that time period, the chairperson of the arbitration tribunal by lot from the sub-list of chairpersons established pursuant to Article INST.27 [Lists of arbitrators]. The co-chair of the Partnership Council from the complaining Party may delegate such selection by lot of the chairperson of the arbitration tribunal.

5. Should any of the lists provided for in Article INST.27 [Lists of arbitrators] not be established or not contain sufficient names at the time a selection is made pursuant to paragraphs 3 or 4 of this Article, the arbitrators shall be selected by lot from the individuals who have been formally proposed by one Party or both Parties in accordance with Annex INST-X [Rules of procedure]. (Article INST.15(3) to (5) TCA).”

It is interesting to observe that a Party’s failure to act does not prevent the establishment of the arbitration tribunal as the right to select the arbitrator falls to the “co-chair of the Partnership Council from the complaining Party [who] shall select… an arbitrator by lot from the sub-list of the Party that has failed to appoint an arbitrator” (Article INST.15(3)TCA). The sub-lists of arbitrators nominated by the EU, UK, and chairpersons, “who are not nationals of either Party” shall be drawn up within 180 days of the TCA’s entry into force, and there shall be at least five persons on each sub-list at all times (Article INST.27(1) TCA). Additional lists “of individuals with expertise in specific sectors” may be established with separate EU and UK nominated sub-lists (Article INST.27(2) TCA). In any event, those included on the lists shall not be “members, officials or other servants of the Union institutions, of the Government of a Member State, or of the Government of the United Kingdom” (Article INST.27(3) TCA). “The chairperson of the arbitration tribunal shall preside at all its meetings. The arbitration tribunal may delegate to the chairperson the authority to make administrative and procedural decisions” (ANNEX INST: Rules of Procedure for Dispute Settlement paragraph 12).

“All arbitrators shall be persons whose independence is beyond doubt, who possess the qualifications required for appointment to high judicial office in their respective countries or who are jurisconsults of recognised competence” (Article INST.16(2) TCA). In general, arbitrators shall “have demonstrated expertise in law and international trade” (Article INST.16(1)(a) TCA), although this may be derogated from “in view of the subject-matter of a particular dispute” (Article INST.16(3) TCA).

The arbitrators may be assisted by one or more ‘assistants’: “individual[s] who, under the terms of appointment and under the direction and control of an arbitrator, [conduct] research or provides assistance to that arbitrator” (ANNEX INST: Rules of Procedure for Dispute Settlement paragraph 1(e)).

It is notable that while “[o]nly arbitrators may take part in the deliberations of the arbitration tribunal… the arbitration tribunal may permit their assistants to be present at its deliberations” (ANNEX INST: Rules of Procedure for Dispute Settlement paragraph 14). The position of ‘assistant’ in this context would appear to be substantially equivalent in nature to that of a référendaire or legal secretary at the court of Justice of the European Union (“CJEU”) or the EFTA Court. However, at those Courts, référendaires are not permitted to take part in the deliberations: See generallyClifton/Pohjankoski, Administering European Justice: Legal Secretaries (Référendaires), Int. T.L.R. [2019] 82-102. In any event “[t]he drafting of any decision and report shall remain the exclusive responsibility of the arbitration tribunal and shall not be delegated” (ANNEX INST: Rules of Procedure for Dispute Settlement paragraph 15). This provision appears to be a response to the challenges made to the Yukos arbitration awards by Russia on the basis of the tribunal secretary’s alleged participation in the decision-making process of the arbitral tribunal (see for example, Puertas and Álvarez, The Yukos Appeal Decision on the Role of Arbitral Tribunal’s Secretaries, International Bar Association, 25 November 2020).

Initial analysis of Article INST.29 TCA

Article INST.29(1) TCA reads:  “1. The deliberations of the arbitration tribunal shall be kept confidential. The arbitration tribunal shall make every effort to draft rulings and take decisions by consensus. If this is not possible, the arbitration tribunal shall decide the matter by majority vote. In no case shall separate opinions of arbitrators be disclosed.”

The arbitration tribunal may issue unanimous or majority arbitral decisions. However, dissenting or concurring opinions shall not be disclosed. In that respect, the operation of the arbitration tribunal will be similar to that of the CJEU or the EFTA Court (although those are of course courts). That “[i]n no case shall separate opinions of arbitrators be disclosed” is unfortunate as it may prevent the reasoning in any majority ruling from potentially being as clear as intended. It is in contrast to the practice of the WTO Appellate Body, as Kim and Mavroidis observed in their 2018 paper “Dissenting Opinions in the WTO Appellate Body: Drivers of their Issuance & Implications for the Institutional Jurisprudence”. In their assessment, dissenting opinions of Appellate Body Members are rare, but important (four dissenting opinions out of approximately 140 reports issued by the Appellate Body). It also rules out the recent innovation of the Andean Tribunal, whose design is based on the CJEU, to publish any dissenting opinion for clarity: see L. J. D. C Nuñez, “Patience and Perseverance in Administering Justice — The Role of a Judge at the Andean Tribunal of Justice” in:  The Art of Judicial Reasoning: Festschrift in Honour of Carl Baudenbacher; Selvik, Clifton, Haas, Lourenço and Schwiesow (Eds.), Springer (2019) p. 197. Perhaps dissenting arbitrators could draft their own opinions but simply not disclose them.

Curiously, “Ruling of the arbitration tribunal” is defined elsewhere in Article INST.20(6) TCA. It provides, “For greater certainty, a ‘ruling’ or ‘rulings’ as referred to in Articles INST.17 [Functions of the arbitration tribunal], INST.18 [Terms of reference], INST.28 [Replacement of arbitrators] and Article INST.29(1), (3), (4) and (6) [Arbitration tribunal rulings and decisions] shall be understood to refer also to the interim report of the arbitration tribunal.”

Article INST.29(2) TCA reads:  “2. The decisions and rulings of the arbitration tribunal shall be binding on the Union and on the United Kingdom. They shall not create any rights or obligations with respect to natural or legal persons.”

Arbitral decisions are binding on UK and EU, and the arbitration is ‘State-to-State’. This would necessitate individuals or companies lobbying either side in order to have a case brought. Access to justice has thus been curtailed. However, interestingly, and positively amicus curiae submissions “from natural persons of a Party or legal persons established in a Party” “that are independent from the governments of the Parties” (ANNEX INST: Rules of Procedure for Dispute Settlement, paragraph 39) shall be “considered” by the arbitration tribunal (Article INST.26(3) TCA). This makes up, albeit to a limited degree, the lack of standing for legal and natural persons. Although it must be emphasised that the arbitration tribunal’s decisions and rulings “shall not create any rights or obligations with respect to natural or legal persons.”

Article INST.29(3) and (4) TCA read:

“3. Decisions and rulings of the arbitration tribunal cannot add to or diminish the rights and obligations of the Parties under this Agreement or under any supplementing agreement.

4. For greater certainty, the arbitration tribunal shall have no jurisdiction to determine the legality of a measure alleged to constitute a breach of this Agreement or of any supplementing agreement, under the domestic law of a Party. No finding made by the arbitration tribunal when ruling on a dispute between the Parties shall bind the domestic courts or tribunals of either Party as to the meaning to be given to the domestic law of that Party.”

Article INST.29(3) TCA places a clear limitation on the role of the arbitral tribunal. Article INST.29(4) TCA is notable for its emphasis on the public international law nature of the arbitration tribunal. It is apparent that the drafters are seeking to ensure compliance with CJEU case law on the autonomy of the EU legal order and the role of the CJEU in that order, for instance, in determining the legality of a measure.

“Party” is not a defined term in the TCA. The term has been left deliberately vague. The TCA’s long title is “Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part”. It might have been anticipated that COMPROV.17 TCA, which sets out the treaty’s definitions, would define the term. The drafters were presumably unwilling to do so.

The word “Party” appears in the definitions only in the following manners. COMPROV.17(1)(f) TCA provides that ““territory” of a Party means in respect of each Party the territories to which the Agreement applies in accordance with Article FINPROV.1 [Territorial scope];” while COMPROV.17(2) TCA provides that “Any reference to the “Union”, “Party” or “Parties” in this Agreement or any supplementing agreement shall be understood as not including the European Atomic Energy Community, unless otherwise specified or where the context otherwise requires.”

It may be anticipated that the anxiety to not define “Party” was to seek to avoid any question of mixity, i.e. whether the TCA is a mixed agreement under the shared competences of the EU and the Member States, or an agreement within the exclusive competence of the EU. This would likely be at issue, with potentially serious consequences, should any opinion be requested from the CJEU on the TCA’s compatibility with EU law. This was examined by the CJEU, most recently, in Opinion 1/17 on the Comprehensive Economic and Trade Agreement between Canada, of the one part, and the European Union and its Member States, of the other part (CETA) EU:C:2019:341. Whether the drafters will have avoided mixity is open to question and beyond the scope of this post to examine. It is certainly plausible that an opinion of the CJEU may be requested.

Article INST.29(4A) TCA reads: “4A. For greater certainty, the courts of each Party shall have no jurisdiction in the resolution of disputes between the Parties under this Agreement.”

This provision is intriguing in several respects. Based on the provision’s numbering, the provision was a late addition to the text. The use of the emphatic “for greater certainty” (rather than perhaps “for clarity”) is quite remarkable, and may be because the text appears not to have been language-washed. The provision is an ouster clause – presumably primarily intended to oust any jurisdiction of the CJEU – and stands in contrast to the imbalanced Ukraine mechanism in the Withdrawal Agreement, and further highlights the public international role of arbitration tribunal.

Perhaps the provision was introduced to remedy any perceived deficiencies in Article COMPROV.16(2) TCA which reads “A Party shall not provide for a right of action under its law against the other Party on the ground that the other Party has acted in breach of this Agreement or any supplementing agreement.”

Article INST.29(5) TCA reads: “5. Each Party shall make the rulings and decisions of the arbitration tribunal publicly available, subject to the protection of confidential information.”

The arbitration tribunal’s rulings and decisions shall be made publicly available by both Parties. This perhaps indicates that the rulings are not published by the tribunal itself. The publication of these rulings shall be “subject to the protection of confidential information” i.e. confidential information is to be redacted. Presumably what may be redacted will be for the arbitration tribunal to define itself.

Article INST.29(6) TCA reads: “6. The information submitted by the Parties to the arbitration tribunal shall be treated in accordance with the confidentiality rules laid down in ANNEX-INST-X [Rules of procedure].”

There is very little laid down in “ANNEX INST: Rules of Procedure for Dispute Settlement”. Indeed, these rules of procedure appear significantly under-developed. Part X of ANNEX INST: Rules of Procedure for Dispute Settlement on confidentiality reads:

“X. Confidentiality

34. Each Party and the arbitration tribunal shall treat as confidential any information submitted by the other Party to the arbitration tribunal that the other Party has designated as confidential. When a Party submits to the arbitration tribunal a written submission which contains confidential information, it shall also provide, within 15 days, a submission without the confidential information which shall be disclosed to the public.

35. Nothing in these Rules of Procedure shall preclude a Party from disclosing statements of its own positions to the public to the extent that, when making reference to information submitted by the other Party, it does not disclose any information designated by the other Party as confidential.

36. The arbitration tribunal shall hold the relevant parts of the session in private when the submission and arguments of a Party contain confidential information. The Parties shall maintain the confidentiality of the arbitration tribunal hearings when the hearings are held in closed session.”

Part IV of ANNEX INST: Rules of Procedure for Dispute Settlement on the arbitration tribunal’s “Organisational Meeting” makes provision for “ad-hoc procedures to protect confidential information.” (paragraph 10(d)). On the basis of ANNEX INST: Rules of Procedure for Dispute Settlement paragraph 34, it is implicit that Parties’ submissions by default will be disclosed to the public. That this is done through an implicit reasoning of the second sentence of paragraph 34 is somewhat curious.

While disclosure of submissions to the public may be useful for the transparency of the proceedings, ensuring the appropriate point at which any submissions are made public will be important. If the submissions are made public before the arbitration tribunal has rendered its decision, this may expose the arbitration tribunal to improper external pressure. Even the public perception of such pressure should be prevented in order to ensure the “serenity of the proceedings.” (see, Joined Cases C-514/07 P, C-528/07 P and C-532/07 P Sweden v API and Commission EU:C:2010:541 paragraphs 92 and 93).

Initial conclusions

The TCA provides for ad hoc, but structured, public international arbitration. Indeed, this makes sense given the ‘WTO plus’ basis of the TCA’s design. Proceedings before the arbitration tribunal shall be in English. The UK and EU have chosen a standard form of international arbitration rather than the so-called ‘Ukraine-style’ arbitration which is structurally imbalanced. This is to be warmly welcomed from a UK perspective as it ensures that the structural neutrality of the dispute settlement mechanism.

It is evident that inspiration has been drawn from a number of international dispute settlement systems including the CPTPP. This is unsurprising given the short duration of the negotiations, as well as the UK Government’s public statement in September 2020 that it intends to seek to accede to the CPTPP. However, how far the ‘State-to-State’ arbitration tribunal will be ad hoc or more permanent in nature is uncertain. This is rather surprising and may well be a direct consequence of the relatively short duration of the negotiations. This is made clear in ANNEX INST: Rules of Procedure for Dispute Settlement paragraph 9a. Paragraph 9a provides that “The Parties may appoint a registry to assist in the organisation and conduct of specific dispute settlement proceedings on the basis of ad-hoc arrangements or on the basis of arrangements adopted by the Partnership Council pursuant to Article INST.34A [Annexes] of Title I [Dispute Settlement] of Part Six of this Agreement. To that end, the Partnership Council shall consider no later than 180 days after the entry into force of this Agreement whether there are any necessary amendments to these Rules of Procedure.”

The arbitration tribunal itself shall sit in panels of three. The Chairperson shall not have EU or UK nationality, and all arbitrators shall possess “qualifications required for appointment to high judicial office [or be] jurisconsults of recognised competence” and they may be aided by ‘assistants’. The procedure to select already listed arbitrators to a panel, if not agreed between the Parties at the outset, is laboured, but the tribunal’s formation cannot be obstructed by a Party.

The drafters have naturally sought to ensure compliance with CJEU case law on the autonomy of the EU legal order and the role of the CJEU in that order, as well as to avoid any question of the TCA being a mixed agreement. Whether that will be challenged before the CJEU at some point is open to question. The drafters have also included a number of ouster clauses to avoid the jurisdiction of the CJEU, and on the basis of reciprocity, UK courts. It is also notable that the powers of the arbitration tribunal have been limited so as to neither “add to or diminish the rights and obligations of the Parties under this Agreement or under any supplementing agreement.” While this may be an understandable intention, it may prove difficult to achieve. 

While a full analysis of the arbitration tribunal’s rules of procedure is beyond the scope of this post, it is likely that its rules of procedure may be amended by the Partnership Council sooner rather than later on the basis of Article INST.34A TCA. They are significantly under-developed. Whether a registry is established will determine, in part, how far the arbitration tribunal will be ad hoc or more permanent in nature.

The arbitration tribunal itself may issue unanimous or majority arbitral decisions. However, dissenting or concurring opinions shall not be disclosed. This is perhaps unfortunate. Although the arbitration is ‘State-to-State’, amicus curiae submissions “from natural persons of a Party or legal persons established in a Party” “that are independent from the governments of the Parties” may be admitted. This makes up, to a limited degree, the lack of standing for legal and natural persons. However, the arbitration tribunal’s decisions and rulings “shall not create any rights or obligations with respect to natural or legal persons.” Ensuring that any submissions are not released at a time which may open the arbitration tribunal to external pressure, even if only in the eyes of the public, will be important. This should perhaps be revisited by the Partnership Council.

Finally, in accordance with Article FINPROV.3 TCA, the TCA and supplementing agreements, including the parts concerning the arbitration tribunal, are subject to joint review “five years after the entry into force of this Agreement and every five years thereafter.” The TCA arbitration tribunal is likely to be the focus of attention for many years to come.

Disclaimers

Michael-James Clifton, the author, is a Barrister (England & Wales, and Ireland), and Chef de Cabinet, Chambers of Judge Bernd Hammermann, EFTA Court. The views contained in the contribution are presented in the context of academic debate, are strictly personal to the author, and do not represent those of the EFTA Court. Any errors are attributable to the author alone.

This blog post was published on 29 December 2020. All references made are to the “Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part” as published by the European Commission on 26 November 2020, version dated Brussels, 25.12.2020 COM(2020) 857 final.

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