LEADING THE WAY OUT OF THE EU

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18 May 2017

The ruling by the EU’s own court has dealt a potentially deadly blow to hopes of continued judicial dominance. 

The negotiations are yet to begin, but already the UK has scored a point, by virtue of an EU own goal struck into the back of the net by its own court. The European Court of Justice’s ruling against the European Commission says that arrangements made in trade deals covering non-direct investments and mediation over disputes between investors and governments require the approval of all of the EU’s national governments. According to the constitutional requirements of certain EU Member States, such approval will be contingent on the blessing of regional parliaments, these parliaments number 38 in total.

The Commission, with the support of the European Parliament (yet another sign of the EU’s two most powerful supranational institutions’ desperation to dissolve national boundaries), argued that the EU has exclusive powers over all aspects of any trade deal. The deal in question was one with Singapore, but the ECJ’s decision applies to all future trade deals, including the upcoming agreement with the United Kingdom.

Remainers have leapt on the opportunity to paint a dark picture. Getting unanimous consent from 38 parliaments is fiendishly difficult and time-consuming, but guess what? The UK should not under any circumstances seek to include investor mediation in its replacement trade deal. Meanwhile, non-direct investments are hardly at the top of the list of priorities. Both the UK and the EU negotiators will therefore naturally be inclined to go for less expansive deal, one that focuses on the essentials requiring the approval of a qualified majority of EU Member States.

ISDS

The ruling is not only a blow for a Remainers on this side of the Channel. The EU’s strategy to slow down the Article 50 negotiations before entangling the UK in an interminable transition period, is also in jeopardy. Investor State Dispute Settlement provisions, also known as ISDS, the hated component of the EU’s dying trade deal with the US that would allow foreign multinationals to abuse national sovereignty through ad-hoc courts, was one of the main culprits for the holding up of the EU-Canada deal by a Belgian regional court. British negotiators will now be well-placed to argue against the inclusion of ISDS in the replacement trade arrangement meaning a comprehensive deal by April 2019 is a strong possibility.

ISDS is so contentious that even if the ECJ had allowed it to be brokered by the Commission with a qualified majority, it would have inevitably slowed everything down, an opportunity the EU institution would no doubt have jumped on.

ISDS, together with the ECJ ruling also brings the court’s own future powers over the UK into question. The EU remains determined to deny the Prime Minister her pledge to free Britain from Luxembourg’s jurisdiction. Awarding the ECJ arbitration powers over disputes between EU investors in the UK and vice versa has been one designated pathway towards this cynical objective. Now that’s scuppered, the EU will hope the Great Repeal Bill founders: in its Brexit guidelines, the EU stated its intention for the ECJ to remain supreme over UK law if existing EU rules and regulations were not satisfactorily incorporated into British state books, the Great Repeal Bill’s purpose.

But with the Conservative Party likely to win a healthy majority, there is a very good chance Theresa May’s restored government will be able to whisk through a fully-fledged GRB well before the Article 50 negotiating period elapses.

No ECJ

Those fidgeting for some form of investor dispute mechanism just as unnecessary as the EU itself will have to settle for the ECJ to take care of disputes in the EU and the UK’s judicial system to rule over disputes on its own turf, the way it has always been done, which works perfectly well in developed economies.

Tuesday’s ruling acts both as a reminder of how much power the EU has, it is shocking that only two “competencies” were classified as shared rather than exclusive to the EU in court’s ruling. The stage is now set for a sovereign nation to take on an emerging empire already creaking under the weight of its own dysfunction. Britain has a wonderful opportunity to rewrite the disastrously intrusive economic paradigms that have defined policy in recent decades.

From the EU’s perspective, ISDS is just one casualty, there will be many more between now and 2019.