Tuesday 8 December 2015
Oral evidence, 8 December 2015.
Witnesses
Professor Sir Alan Dashwood QC, Emeritus Professor of European Law, Cambridge University, and Professor Panos Koutrakos, Jean Monnet Professor of European Law, City University London, gave evidence.
Chair
Professors, welcome to our second session on Brexit and its consequences for our position under international law. I would be grateful if you both introduced yourselves for the benefit of the record.
Professor Sir Alan Dashwood
I am Alan Dashwood, a retired professor from Cambridge, currently a professor at City University and a barrister.
Professor Koutrakos
I am Panos Koutrakos, Professor of European Law at City Law School.
Chair
How, in practice, do EU-only and so-called mixed arrangements differ with respect to the obligations that they place on individual member states?
Professor Sir Alan Dashwood
EU-only agreements are concluded by the Union under its exclusive competences, which are quite limited. There is rather a short list of competences that are exclusive in principle which is found in Article 3(1) of the treaty on the functioning of the European Union. For external purposes, these consist of the common commercial policy and the customs union—they are really two sides of the same coin, and that is the most important instance—together with conservation of marine resources and monetary policy for the member states whose currency is the euro, which of course does not concern us. In those areas where the Union will enter into international agreements in its own name alone, the member states become bound, but only as members of the Union, because Union agreements bind them; they are not directly parties to the agreement. In the case of mixed agreements, which are concluded by both the Union and the member states, the member states are themselves parties—they exercise their national competences in order to become parties to the agreement—but it will often be uncertain to what extent the agreement has been concluded by the Union and to what extent by the member states. This is often left unspecific, partly I think in order to avoid disputes at the moment when agreements are being negotiated. Mixed agreements are often quite complex bundles, which will include an element of the common commercial policy, for example, and therefore that bit of the agreement will belong to the exclusive competence of the Union; they might also include something about development co-operation, which is an area of shared competence, and the member states may very well take the view that they concluded that part of the agreement. If it is a really complex matter, there might be something that impinges on security matters, which the member states will have intended to conclude themselves. I hope that is helpful.
Chair
Yes. In terms of the genesis—whether it is mixed or EU-only—are the obligations placed on the member states in that sense identical?
Professor Sir Alan Dashwood
You have to look at it from the point of view of the third country or countries concerned. If there is nothing in the agreement to identify the parts of it that have been concluded by the Union and the parts that have been concluded by the member states—that is usually the case—the third countries concerned are entitled to assume that the agreement binds the Union and the member states jointly and severally. In some cases—this is relatively rare and not always helpful—there is something that is known as a competence clause, which attempts to define the matters for which the Union is accepting obligations and those for which the member states are accepting obligations. As I said, they are not always very helpful, because the situation is legally complex.
Chair
Professor Koutrakos, is there anything that you want to add to that?
Professor Koutrakos
Not really, other than that, in the context of mixed agreements, in addition to the specific obligations imposed on the basis of the clauses of the agreement, there is an additional obligation on member states in the duty of co-operation. This is a broad duty which is imposed on member states. It is actually a duty which is imposed on the Union institutions, too. The idea is that, in their interactions in the process of the negotiation, conclusion and application of the agreement, they co-operate. This binds the member states even in areas that fall within their own competence. Under the agreement, they have to take this duty into account.
Chair
In the case of mixed agreements, such as the partnership and co-operation agreements with third countries, if we left the EU, would we retain the obligations?
Professor Sir Alan Dashwood
It is a difficult question but, in my opinion, almost certainly not, because these are bilateral agreements which are concluded by the Union and its member states of the one part, and by the third country—say, Bosnia—of the other part. The member states are, therefore, parties to agreements of this kind not in their own right but as member states of the Union. That is a matter that would have to be addressed in the context of withdrawal negotiations, or possibly subsequently if it proved too complicated to resolve during the two-year period which the treaty allows.
Chair
Professor Koutrakos, would you agree with that?
Professor Koutrakos
I think that that is right. The argument might be made that the parts of the agreement that fall within national competence might continue to exist, but actually, as Sir Alan said, both the wording of the agreements and the fact that they are package agreements which the partner country has accepted suggest that it would be very difficult for those agreements to continue to exist.
Chair
So the view of both of you is that we would have to renegotiate those agreements from scratch if we left?
Professor Sir Alan Dashwood
Yes.
Nadhim Zahawi
What are the major ways in which the current EU external legal regime constrains the UK’s international action? How free, in practice, is the UK to conclude agreements in areas of non-EU competence with third states and international organisations?
Professor Sir Alan Dashwood
The constraints are related to what I already said, and Professor Koutrakos also, when I was talking about exclusivity and exclusive competence. Professor Koutrakos mentioned the duty of close co-operation. In areas of exclusive EU competence, the member states are not able to act unilaterally, because it is a competence which, under the treaties, belongs exclusively to the Union. I should add that there is a form of exclusivity that is not specifically provided for by the treaty, at least not initially. It now appears in the treaty post-Lisbon. When the Union has adopted internal legislation on a certain matter, the member states may no longer enter into international agreements relating to the same subject matter. That goes back to quite an old case known as the ERTA case. ERTA stands for European Road Transport Agreement. It is a case that dates from the end of the 1960s when it was decided by the Court that competence to enter into that agreement, which was a multilateral agreement about the social conditions for commercial vehicle drivers—driving hours and that sort of thing—belonged exclusively to the Union. What was then an EEC regulation had been adopted relating to the same subject matter—it is almost identical in its content. If there has been internal legislation in an area of shared competence, that restricts the freedom of the member states to act externally, because otherwise there would be a risk of their taking on international obligations in an area that is already covered by EU law. Perhaps Professor Koutrakos would like to say a word about close co-operation.
Professor Koutrakos
The duty of close co-operation imposes constraints on what member states may do within the context of mixed agreements. For instance, the Court has told us that Ireland did not have the right to bring an action against the UK before the organs of the United Nations convention on the law of the sea, because this violated the duty of co-operation. Instead, it should have brought this matter before the Commission. In another example, in the context of the Stockholm convention on persistent organic pollutants, the Court told us that Sweden did not have the right to make a proposal for a specific substance to be qualified under the regime of the convention. The duty of co-operation is also of a broader scope. It may impose constraints on what member states may do in the context of international organisations to which the EU is not a party. An example is the IMO—the International Maritime Organisation. The Court told us that Greece did not have the right to make a proposal under some conventions of this organisation because it did so in an area that fell within Union competence, even though the Union was not a party to this organisation. It was merely due to the rules of the membership organisation.
Mr Hendrick
How often do member states and the European Commission clash over competences in international law?
Professor Sir Alan Dashwood
Reasonably often, I would say. There are two particularly sensitive areas. There was a time when clashes could usually be explained by the different voting procedures of the Council provided for by legal bases. Member states, and therefore the Council, tended to favour legal bases that provided for unanimity, and the Commission tended to favour legal bases that provided for qualified majority voting. That is more or less a thing of the past, because qualified majority voting has become so widespread, so the clashes about the choice of legal basis are usually related to the common commercial policy because of the Union’s exclusive competence in that field. The Commission, as I suppose you might expect, has a strong preference for using the common commercial policy—that’s trade—as a legal basis wherever a plausible case for this can be made, whereas the member states and the Council will very often be arguing for a different legal basis. One area where there were quite a lot of disputes in the late 1990s was at the interface between the common commercial policy and environmental policy, because so many multilateral environmental agreements use trade-related mechanisms—bans on imports of certain products and that sort of thing. Although the agreement has an environmental objective, the instrumentality is quite often trade-related, so there were disputes about the interface between those two legal bases, some of which the Commission won and some of which the member states won.
Mr Hendrick
How is that resolved? Is it through the Court of Justice?
Professor Sir Alan Dashwood
It has to be resolved through the Court of Justice, yes. There are also disputes in relation to the choice of the common commercial policy or an internal market legal basis, because competence for the internal market is shared, so that opens up the possibility of having a mixed agreement. Those are the two areas where there is an interface that has been contested.
Professor Koutrakos
I have just two brief points to add. First, such disputes do not arise only between member states and the Union; there is also a strong inter-institutional dimension. Institutions themselves may fight over legal bases. This is not just in the area of external relations; it is also in the area of the internal market—internal legislation. It’s just the nature of the beast. The allocation of powers for institutions and different legal bases, all of which may as time goes by become interrelated, raise questions about which is the right legal basis and therefore which institution has power, so this is not really an issue specific to this area. The second point I would like to mention is this. While ultimately these disputes are solved—addressed—by the Court of Justice, there is a very considerable practice, on the basis of which the Union institutions and the member states are trying to avoid these disputes for as long as they can. So there is a proliferation of practical arrangements, ad hoc arrangements, which enable the institutions and the member states to get on with the negotiation of international agreements, leaving the issue of competence aside. Quite often, when the issue of competence arises—it needs to be raised before the Court—it is at the end of this process. This seems to suggest that the system has an in-built degree of flexibility, which allows the question of principle—who has the competence to act in this area?—to be set aside, so that the institutions can get on with treaty making.
Chair
In which direction does the European Court of Justice go when it rules on a delineation of competences? Mythology suggests that it will always rule in favour of the EU institutions and the Commission, rather than the member states. What is your expert opinion and experience?
Professor Sir Alan Dashwood
May I just put a slight gloss on that? Disputes about legal bases are very often between the Council and the Commission, so they are inter-institutional disputes, but of course the member states will be standing behind the Council. More often than not, the Court decides in favour of the Commission—but not invariably.
Chair
Are we talking 70:30, 90:10? Is it, as some people suggest, institutionally on the side of the Commission and ever closer union, or is this not an area—
Professor Sir Alan Dashwood
I bear the marks of these things because I quite often appear for the United Kingdom before the Court of Justice, but—
Chair
Do you think you are pushing water uphill in front of those Justices because they are kind of programmed around ever closer union and therefore supporting Commission competence?
Professor Sir Alan Dashwood
I do not feel that. It really depends very much on the case. I was talking about those environmental cases, and I had no difficulty in arguing those. The ones that I do find difficult—you can understand this, I think—are those that relate to UK opt-outs or opt-ins, because you are asking for special treatment. Now, this is special treatment which has been guaranteed by the treaties, and you are entitled to it, but you have to make a really good case, and more often than not I have failed to convince the Court of Justice.
Chair
So if you have produced a case where we, in treaty, are guaranteed an opt-in or opt-out, whatever it is, and then the Justices just say, “Well, unlucky”—
Professor Sir Alan Dashwood
I am sorry; I did not quite mean to say that. No; you know, these are always cases where there is room for interpretation.
Chair
In which case we are then left with a rather sore feeling, as the United Kingdom, that the interpretation has not been as would have been no doubt presented by our political leaders whenever they negotiated that particular opt-in or opt-out. So they will come back to the UK and say, “Great triumph: we have got ourselves an opt-out on this,” and we then find it gets reversed in the European Court of Justice.
Professor Sir Alan Dashwood
The cases that one ends up litigating are usually rather complex ones that the negotiators probably wouldn’t have thought of at the time.
Mr Hendrick
On that point, do you feel that the Commission in particular sees itself, rather than the Court of Justice, as having the duty to uphold the treaty, and therefore when member states, through the Council, pick up on something, they try to interpret the treaty in a way which they think the Court of Justice would in any case?
Professor Sir Alan Dashwood
The Commission certainly does see itself as the guardian of the treaties, and I think justifiably. That is its job.
Mr Hendrick
But that would be the reason why, in answer to the Chairman’s question, the outcomes would weigh in favour of the Commission rather than the complainant through the Council.
Professor Sir Alan Dashwood
The Commission will be putting forward a view which, in its conception of the Union, is helping to promote the well functioning of the system. The Court may quite often agree with it, but not invariably. It depends on how good a case we have to make, and it is just very difficult to make a case in favour of opt-ins and opt-outs, except where they very obviously apply.
Professor Koutrakos
I want to make just a couple of points. When it comes to the Commission, it is not always a question of ideology. Sometimes it may be, but there is also a question of efficiency. The argument that the Commission quite often puts forward in this context is that it is much easier for it to negotiate with third parties if it did not have at the same time to negotiate with the 28 member states. And it is the complexities of mixed agreements which would make this argument. That is the first point. The second point is that one of the reasons why we do have these disputes is that sometimes the text of the treaties is not particularly helpful. For instance, an area which is under discussion at the moment is what orders for entering investment mean precisely. This is an area where the Union has exclusive competence, under article 207 of TFEU, but there are questions about the scope of this provision. It is the role of the Court, and the member states have asked the Court, to interpret such terms. It is in this context that such disputes arise. The other thing is that there are phases in the developments of the Court’s case law. That is the case generally, but also in the area of external relations. For instance, in the ’90s, when the Union concluded the World Trade Organisation agreement, the Court offered an opinion about the competence of the Union to conclude that agreement. While the Commission had asked for exclusive competence over almost everything, the Court interpreted exclusivity in a much subtler way. What I am saying is that many of these cases are very case-specific, and it is not always easy or useful to draw very general conclusions.
Mr Hendrick
If you look at, for example, competition law and state aids, I get the impression that often it is a toss-up which way these cases go. A member state might have a very good case for wanting to subsidise a particular industry or set of rules or regulations that it wants to bring in, and other member states may obviously object. Looking at competition law as it is constituted, the Court of Justice will often rule either way—not necessarily for the Commission or for the member state. Would you comment on that?
Professor Koutrakos
I think that is right, in this case.
Professor Sir Alan Dashwood
It certainly is right. These cases start off in the general court, because they are normally being brought by a company that has had a fine imposed and is contesting the validity of the Commission’s decision. They may go up to the Court of Justice or Court of Appeal. The Commission loses quite a lot of cases in the area of competition, which of course is a much more technical area.
Yasmin Qureshi
You were asked specifically about the fact that you have represented the United Kingdom. Do you still act as legal counsel for the UK?
Professor Sir Alan Dashwood
I am not at the moment instructed, but I hope I may be in the future.
Yasmin Qureshi
Okay; my next question might be difficult for you then, because this might have an impact on your profession. When the United Kingdom Government present a case on a particular issue—whether that is to do with a treaty, competence or the Commission—as you said, sometimes you are not successful. Nation states will try to push as far as they can. That is not necessarily to say they are legally correct, but they know that. In terms of the decision of the Court as the ultimate arbitrator, looking at this purely academically or as an independent person, do you feel that on the whole, the European Court gets its decisions right on the basis of treaty obligations and case law? I will give you an example. I do not do it any more, but as a barrister, I often put in applications knowing full well I was probably going to be rejected, but you have to go through certain things. When the judge went against me, I knew that the decision was probably right; I was just trying to push things. In reality, how often do you agree with the decision given by the European Court?
Professor Sir Alan Dashwood
I find—perhaps you have had the same experience—it quite difficult to be entirely objective about a judgment when I have been arguing with might and main and lose. It is quite difficult to be so broad-minded as to say, “We did our best, but obviously the Court was right.”
Yasmin Qureshi
That is why I said that, if you are still practising, you may not want to comment on that. I used to make applications that I thought should succeed, but often you make applications because your client expects that, and there may be some room for manoeuvre—it is not that the applications are outrageous—but, on reflection when the decision comes you think, “Actually, it sort of makes sense in the context.”
Professor Sir Alan Dashwood
Yes, there have been cases where I have thought, “This can go either way,” and we do our best, and in the end we lose. You have to remember that, when you are acting for a member state, you do not necessarily lose completely, because a member state is interested not so much in the particular outcome of the case as in the legal principles that it establishes. Sometimes, if you argue the case carefully, although you understand that there is a real chance of losing, you can limit the damage by ensuring that the court will decide the case on a fairly narrow ground. But there certainly have been some cases where I thought the judgment was outrageous.
Daniel Kawczynski
Can you name one?
Yasmin Qureshi
What about the 30/70 or 10/90 figures?
Professor Sir Alan Dashwood
There are not many of those, but there are some.
Yasmin Qureshi
Moving on from that, how successful has the UK been in resisting the so-called competence creep by the European Commission in international law?
Professor Koutrakos
There are areas where the UK has been successful. The thing to remember is that the concerns the UK may have in certain areas may be shared by other parties. Also, when we are talking about international agreements, the decision about the conclusion of these agreements is made by the Council: the representatives of the member states. It may well be the case that in those areas where the UK feels strongly about things, it may have built a coalition in the Council. An example: there is a request to the Court about the conclusion of the Marrakesh treaty to facilitate access to published works for persons who are blind. The Commission brought the request to the Court and, about the conclusion of the agreement, the Commission argued that the agreement ought to have been concluded exclusively by the Union, and the Council did not adopt such a decision. The Commission did not manage to convince the Council to get a qualified majority vote. So there is an area where indirectly there may well be influence in the direction of treaty making. The UK is quite sensitive when it comes to representation: statements made by the European Commission in areas where competences are shared. The Commission thinks that those statements ought to be made by just one actor who speaks for everybody. It is quite important for the UK to be seen to be making such statements, so an arrangement was reached a few years ago. Our partners are not very happy about this, because it makes things a bit more cumbersome and messier, but this is an area where the UK did have an influence. These are the two points that I would like to make: there are such areas; and the UK is not always on its own. It is a question of building coalitions within these organisations. It is not as if the Commission is the most powerful institution that does everything. The Commission must work with the member states in the Council.
Yasmin Qureshi
As you are probably aware, initially the United Kingdom had concerns about competence creep by the European External Action Service. Were those concerns justified? If so, were we able to resist that competence creep?
Professor Sir Alan Dashwood
It is quite difficult to be precise about this because not a great deal has been published. I used to be a Brussels insider when I was in the Council’s Legal Service but that was long before the European External Action Service. The impression that I have from talking to our civil servants is that, on the whole, they co-operate well with the EEAS and they consider that it adds value. The most obvious example of this is the E3+3 talks with Iran. It might be too much to say they have been successful, but the approach has been constructive and positive. On the whole, the EEAS does not represent the threat of competence creep that is kind of constraining the external action of member states.
Professor Koutrakos
I agree with that.
Daniel Kawczynski
From a legal perspective, how would leaving the EU affect the UK’s relations with countries that currently have far-reaching agreements with the EU, such as countries that are members of the European neighbourhood policy?
Professor Sir Alan Dashwood
Just to go back to something I said before: although these are big, complex agreements, they are bilateral agreements between the Union and its member states, and the third country concerned. It would not be possible for the United Kingdom to preserve intact its present legal position under these agreements, nor would we want to—at least, I suspect that we wouldn’t want to—because we would be bound by the obligations that fall on the Union. In my opinion, if we were no longer on the Union side of the agreement, it would be necessary for us to negotiate a new relationship with these countries.
Professor Koutrakos
I think that is right. That gets us back to what we were discussing earlier. These are mixed agreements and the implications for the UK would be messy as they would entail the renegotiation of aspects of the agreements. This will take time and there is the question of what the UK would get in substance, and to what extent that will be equivalent to what it has as part of this package deal—the current agreement. It would also depend on the willingness of the partner countries because these are bilateral agreements.
Daniel Kawczynski
Will it be relatively complex for us to do that?
Professor Koutrakos
I should think that it will be very complex.
Professor Sir Alan Dashwood
Take the example—this is not the ENP agreement—of the free trade agreement with South Korea, which has been very favourable to the UK. I read somewhere that our trade with South Korea has increased by something like 165% since 2011 when that agreement entered into force. Now, that is a bilateral free trade agreement. The UK will not be able to—well, it could not—stay as a part. Although it is a free trade agreement, it is still a mixed agreement because it goes a little further than the core area of the common commercial policy. Nevertheless, I don’t believe that the UK could retain the rights and obligations that apply to it under the agreement. We would have to renegotiate and, of course, we would be renegotiating from a much less favourable position because we wouldn’t be able to offer the South Koreans access to the internal market, which is the quid pro quo for the extent to which they were willing to open up their market. I think we would find that difficult, and we would probably be in a somewhat less favourable position.
Daniel Kawczynski
Forgive my ignorance, but surely if we had a trade deficit with that country, rather than a trade surplus, that would be an influencing factor, wouldn’t it?
Professor Sir Alan Dashwood
I suppose it would, but we wouldn’t necessarily arrive at a package deal that was as favourable that the one that the Union is able to obtain.
Mr Hendrick
Following on from that, I remember when we ratified the Korean free trade deal in this House. That, of course, would be the case in other parts of the world where we have deals. That is one of the stronger cases we can use in the referendum for the UK staying in. Even though we wouldn’t have any particular obligation under these agreements, earlier you gave the example of a development agreement in a third country where the Department for International Development is doing some work. If we left the European Union, although we wouldn’t have a legal obligation through the European Union to continue with that development, I presume that the United Kingdom would still want to continue with that work, and I am sure that the country that is the beneficiary of it would be perfectly happy about that as well. These things can cut both ways, in the sense that if it suits the UK to carry on with the agreement with that third country, that is fine. I agree with you about free trade agreements like the deal with Korea. There is no way that the UK could have negotiated a deal like that on its own, because obviously the weight and mass of the European Union’s market was the major attraction.
Professor Sir Alan Dashwood
As far as development co-operation is concerned, you are right, of course, that third countries would want the UK to go on helping them, but we would still probably have to negotiate new arrangements. For instance, the Cotonou agreement, as you know, organises the relationship between the EU and the African, Canadian and Pacific countries, which are largely former French and British colonies. I do not believe that it would be possible for the UK to continue as a party to the Cotonou agreement, or indeed that we would want to, because it obliges us to contribute substantially to the European development fund. Of course, that doesn’t mean that we wouldn’t be able to—
Mr Hendrick
We could still spend the same amount of money, but not contribute to the fund.
Professor Sir Alan Dashwood
We could do it, but we would have to create a new set of arrangements with the countries concerned. I have a slight worry about Cotonou. There are member states of the Union that are very jealous of the special treatment of the former French and British colonies.
Mr Hendrick
The banana regime, if you remember.
Professor Sir Alan Dashwood
Yes. They might want to wrap the whole thing up.
Mr Hendrick
Exactly, because there are many member states that didn’t have colonies and want to have relationships with other countries that are not covered by the ACP countries.
Professor Sir Alan Dashwood
And I suspect that we would end up picking up the bill, as far as the former UK colonies are concerned.
Chair
Daniel Kawczynski has the final question on the consequences of all this.
Daniel Kawczynski
In the eventuality that we pull out of the European Union, does the Foreign Office currently have the capacity to undertake the renegotiations that we would ultimately require? If not, what would it take to build them up, and what would the cost be?
Professor Koutrakos
I am unable to comment on the cost of it. I can only say that the renegotiation of these agreements would be both messy and long. It would require expertise in areas where national capitals have not been able to be very active for a long time, because those are areas where competence was transferred to the European Union quite early on, and that would be an added complicating factor. There is another factor that complicates things further, and it ties in with what we were discussing earlier. The trend in international treaty making is for package deals, which become more comprehensive, and the scope of which is broader. Sir Alan mentioned the agreement with South Korea. They have the free trade agreement with Canada, and of course the Transatlantic Trade and Investment Partnership. Both the scope of these agreements and the range of these areas are quite challenging. They are challenging for the Union, let alone for one Administration which is not used to negotiating big parts of these agreements. Many people say, “It is possible; it can be done,” and they refer to the free-trade agreement between Switzerland and China. However, the scope of that agreement is nowhere near as broad and comprehensive as, say, the scope of the agreement between the EU and South Korea. That adds yet another complicating factor in all this.
Daniel Kawczynski
May I briefly touch on the Canada thing? You are giving the impression that it will be quite difficult for us to renegotiate these trading agreements, but if it was just the United Kingdom by itself with Canada, don’t the history and the historical emotional ties between the countries facilitate a better agreement for Britain with Canada? Or is it purely done on a commercial basis?
Professor Koutrakos
I would have thought that the parties wanted to find as wide a market as possible to which they would have access.
Daniel Kawczynski
So even though we share the same Head of State, and all the other things that tie us together, the Canadians would not give us the same terms as they would give the rest of the European Union. Is that what you are saying?
Professor Koutrakos
Well, I am a lawyer, and from a legal point of view the only thing I would say is that the market to which the UK would give access when it negotiated with a partner country would be much, much smaller. That would make things much less attractive.
Chair
I am afraid that we have run out of time. Thank you both very much indeed. We are very grateful for your evidence. Oral evidence: Costs and benefits of EU membership for the UK's role in the world, HC 545 2