Collaborative Governance and Dispute Resolution: EU-UK vs. EU-Switzerland

In view of current and upcoming bilateral challenges for partnership agreements between the EU and third countries, this blog post aims at analysing the dispute resolution provisions of (i) both the post-Brexit Trade and Cooperation Agreement (TCA) and the Withdrawal Agreement (WA) between the EU and the United Kingdom (UK), and the (ii) Draft Institutional Framework Agreement (IFA) between the EU and Switzerland. The agreement’s mechanisms include the political bilateral and the judicial third-party level within a wider governance framework. The UK as a former EU Member State now relies on trade and thematic cooperation, whilst Switzerland enjoys sectorial access to the EU Single Market including the freedom of movement.

1. Introduction

The UK left the EU on 1 February 2020. During the transition period expiring on 31 December 2020, the UK still participated in the EU Single Market (including contributions to the EU budget), so virtually no changes of a practical nature occurred during that period with regard to the citizens and business save for the fact that the UK no longer participated in the work and decision-making of the EU institutions. As per 1 January 2021, the UK is a third country and the relations between the two parties are predominantly governed by the Trade and Cooperation Agreement (TCA) which was concluded on 24 December 2020 after nine months of negotiations. On 30 December 2020, the UK House of Commons adopted the European Union (Future Relationship) Act 2020 in order to implement the TCA in national legislation. On the EU side, the Council (EU Member States) signed the TCA on 29 December 2020. At the time of writing, the Agreement is being applied provisionally by both sides subject to the consent of the European Parliament (tentatively in March 2021) and final ratification by Council (“EU-only” legal basis Art. 217 TFEU).

It must be noted, that the UK-EU Withdrawal Agreement, concluded in November 2018 and finally amended in November 2019 (after two unsuccessful ratification attempts in the Commons), has been in force in parallel. It mainly governs citizens’ rights (preserving the status quo of EU citizens resident in the UK and vice versa up until 1 February 2020), the financial obligations of the UK vis-à-vis the EU, and the Protocol on Ireland/ Northern Ireland. The latter is a sui generis regime providing for a common (EU) market between Ireland and Northern Ireland for goods, agricultural products and VAT whilst preserving the UK domestic customs union between Northern Ireland and mainland Britain effectively shifting the EU’s external customs border to the Irish Sea.

Disputes have already emerged with both parties contemplating emergency measures (invoking Art. 16 of the Protocol) to suspend major provisions of the Protocol itself. The EU Commission had considered an export ban of anti-COVID vaccines to retain maximum supply within the EU – and hastened to take back such plans over fierce criticism from the UK and Irish governments. The UK government has considered introducing a lighter regime for imported food and agriculture produce to counter food-supply shortages in supermarkets in Northern Ireland by extending the grace period for checks of goods across the Irish Sea to January 2023 instead of 1 April this year (the latter date stipulated by the Protocol). Also, the territorial dispute about Rockall (a small rock in the North-East Atlantic) between Ireland and the UK re-surfaced in early January due to the expiry of the application of the EU Fisheries Policy to the UK (see the recent EJIL Talk blog post by Ríán Derrig).

The UK left the EU and its Single Market and now has a free trade agreement plus thematic cooperation (on transport, energy including combating climate change, fisheries, law enforcement and judicial cooperation in criminal matters, and the participation in certain EU programmes) in place. Switzerland, however, has had sectorial access to the EU Single Market since the late 1990s through a number of bilateral agreements (in particular freedom of movement, land and air transport, and mutual recognition of conformity assessments MRA) alongside a basic free trade agreement concluded in 1972. The EU and Switzerland have more recently negotiated a draft Institutional Framework Agreement (IFA; original in French, key points in English) to provide for proper governance (including dispute settlement) of the bilateral agreements.

Whilst negotiations had been concluded in November 2018, the draft agreement has not been signed to date. The Swiss side has contemplated to call for unilaterally applied additional measures in the context of the free movement of persons (i.e. to protect Swiss wage levels, not to adopt the EU Citizens Rights Directive, and to limit the coordination of social security systems; see point 6 Swiss Federal Department of Foreign Affairs information note 2018), and to clarify that the provisions on state subsidies would only apply to the sectrorial agreements, but have no effect on the 1972 free trade agreement (point 5). There was a meeting between the Parties in January 2020 in Brussels possibly indicating some new momentum with regard to fine-tuning some elements and/or eventually signing the IFA (for an in-depth overview of the options from a Swiss perspective see Tobler 2020).

2. Governance and dispute resolution

Whilst the full scope of (i) both the TCA and WA and (ii) the IFA are out of place in this post, I shall focus on the governance and dispute settlement provisions.

Collaborative approach

Collaborative dispute resolution, also known as Alternative Dispute Resolution (ADR), is a holistic concept which originated in the US in the early 1990s based on a theory of human needs (see Burton 1990) aiming at avoiding classical litigation. Instead of lengthy, costly, and adversarial court-room procedures with eventual winners and losers, the collaborative approach looks at the interests of the parties and mutual gains, ideally achieving a negotiated solution with an option to involve mediation (see e.g. Di Fonzo 2009). It is now widely used in areas such as commercial disputes or divorces.

EU-UK

The genuine approach of the TCA relates to its governance and dispute settlement ecosystems. The main forum is the Partnership Council comprising ministerial-level representatives of the UK and the EU entrusted with all aspects of the implementation and operation of the Agreement. Furthermore, the Partnership Council has the powers to amend the TCA’s provisions (Annex INST, Rule 2), not least in the context of the periodic review of the TCA’s and supplementing agreements’ implementation every five years (Art. FINPROV.3). The TCA also establishes Committees and Working Groups (Art. INST.3).

In the event of disputes, they shall be discussed in the Partnership Council with a view to reaching a consensus within 30 days (Art. INST.13). If no solution is found or no consultations have been held altogether, the complaining Party can trigger the establishment of an arbitration tribunal composed of three members. Each Party nominates one arbitrator. If one Party fails to do so, the Co-Chair of the Partnership Council from the complaining Party selects an arbitrator. If there is no agreement on the chairperson of the tribunal, the Co-Chair of the Partnership Council of the complaining Party selects the chairperson (Art. INST.15). The arbitration panel presents an interim report within 100 days. If there is no response from the Parties within 14 days, this report shall be the ruling of the panel. In the event of requests for reviews from the Parties, the arbitration tribunal hands down its decision no later than 160 days after the panel’s establishment (Art. INST.20). If there is disagreement on the compliance of the respondent Party or the legality of a possible suspension of obligations by the complaining Party, the panel can rule on the matters (Arts. INST.23 and 24). Should a bilaterally agreed solution occur during the arbitration procedure, the proceedings shall be terminated (Art. INST 31). For greater legal certainty, the arbitration panel has no jurisdiction over domestic laws of the Parties. In turn, the courts of the Parties have no jurisdiction in disputes arising from the TCA (Art. 4(4) and (4a) INST.29). The European Court of Justice (CJEU) plays no role in the TCA save for the UK’s participation in EU programmes (Art. UNPRO 4.4).

As regards the Withdrawal Agreement (WA), however, the CJEU plays a decisive role wherever the application of EU law is concerned (Art. 174 WA), inter alia the Protocol on Ireland/Northern Ireland or citizens’ rights (as for persons residing in the UK or the EU since before the cut-off date 1 February 2020). The primary forum for any matters regarding the operation of the WA including the resolution of disputes is the Joint Committee composed of a ministerial-level representative each of the EU and the UK (Art. 164). If no solution is found during a maximum consultation period of three months, an arbitration procedure can be initiated by either Party including the notification of the Permanent Court of Arbitration (PCA). If the Parties cannot agree on the five arbitrators including the chairperson, the PCA Secretary General appoints the respective tribunal members (Art. 171). All issues relating to EU law the arbitration panel is bound to refer to the CJEU whose rulings are binding on the panel (Art. 174). The arbitration tribunal should deliver its ruling within 12 months, in urgent cases within six months, but may extend the period (Art. 173), and has jurisdiction to review any compliance or remedy issues (Arts. 177-179).

EU-Switzerland

Unlike the TCA and the WA vis-à vis the UK, the (draft) Institutional Framework Agreement (IFA) with the Swiss Confederation consists solely of the governance and dispute settlement framework due to insufficient provisions to that end in the existing bilateral Single Market access agreements. The main fora constitute the (existing) Sectorial Committees (per agreement each) alongside the new horizontal Joint Committee (Art. 15 IFA). If, in the event of a dispute, the competent Sectorial Committee cannot find a solution within three months, either Party can initiate arbitration proceedings (Art. 10(2) IFA). The proceedings are held at the Permanent Court of Arbitration (PCA; Art. I.2 Protocol 3 on the Arbitration Tribunal) and the default is three arbitrators altogether unless one Party requests five (Art. II.1). In default mode, both Parties nominate one arbitrator each, and the two so-designated arbitrators select the third arbitrator acting as chairperson (Art. II.2(1)) from the personalities listed by the horizontal Joint Committee (Art. II.2(3)) within 30 days. If the Parties fail to make the necessary appointments, the PCA Secretary General acts as appointing authority (Art. II.2(4)). The Tribunal decides on the time-line of the proceedings and may extend it (Art. III.1(2)), whilst the Parties should submit their memorial and counter-memorial within 90 days each (Art. III.8). Further, the Tribunal has jurisdiction to review remedies that one Party has put in place due to (perceived) non-compliance of the other Party if the Sectorial Committee has not found a solution within six months (Art. 10(7) IFA).  

When the Tribunal turns to the CJEU with regard to the application of EU law, the arbitral proceedings are put on hold (Art. III.9(2)) and the CJEU shall apply its internal procedural rules for the preliminary ruling procedure (Art. III.9(5)). The Tribunal also has jurisdiction to decide on requests by the Parties to turn to the CJEU over a matter (Art. III.9(3)). The CJEU’s ruling shall be binding for the Arbitral Tribunal (Art. 10(3) IFA). For a comparative overview of the TCA and the IFA see fig. 1 below.

Fig. 1                Major dispute settlement provisions EU-UK (TCA) vs. EU-Switzerland (IFA)

  * safe for the UK’s participation in EU programmes (such as research cooperation “Horizon Europe”)

3. Analysis and way forward

Overall, there appears to be a strong sense of political steer and a spirit of collaboration with regard to dispute settlement in both the EU-UK agreements (TCA and WA) and the draft Institutional Framework Agreement (IFA) between the EU and Switzerland. The ministerial-level Partnership Council (TCA) and the Joint Committee (WA) respectively, and the Sectorial Committees (IFA) are the paramount places for the settlement of disputes. Whilst time-limits for the consultations generally are relatively tight, there are considerable differences nonetheless (30 days in the TCA, three months respectively with the WA and IFA).

With regard to the third-party dispute resolution mechanism, all agreements rely on (ad hoc) arbitration. The procedural provisions of all agreements appear to be sufficiently robust not allowing for blockades. It must be noted, however, that in the case of the IFA there is no fixed time-limit for the arbitration procedure. Whilst the establishment of the arbitration panel in the case of the TCA may be said to be fully autonomous and a matter of the Parties exclusively as regards the appointing authority of last resort, the WA and the IFA rely on the Permanent Court of Arbitration (PCA) in that respect.

As regards the EU Court of Justice (CJEU), its role naturally is paramount with the WA and the IFA, since the WA entails references to EU law in Single Market matters (customs and VAT with regard to Ireland/Northern Ireland, continued pre-Brexit-based citizens’ rights) and the IFA, after all, is about the governance of the bilateral sectorial access agreements to the EU Single Market altogether.

Nevertheless, there appears to be a question mark as regards the time-table for the CJEU’s involvement. On the one hand, the TCA has a 12 months deadline for arbitral proceedings. Assuming the CJEU becomes involved, it seems impossible to meet the deadline given the Court’s deliberations tend to last 12 to 18 months with an ordinary preliminary ruling procedure. It remains to be seen whether the Court would accept applying its expedited procedure pursuant to Art. 105 CJEU Rules of Procedure. On the other hand, the IFA provides full flexibility for the overall duration of the arbitral proceedings, and, strikingly, expressly refers to the Court’s preliminary ruling procedure (Art. III.9(5)).

Looking ahead, it will be very interesting to see how the TCA and the WA will stand the test of contentious disputes. At the time of writing, it does not appear unlikely that a politically negotiated solution as regards amending the WA’s Protocol on Ireland/Northern Ireland with regard to the transition period for the new customs border in the Irish Sea is possible. Political consultations in the WA-related Joint Committee were about to be convened “in the spirit of collaboration, responsibility and pragmatism” in late February 2021 following a high-level bilateral meeting at the beginning of that month. That said, the practicalities of the resolution of disputes between the UK and the EU may well have spill-over effects on the future of the draft IFA. It would not be surprising if some elements of the dispute resolution provisions would be streamlined in the upcoming fine-tuning negotiations of the draft IFA between Brussels and Berne in light of the developments on the UK front. In any event, the dynamics of the dispute settlement ecosystem in the EU-UK relationship (the TCA’s periodic five-year review clause provides for the Agreement to develop flexibly and seems nicely aligned to legislative periods) are prone to exert some influence over the EU’s other agreements with third countries.