Written by Robert Oulds
This article was first published by The Bruges Group and we republish it with their kind permission.
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The Revised Political Declaration
So far as we are aware the only material changes in the Withdrawal Agreement (Treaty) are to the NI Protocol, which means that the critical ECJ oversight and Art 184 link to the Political Declaration remain. I am told by UKREP that there are two changes to other Articles in the Treaty but they were unable to tell us which ones.
The Treaty permanently restricts our military independence, demands payment of an unspecified sum, prevents independent arbitration, grants EU officials immunity from UK laws, leaves us with EIB contingent liabilities running into tens if not hundreds of billions and will impose punitive laws on the UK during a transition which is likely to be extended until mid 2022 (just a few months before the next General Election).
The Political Declaration is such that a future FTA with the EU is made unpalatable because it will restrict our foreign policy and military independence as well as policies in trade, tax, fishing, environment, social and employment, competition and state aid. Free movement is replaced with vague notions of “mobility” and “non discrimination”.
Specific Provisions in which the Withdrawal Treaty:-
1.Restricts Parliamentary independence
Just as before, the Court of Justice of the European Union (ECJ) governs the entire Treaty and EU law takes precedence – binding future British Parliaments and requiring judges to overturn laws passed by the British Parliament if the ECJ considers them to be inconsistent with obligations in the Treaty. (Articles 4, 87, 89 and 127).
2. Restricts independent trade policy
Although there is no longer any reference in the Political Declaration to “building on the customs territory” the new provisions may still create difficulties for the UK in agreeing trade deals because any FTA with the EU must satisfy principles and objectives that include “ensuring a level playing field for open and fair competition” (para 17) and “deep regulatory and customs cooperation” (para 21). This will make it difficult for the UK to reduce non-tariff barriers as a means to facilitate a trade deal with a third country – particularly the United States.
The Political Declaration requires that a FTA “ensure no tariffs, fees, charges or quantitative restrictions across all sectors with… ambitious customs objectives that are in line with the Parties’ objectives and principles” (para 22). This does not exclude the possibility of a Customs Union. It is not clear how the UK could protect its industries against dumping by third countries with which the EU has FTAs.
The problem also remains that there is no definition in the Withdrawal Treaty for the word “goods”
and so its scope will be interpreted as the ECJ determines from time to time (Articles 127, 184).
3. Prevents an independent tax policy
The Political Declaration still obliges the UK to adopt a future relationship which will impose EU State Aid rules and “relevant tax matters” on the UK (para 77), the EU specifically intends to curb the UK’s ability to have “harmful tax practices”, the Withdrawal Treaty also applies EU law to the UK during the transition period (Article 127) – allowing the EU to sue the UK, including infringement proceedings for: as yet unidentified breaches of State Aid rules (which can take the form of tax exemptions); and billions in unpaid VAT on commodity derivative transactions dating back to the 1970s (Articles 86 and 93).
4. Controls Fishing
The CFP continues in UK waters during the transition period (which can be extended) but the UK will have no say in its implementation or enforcement. After the transition, the Political Declaration requires “cooperation on… regulation of fisheries, in a non-discriminatory manner” (para 72), which is code for continuing the current arrangements for EU access to UK waters.
The Political Declaration also requires that any FTA “ensure service providers and investors are treated in a non-discriminatory manner, including with regard to establishment” (para 29) – this would prevent the UK from introducing the modern equivalent of the Merchant Shipping Act 1988 which sought to protect the British Fishing Fleet’s quota from being bought-up by foreign owners (and which was the subject of the infamous litigation in Factortame).
5. and 6. Prevents independent military action
The Treaty permanently restricts the UK’s sovereignty by preventing the UK from taking “any action likely to conflict with or impede” EU foreign policy (Article 129(6)). It is instructive that this contrasts with almost all the other sub-sections of Article 129 – each of which include language limiting them to the duration of the transition period.
It is also very revealing in the Political Declaration that critical parts of the section on foreign policy and security are not reciprocal. For example, para 99 confirms that the future relationship will not “prejudice the decision-making autonomy of the EU” but no such language is afforded to the UK – we are merely permitted to “maintain the right to determine how [to respond] to any invitation to participate in operations or missions”.
Additionally, in the Political Declaration the parties “agree to consider” security collaboration in the European Defence Agency, the European Defence Fund and PESCO “to the extent possible under [EU law]” (para 102(c)) which is a prescriptive obligation and not merely a permissive option. Despite making payments to the European Defence Agency during the transition period, British troops in EU battlegroups will not be led by British staff officers (Articles 129(7) and 156-157).
7. Restricts Foreign Policy
The UK will be bound by international agreements concluded by the EU despite having no influence in their negotiation during the transition period and must “refrain, during the transition period, from any action… which is likely to be prejudicial” to the interests of the EU (Article 129(3) and (6)).
8. Demands Payment of a sum to be decided by the EU
Possibly a 39bn payment to the EU according to HM Treasury but as that amount can’t anticipate EU fines and contingent liabilities it’s just a minimum figure (Articles 138-144, and 152-155).
9. Replaces one Commission with another
A new body is established with ‘powers equivalent to those of the European Commission’ (Article 159).
10. Prevents independent arbitration
The UK is expressly denied the right to take any dispute about the Treaty to the international courts and must accept the exclusive jurisdiction of the Arbitration Panel (half of whom are appointed by the EU) and, via it, judgments of the ECJ (Articles 168, 174).
11. Grants EU officials immunity
The EU and its employees are to be immune to UK regulations, criminal law and exempt from tax (Articles 101, 104, and 106-116).
12. Imposes a gagging order on the UK
The UK must keep all EU information confidential but the EU can use UK information as it sees fit. (Articles 74 and 105).
13. Leaves the UK with EIB risks but no profits
We abandon rights to not only past and future profits made from our investment in the EIB, but also our share of assets of the EIB and yet remain liable for contingent liabilities of up to 500bn euros of guarantees given to the EIB via the EU budget (Articles 143, 147, 150).
14. Imposes EU public procurement rules
EU public procurement rules continue at least during the transition period (Articles 75-78 and 127).
15. Makes the UK a bystander in laws that govern it
The UK is permitted to send a civil servant to Brussels to observe the EU passing laws designed to disadvantage our economy during the transition (which might last many years) (Article 34). For example, the EU is discussing regulating London’s huge Foreign Exchange Markets and also imposing a financial transaction tax that would be collected at our expense by HMRC but sent to foreign governments.
Benjamin Wrench Barrister
Brussels, 17th October 2019