Britain lays out a menu of fudge for its ECJ red line

Negotiations over Brexit between the EU and UK resume on Monday after a month’s break. During that time, the UK has issued a flurry of position papers on various issues including the Irish border and customs arrangements, focused more on managing domestic political debate than advancing talks with Brussels.

This week’s effort addresses how the “deep and special partnership” the UK says it wants with the EU will be enforced and disputes within it settled. This issue has high political salience in the UK given Theresa May’s decision to bow to Eurosceptic pressure and rule out the continued jurisdiction of the European Court of Justice in Britain.

The ECJ has many roles, but as far as economic relationships are concerned, the fundamental principle is quite simple. If a non-EU country wants to sell into the single market, it will have to adhere to the rules of that market. Ultimately, the final arbiter of those rules is the ECJ. The shallower a country’s market access, the more freedom any judicial mechanism can have from the ECJ, but the weaker its enforcement will be.

As the government position paper notes, if the UK leaves the single market and the customs union and relies on a so-called “free trade agreement” with the EU, it would probably be governed by a dispute settlement system typical of such agreements, a version of which also oversees the enforcement of World Trade Organisation rules. But for companies and states wanting swift redress from unfair treatment, such panels are distinctly inferior to the ECJ. They derive from treaty law rather than being rooted in the law of the countries involved. Cases can only be brought by governments, rather than individuals or companies. Enforcement is relatively weak.

Rather than being able to exact fines or overrule domestic law like the ECJ, dispute settlement panels can only authorise the aggrieved party to impose trade sanctions, which harm the consumers and importers of the plaintiff as well as the exporters of the defendant. Such mechanisms cannot effectively guarantee the kind of deep access to the single market the UK says it wants to achieve.

More interestingly, the paper floats the possibility of a hybrid system, possibly based on the European Free Trade Association court, which generally follows ECJ rulings but is not bound by them. It is a constructive suggestion, supported by some Brexiters, though how far the EU will accept it is unclear. For economic regulation under the single market it may well do so, though a court that starts diverging substantially from the ECJ in rulings on an economy as large as the UK will cause a rethink.

But for more politically explosive issues, such as the rights of EU citizens resident in the UK, Brussels is insisting on the ECJ. And whether the EU has the patience to create a plethora of hybrid courts for the other myriad issues the ECJ oversees is doubtful.

The UK has barely begun to seek domestic political consensus on the trade-off between judicial sovereignty and market access, let alone put that position to the EU. To its credit, this paper does at least lay out various options. It may play a useful role as a softening-up exercise to allow the less extreme Brexiters to come around to accepting ECJ influence.

But those conversations are moving far too slowly. British negotiators will sit down with their EU counterparts next week with a continuing credibility deficit. On the enforcement issue, Mrs May’s government will need to do some serious fudging of its ECJ red line if it is to build the close economic relationship with the EU it professes to want.