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Prof. Dr. Iur. Dr. Rer. Pol. H.C. Carl Baudenbacher President of the EFTA Court University of St

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Prof. Dr. Iur. Dr. Rer. Pol. H.C. Carl Baudenbacher President of the EFTA Court University of St Prof. Dr. iur. Dr. rer. pol. h.c. Carl Baudenbacher President of the EFTA Court University of St. Gallen, Switzerland The UK After Brexit: EEA +/-? Or EEP? University of Edinburgh, Monday 30 January 2017 A. Introduction If the UK leaves the EU, it leaves the customs union and the single market. It is no more subject to the surveillance of the Commission and the jurisdiction of the ECJ. However, the Scottish Government, the Welsh Government and large parts of the City of London and of industry want Britain to stay in the single market. Is it possible to leave the EU but stay in the single market? Is it possible for a non- EU State to let its citizens and economic operators participate in the single market? Would this include “passporting rights” for financial operators? Yes it is possible. The UK may join the Agreement in the European Economic Area (EEA) on the EFTA side. The actors of the EEA/EFTA States have access to the single market. As an EU Member State, the UK is currently a Contracting Party to the EEA Agreement on the EU side. The theory that Brexit means only exit from the EU, but not from the EEA is untenable. The EEA is based on a two-pillar structure. There is an EU pillar and there is an EFTA pillar. You have to be part of a pillar; you cannot float unmoored from one pillar to the other. Article 126 (1) EEA states: “The Agreement shall apply to the territories to which the Treaty establishing the European Economic Community is applied and under the conditions laid down in that Treaty, and to the territories of Iceland, the Principality of Liechtenstein and the Kingdom of Norway.” B. Re-negotiating the EEA Agreement I. A single market is not the same as a customs union The EEA is not a customs union: sovereignty in foreign trade (as with regard to agriculture, fisheries, taxation, currency) is held by the EEA/EFTA States. EEA/EFTA States have the right to conclude FTA’s with third countries. They may do that as part of EFTA (i.e. including Switzerland) or individually. II. What are the bones of contention? 1. Voting right. 2. Free movement of persons. 3. Payments to the EU. 1 4. Institutions. 5. Other matters. C. Voting right I. Current situation The EEA/EFTA States have a co-determination right when it comes to new legislation. The current EEA/EFTA States do not make sufficient use of this right. In particular, the Norwegians prefer to complain about the lack of a voting right. They underline this by using petulant language: “Faxocracy;” “No rule making, rule taking.” Upon a close look, one discovers that they are doing rather well in this faxocracy. A lot of EU legislation is based on global regulation. And there are other advantages of EEA/EFTA membership. Still, for a country of the size of the UK the current situation is hardly acceptable. II. Improvement Delors I (1989): A “more structured partnership with common decision-making and administrative institutions.” Delors II (1990): Pledge taken back. Bruegel think tank 2016: Some sort of a voting right. The EU’s own interest: input of the common law (ex: financial services law; competition law). III. Input of the common law Common law is a global legal system. Legal origins theory: Institutions depend on political factors, in particular on the dominant beliefs in France and England on the roles of the King/Queen/Government, Parliament, Judges and individuals in the society. English common law developed as it did because landed gentry and merchants wanted a system of law providing protection for property and contract rights and limit the Crown’s ability to interfere in markets. French civil law developed as it did because the revolutionaries and Napoléon wished to disable judges from thwarting government economic policies. Civil law is more comfortable with a centralized and activist government than common law. (Paul G. Mahoney, 2000.) Efficient financial markets have developed under the common law. There is a correlation between flexible labour law, diffuse ownership in corporations and 2 radical innovation - as opposed to incremental innovation (Massimiliano Vatiero). The top positions are currently held by anglo-saxon countries and by Switzerland. Joseph Schumpeter: Radical innovations create major disruptive changes, incremental innovations continuously advance the process of change. EEA +. Former Czech Foreign Minister Karel von Schwarzenberg: What I fear most about Brexit is that we will end up by having a centrist EU acting with German thoroughness (“deutscher Gründlichkeit”). What one must bear in mind when talking to Norwegian elites: They want to join the EU whereas Britain wants to leave. The Norwegian elites don’t sell the EEA Agreement. They overemphasize the downsides and underplay the advantages. For the Scots fisheries are important D. Free Movement of Persons EU: From free movement of workers to the right of residence to the concept of European citizenship. EEA: Not as far reaching, but still quite far reaching. Reasonable safeguard clause? Can the EU uphold the dogma? Cf. the outcome of the American Presidential election. Brain drain. Migration leads to wage pressures; rise of far right parties. Aggravation of the situation on the eurozone. Rachel Sylvester criticized Prime Minister May’s Brexit speech at Lancaster House in The Times of 17 January 2017: Brexit is not a still photograph, it is a moving picture. In Switzerland with its direct democracy, the first referendum concerning immigration was already held back in 1970. The Brussels-based Bruegel think tank’s paper of 1 September 2016 discusses whether the EU should make a concession to the UK on this point. Unlike the other freedoms, free movement of persons is in the view of the authors not economically but politically determined. One of the five authors is the former German Federal Minister and now Chairman of the Bundestag’s Committee on Foreign Affairs Norbert Röttgen. EEA -. 3 E. Payments to the EU Bruegel paper: UK payments into the EU budget are vital. That a Non EU-State which participates in the Single Market pays is reasonable (even Switzerland pays). The goal is to enable less developed regions to be able to purchase goods and services from wealthier regions and to guarantee political stability. EEA/EFTA States pay too, but not into the EU budget. They have their own organisation and their own projects. The UK would have to make roughly 50% of its current payments. “Norway Grants” are voluntary payments. F. Why the EFTA Court? I. Access for Non-EU-States only with a surveillance and court mechanism EU Council conclusions regarding the EFTA States in 2008, 2010, 2012, 2014: Market access only with surveillance and Court. Directed against Switzerland which is linked to the EU by a network of bilateral sectoral agreements without a surveillance mechanism and without a court. Since 2008, no new agreement has been concluded between Switzerland and EU. Will the surveillance and court requirement also apply to the UK after Brexit? II. Aversion to the ECJ in the UK PM May’s Lancaster House Brexit speech. Absurd debate about “foreign judges.” Notion seems to be imported from Switzerland. There, the historic rejection of foreign judges (1291) simply set out the plaintiff’s obligation to bring its lawsuit before the court of the defendant’s domicile and not before a “foreign” court. But aversion is a fact. However: Single market does not necessarily mean ECJ. In that regard, the PM’s speech was based on a wrong assumption. There is the independent EFTA Court. III. Initial question Why should Britain accept ESA and the EFTA Court if it dislikes the Commission and the ECJ? EEA homogeneity rules: EFTA Court shall follow or take into account ECJ case law; securing a level playing field. 4 But: Even under the one-sided current homogeneity rules and as a court of three small countries, the EFTA Court has managed to uphold classical EFTA values. IV. Own institutions are an advantage Britain (as Norway, Iceland, Liechtenstein) would always have an own actor (due to the size of the EFTA institutions). ESA has not been overly active in the past 23 years. For 21 ½ years ESA has been headed by a Norwegian diplomat. Aftenposten of 8th December 2016: “Norge har dominert.” V. EFTA pillar is less onerous than EU pillar Leaves the EFTA States and their courts more sovereignty. No direct effect and no primacy; only after implementation in the domestic legal order. “Obligation of result” (difficult to enforce). State liability No penalty payments in case of non-compliance with an infringement judgment. No written obligation of courts of last resort to refer (“more partner-like relationship”). Preliminary rulings not formally binding. But duty of loyalty and principle of reciprocity. Right to a fair trial (Article 6 ECHR). On balance: More flexibility. Knut Almestad: The EEA Agreement is tilted in favour of the EFTA States. VI. EFTA Court going first In the majority of the cases (“first mover advantage”). Reasons: Our economies are highly developed and we are fast. Over 160 references by ECJ, AGs, GC to case law; systematic judicial dialogue. VII. If there is ECJ case law Judging is no exact science. The EFTA Court is not a court of lower instance. 5 Homogeneity is important, but it is no snapshot in time. A mature court has more self-confidence. We must be convinced. Homogeneity rules, but independence (E-28/15 Yankuba Jabbi). Triangle ECJ – EFTA Court – ECtHR. Vassilios Skouris in 2014: Symbiotic relationship marked by mutual respect and dialogue which has allowed the flow of information in both directions.
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