Independent panel to resolve trade disagreements after Brexit

Who will mediate trade disputes under Brexit deal? ‘International third party panel’ but NOT the European Court of Justice will resolve disagreements, raising fears of protracted negotiations with Brussels

  • PM: ‘Third party arbitration’ used if either side felt it was being ‘unfairly undercut’
  • Honoured Brexit pledge to remove UK from the EU’s legal sphere of influence
  • EU demanded ‘level playing field’ on issues like workers’ rights and environment

Britain and the EU will seek international help if they clash over trade in the future to avoid using the European Court of Justice, it was confirmed today.

Boris Johnson said that ‘independent third party arbitration’ would be used if either side felt it was being ‘unfairly undercut’ by the other.

The Prime Minister was following through on a commitment of the whole Brexit campaign to remove Britain from the EU’s legal sphere of influence.

One of the bones of contention in the trade talks was Brussels’ fear that Britain could take advantage of leaving the bloc by lowering standards to make its firms more competitive. 

The EU was also worried that the UK could give more financial help to its own firms. 

As a result, it demanded a ‘level playing field’ to avoid a race to the bottom on issues such as workers’ rights and environmental regulation. 

It also wanted Britain to continue to accept a slew of EU rules.

The UK said this would pose an ‘existential threat’ to its sovereignty. Britain said it would settle for No Deal rather than face being tied to EU rules after Brexit.

Under the deal announced today  there will be zero-tariff, zero-quota access to the EU single market – and Mr Johnson has maintained the ability to diverge from Brussels standards, with no role for the European Court of Justice.

Disputes will be settled by an independent arbitration panel, similar to the structures already in the Withdrawal Agreement and those commonly used in international trade situations. 

In a Downing Street press conference today, Mr Johnson said: ‘In the context of this giant free trade zone that we’re jointly creating the stimulus of regulatory competition will I think benefit us both.

‘And if one side believes it is somehow being unfairly undercut by the other, then subject to independent third party arbitration and provided the measures are proportionate, we can either of us decide – as sovereign equals – to protect our consumers.   

Boris Johnson said that ‘independent third party arbitration’ would be used if either side felt it was being ‘unfairly undercut’ by the other

Under the deal announced today there will be zero-tariff, zero-quota access to the EU single market – and Mr Johnson has maintained the ability to diverge from Brussels standards, with no role for the European Court of Justice

‘But this treaty explicitly envisages that such action should only happen infrequently and the concepts of uniformity and harmonisation are banished in favour of mutual respect and mutual recognition and free trade.’

The UK will leave the EU’s single market and customs union on December 31, so the rules and regulations on trading everything from car parts to camembert cheese will change. 

In the end, both parties have agreed a common baseline of regulations on some issues, below which neither side will plunge.

However, the EU had also been insisting that if one side raised standards and the other did not, the latter should be penalised if failure to keep up resulted in unfair competition.

Instead the two sides have agreed an independent mechanism to resolve matters if one side diverges too far from common standards. This would ultimately make rulings on retaliatory tariffs in the event of a dispute.

The Government claims it ‘won’ five of the eight key sticking points in this part of negotiations, including EU law, the ability of the UK to set its own subsidy rates, competition and tax rules.

In a ‘scorecard’ it produced before the talks were agreed, it said: 

The UK rejected the EU’s asks for an ‘equivalence’ mechanism, and instead secured a review and rebalancing clause which allows either side to initiate a formal review of the economic parts of the deal, including the level playing field provisions, and  update the balance of the agreement over time. 

‘Any short-term rebalancing  measures are strictly limited and proportionate and subject to the approval of an independent arbitration panel.’

This was billed as a ‘win’ for the UK. 

Asked at a Brussels press conference this afternoon how the EU will make sure the UK will stick to its side of the agreement, Ms Von der Leyen said: ‘We have strong measures that can be taken if one party does not play by the rules’

Asked at a Brussels press conference this afternoon how the EU will make sure the UK will stick to its side of the agreement, Ms Von der Leyen said: ‘We have strong measures that can be taken if one party does not play by the rules. 

‘So starting from re-balancing mechanisms that are built-in with dispute settlement mechanisms, to review clauses and overall review for example, after four years, to see whether both sides played by the rules, that the level playing field is level indeed. And there is the commitment to follow whatever has been agreed in this deal.

‘So from the experience we have had we built in safeguards that are necessary to make sure there is a strong incentive for both sides to stick to what they have agreed to.’    

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