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CIArb Policy Briefing: Brexit Arbitration Body

Wednesday 28 June 2017

The Secretary of State for Exiting the European Union, David Davis, recently announced the potential development of an arbitration body as an alternative to the European Court of Justice (ECJ) for future trade disputes.

 

He argued that the European Council had not mentioned the ECJ in its negotiating guidelines, but the European Commission did in its interpretation. Mr Davis said the UK could accept some arbitration for future disputes but not under the current system.

 

In turn, the EU has reiterated the fundamental importance of the ECJ with figures such as Donald Tusk, President of the European Council, stating the UK's offer to protect the rights of EU citizens was "below our expectations.” 

The options

Whilst it is highly unlikely the EU will countenance an alternative to the ECJ, the UK is increasingly making clear that this is a red line. There are five possible options for a joint UK-EU arbitration panel that will ensure that the terms of an agreement are respected under international law:

  1. The International Court of Justice (ICJ) but it is only open to States, so the EU could not make use of it. 
  2. The Permanent Court of Arbitration (PCA) could be another option but that would mean that the ECJ would have to accept to be bound by an ad-hoc arbitral tribunal (unlikely). 
  3. The World Trade Organisation (WTO) Appellate Body which the EU and all Member States are party. However, the Appellate Body’s jurisdiction would have to be amended, and this would require modification of the WTO treaties (alongside the renegotiation which both the UK and EU will be embarking upon). 
  4. The European Court of Human Rights (ECHR). However, the EU is not party to it and the clear rejection of a possible accession of the EU to the ECHR by the Court of Justice of the European Union (CJEU) illustrated that it does not wish to be bound by the rulings of the ECHR. This is also politically difficult in the UK, though a minority Government may face difficulty with centrist rebels on leaving the ECHR and Labour remains in favour. 
  5. The Court of Justice of the European Free Trade Association States (EFTA court). It is a supranational judicial body responsible for the three EFTA members who are also members of the European Economic Area (EEA): Iceland, Liechtenstein and Norway. This option has the advantage of covering non-EU Member States, while still having some links with the EU. The EFTA court is essentially the only international court, which the CJEU has accepted alongside itself.  From a UK perspective, this could be acceptable or a division of the EFTA court focused on Brexit matters.

 

Of the options above, the EFTA court comes out as the front runner. It is accepted by the ECJ, it applies EU law and follows the ECJ’s case law/jurisprudence but it is still outside the EU and caters for non-EU Member States.

Whilst it contains the words ‘Europe’ and ‘court’, this would be politically acceptable in the UK, unless both the EU and UK push for a completely new dispute settlement body.

However, an adaptation of EFTA seems like a viable option if the EU does consider an alternative to the ECJ to guarantee the rights of EU citizens as part of a Brexit deal. 

Conclusion

As with recent drawn out trade negotiations such as the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP), arbitration will once again take centre stage as a key focal point for both the parties involved and wider civil society.

CIArb warned of the political significance of arbitration in its Brexit briefing earlier this year.

Against the backdrop of the European Commission's ongoing work on a Multilateral Investment Court, a key feature of the forthcoming UNCITRAL session in July, this development will add to the growing debates regarding the relationship between investment arbitration and international public law.

CIArb looks forward to continuing to work with the member community and partners beyond as policymakers strive to develop a dispute settlement system that works for everyone.

Professor Nikos Lavranos, Secretary General of EFILA, also continues to explore these issues in detail.

Further information

 

If you would like further information or to become involved in CIArb’s work to inform policymakers about private dispute resolution, please email Chris Wilford, Head of Policy, Public Affairs and Research at cwilford@ciarb.org.