Caribbean Trade Law and Development

Category: Brexit

  • UK Supreme Court to deliver ruling in Article 50 Brexit Appeal next Tuesday

    UK Supreme Court to deliver ruling in Article 50 Brexit Appeal next Tuesday

    Alicia Nicholls

    Mark the date Tuesday, January 24th at 9:30 am on your calendars! That is the date on which the United Kingdom’s highest court will deliver its highly anticipated judgment in the appellate case of R (on the application of Miller and another) (Respondents) v Secretary of State for Exiting the European Union (Appellant), known more familiarly as the Article 50 Brexit Appeal. The Supreme Court made this announcement via its official Twitter account today, a day after UK Prime Minister Theresa May laid out her 12-point Brexit strategy.

    This case is one of the most consequential constitutional cases in recent UK history. The legal question before the Supreme Court is whether the Government has the power to give notice pursuant to Article 50 of the Treaty on European Union (Lisbon Treaty) of the UK’s intention to withdraw from the EU, without an authorising Act of Parliament. Or put more simply, is it the executive or the legislature which has the power to decide whether Article 50 is to be triggered. While some Brexiteers have seen the case as an attempt to delay or derail the “inevitable” (i.e. the UK’s leaving of the EU), the Court is not being asked to consider the more political question of whether the UK should leave the EU.

    The genesis of this case was a legal challenge brought by investment fund manager Gina Miller and hairdresser, Deir Dos Santos in the High Court against Prime Minister May’s assertion that the Government could use its prerogative powers to make the Article 50 notification without first seeking parliamentary approval. Ms Miller argued that due to the principle of parliamentary sovereignty, a crux of UK constitutional law, only the parliament could make such a determination. Relying primarily on the principle of parliamentary sovereignty, the High Court in its October ruling in R (Miller) v Secretary of State for Exiting the European Union held that the Government did not have the power under the Royal Prerogative to make the Article 50 notification. The Government swiftly appealed.

    In a rare sitting of all eleven justices on the bench, the UK Supreme Court held a four-day (December 4-8) hearing to consider the Government’s appeal against the High Court ruling. The Court’s ruling will be final.

    In her major speech on Tuesday before the announcement was made, Mrs. May stuck to her end of March deadline for making the Article 50 notification. However, the feasibility of that deadline will depend on whether the Supreme Court upholds or overturns the High Court’s ruling. If the Supreme Court dismisses the Government’s appeal, a bill would have to be laid and debated in Parliament. Depending on the length and robustness of debate, it may delay the March 2017 deadline Mrs May has insisted upon. The Government is likely to draft a bill which is as simple as possible to reduce the length of time for debate or for amendments.

    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.

  • Why PM May’s “Hard Brexit” Choice is no surprise

    Why PM May’s “Hard Brexit” Choice is no surprise

    Alicia Nicholls

    In a much anticipated speech delivered at Lancaster House on Tuesday, Prime Minister of the United Kingdom, Mrs. Theresa May, confirmed speculation that the UK’s membership of the European Single Market was off the table, an option which has been colloquially dubbed a “hard” Brexit. The news may be dismaying (no pun intended) to some who preferred a “soft” Brexit (remaining in the single market). However, it is not unexpected given the main reasons why 52% of Britons voted in favour of leaving the EU in the first place, inter alia, stemming the tide of immigration and getting away from the “intrusiveness” of Brussels.

    In a speech that was both conciliatory but also declarative, Mrs. May said as much as she succinctly outlined the reasons for the UK’s decision. It should be noted that while serving as Home Secretary, Mrs. May was part of the “Remain” camp during the Brexit campaign. However, during her bid to assume the office of Prime Minister, she  strongly and famously stated that “Brexit means Brexit“. Among the reasons enumerated by Mrs. May include Britain’s “profoundly internationalist” history and culture and the belief that EU membership has come at the expense of the UK’s external trade relations. To this effect, she noted that trade as a percent of UK GDP (an indicator of a country’s trade openness) had stagnated.

    She went further by noting the difference in political traditions between the UK and EU, including the incongruity between the UK constitutional principle of parliamentary sovereignty and the power of supranational institutions in Brussels to make laws for the UK, and the inability to hold those institutions accountable. While stressing that she did not wish to see a disintegration of the EU, she ultimately argued that there was need for greater flexibility by the EU if it is to succeed.

    12-point Brexit Plan

    In her biggest speech since coming to 10 Downing Street, Mrs. May sought to quell criticisms over the lack of clarity of her Brexit strategy by outlining a 12-point plan which would guide the UK’s Brexit negotiations, and with the overarching goal of fostering “a new, positive and constructive partnership” between the UK and the EU.

    Mrs. May, therefore, ruled out membership of the Single Market, citing instead her preference for a comprehensive free trade agreement (FTA) with the remaining 27 countries of the EU.Five main models of arrangement have been proffered in the literature but Mrs. May has strongly stated that she wants a model unique to Britain.

    She has stated that the UK would not have to contribute to the EU budget but noted she was prepared to make contributions if there are any specific European programmes in which the UK may wish to participate.

    More confusingly, however, was her statement that she wanted to remain a partial member of the EU Customs Union (EUCU), yet still control the UK’s trade policy by not being bound by the common custom tariff or the EU’s Common Commercial Policy. To my mind, this is at cross-purposes. There is, of course, precedent in the EU of countries being in a customs union relationship with the EU, while not being EU members, such as Turkey, San Marino and Andorra  who apply the CET on only certain goods. However, the essential element which differentiates a customs union from an FTA is that parties to a customs union apply a common external tariff (called the Common Customs Tariff in the EU). I am at pains to see how the UK can be a member of the EUCU without being bound by the CET to some extent. In such a case, it would be best to simply just negotiate an FTA.

    More Outward Looking Britain

    Besides outlining her vision for a future relationship with the EU, Mrs. May also elaborated that she wanted to build “a truly global Britain” and significantly expand its trade with the world’s fastest growing export markets, as well as have its own tariff schedules in the WTO. As an EU member, the UK was bound by the Common Commercial Policy and was unable to enter into third party trade negotiations.

    The outward looking Post-Brexit UK is good news for Caribbean countries. As I noted in previous articles, countries of CARIFORUM (countries of the Caribbean Community plus the Dominican Republic) currently enjoy preferential access to the UK market under the CARIFORUM-EU Economic Partnership Agreement (EPA). Once the UK leaves the EU, it will no longer be bound under the EPA and Caribbean countries will no longer have preferential access to the UK market. Since the UK is a major trading partner for the region and the region’s largest in Europe, it is within the region’s interest to negotiate some form of WTO-compatible preferential agreement with the UK post-Brexit, even though admittingly the region would likely be at the back of the queue.

    On this note, she highlighted her newly created Department of International Trade (headed by Mr. Liam Fox) and mentioned the large queue of countries eager to negotiate an agreement with post-Brexit UK, including the US under incoming President Donald Trump. It is worth noting that recently the Dominican Republic indicated its interest in an FTA with the UK.

    Deadline and Preparedness to walk away empty-ended

    Of interest is that Mrs. May has stuck to her previously stated end of March deadline for making the Article 50 notification under the Lisbon Treaty (which is the only way the formal process of withdrawing from the EU can begin). The UK Supreme Court is set to render its judgment in the appeal on whether parliament or the executive branch has the power to decide to make the Article 50 notification. Depending on the ruling, Mrs. May’s timeline may not be realistic. Mrs. May has called for a phased-in approach to the withdrawal and has also reiterated that Parliament would have a vote on the final withdrawal agreement.

    Highlighting that a punitive approach by the EU would be “an act of calamitous self-harm for the countries of Europe”, Mrs. May has indicated that she is prepared to walk away with no agreement rather than a bad one.

    Reaction in Europe to Mrs. May’s speech has been mixed as this Telegraph article notes.

    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.

  • Seven Major Trade Developments of 2016: Trade Year in Review & Look Ahead

    Seven Major Trade Developments of 2016: Trade Year in Review & Look Ahead

    Alicia Nicholls

    Popular support for global trade took its greatest hammering in 2016 than it has in recent times.  Below are seven of the major international trade developments in 2016 and some thoughts on what 2017 may bring.

    1.Continued slowdown in Global Trade Growth

    Global merchandise trade growth continued to be lacklustre in 2016, according to the World Trade Organisation (WTO). The WTO in its September update downgraded its forecast for global trade growth for 2016 to 1.7%  from the April forecast of 2.8%, and for 2017, to between 1.8% and 3.1% from the April forecast of 3.6%.

    According to the Director General Roberto Azevedo in his Annual Report, if realised, this would be the slowest pace of global trade growth and output since the global financial and economic crisis in 2008. The reasons proffered were a fall in import demand and a slowdown in global GDP (particularly among emerging economies such as China and Brazil but also some deceleration in North America).

    Trade restrictive measures remain high. According to the DG’s Annual Report, 182 new trade restrictive measures (outside of trade remedy measures) were put in place by member states since the last report. The monthly average represented a reduction from 2015 but the Director General cautioned that “this does not mean that we are on a downward trend. Rather, it seems to be a return to the somewhat steady levels we have witnessed since 2009.”

    2. UK votes to leave the European Union 

    The first political bombshell of 2016 came on June 23rd when voters in the United Kingdom voted for the UK to withdraw from the 28-member European Union, its largest trading partner. Then UK Prime Minister, David Cameron, who backed the “Remain” camp, voluntarily resigned after the result.

    The value of Sterling has fallen significantly since the Brexit vote, improving the price competitiveness of UK exports. A BBC report noted that in the three months following the vote, the UK economy grew 0.5% on average, which while slower than the previous quarter, was higher than the rate predicted by many economists. However, the vote has created a climate of uncertainty not just with regard to the City of London’s future as the financial hub of Europe,  but also what level of access UK exporters would have to the EU single market once a withdrawal agreement is concluded pursuant to Article 50 of the Lisbon Treaty. In other words, will there be a “hard” or “soft” Brexit ?

    The new Prime Minister, Theresa May’s slated timeline of making the Article 50 notification by the end of March 2017 is now in doubt. The UK High Court held in R (Miller) v Secretary of State for Exiting the European Union that a parliamentary vote was needed which may extend the timeline (and that is if Parliament votes in favour of making the notification). The May-led government appealed and the UK Supreme Court is expected to render its judgment in R (on the application of Miller and Dos Santos) v Secretary of State for Exiting the European Union and associated references early this year.

    3. Donald Trump is elected US President

    In another unexpected political twist, billionaire businessman, Donald Trump, defeated establishment favourite, democratic nominee Hillary Clinton, in the November 8th US Presidential election poll. President-elect Trump will take office on January 20, 2016 but already many have questioned what will be the US’ new trade orientation in light of Mr. Trump’s trade policy proposals during and since the campaign.

    Both Canada and Mexico have indicated their willingness to come to the negotiating table in regards to renegotiating the North American Free Trade Agreement (NAFTA). It is not clear what will be the fate of the Trans-Atlantic Trade and Investment Partnership (TTIP) which was being negotiated between the US and the EU or any of the fourteen other free trade agreements under negotiation by the US. Additionally, the nature of the US’ continued involvement in the plurilateral negotiations of the Trade in Services Agreement (TISA), the Environmental Goods Agreement (EGA) and the Fisheries Subsidies Agreement, is uncertain.

    There are also concerns about a possible trade war between the US and China. Mr. Trump has promised to name China a currency manipulator and has also stated he would impose a tariff on Chinese imports.

    4. EU & Canada sign CETA 

    One agreement does appear to have bucked the trend. After nearly being derailed by the Belgian region of Wallonia, the Comprehensive Economic and Trade Agreement (CETA) was finally signed by the European Union and Canada in October, 2016. The Agreement will need the approval of the EU and Canadian parliaments into order to take full effect.

    One major question is what impact will the UK’s possible impending departure from the EU have on CETA especially given that the UK is Canada’s largest EU trading partner. A Bloomberg report quotes Canada’s Trade Minister, Chrystia Freeland, as stating that once the European Parliament passes CETA, Canada will have a trade deal with Britain which can be built on. There would be no need for a separate trade agreement with the UK.

    5. Maersk acquires Hamburg Süd

    The world’s largest shipping company Maersk acquired the German container shipping line, Hamburg Süd, the world’s seventh largest operator. It was noted in the press release announcing the acquisition agreement that Hamburg Süd would continue as a separate brand. The Wall Street Journal reports that the deal, which is estimated to be worth $4 billion dollars, would boost Maersk’s presence on North-South shipping routes and would make the shipping company the leading player in and out of Latin America.

    Overcapacity due to larger vessel capacity but weaker demand has plagued the global container shipping industry and has seen declines in global shipping rates. According to a report by American Shipper, credit rating agency Moody’s “holds a negative outlook for the shipping industry in 2017”. With declining profitability, it is likely that more mergers and acquisitions may follow in order to create scale in an industry which remains quite fragmented.

    6. Paris Climate Agreement comes into effect

    The Paris Climate Agreement, agreed by 195 countries at the UNFCCC’s COP21 in December 2015, came into effect, which is great news for the planet and especially for small island developing states and coastal states which are the most vulnerable to the ravages of climate change.

    While there is concern about whether the incoming US administration will adhere to the Agreement, the Agreement’s entry into force will have several possible impacts on global trade trends. Firstly, there may be increased trade in climate-friendly and renewable energy products as businesses and countries seek to reduce their carbon footprint in line with commitments made by countries under Nationally Determined Contributions and in line with businesses’ corporate social responsibility goals. Concomitantly, there might be reduction in trade in fossil fuel and other environmentally dangerous products.

    More trade disputes are likely as a result of climate change policies implemented by member states which may be deemed to be protectionist or discriminatory to other member states’ exports. The challenge for states will be in crafting environmental policies to promote a low carbon economy which also conform with their trade obligations.

    7. Oil producing nations reach deal to cut oil output 

    On November 30, 2016 oil producing nations, including member countries of the Organisation of Petroleum Exporting Countries (OPEC), reached a deal for the first time since 2008  to cut back oil production in order to stem a two-year glut. According to Wall Street Journal reporting, the deal would lead to 558,000 barrels less of crude oil per day and represents almost 2% of global oil supply. Saudi Arabia, the largest producer, has committed to cutting  back its output by 4%, according to The Economist’s reporting.

    Oversupply has led to two years of oil prices dropping to unprecedented lows, to the detriment of some oil-producing economies, most notably Venezuela but a much needed reprieve for oil importing nations. In the wake of the announcement, the price of Brent crude surged to over $50 a barrel, the highest in over a year. However, both oil prices and WTI futures fell shortly thereafter amidst skepticism about whether output would actually be reduced in light of higher output by oil-producing countries that same month.

    The “success” of this deal depends on several factors, including to what extent can an increase in US shale production compensate. Recall also that President-elect Trump has also promised to increase US production in order to ensure energy dependence. It will also depend on whether Russia will follow through with cutting output, and whether OPEC members themselves actually adhere to their own proposed production cuts.

    So what does this deal mean for trade? For starters, expect higher fuel costs to lead to higher freight  and production costs.

    What does this mean for 2017?

    In light of the above, what does 2017 portend? At the time of this article’s writing, we are just hours into 2017. The good news is that we are ever closer to the Trade Facilitation Agreement coming into force.

    However, the biggest buzzword for 2017 is uncertainty. A growing rise in populist anti-trade, anti-immigrant fervour has led to the election of Donald Trump, while anti-EU sentiment was one of the contributing factors underlying the UK Brexit vote. Will the election of anti-EU, anti-trade governments continue and what does this mean for the future of that trade bloc? Several European elections scheduled for 2017, including the French presidential elections (with the leader of the right wing Front National, Marine LePen, a strong candidate), the German presidential and parliamentary elections and the Netherland elections.

    Besides this, will the UK actually make its Article 50 notification? Will Donald Trump follow through with his promise to jettison the TPP and renegotiate NAFTA and will there be a trade war between the US and China? What about global trade? Will we see a pickup this year? Turning to the multilateral trade negotiations, what progress (if any) will be made at the WTO’s Buenos Aires ministerial this December? Will OPEC members follow through with the proposed cuts? No one knows.

    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?

    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.