Out-Law News 2 min. read

UK seeks new dispute resolution mechanism for post-Brexit world


The UK is to argue for the implementation of a new dispute resolution mechanism to resolve disputes between the UK and European Union (EU) following the former's withdrawal from the latter.

Brexit secretary David Davis, in a column in the Sunday Times (registration required) said the UK would bring about an end to the direct jurisdiction of the Court of Justice of the EU and that finding a mechanism to manage disputes between the UK and EU over their agreements would require a “new and unique solution”.

Under that solution the UK could follow the precedent set by the European Free Trade Association court. That body handles disputes between Iceland, Liechtenstein and Norway with the EU single market.

EU law expert Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said the stances taken by the UK and EU over the dispute resolution mechanism that would govern the implementation of the withdrawal agreement “highlight the philosophical differences between the UK and the EU”. 

“From the UK perspective, the desire is to have a new body or system that is not the European Court of Justice given that, from Brexiteers’ perspective, it embodies the EU system. From an EU perspective it is entirely natural, if not necessary, that the arbiter is the European Court of Justice, because of its central role as the final appellate court in the EU system,” said Lougher. 

“The European Economic Area agreement has a different dispute resolution system, not including the European Court of Justice, which may offer a possible way forward, assuming that there is sufficient goodwill on both sides for such a system to work effectively,” said Lougher.

The Department for Exiting the EU also published two position papers ahead of the third round of negotiations focusing on the trade of goods and services (11 page / 242KB PDF), and confidentiality and access to documents (4 page /168KB PDF).

The government said it was in the interests of both the UK and EU for their trade and economic relationship to be maintained after Brexit, and it wanted to provide legal certainty and avoid disruption during the withdrawal process.

It proposed four principles to achieve these aims: goods available on the single market before Brexit should continue to circulate freely afterwards; businesses should not have to duplicate any compliance activities to continue to trade in the EU after Brexit; a trade agreement should facilitate the continued regulatory oversight of goods; and where goods are supplied with services, there should be no restriction on the supply of these services that would undermine the agreement on goods.

With regard to confidentiality of documents, the UK government said it would recognise the importance of protecting information exchanged while it was a member of the EU and that any confidentiality arrangements agreed before Brexit should be maintained and reciprocal afterwards.

The latest position papers come as a report suggests that “hard Brexit”, which would see the UK quit the single market and EU customs union, could provide a £135 billion boost to the economy. The Economists for Free Trade group said a surge in national output would be accompanied by an 8 per cent fall in prices and a cut in benefits paid to EU immigrants. It suggested the UK should eliminate trade barriers without asking for trading partners to do the same.

“There will doubtless be more reports on the economic impact of Brexit, suggesting both adverse and favourable consequences arising from Brexit, as there is currently no across the board consensus on the issue,” said Lougher.

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