Friday, 25 August 2017

Co-operation versus Harmonisation

One of the enduring myths around Brexit is the claim that to trade with the EU we must accept the rule of EU law.

This is not a new line. Peter Shore gave the speech of his life in the 1975 EEC Referendum campaign in which he observed that the aim was the "transfer of our whole democratic system to others" while pouring scorn on the idea that Australia would allow its laws to be set by Japan or Canada would allow its laws to be set by USA, just because they trade with each other.

The modern variant has it that we must continue to abide by the Court of Justice of the European Union (CJEU) and adopt EU laws  - accepting supra-national harmonisation to retain the benefits of frictionless trade inside the single market. Firstly, this assumes the single market is the fount of all prosperity when as Andrew Lilico has noted, even the EU Commission suggest that at best, it added just 2% to GDP in 20 years.  Secondly, this assumes there is no way to remedy non-tariff barriers trading from outside the single market.

A twitter tread by international trade lawyer Robert McDougall describes the difference between regulatory harmonisation and regulatory co-operation, contrasting the EU's single market with Canada-USA trading relations (echoing Shore's 1975 speech) :
  • Regulatory harmonisation affects the whole economy. 
  • Regulatory co-operation can help export industries and preserve domestic policy autonomy
  • Canada seeks regulatory co-operation via NAFTA, but would not accept EU-style regulatory harmonisation with US.
This week the Governments Brexit paper on Enforcement & Dispute Resolution provided some clues as to the post-Brexit role of EU law and the CJEU.  Pre-existing CJEU rulings will be copied into UK law as part of the Repeal Bill and will also be referenced to interpret language/concepts deriving from EU law - which is broadly seen as un-contentious. But the Government also leave open the possibility of future CJEU rulings being "taken into account" where both parties "seek to avoid divergence" - or in other words remain harmonised.

Pro EU supporters think this has handed them a victory and we are set to remain harmonised with large swathes of EU law in an EFTA-EEA like relationship. As I mentioned in my previous blog post, I can see the relevance of this for certain sectors for a transitional or interim arrangement, e.g. aviation / Single Skies. But some have suggested we will remain permanently enmeshed in EU law, citing Data Protection as the prime example where Government has already conceded this. So the Government's latest Brexit paper on Data Protection (published Thursday 24/8/17) is particularly relevant.

In fact, the Government's data protection paper proposes a UK-EU model based on:
  • regulatory co-operation between the UK’s Information Commissioner’s Office (ICO) and EU regulators (paras 4, 22, 24-6, 44).
  • partnership between UK and EU as global leaders in data protection (paras 3, 4, 21, 22, 24, 41, 42).
  • mutual recognition & respecting UK sovereignty (paras 22, 29, 43, 45).
The paper suggests a UK-EU partnership could be based on the adequacy provisions built into the EU's data protection laws (paras 4, 22, 23) and provides a lengthy discourse on the how adequacy facilitates data flows with third countries (paras 32-41) :
  • The EU Commission scrutinises third country domestic legislation/practice and compliance with relevant international standards, to ascertain whether data protection standards are "essentially equivalent" to EU standards (para 35). 
  • 12 adequacy decisions have been issued the under the 1995 Directive, including Argentina,  Israel, New Zealand, Switzerland, Uruguay (para 37).
  • Partial adequacy decisions cover only certain sectors of the economy and have been made with Canada (where PIPED act applies) and USA (where EU-US Privacy Shield applies). (para 38)
  • New EU Data Protection legislation also contain adequacy provisions and provide more detail on the the the adequacy decision process (para 39).
  • Starting from a position of 100% alignment with EU data protection laws, there is no good reason to believe the UK would not be deemed "essentially equivalent". (paras 2, 4, 16, 27, 30, 41)
All of which sounds a long way from the rigid harmonisation of the EFTA EEA model. The proposed UK-EU model based on partnership, co-operation and mutuality is in stark contrast to the one-way direction of EU law implied by EFTA EEA (see also para 47 of the Governments Dispute Resolution paper).  Dominic Raab saying that the UK and EU will keep half an eye on each others courts seems an accurate description. UK sovereignty is protected and if EU data protection develops in a particularly onerous way, "partial" adequacy would allow UK-EU data exchanges to be covered while allowing divergence for UK domestic and other UK-international data flows.

So perhaps those pro-EU supporters championing harmonisation have misunderstood the Government's proposals - either that or we are in violent agreement about the nature of future UK-EU relations. Either way, I'm very happy with the Government's approach - they have chosen co-operation over harmonisation.

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