A reasonable divorce bill?

Mrs May, so we were told last Sunday, has decided to agree a £50 billion divorce bill with the EU, although the UK’s Chief negotiator, David David has denied this, saying that it was “complete nonsense”.

Accounts appeared in several papers suggesting that the government would be paying between £7 billion and £17 billion for three years after Brexit, but that payments would cease by 2022 – the year of the next General Election.

There is a sizeable group of Brexit supporters who believe that we should pay absolutely nothing to the EU after we become independent. “Not a a penny to the blackmailers!” says one comment to the article cited above. Others would not take such a hard-line position, maintaining that we should honour our obligations to the end of the current seven-year budget cycle, which ends in 2020.

Whatever, it is hard to justify the figure of £100 billion which the EU is demanding. Our current net budget contribution amounts to somewhere in the order of £10 billion and was not predicted to rise that much up to the end of the EU’s budget cycle or beyond.

Of course, the EU is not only losing a member state but losing a net contributor to the EU budget. In only one year since joining in 1973 has the UK received more money from the EU than in paid in. Günther Oettinger, the EU Commissioner responsible for the budget, reckons that Brexit could make a hole as big as €20 billion in the EU’s finances.

During the last round of Brexit talks, Michel Barnier, the EU’s negotiator, was distinctly unhappy with the UK negotiating team’s three-hour line-by-line rebuttal of the EU’s expensive divorce bill. There does seem, however, little justification for the figure demanded by the EU.

Perhaps the most sober estimate of a reasonable divorce settlement comes from the Institute of Chartered Accountants of England and Wales. It has produced a report suggesting that the likely cost should end up somewhere between £5 billion and £30 billion. The most likely figure, £15 billion, would equate to be £225 for every person living in the UK in 2019.  This is roughly on a par with our net annual contribution to the EU budget – in other words, how much we pay after the rebate and agricultural subsidies are deducted.

The full report can be downloaded here. It includes spending which has been authorised but not yet incurred, which will be hard to avoid. ICAEW’s study puts this figure at £28 billion.

On the other hand, there are assets which we can cash in. We have a 16% stake in the European Investment Bank, estimated to amount to some £10 billion by 2019. With ownership restricted to EU members, our shareholding will need to be sold.

The authors also indicate that some additional expenditure will be needed to complete the Brexit process. After all,  for one thing, extra staff will need to be employed for what will be complex but one-off negotiations.

The report considers that the most contentious issue may be any ongoing commitment to infrastructure projects in the former Soviet bloc countries. After all, the state of infrastructure in the UK leaves much to be desired and given the claims that some UK workers, including teachers and nurses, are worse off now in real terms than they were five years ago, it would not be unwise for Mr Davis and his team to argue that charity must begin at home.

We have been somewhat critical of certain aspects of the government’s approach to the  Brexit negotiations recently, but when it comes to the divorce settlement, there is no question that it is the EU which is being most unreasonable in the sum it is demanding.

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Brexit and the mechanisms of EU trade

The UK’s International trade depends upon efficient electronic systems that avoid entry inspections and delays at border crossings. These systems depend upon various mutually-agreed standards on both sides of the border. Unfortunately, the recently-published Government Position Papers on Brexit chose to ignore such details – indeed, they amounted to little more than political aspirations. As Brexit day approaches, it would not be surprising for businesses in both the UK and EU member states to put pressure on their governments to address the steps needed to prevent a massive “Operation Stack” on both sides of the Channel once we leave the EU.

Businesses likely to be affected by Brexit will need to know about how the movement of goods, services, ships and aircraft will be controlled.  They cannot move freely after March 2019 unless they are the subject of new inter-government agreements. These agreements can be achieved by way of MRAs [Mutual Recognition Agreements], Memoranda of Understanding or Exchanges of Notes for example.

There is a great deal of interplay between Laws and Regulations, Standards, Inspections and Conformity Assessment, Government Market Surveillance by checks and Customs and Tariff requirements. It must  be pointed out that the so-called ”WTO model” post-Brexit advocated by some economists would deal only with tariffs and would not address in full the requirements of these other critical areas.

So what else would be needed? Firstly, Mutual Recognition of bilateral product regulations. Whether or not two trading countries’ standards rules are identical, either way they are deemed to be mutually acceptable by that MRA.

Then there are internationally agreed certificates recognising that a produce conforms to a given set of standards. These are vital before the goods can reach the marketplace. The most important body dealing with international  standards, the International Organisation for Standardization (ISO) is a non-government organisation although its membership does include 163 national standards bodies. It seeks to apply one international standard for a given product everywhere across the world.

In Europe there are three European standards organisations, ETS, CEN and CENELEC, and they have 34 members – all 28 current EU member states plus Iceland, Norway, Switzerland, Turkey, Serbia and the Former Yugoslav Republic of Macedonia. Every agreed standard is adopted by all 34 member countries’ standards bodies. In the UK, the British Standards Institution (BSI) is our national standards body. The UK Government therefore seeks to avoid making any other bilateral national agreements on standards for legal compliance purposes. In other words, only one standard per topic is permitted in these 34 countries.

There is a silence from the DExEU upon any progress in these areas. These standards organisations were not mentioned once in the Position Papers, even though they are going to play a hugely important role in facilitating trade with other European nations.  David Davis has perhaps unwisely accepted the Barnier sequencing agenda, which means that the concerns of Industry and Commerce over these issues cannot be addressed until the EU is satisfied with progress in other areas – and it is currently distinctly dissatisfied.

As Anthony Scholefield has pointed out in his research paper for the Futurus think tank, the Government’s “Plan A” – a bespoke trade agreement with the EU – is doomed to fail unless transitional arrangements are agreed.

There is also the question of non-EU trade. Approximately 80% of UK GDP is domestic. Of the remainder 13% is Entrepôt non-EU and 7% is with the EU. Will this Government prioritise the 13% or the 7%?

One of the much-trumpeted benefits of Brexit is the freedom to strike our own trade deals. Will the Government go for a “Plan B” and seek to negotiate some trade agreements with non-EU countries which will be conditional on Brexit taking place in March 2019?

At the moment, we have no idea. “Operation Stack” on the M20, with all the attendant  consequences are looking increasingly inevitable from April 2019. The only consolation is that the UK will at least have escaped from the EU political project of ever-closer union and will not be asked to prop up the failed Euro. As Lord Mervyn King says, ”In 30 years this will look like any old blip!” We can but hope he is right, but without a change of mindset among those entrusted with the Brexit negotiations, the blip could be rather bigger and longer than he anticipated.

 

 

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Going round in circles?

It’s now the third round of Brexit negotiations. Last week, we were given what amounted to an aspiration list – five “position papers” following on from two the previous week which went into very little detail as to how the UK negotiating team intended to go about achieving its desired objectives. The papers also made a number of assumptions about the EU’s negotiating position which do seem at first glance rather unrealistic. In short, it doesn’t seem very clear what the UK government actually wants. By contrast, the EU has made its position clear from the very start.

The EU’s Chief Negotiator, Michel Barnier, is understandably frustrated and warned about the clock ticking. He recently told the UK to “start negotiating seriously.” We are now less than 19 months to Brexit day; 14 have already elapsed with very little achieved except a foolish agreement to submit to the EU’s negotiating schedule whereby sufficient progress must be made on the divorce settlement, the rights of EU nationals and the Irish border before issues such as trade can be discussed. A helpful summary of the full areas of disagreement can be found in this article.

As far as the UK government is concerned, there has been a recognition that a long-term trade deal cannot be negotiated before March 2019 so some sort of interim arrangement will be needed. Even this is going to be a challenge as the rather nebulous statements from the government insist that the Single Market is not on the agenda, necessitating a bespoke deal (or a change of mind). Labour, however, seems to be moving round to supporting membership of the Single Market.  It now agrees with the Government that a transitional deal is necessary but disagrees with it not only on the Single Market but on the customs union too. As Dr Richard North points out, Keir Starmer, the shadow Brexit secretary, has advocated the Single Market without offering any hint of how we would access it – in other words, no mention of the European Economic Area or EFTA.

Professor George Yarrow from Oxford University, has argued that the default position for a newly-independent UK is that we would remain within the Single Market and would not need to rejoin EFTA to retain access. Not everyone is convinced by his arguments and if he is wrong, a bespoke deal allowing the UK to remain within the Single Market or the Customs Union would require a new treaty – a very challenging prospect within this increasingly tight timetable.

Of course, there are still some voices arguing against any sort of transitional agreement and claiming that a “hard” Brexit will bring economic benefit, such as Professor Patrick Minford of Cardiff Business School.  We have also highlighted the Bruges Group’s paper What will it look like? which claims that it is possible to agree a long-term trade deal within the Article 50 timeframe.  This paper has highlighted the key areas on which an agreement will be required, but if the Government is considering this route, the Position Papers offered us not the slightest hint that this is their preferred strategy.

So it looks like this week’s talks will be little more than going round in circles. We will, no doubt, be given a very upbeat assessment of the talks by David Davis, but little real progress will be made as the Government does not seem to be offering any sort of road map to arrive in the promised land of Brexit while Labour has little idea either. Meanwhile, as M. Barnier keeps reminding us, the clock is ticking away and the cliff edge is getting closer……

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New government position paper – Enforcement and dispute resolution

This latest Government position paper begins with a phrase we have heard time after time “new deep and special relationship.” This is a most unfortunate term, although at least it makes the point that we don’t want to make enemies of EU-27. Our relationship will certainly be “new” as we will no longer be a member state but “deep and special”? We voted for a looser relationship to enable us to be closer to the rest of the world. It is hard to imagine that in a decade or so, if Brexit is managed successfully we will be any closer to the EU than to our friends in the Commonwealth, for instance. The EU, in other words, will not be particularly special even if we naturally want to work closely with it.

The paper attracted much comment over the future role of the European Court of Justice. Upon its publication, the Government was accused of back-tracking over its commitment to end the jurisdiction of the European Court of Justice upon  Brexit. Even the Prime Minister felt obliged to make a statement confirming that this was still the Government’s intention.

The paper says little about one contentious issue – the desire of the EU that its citizens resident in the UK will remain subject to EU law after Brexit. This is a most unreasonable request and flies in the face of our Common Law principle – that the law is the law for everyone from the monarch downwards. Historically, the scope of our Common Law has applied to non-nationals either resident in or visiting the country. We do not hear of the governments of, for example, India, Saudi Arabia, Switzerland or the USA wanting an arrangement whereby their citizens remain subject to the laws of their home country while they reside in the UK, nor would these countries grant UK citizens living abroad the right to be governed by UK law. The EU’s claim to “extra-territoriality” is exactly the same as that which the nineteenth century Imperial powers imposed on China. Under their terms, Citizens of the European states could not be tried by Chinese courts but only in the courts established by the European powers in China. Given that the UK’s legal systems are better than those found in much  of Continental Europe, the EU’s demand should be resisted


As an aside, if the UK rebuffs the EU on the grounds that the same legal system applies to everyone resident in the country,* it does pose the question about the legitimacy of the Sharia courts operating in the UK, which do not have any formal legal status but in reality, make decisions which have a profound impact on the lives of women and children in particular.

The paper leaves open the nature of cooperation between the legal authorities in the UK and the EU in the event of international disputes. It quotes examples of international legal bodies already in existence, including the EFTA court, interestingly enough. The UK government has thus far shown no inclination that it wants to re-join EFTA, but such a move could be helpful in enabling us to take advantage of an existing body which works closely with the ECJ while remaining independent of it.

Like the previous papers, detail is rather limited and although these papers have been produced in theory to guide the next round of Brexit talks which are due to start next week, this topic isn’t going to be discussed any time soon. We need not have agreed with the EU’s demand for progress on the rights of EU citizens living within the EU, the exit fee and the Irish border issues before moving onto discussing the wider Brexit settlement, but David Davis did so. Consequentially, as has been pointed out elsewhere, this paper is really only for domestic consumption only.

 * Obviously, Scotland and Northern Ireland have different legal systems to England and Wales

 

The proposed alternative to the European Arrest Warrant is not satisfactory

I am afraid that David Davis’s scheme for a new European Arrest Warrant is not at all satisfactory as it stands. Here is the essence of it:

__________

Under the proposal a new “ad hoc” legal commission would replace the European Court of Justice (ECJ) which currently rules on extraditions.

The new panel would have a Supreme Court judge, an ECJ judge and one from a third neutral country to rule on each extradition.

__________

This proposal as it stands is merely cosmetic, and here is why:

Any oversight by a superior body, whether our own Supreme Court or even more so by a new ad hoc mixed legal commission can only see and ensure that the current EAW legislation is applied by the lower courts.

And the main problem is that it is not proposed here to alter the current EAW legislation, which says that prisoners must be surrendered at a bald, unsupported, demand from the requesting State, with no examination by a court of the requested State of evidence of whether there is a serious case to answer or not.

It is – wrongly and wrongfully – ASSUMED by many in Britain that the EU states will all have assembled evidence of guilt and will be “prosecution-ready” before they issue an EAW (as is the normal practice in Britain). Indeed according to the Treaty we are bound to trust them blindly to have done so, under the doctrine of “mutual confidence and recognition”.

Our politicos and legal eagles, not to mention pundits, are still – willfully? – ignoring the fact that the practice in States ruled under the Napoleonic-inquisitorial dispensation is to arrest a suspect FIRST, and only AFTER they have him under lock and key, do they try to build a case and seek evidence against him. This often takes months, while the unfortunate rots in duress vile with no public hearing, as we have seen happen all too often.

This is not – as our own people assume – due to the sloppiness of continentals in applying standards that we in Britain consider to be right and normal; it is the way their system functions normally, and is supposed to function. They do not work to our standards,  but to their own, which are completely different from, indeed alien to, ours.

I have been through the historic reasons, going back 800 years, for this profound difference elsewhere and shall not do so again here.

Whether the grounds for suspecting, and for arresting, a particular person amount to serious evidence of a case to answer, or flimsy evidence that would not stand up to serious scrutiny, or no evidence at all but merely clues, or just a hunch, or even a prejudice, on the part of the investigators, is sorted out in Britain by our Habeas Corpus.

This provides a right for a prisoner to be brought into a public hearing in open court within HOURS or at most a few days after arrest. And there he can demand to be shown the evidence on which he was arrested. He must there be “charged”, and in Britain and other English-speaking nations a charge must be based on hard evidence, already collected, of a case to answer. No right to any such speedy public hearing exists in continental States, where six months, extensible, in prison “pending investigaton” with no public hearing, is considered a normal limit (for many categories of cases, not only extreme terrorism cases), as per the Corpus Juris proposal for a single unified criminal code for all Europe.

Some years ago an attempt by our own government to introduce 42-day detention without charge nor public hearing in terrorist cases was resisted and opposed on principle by none other than David Davis himself, who nobly resigned his seat and stood for re-election on this very point, and was returned again by his electorate who clearly shared his concern to keep our traditional safeguards of the liberty of the subject. Has he forgotten this? How can it have escaped his notice that the EAW as it stands brings in not just six weeks, but six months, in the case of Andrew Symeou eleven months, detention without charge or public hearing?

The European Convention on Human Rights provides no remedy. Its article 6 merely says that a prisoner must have a public hearing within a “reasonable” time after arrest, and the continentals will say that it is “reasonable” for them to take six months to investigate a person and assemble evidence against him of a case to answer.

One solution could be to force the continental States to hold a Habeas Corpus public hearing within hours of receiving a prisoner to show that there is a case to answer, or to release him. We have already seen that this would not be accepted by them for it goes against their whole legal culture. Indeed in 2002 the late Neil McCormick QC MEP presented a motion to the EU Parliament to set up a “Euro-Habeas Corpus” to go with the EAW, but it was overwhelmingly voted down.

So it will have to be our own courts who demand that an EAW, or indeed a warrant received from any foreign State, must be accompanied by evidence of a case to answer which can be examined by a UK court with the power to reject it if considered insufficient. This is what happened before the European Extradition Act of 1989. The delays complained about were largely due to the foreign authorities, who are quite unaccustomed to having to investigate first and arrest after. They prefer to do it the other way round. Under our previous legislation, they had to do it our way. Now we have to do it their way.

At present the UK is forced to conform to the continentals’ yardstick. This flies in the face of Magna Carta (clause 38).  But people on British soil (even if not British citizens) must be entitled to the protection of British laws. This always used to be the case, and it must be restored.

The renewal of border checks will enable the UK to keep out known foreign criminals whose identities have been flagged up to us by foreign authorities. So the garish scare-mongering about “Britain becoming the Costa del crime” and the “honeypot for criminals” argument can be laid to rest.

The practical argument that supporters of the EAW cannot answer is: if no substantial evidence of guilt is collected BEFORE arrest, how can the authorities know that they have got the right person to accuse? Indeed the record of the EAW’s application shows many cases where perfectly innocent people (including even a British judge – Colin Dines!!) were targeted and made to suffer forced transportation and often lengthy imprisonment, thus allowing the truly guilty parties to escape scot-free.

Even if we had our own Supreme Court to oversee the application of the EAW, it can only do so on the basis of the legislation as it stands. However sympathetic it might be towards an obviously innocent victim of a monstrous judicial muddle, or even of persecution on a trumped-up charge, as long as the doctrine of “mutual recognition” remains on our Statute book, the Supreme Court cannot do anything other than apply it. Willy-nilly. Judges in our lower courts have even been embarassed about EAW cases like this, but have been powerless to do anything other than apply the law as it stands. The Supreme Court would be in a like position.

So a reform of the EAW needs to insist that when foreign authorities send us a warrant to arrest someone on British soil, they must also send an indication of the evidence of a prima facie case to answer. Otherwise we cannot prevent them from using the EAW as a tool for fishing expeditions.

Customs: What the Government position paper told us

Today, the Government published its first Brexit position paper, which covers future customs arrangements. It is a short document, only 16 pages long and intended to be a precursor to a White Paper on trade which is scheduled to appear in the autumn.

What does it tell us? Firstly, the Government has been talking to businesses concerned about a “cliff edge” situation on 29th March 2019 and is seeking to ensure that we will end up with  “the freest and most frictionless trade possible in goods between the UK and the EU, and allows us to forge new trade relationships with our partners in Europe and around the world.”

The paper expresses enthusiasm for striking trade deals with “old friends and new allies” – in other words, the Commonwealth nations and the rapidly growing economies of Asia. We can only do this from outside the EU and particularly, outside the Customs Union. It was announced very early after Mrs May took office that we will be leaving the EU’s customs union – in many ways, this was a bit of a non-issue as it was hardly mentioned during the referendum campaign.

The paper recognises  the challenges of establishing a new relationship with the EU. As a short-term transitional measure, what is proposed is in effect a shadow customs union where by the EU will treat the UK as thought it was a member of the customs union. David Davis, interviewed on Radio 4 today, was adamant that the transitional period would end before the next General election – probably no more than two years – to be replaced by a “deep and special partnership” with the EU. This, the paper admits, will be an innovative but untested approach. It suggests two options:-

  • A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on UK-EU trade as possible. This would aim to: continue some of the existing agreements between the UK and the EU; put in place new negotiated and unilateral facilitations to reduce and remove barriers to trade; and implement technology-based solutions to make it easier to comply with customs procedures.
  • A new customs partnership with the EU, aligning our approach to the customs border in a way that removes the need for a UK-EU customs border. One potential approach would involve the UK mirroring the EU’s requirements for imports from the rest of the world where their final destination is the EU.

There is, in theory, a third option – failure to reach an agreement (see Paragraph 53), but the paper insists that “this is not the Government’s preferred outcome to the negotiations, but it is essential that the UK is prepared for all possible outcomes of customs arrangements.” As for the first option – a high-tech solution, there are some doubts as to whether it really will create frictionless borders, especially as soon as March 2019. As one analyst has said, ” making sure there are no traffic jams in Dover will be more about the arts of management, politics and the law than technology.

The obvious concern on reading the paper through is that this paper is very much a UK wish list. The EU is under no obligation to say yes. What is a particular cause for concern is that its treaty-based structure may not allow it to treat us as an honorary member of its Customs Union.  It is likely that we will be able to devise a system allowing  goods from the EU a reasonably smooth passage through UK customs by March 2019, especially as the if the new customs declaration service using state-of-the-art technology is up and running by then. What is far from certain is that our exports to the EU will enjoy anything like a seamless passage through their customs.  The EU will have to change its customs procedures to adapt to the different  status of the UK on Brexit. Are they prepared to do this?

We will have to wait a while for a formal response. So far, the main comment from Michel Barnier, the EU’s chief negotiator, is that no discussions on customs can proceed until sufficient progress is made on the UK’s exit bill, the Irish border and the rights of EU citizens living in the UK after Brexit. Guy Verhofstadt, representing the EU Parliament, was  very sceptical, dismissing talk of a shadow customs union and invisible borders as “fantasy”.

One also would like to know if the author(s) of this paper are sufficiently aware of the differences between a customs union and a customs clearance agreement.  The latter is essential, the former almost certainly not, even as an interim arrangement.

The CBI has nonetheless described the proposal as “encouraging”.  David Davis’ interview made it clear that his Department still has a few cards up his sleeve and that for tactical reasons, he was not prepared to give anything further away. What has been put into the public domain has shown that the Government is aware of the issues UK businesses will face but offers little detail on how they will be resolved.