You won't hear it often, but the EU Court of Justice (ECJ) has been both a friend and a foe to firms over the years.
Many of the more recent headlines have focused on some of its landmark rulings which have bowled businesses over. These include unprecedented and unexpected changes to holiday pay, where ill-defined parts of the Working Time Directive have allowed the Court to apply an overly liberal interpretation of what constitutes a deterrent to taking annual leave.
But the Court has also delivered other watershed moments over the past decade that prioritised the freedom to provide services and facilitate company posting of workers, much to the chagrin of trade unions. The rights it has provided both businesses and individuals to challenge discriminatory treatment across borders are not principles we should give up lightly, even as the Court’s direct jurisdiction comes to an end.
The government’s paper this week on the options for enforcing our withdrawal and new partnership agreements with the EU, and new dispute resolution mechanisms, is a pragmatic start. It sensibly separates the issue of enforcement of rights, emanating from these eventual agreements, from what is needed in the likely event of disputes over application and interpretation of those entitlements.
And while the reference to ending the “direct effect” of EU law and ECJ decisions means UK courts would not automatically have to refer questions thereafter to the Luxembourg court, it leaves open the possibility that our judges would still naturally have regard to its evolving case law.
That said, the options outlined for replacement dispute resolution mechanisms are far from clear with respect to what ability firms would have for direct legal redress.
Instead, most of the suggestions listed seem to deal with disputes arising between contracting parties to the new agreements. This essentially means states, indeed governments, would be allowed to bring legal challenges on the basis of the rights afforded therein, and leaves little clarity as to whether businesses or individuals would be given the rights to bring cross-border disputes on their own behalf.
This is why on the face of it, the European Free Trade Association (Efta) Court – or at least a judicial mechanism based on its setup if the UK feels it cannot “dock” to it outside of the European Economic Area – is such an attractive option to tie off both enforcement and dispute resolution. Direct action cases involving rights afforded by the EEA agreement may be brought by entities other than the contracting parties, including individuals and companies, who benefit from an independent arbiter beyond national domestic courts.
While the government’s discussion paper did not directly reference it, investor-state dispute settlement in trade agreements is one of the only ways in which businesses can challenge governments over discriminatory or expropriating treatment.
But it is controversial and not something which small and medium sized enterprises are likely to take advantage of.
Moreover, the government has repeatedly set out an ambition for a “deep and special partnership” that would maintain as much of our existing trade liberalisation with the EU as possible. If that truly is the aim, and we want agreements with Europe which preserve the rights to fair treatment and legal redress when disputes arise over them, some sort of judicial mechanism is needed to ensure this. The Efta court may not be the ultimate answer, but the principles underpinning it – which allow those accessible legal and independent safeguards – should be preserved.