In this post, Harry Gillow of Monckton Chambers provides a summary of the fifth Cambridge Law Faculty – Monckton Chambers EU Relations Law seminar on the UK’s external relations with the EU and other trading partners.
In the last of a series of five webinars jointly organised by Monckton Chambers and the Centre for European Legal Studies at Cambridge University, four academic and practising lawyers considered competition issues and the proposals for level playing field provisions for EU-UK economic relations. The webinar was chaired by Judge Ian Forrester formerly of the General Court, CJEU.
A recording of the one-hour webinar is available here.
Regulatory Policy and Level Playing Field Obligations
Anneli Howard (Monckton Chambers) began by noting that on first glance, the issue between the UK and EU might seem relatively minor, as the UK is transposing EU law into UK law as part of the Brexit process. She pointed out, however, that Parliament will be able to modify this law, and the UK courts will be able to depart from CJEU precedents, which alongside the lack of transposition of future EU law raises the possibility that the UK may diverge from the EU’s regulatory system in a way that allows UK businesses to undercut EU competitors.
The UK and EU have proposed fundamentally different approaches to regulatory convergence. The UK has in negotiations placed a great deal of emphasis of regulatory autonomy, and while it is prepared to give commitments not to lower standards, does not wish these to be subject to any enforcement procedure contained in the Free Trade Agreement itself. The EU, by contrast, wants specific and legally enforceable level playing field guarantees, with continued application of current and – importantly – future EU rules, upheld by a treaty enforcement mechanism.
The UK and EU also have a differing approach to sectoral regulatory bodies, from which a large part of the relevant regulations arise (rather than through legislative harmonisation). The UK has announced its intention to withdraw from most EU sectoral regulatory bodies, but wishes to participate in certain areas – for example financial services, aviation, road haulage – on the basis of separate deals. The EU wants a single comprehensive deal covering all of the relevant sectors together, and is only prepared to give unilateral equivalence for financial services by member state, on the basis of very close alignment in standards. There are, further, some areas where the EU is not prepared to let the UK have any access, in particular road haulage, electricity and gas, and audio-visual. This raises the issue that in order for the UK to have market access, it will have to accept at least some degree of regulatory alignment and abide by rules it has had no say in reaching.
For UK companies, issues will only arise when selling to the EU, or where there is a risk of goods sold in Northern Ireland being sold on and ending up in the EU’s market. Problems are less likely to arise where the UK simply has lower standards, as companies can gold-plate products to comply with both EU and UK rules in those circumstances. The real concern will be where the UK and EU develop different and mutually incompatible standards; in those circumstances, companies may have to develop different production lines for the different markets.
State aid
George Peretz QC (Monckton Chambers) began by commenting that he had hoped to be delivering this talk as a detailed analysis of a written text, but given that no treaty text had been agreed, this was going to be an exercise in reading tea leaves. He noted the irony that state aid is at the heart of the issues remaining between the UK and EU, given the UK’s historic status as a vigorous champion of state aid control, and one rarely on the receiving end of the EU’s state aid rules to date.
He stated that there were three strands to the EU-UK state aid story, a UK one, an EU one, and a Northern Ireland one, which he would outline in turn before commenting the sorts of provision that appear to be under negotiation.
The UK strand represents a policy development as part of a steady shift since the 2019 election. The May Government had signalled an intention to keep the EU’s state regime in essence, and the current government has previously committed itself to keeping a robust state aid regime.
The EU strand demonstrates EU concerns with the prospect of large trading partner outside the EU’s state aid rules, and the possibility of subsidies providing an unfair advantage to UK companies.
Finally, the Northern Ireland strand is a result of the “reachback” effect of the Northern Ireland Protocol; the UK Government appears to have implicitly accepted that this is the case, demonstrated by the controversial provisions of the Internal Market bills giving the UK the unilateral power to interpret or modify the relevant provisions of the Protocol.
The UK and EU do, however, now seem to be in agreement that some form of subsidy control is appropriate; it is possible that this will be based on WTO subsidy principles (which would include tax-related aids). It also appears that the UK has accepted that there will be some form of regulator to govern its post-Brexit subsidy policy, which is likely to be the CMA.
Each party has chosen points of principle to defend that are not, in George Peretz’ view, necessarily the most sensible hills to die on. In the EU’s case, third party rights to pursue damages in court in cases where the UK regulator fails to act are perhaps of limited use given the rarity of damages awards even under the present system: far more valuable is the right to bring a case to the regulator and challenge the regulator in cases where it does not investigate properly.
In the UK’s case, insisting that there be no requirement to provide notification of a subsidy before award is also of limited value. The EU is bound to accept that there should be a block exemption regime like its own, which would in any case exclude the vast majority of subsidies from any need for pre-notification; where this doesn’t apply, any properly advised company would be unlikely to accept a subsidy without sign-off in advance from the relevant regulator.
Procurement
Michael Bowsher QC (Monckton Chambers) started by saying that he wasn’t even reading tea leaves, merely trying to determine the shape of problems to come emerging from the mist. The UK has said very little about procurement in its approach to negotiations, and while the EU has always recognised potential problems in this area, there has been little public debate arising from either side. The issue has been parked to some extent, partly as result of the UK signing up to the WTO’s GPA, and confirming it will keep the current coverage schedules.
Public procurement is, however, an important area, not least because it is one of main tools the EU intends to use to aid economic recovery, as the EU Council has recently made clear. The EU intends to use the 14% of GDP covered by public procurement regimes as a tool of industrial strategy, and will use what flexibility it can to “get around” the constraints imposed by the GPA.
Michael Bowsher noted that it was interesting in this regard to compare the GPA’s list of excluded sectors with those that Anneli Howard mentioned in the context of regulation, and pointed out that there is a considerable overlap. If the EU does intend to pursue a procurement strategy focussing on local suppliers, this may hit the UK, with its heavily service-based economy, particularly hard. It is, however, important to note that this approach is already being pursued by the UK through requirements for public bodies to consider social value benefits in procurement, and it is likely that this is a process that will only continue in future.
Leaving aside the question of specific changes in the law, it will also be necessary for the courts to consider what procurement law really means in a number of areas. To take one example, the concept of “discrimination” has long been treated as if synonymous with “contrary to EU law”; once EU law falls away, however, that will no longer be particularly helpful. There is very little GPA law, and there is therefore considerable scope for future legal developments in this – and other – regards.
The role of the CMA
Dr Oke Odudu (University of Cambridge) discussed the changing and expanding role of the CMA as a result of Brexit. While during transition the landscape has remained as it always was, with the CMA applying provisions of EU law alongside domestic law, this will change from the end of this year, as the CMA no longer applies EU law.
Alongside this, the CMA is likely to gain a number of new functions, including becoming the home for the new Office for the Internal Market and Digital Markets Unit, as well as potentially taking on new roles around state aid and procurement. The CMA’s work will also become more complex; not only will it be responsible for competition issues that were previously the role of the EU Commission, it will also take over jurisdiction from the Commission in merger issues. These increased responsibilities are recognised in the CMA’s increased operating budget of £110m.
To achieve this, the CMA has recognised the need for international cooperation, and has signed agreements in this regard with its counterparts in Australia, New Zealand, and Canada, and with the US Department of Justice. The CMA has also called for domestic legislative reform to allow it to take swift and flexible action in response to competition infringements.
The overall picture is of a trusted regulatory body that is undergoing a rapid expansion in its role, which may in turn lead to a considerable change in the UK environment for competition regulation.
This was the final webinar in the series for 2020. The full list is available here:
What is EU Relations Law? The Legal Ecosystem of Brexit: https://www.youtube.com/watch?v=Ixt8IMhtvsw&t=1s
EU Relations Law – Interpretation, Enforcement and Dispute Resolution: https://www.youtube.com/watch?v=_NEgEiz_s5U&t=1s
The UK Internal Market: https://www.youtube.com/watch?v=WGy_Lv8g5YI&t=1s
EU Relations Law – The External Trade Relations: https://www.youtube.com/watch?v=Ru0AmnoOw0Y&t=1s
EU Relations Law – A Level Playing Field for EU-UK Economic Relations: https://www.youtube.com/watch?v=f1s7PLBrtes
Share this post on social media: