After Brexit #10

Maximising Sovereignty under the UK-EU Trade and Cooperation Agreement: Outlines of a Strategy

Danny Nicol

5 January 2021

The UK-EU Trade and Cooperation Agreement still tries to tie the British government’s hands. A strategy is needed to maximise sovereignty and defy international law wherever democracy requires it.

The most significant feature of the Trade and Cooperation Agreement (TCA) between the United Kingdom and the European Union is that it secures limited gains for sovereignty and democracy by removing the UK from the EU legal system (see After Brexit #9 - The UK-EU Trade and Cooperation Agreement: Minimum Brexit). By replacing adherence to the EU legal order with a bilateral international treaty, the UK is no longer subject to the interpretative monopoly of the European Court of Justice (ECJ). This means that the actual meaning to be attributed to the TCA’s provisions is up for grabs. This change gives British governments opportunities to press for TCA provisions to be interpreted in ways that maximise national sovereignty, and with it, national democracy.

 

The underlying difficulty, however, is political, not legal. We have for forty years been governed by an elite which has sought to reduce national sovereignty very substantially in order to insulate neoliberal, anti-working-class policies from democratic control.  This has contributed to turning Britain’s political parties into identikit parties, generating the widespread feeling that “politicians are all the same” and that “they’re all just out for themselves”, sparking the discontent that resulted in Brexit.

 

There is scant evidence that the Labour Party wishes to escape this mindset. Now safely under middle-class domination, Labour appears to want to maintain the neoliberal limits to democracy from which the TCA offers the possibility of some relief. Its strident calls to retain full alignment with the EU’s “level playing field”, including state aid rules, hardly signify a vibrant social democratic party looking to break with the doctrine that There is No Alternative.

 

As for the Conservative government, the extent to which it is really prepared to maximise sovereignty remains to be seen. But sovereignty is required to pursue the interventionist policies needed to retain the Conservatives’ new Red Wall voters, many of whom have also borne the brunt of the COVID-19 lockdowns. It may prove difficult, however, for the Conservatives to promote the interests of this new class base in preference to those of its traditional base and capitalist ideology.

 

It is therefore easier to propose a strategy for maximising democratic space under the TCA than it is to have confidence that British politicians will wish to pursue it.

 

To sketch the basic outlines of a strategy to maximise sovereignty is nonetheless worthwhile. One cannot rule out the possibility that the present government, perhaps in some fields more than others, will need to exert national sovereignty in order to retain its new supporters. Nor can one exclude the possibility that a more clear-cut pro-working-class party may come into existence should the government fail to deliver.

 

Such a strategy would be two-pronged. Firstly, governments need to accord an interpretation to the TCA which maximises national sovereignty. Secondly, however, governments should not treat the TCA as sacrosanct. They should be prepared to violate the TCA wherever the public interest so requires.

 

Making the Most of the TCA Text

Certain lawyerly Remainers, noting the presence of existing EU language on state aid in the TCA, claim that nothing has changed. This is to overlook the fundamental difference between the TCA and the EU legal order, namely that the ECJ is no longer the authoritative interpreter of the law. Instead, this crucial power lies with the parties – the EU and the UK – along with such arbitration tribunals as convene to resolve disputes. This gives the UK more scope to interpret the TCA in a way that maximises national sovereignty. Doing so should become the long-term strategy of British governments.

 

Let us consider an example. The TCA provisions on state subsidies are particularly controversial. This is because, whilst capitalist globalisation requires states to be prevented from “distorting” markets through subsidising domestic producers or service providers, many voters expect their governments to intervene in the economy in the national interest. One seminal means of state intervention is to provide state aid to domestic industries.

 

The TCA stipulates that both parties, UK and EU, must establish a system of subsidy control. Such a system is to consist of courts or tribunals, charged with determining whether a given state aid is lawful. These bodies must assess whether a subsidy’s positive contribution in achieving its public-interest objective outweighs any negative effects in terms of trade and investment between the parties (Part Two, Heading One, Title XI, Art. 3.4). Yet the text of the TCA does not really flesh out how courts or tribunals should apply this test. It could be construed as a strict “proportionality” test, whereby the subsidy, to be lawful, must constitute the least restrictive means (in terms of restricting trade and investment) to achieve the desired objective. Or the test could be a looser “reasonableness” test, whereby any subsidy would pass muster unless it is manifestly excessive in terms of harm to trade. When designing the UK’s new subsidy control system, the UK government and Parliament should elaborate on the TCA test and ensure that “light touch” review prevails.

 

Similarly, it is a matter for the British government and Parliament who will staff the courts or tribunals. Tribunals composed of trade unionists may well reach different decisions, and develop a different collective ethos, to tribunals staffed by business leaders or judges or lawyers steeped in decades of deference to EU law. As for who may bring cases, the TCA stipulates that the standing rules must match national law on the subject (Title XI, Art. 3.10(1)(d)). This suggests that there is nothing to stop a determined government from restricting both. For example, parliament could legislate to prevent corporations from suing the government, and limit the EU’s ability to intervene in state aid cases. The TCA’s provisions also allow Britain to shield subsidies from domestic judicial review by incorporating them into Acts of Parliament (Title XI, Art. 3.10(3)). This provision should be used wherever necessary.

 

The TCA also exempts from the state subsidy rules “services of public economic interest”. It provides that service-providers who are assigned public-interest tasks must not be obstructed in the performance of those tasks by the TCA’s state subsidy principles (Title XI, Article 3.3). Significantly, there is a similar provision in Article 106 of the Treaty on the Functioning of the European Union. However, the ECJ has interpreted this in such a way as to encourage its use by private companies to nullify state reservations of exclusivity. The ECJ has thereby fostered the destruction of public monopolies by private companies. At the same time, it has enmeshed national courts deeply into decisions that are central to the public/ private ownership divide, thereby usurping the political role of governments and legislatures.[1] Having escaped the clutches of the ECJ, the corresponding provision in the TCA is therefore a prime candidate for an autonomous British government interpretation that maximises economic autonomy.

 

Given the scope for pro-sovereignty interpretation of the TCA, it is imperative that the room for interpretative manoeuvre of British governments is preserved long term. In this regard the TCA establishes a Partnership Council (PC) consisting of the two parties (Part One, Title III, Article INST1). This body has power to amend the TCA itself, with most amendments taking effect through ministerial regulations – i.e., without proper parliamentary scrutiny. Neoliberal governments could too easily use this power to bind the country more tightly to neoliberalism.

 

Parliament should establish tight controls to avoid the executive misusing these powers. It should create a successor to the EU Scrutiny Committee, with a remit of overseeing anything emerging from the PC. A simple majority vote on this committee on any matter should trigger an automatic parliamentary debate, with a majority required to enact any changes to the TCA. Parliament could also legislate to require the UK government to request that PC meetings are routinely held in public, to maximise accountability.

 

Governing in Defiance of the TCA

Bold interpretation of the TCA, however, can only take us so far. Sometimes the TCA’s wording is all too clear. The second prong of the sovereignty-maximising strategy would therefore have to be one of selective violation of TCA provisions.

 

The limits of sovereignty-maximising interpretation are readily apparent in Articles SERVIN 2.2 and 3.2, which relate to market access for enterprises in the territory of the other party. They stipulate that a party may not adopt or maintain measures which limit the number of enterprises and/ or service-suppliers engaged in a specific economic activity, for example by establishing a monopoly. This rules out 1945-style nationalisation of economic sectors, making capitalist markets in effect the only permissible template for the British economy. Yet the choice between markets and nationalised monopolies is a fundamental political choice that any country must preserve in order to be a democracy. The relevant TCA articles give no real scope for creative interpretation. In such contexts, outright defiance of the TCA becomes the only way to secure democracy.

 

Two obstacles stand in the way of defying the TCA, one political, the other legal. It is a well-established principle of the British constitution that UK Acts of Parliament prevail over incompatible international rules.[2] Yet British MPs claim to be reluctant to violate international law. To do so is seen as bad form. For instance, the prospect that the recent Internal Market Bill might breach the Good Friday Agreement had MPs and peers reaching for their smelling-salts.  In reality, however, MPs’ invocation of international law has proven to be entirely opportunistic. The argument is pulled out whenever they really object to a Bill on other grounds – for example, MPs’ desire to retain their beloved constitutionalised neoliberalism. After all, most MPs had few qualms that the invasions of Iraq and Afghanistan, or the bombing of Kosovo or Libya, might breach international law.

 

In reality, international law enjoys an entirely unsustainable normative status. It has prestige among the chattering classes, but both its origins and content erode its claims to legitimacy. This is obvious when we consider the way that international law has developed in lockstep with neoliberalism. To create a brave new world for the globalisation of transnational corporations, neoliberal leaders have since the 1980s created a vast web of international and supranational regimes. These accord supra-legislative rights of free movement to corporations, whilst restricting the possibilities of repealing neoliberalism at the national level. Through international law, therefore, neoliberalism was effectively constitutionalised. Over the past 40 years, bewildering volumes of such international law devoted to protecting neoliberalism against democracy have been built up.

 

Importantly, and fittingly, these international regimes have been developed in secretive settings insulated from democratic debate and scrutiny. Hugely significant regimes such as the World Trade Organisation Agreements were negotiated in secret, then approved by parliament at great speed and with scant debate. Moreover, such treaties are invariably presented as vast take-it-or-leave-it packages, leaving legislators powerless to amend them even if they wished to do so. With government and opposition united on ideology, the constitutionalisation of this ideology through international means largely fell under the radar of the general public. The anti-globalisation protests of the 1990s signified some resistance to this process – before left liberals drunk the neoliberal Kool-Aid and became crusading defenders of “just-in-time” production networks enabled by EU regulation.

 

The TCA’s creation fits this pattern, notwithstanding media scrutiny throughout the negotiation process. The content of the negotiations remained opaque throughout, beyond some anodyne press briefings, and MPs were presented with over 1,200 pages of text with less than a week for public debate. Facing the “cliff-edge” of “no deal”, legislators were clearly bounced into approving a highly consequential international treaty without time to even read the text, let alone consult their constituents. The TCA’s democratic legitimacy is therefore extremely weak. Furthermore, unlike EU membership, the TCA has little emotional pull. EU membership clearly enjoyed some measure of devotion, albeit among a small but vocal and fanatical segment of middle-class voters. The TCA cannot inspire such zeal.

 

Politically, then, it is essential to start mobilising arguments against the primacy of international law, by appealing to what ought to be primary in a sovereign democracy: the wishes and interests of the people. Since the TCA has very little democratic legitimacy or emotional weight, it is not impossible to prepare the population to expect it to be overridden if it stands in the way of democratic decision-making. The “radicals” who argued that we should “remain and rebel” within the EU should surely be fully on-board with such a strategy (see Analysis #29 - “Remain and Revolt”: A Lame Variation on the Bogus “Remain and Reform”).

 

As for legal obstacles, the TCA is a bilateral treaty, entailing few legal remedies in case of such defiance. For those EU programmes that the UK has opted-in to, any disputes are handled under EU institutions and rules. For the bulk of the Agreement, if the EU identifies a breach by the UK, it may request the establishment of an arbitration tribunal (Part Six, Title I, Art. INST.14). That tribunal will decide the conformity of the challenged measure with the TCA (Art. INST.17-18). Rulings of arbitration tribunals cannot affect the legality of UK measures themselves, nor can they be applied directly in UK courts (Art. INST.29.4)

 

In the event that a party does not rectify its breach, the only sanction is that the other party may suspend some of its own obligations under the TCA (Art. INST.34 B-D).  Such a punishment can only do so much harm. Indeed, if rebellion against the TCA prompts its replacement with an agreement more respectful of national autonomy then so much the better. Each party can, after all, withdraw from the Agreement with twelve months’ notice (Art. FINPROV.8).

 

It is therefore a viable political strategy to attempt to break the taboo on breaching international provisions. There is no need any longer to tolerate excessive interferences with national sovereignty and democracy. To be sure, for the UK to directly challenge the international order, or lead the way in challenging it, probably requires greater political mobilisation of its population than we currently have. Nonetheless, the need to mobilise to champion democracy is now imperative. The time has come for international law to be put in its place.

 

 

References

[1] Danny Nicol, The Constitutional Protection of Capitalism (Oxford: Hart, 2010) pp. 107-110.

[2] Mortensen v Peters (1906) S.L.T. 227.

About the Author

Danny Nicol is Professor of Public Law at the University of Westminster and author of The Constitutional Protection of Capitalism (Oxford: Hart, 2010).

This work represents the views of the authors only. It is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.