Category Archives: Article 50

Post-Brexit UK-Caribbean Trading Relations: What are the options?

Alicia Nicholls

With the United Kingdom’s Prime Minister Theresa May due to formally begin the Brexit process by making the Article 50 notification this Wednesday (March 29), it is worth considering what are the possible options for future Caribbean trading relations with post-Brexit “Global Britain”. Moreover, should one of the options be participation in a Commonwealth-wide free trade agreement (FTA)?

UK-CARICOM Trading Relations

The UK and the Commonwealth Caribbean have a shared and close relationship which goes beyond historical, cultural and diplomatic ties. While Commonwealth Caribbean countries’ trade with the United States dwarfs trade with the UK, the latter remains the region’s largest trading partner within Europe. Caribbean Community (CARICOM) Member States, as part of the CARIFORUM (CARICOM plus the Dominican Republic), enjoy preferential access to the UK market under the CARIFORUM-EU Economic Partnership Agreement (EPA) signed in October 2008.

As the EU agreements to which the UK is currently part will cease to apply to the UK once it has completely withdrawn from the EU, here is what CARICOM/CARIFORUM will losing preferential access to (a) the world’s fifth largest economy (or sixth largest according to some reports), (b) a market of over 64 million people which includes a Caribbean diaspora population whose potential demand for Caribbean goods and services and as a source of diaspora investment still remains largely under-exploited, and (c) a trading partner with a shared language, shared culture and shared values and a common law legal system which brings a level of assurance and certainty for cross-border commerce.

Merchandise trade aside, the UK is an important source of tourist arrivals for many Caribbean countries, while in Barbados, for example, British high net worth individuals (HNWIs) are the largest buyers of luxury real estate on the island, making the UK the largest source of real estate foreign direct investment (FDI) into the island.

Whilst the UK cannot formally commence negotiations with third States until it has left the EU, the May Government has reportedly already begun preliminary informal trade talks with some States. Indeed, several countries around the world, including Commonwealth states like Australia, Canada and India have lined up in hopes of being among the first negotiate post-Brexit trade agreements with the UK. Here in the Caribbean, the Dominican Republic has also signalled its interest in a post-Brexit UK-DR FTA as the UK is apparently the Dominican Republic’s fastest growing market for Dominican exports according to the statement made by the DR’s Ambassador to the UK.

To this point, it is heartening to note that Prime Minister May has bucked the protectionist trend and intends to expand the UK’s trading relations around the world under her “Global Britain” banner. Indeed, Mrs. May argued that one of the compelling reasons for Brexit was so Britain would be free to expand its trade with the rest of the world on its own terms. The door is clearly open to the region for dialogue.

Possible Options for post-Brexit UK-CARICOM/CARIFORUM Relations

As I see it, the possible options for post-Brexit UK-CARICOM/CARIFORUM trading relations are as follows:

  1. Interim Arrangement which preserves EPA-level concessions before an FTA can be negotiated
  2. Negotiation of a UK-CARICOM or UK-CARIFORUM FTA
  3. Commonwealth FTA
  4. Most Favoured Nation (trading under WTO rules)

The Commonwealth Advantage?

This discussion is even more interesting in light of what is clearly a Commonwealth pivot by the UK government as it seeks to map its future trade policy and relations. Most CARICOM countries are member states of the 52-member Commonwealth of Nations, an intergovernmental organisation which consists primarily of former British colonies and current dependencies spanning Africa, Asia, the Americas, Europe and the Pacific.

The Commonwealth is not a trade bloc. However, despite the absence of a Commonwealth FTA, intra-Commonwealth trade and investment flows are substantial and growing. According to a 2015 report released by the Commonwealth, not only is “trade between Commonwealth members on average 20 per cent higher and trade costs are 19 per cent lower compared with in trading between other partners”, but intra-Commonwealth trade is expected to reach 1 trillion by 2020. The Secretariat’s International Trade Policy section also publishes very timely  and insightful research on trade matters. A good example is this brief which was part of the Meeting documents.

However, despite this, Commonwealth Trade Ministers have not met frequently. This is why the Inaugural Commonwealth Trade Ministers Meeting two weeks ago was such a momentous event.  From all reports the meeting was not only well-attended but the ministers discussed prospects for deepening intra-Commonwealth trade and investment ties using the “Commonwealth Advantage”. Inter alia, Ministers directed the Secretariat to “develop pragmatic and practical options to increase Commonwealth trade and investment”, to regularise and institutionalise Trade Minister meetings, and to cooperate on the implementation of the WTO’s Trade Facilitation Agreement.

The prospect of a Commonwealth-wide FTA has been floated informally, although it does not yet appear to be a firm policy proposal. The arguments for a Commonwealth FTA include a ready market of over 2.4 billion people yoked by a shared language and history, common principles and values, respect for the rule of law, the common law legal system, all of which form part of the “Commonwealth Advantage”. Additionally, it is argued by proponents of a pan-Commonwealth FTA that the potential for even greater intra-Commonwealth trade and investment should be harnessed as a buttress against rising protectionism and slowing global trade which are potentially harmful for Commonwealth developing States.

To be sure, the Commonwealth brings important value for the Caribbean. It has, for example, developed a strong small states agenda, which is not surprising given that thirty-one of its member States are small States. As an illustration, the Commonwealth launched the Commonwealth Small States Trade Finance Facility in 2015. Moreover, the fact that the current Secretary-General, Dame Patricia Scotland QC, is a daughter of the soil is also an advantage for the region.

There is also, of course, merit to fomenting closer commercial and political ties with fellow Commonwealth countries as some of the more developed Commonwealth countries are part of influential fora like the Group of 20 (G20), Organisation for Economic Cooperation and Development (OECD) and the Financial Action Taskforce (FATF) where Commonwealth Caribbean countries are not represented.  This is doubly important in light of the on-going slowdown in global trade flows, an apparent retreat from multilateralism and rising protectionism. Moreover, Commonwealth Caribbean countries have been seeking to diversify their trading partners, including source markets for tourism, foreign investment and international business and deepening ties with the rest of the Commonwealth could be useful.

Nonetheless, while I have not done any econometric analysis on what would be the possible economic and welfare benefits of any Commonwealth FTA for CARICOM/CARIFORUM, given the length of time it may take to negotiate a Commonwealth FTA, the varying levels of development, the differences in economic profile, and the diverse offensive and defensive interests of the various Commonwealth Member States which will need to be managed, the negotiation of a Commonwealth-wide FTA will not be an easy task. Therefore, I submit that the Caribbean region’s interests will, at least in the short to medium term, be better served by either negotiating an interim arrangement  with the UK which preserves EPA-level concessions until an FTA can be negotiated or negotiating an FTA with the UK straight off the bat.

So what should a possible UK-CARICOM/CARIFORUM take into account?

CARICOM countries have limited experience in negotiating FTAs with developed countries. So far the EPA is the region’s only completed FTA with a developed partner, as the Canada-CARICOM negotiations are currently in abeyance. Perhaps, fortuitously, the UK has even less experience with negotiating trade agreements, as trade negotiations have hitherto been handled exclusively by the European Commission, pursuant to the EU’s common commercial policy. So both parties, despite the power asymmetry, will be on a learning curve.

Commitments made under any prospective UK-CARICOM/CARIFORUM free trade agreement should take into account the sustainable development and economic growth needs and interests of both parties in a mutually beneficial way, while also taking into account differential levels of development among CARICOM/CARIFORUM countries.

CARICOM/CARIFORUM countries will also want at least the same level of concessions for their service suppliers, particularly in Mode 4 (Presence of Natural Persons) which has been the mode of supply which is the least liberalised. Additionally, as capital-importing States, CARICOM/CARIFORUM countries will likely wish to negotiate an investment chapter which protects, promotes and liberalises investment between CARICOM/CARIFORUM and the UK for the mutual development of both parties.

Of course, stakeholder consultations with not just the private sector but also civil society and citizens at large should continue to inform the region’s negotiating positions, including whether there is actually the need for an UK-CARICOM FTA and what are the region’s offensive and defensive interests.

FTA negotiations can take several years. The EPA negotiations, for instance, had been launched in April 2004 and the Agreement was not signed until October 2008. Therefore, unless a WTO-compatible interim arrangement could be negotiated whereby the UK agrees to continue EPA-type concessions to the region until a UK-CARICOM/CARIFORUM FTA is negotiated, it is possible that UK-CARICOM/CARIFORUM trade relations may revert to MFN conditions. Even so, while the UK is also a WTO member in its own right, its schedules are part of the EU’s which means the country will have to work out its own tariff schedules under the WTO post-Brexit. Additionally, WTO MFN conditions will not afford CARIFORUM countries the level of market access, especially for their service suppliers in the UK market, that they currently enjoy under the EPA.

Although the argument is often rightly made that the Caribbean region will be at the low rung of the negotiation priority ladder, I believe that the region cannot sit idly by as the clock begins ticking come Wednesday. While other major countries have begun to erect barriers, the May Government’s “Global Britain” outlook is a welcomed open door for the region. We should at least signal to the May government our interest in beginning talks on cementing a mutually beneficial UK-CARICOM/CARIFORUM trading arrangement post-Brexit, and take steps to do the ground work for such an eventuality.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

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Brexit Bill Clears First Parliamentary Hurdle

Photo credit: Pixabay

Alicia Nicholls

The Theresa May government may have lost its Supreme Court Appeal last month but today the Government’s Brexit bill cleared its first parliamentary hurdle. After fourteen hours of debate spread over two days, the House of Commons voted 498 to 114 in favour of the European Union (Notification of Withdrawal) Bill, a bill to confer power on the Prime Minister to notify the UK’s intention to withdraw from the European Union under Article 50(2) of the Treaty on European Union (Lisbon Treaty).

Article 50(1) of the Treaty on European Union provides for any member state to decide to withdraw from the EU in accordance with that state’s own constitutional requirements. Last month, the UK Supreme Court, in dismissing an appeal by the UK government, held that a parliamentary vote was required in order for the Brexit process to begin. It should be noted that many of the parliamentarians who voted in favour of the Bill’s advancement had originally supported staying in the EU. However, many felt compelled to put aside personal views in order to give effect to the will of the 52% of British voters who had voted for Brexit. Mrs. May has reportedly indicated that she will publish a White Paper outlining the Government’s Brexit plans.

So what’s next?

Today’s House of Commons vote (the second reading) means that the Brexit bill is one step closer to becoming law, and will go to the next stage in the parliamentary process – the Committee Stage. During the committee stage, the Bill will be subjected to more enhanced scrutiny and it is here that any amendments may be made.

Upon leaving the Committee stage, the bill (whether or not amended) will again be debated and subjected to a final vote in the House of Commons. If the ayes have it, then it will pass to the House of Lords where the process will be repeated. The bill will be referred back to the House of Commons if the Peers make amendments to the bill.

However, once everything goes smoothly (i.e. there are no further amendments and the peers vote in favour of the bill), the Brexit bill will be sent to the Queen for the royal assent and thereupon will become law. This confers on the May Government the legal authority to make the Article 50 notification which commences the formal withdrawal negotiations with the EU. Mrs. May has indicated the end of March 2017 as her timeline for the notification. She has also promised that she will put the final withdrawal deal to a parliamentary vote.

The full text of the Brexit bill and further reporting on the UK House of Commons’ vote may be found here.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

UK Government Loses Article 50 Brexit Appeal; Parliamentary Vote Needed

Alicia Nicholls

In its ruling made shortly after 9:30 GMT this morning, the United Kingdom’s Supreme Court by a majority of 8 to 3 dismissed the Government’s appeal against a High Court decision that ruled that the Theresa May-led government must attain parliamentary consent before invoking the EU’s exit clause (Article 50 of the Treaty on European Union – Lisbon Treaty). A second issue which the court was called on to give its ruling upon was whether consultation with the devolved legislatures (e.g: Scotland, Wales, Northern Ireland) was required before Article 50 was triggered.

In a judgment written by the 8 justices in majority and delivered by Lord Neuberger (President of the Supreme Court), the Court held that section 2 of the European Communities Act of 1972 Act did not allow the Government to trigger Article 50 without parliamentary authority.

The main reasons for the Court’s decision were, inter alia, as follows:

  • Section 2 of the European Communities Act makes EU law another source of UK law which can override domestic law and will remain so unless and until Parliament decides otherwise.
  • Once the UK leaves the EU and as such is no longer party to the EU treaties, not only will UK domestic law have changed but the rights enjoyed by UK residents granted through EU law will be affected.
  • Under the UK constitution, parliamentary legislation is required for any fundamental changes to the UK’s constitutional arrangements. Withdrawal from the EU treaties would be such a fundamental change as it would cut off the source of EU law. The justices reiterated that there is “a vital difference between variations in UK law resulting from changes in EU law, and variations in UK law resulting from withdrawal from the EU Treaties”.
  • Parliamentary authority is needed because withdrawal from the EU would remove some existing domestic rights of UK citizens.
  • In regards to the June 23rd 2016 referendum, the Court held that “its legal significance is determined by what Parliament included in the statute authorising it, and that statute simply provided for the referendum to be held without specifying the consequences.”

On the second issue under consideration, the Court unanimously held that the Government is not compelled to consult the devolved Parliaments.

The Court’s ruling is final and it was a decision which was much more expected than the results of the June 23rd Brexit result which precipitated it. It should be emphasised that this ruling was on the legal question of whether the Government could make the Article 50 notification using its prerogative powers and not on the political question of whether Brexit should occur. It is also one of several legal challenges which have been filed since the Brexit vote decision.

In brief remarks following the ruling, the Attorney General, Jeremy Wright, said the Government will comply with the ruling. Even before the ruling, the Government had indicated that in case it lost the appeal, it would present a short Brexit bill to minimise the need for lengthy amendments and debate that would jeopardise Prime Minister May’s end of March timeline for making the Article 50 notification. Once the Article 50 notification is received, the UK and EU would have two years to negotiate a withdrawal agreement, with an extension only possible if agreed to. EU countries had indicated that they would not be engaging in any informal negotiations with the UK prior to the latter’s Article 50 notification.

In her long-awaited  speech last week in which she outlined her 12-point Brexit plan, Mrs. May confirmed that the UK would be pulling out of the single market (a move dubbed a “hard Brexit”) but also indicated that Parliament would be given the chance to vote on the final withdrawal deal negotiated with the EU.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Brexit High Court Ruling: What does it Mean?

Alicia Nicholls

In a landmark decision handed down today, the London-based UK High Court in R (Miller) v Secretary of State for Exiting the EU, has held that the Theresa May-led UK Government cannot begin the formal process of leaving the European Union (EU)  without first seeking parliamentary approval.

As a bit of context, on June 23, 2016 52% of the British electorate voted for the UK to withdraw from the EU. However, for Brexit (British exit from the EU) to formally begin, notification of such intention by the UK must be made pursuant to Article 50 of the Treaty on European Union (Lisbon Treaty). This came into effect in 2009 and  gives an EU member state the express right to withdraw from the 28-member bloc in accordance with its own constitutional requirements and with the provisions contained in said Article. A useful synopsis of the Brexit process can be found here.

EU leaders have stated that they do not intend to begin negotiations with the UK until Article 50 is triggered. This probably explains why British Prime Minister Theresa May has indicated that she wishes to make the Article 50 notification by March 2017.

This latest chapter in the Brexit saga is an unexpected bump in the road for the conservative government. While Mrs.May had been part of the “Remain” camp while serving as Home Secretary in the cabinet of then Prime Minister David Cameron, she has since upon becoming Prime Minister stated in pellucid language that she intends to respect the will of the British people. She has famously stated that  “Brexit means Brexit”.

The Issue

Simply stated, the central issue before the High Court was whether under UK constitutional law, the Crown (as embodied by the executive) has prerogative power to make a notification pursuant to Article 50. Prerogative powers, also known as the Royal Prerogative, are residual legal powers which are vested in the Sovereign but are exercised primarily by the executive. One of such prerogative powers is the power to engage in international relations, for example, through the conclusion of treaties.

Arguments

The crux of the Government’s argument was that the Crown under its prerogative powers could make the Article 50 notification without Parliamentary approval and that this had to have been the intention of Parliament under the European Communities Act of 1972 (ECA 1972). The Government argued that neither the ECA nor any other primary legislation has removed the Crown’s prerogative power to withdraw from the Treaty on European Union (Lisbon Treaty) or any other treaties. The Secretary of State, David Davis, also argued that Parliament would have its say on the withdrawal agreement in any case.

However, not everyone was happy with Mrs. May’s stated intention to by-pass Parliament and effectively take away legal rights accruing to the  British people under the EU treaties. A legal challenge against the Government’s policy position was led by investment fund manager, Mrs Gina Miller, and supported by London-based Spanish hairdresser, Deir Dos Santos, and other interested parties. They referred to the fundamental principle in UK constitutional law that rights under the law of the UK cannot be varied by the Crown in exercise of its prerogative powers unless Parliament has expressly or impliedly given the Crown this right. They, therefore, argued that Parliament has not given such authority (whether expressly or impliedly) in neither the ECA 1972 nor in any subsequent Acts.

The Judgment

The 30-plus page judgment was delivered by Lord Thomas of Cwmgiedd, Lord Chief Justice of England and Wales. The court relied primarily on law from England and Wales but also from other Scottish and Welsh law. Referring to the common ground between the claimants, the court noted that they both acknowledged that a UK withdrawal from the EU would change domestic law in each of the UK’s jurisdictions and that once notice pursuant to Article 50 is given, it is irreversible.

Going back to first principles and with reference to decided cases, the Court delineated several fundamental and long settled tenets of UK constitutional law. Importantly, they reiterated that sovereignty of the UK parliament was a cornerstone of UK constitutional law. The Court noted that while the ECA 1972 was an exception to the supremacy of primary legislation (Acts of Parliament), it is Parliament which made this decision and only Parliament has the power to repeal this Act if it so chooses.

Additionally, the Court went on to reiterate that primary legislation cannot be displaced by the Crown in the exercise of prerogative powers. In other words, the Crown cannot change domestic law by exercising its prerogative powers, nor can it confer or deprive individuals of rights without Parliamentary action. Recall that the ECA 1972 gives effect to EU law in domestic law, including rights.

In summary, the two main reasons presented by the Court for its ruling were that:

(1) there is nothing in the text of the ECA 1972 to support that the Crown can exercise prerogative powers in such matters. Indeed, the Court methodically laid out several instances in which Parliament intended that EU law be introduced into domestic law in such a way that it could not be undone by the Crown in the exercise of its prerogative powers,

(2) it is contrary to the constitutional principles of parliamentary sovereignty and of the inability of the Crown to change domestic law through the exercise of prerogative powers

In summary, the Court ruled in favour of the claimants and held that the Crown had no prerogative power to give notice of withdrawal under Article 50.

Reactions to the Ruling

As one would expect, the ruling has brought mixed reactions. For Brexiteers and for Mrs May, the disappointment was palpable. They have viewed this defeat as undermining the will of the people. For their part, EU envoys do not appear to welcome the delay either.

For the Pro-EU supporters, the ruling is a small victory. After all, it is one more hurdle in the road towards Article 50. Ms. Miller in her speech after the ruling reiterated that the case was about “process and not politics” and urged the Government not to appeal the ruling. First Minister of Scotland, Nicola Sturgeon welcomed the ruling which she termed “hugely significant”, according to media reports.

What does this ruling mean?

So what do we know? Firstly, we know from the ruling that the Crown has no prerogative power to trigger Article 50 and that parliamentary approval is needed. But what form of approval should this take? Should there be just a yes or no vote or should there be a fuller debate on the scope of the negotiations as some are suggesting?   The ruling also appears to confirm that the referendum was merely advisory and not mandatory.

Does this ruling stop Brexit? No. The Court went to great pains to explain that what it was being called upon to decide  was a question of law and not the merits or demerits of a UK withdrawal from the EU. The court has not, nor was it its role to, decide on the political issue of whether there should be a Brexit.

But lest, we think this ruling has settled the matter of who is responsible for triggering Article 50, it should be noted that the Government has been granted leave to appeal to the UK Supreme Court which will hear the matter in December. The Supreme Court’s ruling is final. Therefore, it could either uphold the ruling of the lower court or it could overturn the lower court’s ruling and hold in favour of the Government.

Assuming that the Supreme Court upholds the High Court’s ruling and the question goes to Parliament for a vote, there are two possible scenarios. If the members of Parliament and the Peers decide to support the wishes of the British electorate and support making the notification, then the Government is free to make its Article 50 notification. However, if the Parliament votes against the triggering of Article 50, then the situation is less clear. My own view is that if the referendum is merely advisory, then would not Parliament have the final say? It will be interesting to see what happens in such a case. But will it be a simple yes or no vote or will Parliament seek to delineate the parameters under which the negotiations take place?

Here is another thing. It puts a spanner in the works of the quick Brexit Mrs. May was envisioning and the feasibility of the posited March 2017 deadline. There is no telling how long it will take for the question to be laid before parliament and for both houses of Parliament to debate and vote on the issue. What is certain though is that there will be more uncertainty. Some have speculated that Mrs. May may be forced to call an early general election.

But there is one bit of good news! On the back of this news, the value of UK Pound Sterling rose to GBP to 1.25 USD, still low but higher than the slump it has endured for the past few weeks when it appeared the Government was going for a “hard” Brexit. The rationale is that Parliamentary involvement would lead to a “soft” Brexit (where the UK remains in the single market and accepts the free movement of persons) as opposed to a “hard” Brexit which Mrs. May appeared to be supporting by her statements on immigration.

Suffice it to say, we have a long way to go before this issue of triggering Article 50 is resolved. And that is just the beginning of the Brexit process! It will be interesting to see whether the UK Government will rely on the same arguments it made in this case or whether it will change its pleadings when it makes its submissions before the Supreme Court in December. Interesting times are ahead!

The full judgment may be accessed here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.