THE LEGAL CONSEQUENCES OF BREXIT FROM AN INTERNATIONAL ECONOMIC LAW PERSPECTIVE

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1 Working Paper No. 188 June 2017 THE LEGAL CONSEQUENCES OF BREXIT FROM AN INTERNATIONAL ECONOMIC LAW PERSPECTIVE Ines Willemyns Marieke Koekkoek 1

2 THE LEGAL CONSEQUENCES OF BREXIT FROM AN INTERNATIONAL ECONOMIC PERSPECTIVE Ines Willemyns Marieke Koekkoek Abstract Ever since the Brexit referendum much unclarity has existed on the consequences of a Brexit for the United Kingdom in the context of international economic law. Although the economic consequences of Brexit have received much attention, little is known yet with respect to the international economic law aspects of the new position of the UK in relation to the WTO and the future EU-UK trade relationship. This paper provides an analysis on the possible ways the different legal questions related to Brexit from the perspective of international economic law could be addressed. The first section of the paper discusses the legal consequences of Brexit in the WTO. The general and specific rights and obligations of the UK within the WTO are touched upon, as well as the consequences for the countryspecific obligations of the UK post-brexit, considering the unique position of the EU, representing its member states within the WTO. Different legal possibilities to manage these consequences are discussed drawing inspiration from public international law on state succession, the accession process for separate customs territories within the WTO and the enlargement of customs unions under Article XXIV of the GATT The second section of this paper includes an overview of possible forms the future EU-UK relationship could take. It considers the different paths taken under a hard and under a soft Brexit. The paper concludes by sharing some thoughts on the more feasible options for the position of the UK post-brexit. Keywords international economic law, World Trade Organization, Brexit and EU law Author Ines Willemyns is Doctoral research fellow and junior member of the Leuven Centre for Global Governance Studies and the Institute for International Law, KU Leuven Marieke Koekkoek is Doctoral research fellow and junior member of the Leuven Centre for Global Governance Studies and the Institute for International Law, KU Leuven. Address for correspondence Ines.Willemyns@kuleuven.be Marieke.Koekkoek@kuleuven.be 2

3 THE LEGAL CONSEQUENCES OF BREXIT FROM AN INTERNATIONAL ECONOMIC LAW PERSPECTIVE Ines Willemyns Marieke Koekkoek 1. INTRODUCTION THE LEGAL CONSEQUENCES OF BREXIT IN THE WTO THE UK S GENERAL RIGHTS AND OBLIGATIONS UNDER WTO LAW THE UK S SPECIFIC RIGHTS AND OBLIGATIONS UNDER GATT 1994 AND GATS DIFFERENT POSSIBILITIES TO MANAGE THE WTO CONSEQUENCES OF A BREXIT PLURILATERAL AGREEMENTS - GOVERNMENT PROCUREMENT AGREEMENT THE LEGAL OPTIONS OF THE UK IN ITS ECONOMIC RELATIONSHIP WITH THE EU A HARD BREXIT A SOFT BREXIT CONCLUSION

4 1. INTRODUCTION Since the results of the Brexit-referendum were released on the 24 th of June 2016, much unclarity has surfaced regarding the consequences of the Brexit for the United Kingdom (UK) and the European Union (EU) in the context of international economic law. As membership to the EU entails first and foremost membership to its economic single market, the economic effects of the Brexit will be considerable and very interesting from the perspective of legal scholars. This paper aims to provide the reader with some clarifying elements on the UK s future position within the World Trade Organization (WTO) and the possibilities of a future EU-UK economic relationship. More than a year after the UK s decision was made public, unclarity exists on the UK s legal position within the WTO. As already signalled by the WTO Director-General, Roberto Azevêdo, in a cautionary speech given in London in the context of the (then) imminent threat of Brexit: The UK, as an individual country, would of course remain a WTO member, but it would not have defined terms in the WTO for its trade in goods and services. It only has these commitments as an EU member. Key aspects of the EU s terms of trade could not simply be cut and pasted for the UK. Therefore important elements would need to be negotiated. 1 Various possible scenarios have already been raised in the discussion on the UK s position within the WTO. These range from the statement that the UK will have to accede to the WTO from scratch, thereby negotiating all of its commitments with all WTO Members, as is required for any acceding Member to the WTO. This would entail a long and painstaking process, with de facto veto power on the UK s accession accorded to every single WTO Member. The suggestions on the other side of the spectrum point to the fact that the UK so far has been bound by EU commitments and that it therefore might be considered a logical consequence for the UK to be able to take over EU commitments and to only be required to renegotiate its share of EU (agricultural) support commitments and its share of EU tariff rate quotas (TRQs). This seemingly easy solution raises several difficult questions: Is it possible for a WTO Member to simply take over the commitments negotiated by the Customs Union it used to be part of? What about the plurilateral agreements negotiated in the context of the WTO? What is the position of a WTO member leaving a customs union in the sense of Article XXIV General Agreement on Tariffs and Trade (GATT)? Will the UK inevitably fall into legal limbo during the period in which it conducts bilateral negotiations with other WTO Members over its specific rights and obligations under WTO law? This first section of this Article will assess the UK s position regarding its various rights and obligations in international trade law. In its second part, this Article discusses some of the more plausible options the UK and the EU can explore in shaping their post-brexit economic relationship. It is clear that the UK, by being part of the EU internal market and having negotiated its international trade commitments under the umbrella of the EU, has to address its economic relationship with the EU before it can turn to repositioning itself within the WTO. 1 WTO News, Azevêdo addresses World Trade Symposium in London on the state of global trade, 7 June 2016, < visited on 19 May

5 2. THE LEGAL CONSEQUENCES OF BREXIT IN THE WTO 2.1. The UK s general rights and obligations under WTO law As a continuing Member to the WTO, as acknowledged by the WTO s Director General in his 7 June speech, the UK is subject to all rights and obligations under the Marrakesh Agreement 2 and its Annexes: the General Agreement on Tariffs and Trade 1994 (GATT) 3, the General Agreement on Trade in Services (GATS) 4 and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) 5. 6 The erga omnes obligations in these Multilateral Agreements will continue to apply to the UK without the need for renegotiation or further formalities. The sole fact of being a Member to the WTO suffices for these rights and obligations to apply to the UK without further delay. The exceptions to the erga omnes rules applying to the WTO Members can be found in Article II GATT and Article XX GATS. Both of these articles contain the specific references to the Schedules of Concessions and the Schedule of Specific Commitments respectively. These Schedules contain each Member s individual commitments, reflecting specific tariff concessions and other commitments that have been agreed upon between the individual Member and all other WTO Members. For trade in goods, these schedules include the bound tariff rates for specific goods. For services, these schedules include the specific commitments on the market access and national treatment obligation of Members for specific service sectors. For agricultural goods specifically, the Schedules not only bind tariffs, but concessions and commitments are made regarding TRQs, limits on export subsidies and some kinds of domestic support. 7 The commitments and exceptions applying to all EU member states are included in the Schedule of the European Union. 8 As part of a single customs union, the tariffs of all EU member states are the same and set out in the EU s goods Schedule. For those member states that acceded to the EU after the negotiation of the original Schedules, their individual Schedules have been withdrawn by request of the European Union (e.g. Schedules of Bulgaria, Croatia and Hungary). 9 There is thus some practical guidance on the accession of countries to the EU s customs union, however this is not the case for countries wanting to leave such an integrated customs union. It is this lack of individual specific commitments for the UK that creates most confusion on the consequences for a post-brexit WTO membership of the UK. In an interview for BBC news on 2 November 2016, the Director- General of the WTO, Azevêdo, indicated that negotiations will have to happen between both 2 Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 U.N.T.S. 154, 33 I.L.M (1994). 3 General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1867 U.N.T.S. 187, 33 I.L.M (1994). 4 General Agreement on Trade in Services, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1B, 1869 U.N.T.S. 183, 33 I.L.M (1994). 5 Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 33 I.L.M (1994). 6 As stated in Article II, para. 2 of the Marrakesh Agreement: The agreements and associated legal instruments included in Annexes 1, 2 and 3 (hereinafter referred to as Multilateral Trade Agreements ) are integral parts of this Agreement, binding on all Members. 7 WTO, Goods Schedules Member s commitments, < visited on 19 May These can be found at, respectively, WTO, Goods schedules Current Situation of Schedules of WTO Members, < visited on 19 May 2017 and WTO, Services: commitments Schedules of commitments and lists of Article II exemptions, < visited on 19 May WTO, Goods schedules Current Situation of Schedules of WTO Members, supra note 8. 5

6 the EU and the UK as well as between both parties and the WTO Members. 10 He additionally indicated that a lot will depend on the terms of separation between the EU and the UK, thereby stating that both the EU and the UK will have to agree on their new schedules of commitment (as negotiated between them) with all other WTO Members. The different elements of the UK s position within the WTO post-brexit will be discussed in more detail below The UK s specific rights and obligations under GATT 1994 and GATS The UK as an original member and the EU s common external tariff The UK qualifies as an original WTO Member as explained in Article XI of the Marrakesh Agreement. The United Kingdom was one of the 23 original Members of the 1947 General Agreement on Tariffs and Trade (GATT 1947), automatically acceding to this Agreement on 1 January When the UK became a member state of the (then) European Communities (EC) in 1973, it (as all member states of the EC) retained its original GATT Membership. 12 The European Communities were not a contracting party to the GATT 1947, but their acceptance of certain GATT-related agreements was explicitly recorded. Moreover, most agreements negotiated in the GATT framework after 1970 were accepted only by the European Communities, without separate acceptance by its different member states (thereby arguably having a de facto membership). 13 Contrary to the GATT 1947, the WTO did foresee EU membership. Art. XI:1 Marrakesh Agreement sets out that both the contracting parties to the GATT 1947 and the European Communities ( which accept this Agreement and the Multilateral Trade Agreements and for which Schedules of Concessions and Commitments are annexed to GATT 1994 and for which Schedules of Specific Commitments are annexed to GATS ) become original WTO Members. This includes a membership by all EU member states as well as the EU as a customs union. As confirmed by the Panel in EC and certain Member States Large Civil Aircraft, all EU member states are in [their] own right, a Member of the WTO, with all the rights and obligations pertaining to such membership, including the obligation to respond to claims made against it by another WTO Member. 14 Additionally, it was held that The Panel notes that the European Communities is a Member of the WTO. In addition, all the constituent member States of the European Communities are Members of the WTO. The member States were either founding Members of the GATT; they acceded to the GATT; or they have since acceded to the WTO. Therefore, it would appear that the European Communities as well as its constituent member States concurrently bear the obligations contained in the WTO Agreements. 15 However, because the EU qualifies as a single customs union, its goods Schedule reflects the common external tariffs as applied by all of its member states. Therefore, the EU annexed its Goods Schedule to the GATT 1994, revoking the UK s original GATT 1947 Commitments. Similar steps were taken for countries that joined the EU after the establishment of the WTO. In 2004 the European Communities notified the withdrawal of the commitments in the Schedules of the Czech Republic, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, the Slovak Republic and its own Schedules, and that it was ready to renegotiate its 10 BBC News, WTO Chief: Post-Brexit trade uncertain, 2 November 2016, < visited on 19 May WTO, The 128 countries that had signed GATT by 1994, < visited on 19 May WTO, Member Information - United Kingdom and the WTO, < visited on 19 May J. Brsakoska Kaserkoska, The European Union and the World Trade Organization: Problems and Challenges 7 Croatian Yearbook of European Law and Policy (2011), p Panel Report, EC and certain Member States Large Civil Aircraft, WT/DS316/R, para Panel Report, European Communities Selected Customs Matters, WT/DS315/R, para

7 commitments under Article XXIV and XXVIII GATT. 16 It was also clarified that [p]ending the completion of the Article XXIV and XXVIII GATT 1994 procedures and the creation of a new schedule valid for the European Communities of 25, the commitments in the European Communities Schedule CXL will be fully respected. The new members of the European Union intend to align their Schedules with those of the European Communities on 1 May Because the UK was and still is a full WTO Member, the rights and obligations applying to all WTO Members are still fully applicable to the UK. This includes, as explained above, any erga omnes partes obligations included in the DSU, GATT, GATS and TRIPS agreement. What does change for the UK, is the fact that, after leaving the EU, it is a Member without any country-specific commitments (reflected in Goods or Services Schedules). Leaving the EU, the UK will no longer have a specific Schedule of Concessions as required by Article II:1(a) GATT and Article XX GATS. As already highlighted by Bartels, this has several implications for both Members, i.e. unclarity regarding: (i) the tariff concessions applied by the UK in its future trade relations; (ii) the distribution and/or continuation of the tariff rate quota s applied by the EU; (iii) the distribution and/or continuation of (agricultural) support commitments. 18 In addition to these issues related to the UK s Schedules, it should be noted that Brexit creates the need for the UK to draft rules dealing with trade remedies as well as develop new rules of origin. 19 In its first report on the Session , the International Trade Committee 20 of the UK s House of Commons stated that the drafting of new UK Schedules of Commitments and Concessions is a necessary and inevitable technical aspect of Brexit, which is concomitant upon the UK ceasing to be a member of the EU, irrespective of the terms on which UK-EU trade ends up being conducted after Brexit. 21 It additionally highlighted that the UK government prefers replicating current obligations as far as possible, in dialogue with the WTO Membership. 22 Moreover, the Department for International Trade stated that it will push for a technical rectification of the UK s Schedules, rather than a modification. 23 The difference between both modalities for making changes to existing goods Schedules is set out in the GATT Decision on Procedure for Modification and Rectification of Schedules of Tariff Concessions 24, which is a binding decision under the GATT Whereas rectification can be used for rearrangements that do not alter the scope of the commitments or other formal changes (thereby only requiring that no WTO Member objects to this change), modification entails a substantive change of concessions and therefore requires 16 WTO, Article XXIV:6 Negotiations Enlargement of the European Union, Communication from the European Communities, 30 January 2004, G/SECRET/20, p Ibid. 18 L. Bartels, The UK's Status in the WTO after Brexit, 23 September 2016, <ssrn.com/abstract= >, visited on 19 May See House of Commons, supra note 21, p. 13 and A. Mishra, supra note 25, p The International Trade Committee was appointed in October 2016 to scrutinise the work of the newly established Department for International Trade, created to develop, coordinate and deliver an new trade policy for the UK. 21 House of Commons, International Trade Committee, UK Trade Options Beyond First Report of Session , 7 March 2017, HC 817, p. 9, < visited on 19 May Written statement made by dr. Liam Fox at the House of Commons, UK s Commitments at the World Trade Organization, 5 December 2016, HCWS316, < visited on 19 May House of Commons, supra note 21, p GATT, Procedures for Modification and Rectification of Schedules of Tariff Concessions, Decision of 26 March 1980, L/4962, paras 1 and 2. 7

8 rounds of negotiations with the other WTO Members. 25 Even though the UK s preference for a rectification of their Schedule rather than a modification is an obvious one, it does not necessarily reflect the reality of the changes required. As will be elaborated on below, even though the bound tariffs might quite easily be transposed from the EU Schedule to the UK s Schedule, this is not necessarily the case for other elements in the Schedule Exercise of UK s rights and obligations after Brexit: its Goods and Services Schedules, Tariff Rate Quota s and Agricultural Subsidy Commitments It is especially the quantified tariff commitments that create uncertainty and will require deep consideration by both the EU and the UK. 26 If both Members want to tackle these issues head-on, it might be advisable to, as suggested by Roberto Azevêdo, already draft an action plan before the lapse of the Article 50 negotiation period, containing a clear distribution of quantified commitments. In as far as such changes would be qualified as modifications of Schedules, it will be up to the other WTO Members to agree to these proposals before they are incorporated into either Member s Schedules. As will be explored more in-depth in the second part of this Article, the legal necessity of such an agreement between the UK and the EU is certain when the UK would pursue a hard Brexit as well as when it would pursue a soft Brexit. The first report of the International Trade Committee indicated the different opinions on how the EU s tariff rate quotas (TRQs) should be included in the UK s new Schedule and the degree of difficulty. Some opine that a simple calculation of the UK s share in these quantitative commitments can be transposed into the new Schedule. 27 Others take the position that an inclusion of UK-specific TRQs would modify existing conditions of competition as imports into the UK would no longer lead to access to the EU internal market. 28 In addition, it should also be noted that the TRQs of the EU should equally be amended to reflect the new reality of a UK-less EU, involving a unavoidable complex disentangling process. 29 However, the Secretary of State for International Trade, dr. Liam Fox, has indicated that successful private bilateral talks have already been had with interested WTO Members in relation to these quotas. 30 With regard to agricultural subsidies, it can, first, be noted that export subsidy entitlements will most likely not pose any issues as it was agreed at the 2015 Nairobi Ministerial that these would be eliminated by 2020 at the latest. 31 Second, the EU s Aggregate Measurement of Support (AMS) commitments still exist, but are currently being used to a very limited extent. 32 It is argued that little discussion 25 See A. Mishra, A Post Brexit UK in the WTO: The UK's New GATT Tariff Schedule in J. Hillman and G. Horlick (eds.), Legal Aspects of Brexit. Implications of the United Kingdom s Decision to Withdraw from the European Union (Institute of International Economic Law, Georgetown Law, Washington DC, 2017) pp L. Bartels, supra note 18, pp House of Commons, International Trade Committee, Oral Evidence: UK trade options beyond 2019, 13 December 2016, HC 817-ii, Q Ibid., Q House of Commons, supra note 21, p There are a number of countries who will have questions over quotas in relation to that and we wanted to deal with them and talk to them privately before we acted in a public way. We did that and I am happy to say that our discussions have been extremely useful and I think productive. House of Commons, International Trade Committee, Oral Evidence: UK trade options beyond 2019, 1 February 2017, HC 817-vii, Q By developed countries. WTO, Ministerial Conference Nairobi, Export Competition, Ministerial Decision of 19 December 2015, WT/MIN(15)/45, WT/L/ For the marketing year 2013/2014, the EU used 8,2% of the total AMS commitment level. See WTO, Committee on Agriculture, Notification by the EU, 8 February 2017, G/AG/N/EU/34. 8

9 will be caused by the apportionment of the unused percentage of AMS and that the UK will most likely not want to increase use of trade-distorting support after Brexit. 33 For its services Schedule, the situation is a bit more straightforward (and arguably less complicated). Contrary to trade in goods, the UK has never had an individual GATS schedule, as these Schedules were only negotiated during the Uruguay Round. The GATS Services Schedules are positive lists of commitments, which means that if the UK decides to take over these commitments, there will probably not be much objection by other Members (as it does not lead to more protectionism). Moreover, these commitments are generic, with limitations often on a EU member state-specific basis, which means they can easily be transposed to a UK-specific GATS Schedule Different possibilities to manage the WTO consequences of a Brexit Several possibilities to manage the consequences of a Brexit within the WTO can be imagined, some of which are more probable than others. Because of the limited scope of this paper, we limit ourselves to an analysis of the rules on state succession in public international law, the law and practice regarding WTO membership through acceptance by separate customs territories and the legal and practical consequences of EU enlargement State Succession An arguably obvious part of international law to turn to in the Brexit scenario, are the legal rules and practice on state succession. 35 State succession is present in various instances 36 : (i) decolonisation 37, (ii) dismemberment of an existing state 38, (iii) secession, annexation and merger 39. The situation created by the Brexit resembles most closely the secession of part of a state to form a new state. Of course, the UK is not in new state in the sense of public international law whatsoever, not even in WTO terms. Correspondingly, the EU is also not a state according to public international law. We therefore readily submit that the Brexit scenario does not directly fit into the practice of State succession as known in international law. It could however be argued that, as far as WTO law goes, the EU, as a customs union, has been granted the exact same rights and obligations as its State-counterparts. 40 For this analysis, we will therefore qualify the EU as the continuing predecessor State and the UK 33 A. Mishra, supra note 25, p. 19 and House of Commons, supra note 27, Q For more specific information and arguments: L. Bartels, supra note 18, pp As codified in the Vienna Convention on Succession of States in Respect of Treaties, 1946 UNTS 3; 17 ILM 1488 (1978); 72 AJIL 971 (1978). 36 M. N. Shaw, International Law (Cambridge University Press, Cambridge, 2014) p A form of state succession where independence is either granted by the predecessor State to the successor State or is claimed by the successor State (which used to be part of the predecessor State), with a continuation of the predecessor State, who despite loss of territory continues its existence unaltered. See D. B. Majzub, Does Secession mean Succession? The International Law of Treaty Succession and an Independent Québec 24 Queen s Law Journal (1999) p A form of state succession where the predecessor state ceases to exist and with each successor state emerging with a new legal personality. See ibid., p All forms of state succession where there is continuation of the predecessor State, albeit with altered territory (but the international legal personality of the predecessor State remains unchanged in case of secession and annexation). 40 As held by the Panel in the EC Trademarks and Geographical Indications dispute: The European Communities is not a country, but [the first explanatory note to the WTO Agreement] might not be relevant if all references to a "country" in the relevant agreements can be adequately understood in relation to the European Communities. Panel Report, EC Trademarks and Geographical Indications, WT/DS174/R, circulated 15 March 2005, para

10 as the successor State, as the secession of the UK from the EU creates issues within the WTO very similar to those that would follow from a full-blown secession in public international law. We therefore hope to draw some inspiration from these public international law rules to help and assess the position of both the EU and the UK within the WTO framework. The international aspects of state succession are governed through several customary international law rules as set out in the Vienna Convention on Succession of States in Respect of Treaties (1978) (hereafter: Vienna Convention on Treaty Succession). 41 The main question relevant for the debate on Brexit and the WTO relates to the continuation of international commitments as recorded in WTO Members goods and services Schedules, as explained above. In international law, it is clear that a secession of a territory from an existing state does not affect the continuing commitments of the latter state, regardless of its change in territorial dimension. 42 This however seems to directly contradict the suggestion made by WTO Director-General Azevêdo, that the EU will have to amend its Schedules as well because of a new economic reality. 43 Does the difference lie here in the fact that WTO Member s Schedules are equivalent/similar to bilateral agreements between states and that they, as such, do not reflect multilateral rights and obligations? Does the fact that other WTO Members have a de facto veto during negotiation of Members Schedules qualify them as extensive bilateral agreements with all WTO Members? The existing state remains in being, complete with the rights and duties incumbent upon it, save for those specifically tied to the ceded or seceded territory. 44 Are country-specific commitments within the context of the WTO specifically tied to the territory as a whole? And if so, are they impacted by the loss of an important part of that Member s territory and GDP? It can be argued that this is the case for the quantitative commitments in Members Schedules. The provisions of the Vienna Convention on Treaty Succession will be applied to the specific case of Brexit, with the aim of considering whether some guidance can be found for dealing with the outstanding issues. As noted by Shaw, in many cases, problems relating to succession are solved by agreements between the States involved (devolution agreements, however, these do not bind third states). 45 In this case, this would entail a bilateral 41 The Vienna Convention on Treaty Succession was adopted in 1978, but only entered into force in Currently, this Convention only counts 22 State parties. We readily admit that not all of the provisions in this instrument can be considered as codifications of customary international law. However, as will be explained below, every Article that is referred to in the context of this paper has been recognised by some as an expression of customary international law. It should be taken into account that discussion exists on the customary character of most of these provisions, but we submit that they, regardless of this ongoing discussion, could provide for relevant guidance in the Brexit debate. See also G. Di Stefano et al., Introduction, in G. Di Stefano, G. Gaggioli and A. Hêche (eds.), La Convention de Vienne de 1978 sur la succession d états en matière de traités (Bruylant, Brussels, 2016) pp. 1-4; M. N. Shaw, supra note 36, p M. N. Shaw, supra note 36, pp. 696, 706. This same rule can be found in Article 35 Vienna Convention on Treaty Succession: existing treaties remain in force for the predecessor state unless agreed otherwise or if the treaty related only to the secede territory or if continuing application would be inconsistent with the treaty s object and purpose. This provision is considered a customary rule of international law. See V. Mikulka, Article 35, in G. Di Stefano, G. Gaggioli and A. Hêche (eds.), La Convention de Vienne de 1978 sur la succession d états en matière de traités (Bruylant, Brussels, 2016) p BBC News, supra note M. N. Shaw, supra note 36, p Article 8 Vienna Convention on Treaty Succession; This provision is deemed an expression of customary international law, as it is considered an application of the rule of pacta tertiis nec nocent nec prosunt as codified in Article 34 of the Vienna Convention on the Law of Treaties (hereafter VCLT), which is also considered an rule of customary international law; A. Garrido-Muñoz, Article 8, in G. Di Stefano, G. Gaggioli and A. Hêche (eds.), La Convention de Vienne de 1978 sur la succession d états en matière de traités (Bruylant, Brussels, 2016) p

11 agreement between the EU and the UK. Such a bilateral agreement is already required by Article 50 TEU. Trade relations between the EU and the UK, however, are not definitively established after such a bilateral agreement is developed. After the UK formally submitted its article 50 TEU notification on the 29 th of March 2017 it became clear that the EU is not willing to commence negotiations on trade relations before a definitive withdrawal agreement is concluded between the EU and the UK. 46 It should be noted that, in practice, devolution agreements were not considered satisfactory by many new states and several successor States have resorted to unilateral declarations, setting out a transitional period to decide upon the treaties to which the new state would remain member (in the meantime, both multilateral as well as bilateral agreements continued to apply to it). 47 Whereas the EU s position within the WTO after Brexit remains similar 48, the UK s position regarding its (country-specific) WTO rights and obligations is less straightforward, as various views exist on whether the seceding territory commences its international life free from the treaty rights and obligations that applied to the predecessor State, or whether there is a presumption of treaty continuity. The provision of the Vienna Convention on Treaty Succession most likely to apply to the situation of Brexit, Article 34, provides that treaties applying to the predecessor State continue to apply to the seceding State, unless States agree otherwise or if it appears inconsistent with the object and purpose of the treaty or would radically change its conditions of operation. 49 The requirements of international stability in certain areas in particular will stimulate States generally to encourage an approach of succession to multilateral obligations by the newly independent secessionist States. 50 This statement holds true in WTO context as well. It would be quite undesirable for the UK to have to start off with a clean slate within the WTO. A country with no countryspecific commitments applying to the goods and services it trades will inevitably lead to much uncertainty, and might even lead to a considerable decline in trade to and from the UK, as exporters and importers are trying to figure out the applicable tariffs and concessions. A prolonged limbo where the UK is expected to renegotiate all of its commitments and concessions, starting from a clean slate, would in any scenario be quite undesirable. Therefore, applying Article 34 of the Vienna Convention on Treaty Succession would allow the UK to continue application of the EU s existing Schedules, with no risk of legal uncertainty. 51 However, if the UK can take on the concessions as negotiated by the EU, 46 The tough EU stance became clear after a leaked resolution of the European Parliament. It was stated that any free trade deal including free trade would be a mixed agreement, subject to the ratification of the national parliaments of all EU Member States and the European Parliament. D. Boffey, First EU Response to Article 50 Takes Tough Line on Transnational Deals, The Guardian, 29 March 2017 < visited on 19 May On the possibilities for the negotiations of a withdrawal agreement between the EU and the UK, see section 3 and below of this paper. 47 M. N. Shaw, supra note 36, p As explained above, as a general rule, the continuing state remains bound by its international rights and obligations. 49 Art. 34 Vienna Convention on Treaty Succession. Even though this provision is not explicitly recognised as a rule of customary international law, it has been stated that this provision has served as an important source of reference in the consolidation process in recent international practice. See V. Mikulka, Article 34 in G. Di Stefano, G. Gaggioli and A. Hêche (eds.), La Convention de Vienne de 1978 sur la succession d états en matière de traités, 2016, Brussels, Bruylant, A similar position was taken in D. B. Majzub, supra note 37, p. 429: [a]n examination of the deliberations of the ILC clearly indicates that Article 34 is not a codification of customary international law, but represents an attempt by the ILC to develop the law of treaty succession. Therefore, we deem this provision relevant for this discussion, if only for the sake of the argument. 50 M. N. Shaw, supra note 36, p See also R. Szafarz, Succession of States in Respect of Treaties in Contemporary International Law, 12 Polish Yearbook of International Law (1983), p In applying this Article, it might be argued that an adoption of EU Schedules by the UK would go against the object and purpose of the GATT and/or GATS, as both require the Schedules of concessions/commitments to be country-specific. See Article II GATT and Article XX GATS. 11

12 other WTO Members might feel cheated in the beneficial treatment that is automatically granted to a much smaller market, that can offer its trading partners less than the EU can. An interpretation of Article 34 allowing for continuity of existing Schedules would, in fact, undermine the principle of consent. In the thinking on the law of treaties, the absence of consent could be justified, when applying the theory of automatic continuity. This theory has been coined in the context of international human rights law and international humanitarian law. It recognised that there are certain treaty provisions that continuously apply, even in the absence of the explicit consent of the successor State, due to the special nature of the legal obligations. 52 The absence of consent is unimportant, as it is the interest of the international community which is protected by such treaties. 53 Automatic succession could arguably have become a principle of contemporary international law due to subsequent practice by, amongst others, the Appeals Chamber of the Tribunal for the Former Yugoslavia. 54 Automatic continuity would apply to those cases where a treaty does not include individual advantages or disadvantages to states, but is concerned with protecting the common good of the international community. 55 The obligations in this category of treaties are not owed to individual governments, but directly to the individual citizens. 56 The protection of individuals included in these treaties cannot, once granted, be lost due to a change of the legal situation in a territory. 57 With respect to the WTO agreements, it is highly doubtful such reasoning applies. The primary objects of WTO law are individual governments, which is exemplified by for example the fact that only WTO Members may bring a dispute to the Dispute Settlement Body (DSB). 58 As opposed to the protection of human rights 59, promoting a stable and predictable international trading system is not sufficiently recognised in international law as protecting the interest of the international community as a whole. The specific nature of WTO law thus does not warrant for automatic continuity. Furthermore, taking into account state practice, there seems to be a preference for the clean slate theory, cases in point being the separation of Belgium from the Netherlands (1830), Panama from Colombia (1903), Finland from Russia (1919), Poland and Czechoslovakia from Austria (1919), Ireland from UK (1922), Pakistan from India (1947) and Singapore from Malaysia (1965). 60 The clean 52 M.T. Kamminga, State Succession in Respect of Human Right Treaties, 7 European Journal of International Law (1996), p Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia Herzegovina v. Yugoslavia), 11 July 1996, Judgment on Preliminary Objections, Separate Opinion of Judge Weeramantry, ICJ Reports 1996, paras. 595, F. Pocar, Some Remarks on the Continuity of Human Rights and International Humanitarian Law Treaties, in E.Cannizzara (ed.), The Law of Treaties Beyond the Vienna Convention, (Oxford University Press, Oxford, 2011) p. 8, <oxfordscholarship.com/view/ /acprof:oso/ /acprof chapter-17>, visited on 19 May Reservations to the Convention on the Prevention and Punishment of the Crime of Genocide, ICJ, Advisory Opinion of 28 May 1951, p. 23, < visited on 19 May R. Higgins, Problems and Processes. International Law and How We Use It (Clarendon Press, Oxford, 1994) p Human Rights Committee in General Comment No. 26(61), Issues relating to the continuity of obligations to the International Covenant on Civil and Political Rights, 29 October 1997, para. 4 in CCPR/C/21/Rev. 1/Add. 8 and Report of the Committee, GAOR, Fifty-third Session, Supplement No. 40 (A/53/40), vol. I (1998), Annex VII, Article 1 and 3 Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M (1994). 59 F. Ruiz Ruiz, The Succession of States in Universal Treaties on the Protection of Human Rights and Humanitarian Law, 7 The International Journal of Human Rights (2003), p See also A. Rasulov, Revisiting State Succession to Humanitarian Treaties: Is There a Case for Automacity?, 14 European Journal of International Law (2003) p

13 slate principle is also set out in Article 16 of the Vienna Convention on Treaty Succession, applying to newly independent State (i.e. former colonies). 61 However, if the new State notifies succession, it can stay a member to the multilateral treaties in force in the preceding state. 62 The terms of the treaty can require that participation of another State requires the consent of all parties, which the newly independent State must then obtain before it can become a member. 63 Considering Article XII Marrakesh Agreement and the negotiations with all WTO Members in practice, who have to agree to the terms of accession (including the commitments made by the new member in its goods and services Schedules), this would probably be required within the WTO. Contrariwise, bilateral treaties are only continuously applicable to the newly independent state in case of an express or tacit agreement to that end between the new State and the bilateral party. 64 The question can be asked whether Member s Schedules can be interpreted as being bilateral agreements in the sense that each and every WTO Member has to consent to a new Member s Schedule, often using their own Schedules (and the concessions that they have included) as bargaining power. Members Schedules are after all in practice negotiated through bilateral concessions between principal trading partners, which are then extended to all WTO Members on the basis of the MFN principle. 65 If this interpretation is accepted, automatic continuity is not justifiable. 66 This is supported by state practice during the decolonisation period; bilateral treaties were only continued when both parties explicitly agreed thereto. 67 Article 24 of the Vienna Convention on Treaty Succession states that bilateral treaties after a succession of states only remain in force when parties expressly agree to do so, or when the will to continue is shown by both parties conduct. Bilateral treaties, more so than multilateral 61 A newly independent State is not bound to maintain in force, or to become a party to, any treaty by reason only of the fact that at the date of the succession of States the treaty was in force in respect of the territory to which the succession of States relates. This Article is deemed conform to the aforementioned Article 34 VCLT (which cannot be directly applied to situations of state succession), leading to some authors submitting that this is a rule of customary international law. For a discussion on this, see E. Henry, Article 16 in G. Di Stefano, G. Gaggioli and A. Hêche (eds.), La Convention de Vienne de 1978 sur la succession d états en matière de traités (Bruylant, Brussels, 2016) pp It has also been argued that if Article 16 is not a rule of customary international law, it is at least declarative of customary international law. See D. B. Majzub, supra note 37, p See Article 17.1 Vienna Convention on Treaty Succession. Various arguments have led to the conclusion that Article 17 is a rule of customary international law: (i) its content is based upon or a logical consequence of the tabula rasa principle, which in itself is derived from the principle of selfdetermination (considered as a clear example of customary international law); (ii) it codifies the principle of the free choice of accession to multilateral treaties for new states; and (iii) it furthers the objective of facilitating accession in the interest of the international community. See S. Rosselet, Article 17 in G. Di Stefano, G. Gaggioli and A. Hêche (eds.), La Convention de Vienne de 1978 sur la succession d états en matière de traités (Bruylant, Brussels, 2016) p See Article 17.3 Vienna Convention on Treaty Succession. For discussion its customary international law status, see explanation Article 17.1, Ibid. 64 See Article 24 Vienna Convention on Treaty Succession. Various positions have been taken on whether Article 24 codifies rules of customary international law. The argument can however be made that the customary international law character of this provision derives from its similarity to Articles 16 and 17 of the Vienna Convention on State Succession. See A. Di Stefano, Article 24 in G. Di Stefano, G. Gaggioli and A. Hêche (eds.), La Convention de Vienne de 1978 sur la succession d états en matière de traités, (Bruylant, Brussels, 2016) p The most favoured nation treatment principle is set out in Article I GATT. 66 P. Dumberry, State Succession to Bilateral Treaties: A Few Observations on the Incoherent and Unjustifiable Solution Adopted for Secession and Dissolution of States under the 1978 Vienna Convention, 28 Leiden Journal of International Law (2015) pp International Law Association (ILA), Conclusions of the Committee on Aspects of the Law of State Succession, Resolution no. 3/2008 (2008), adopted at the 73rd Conference of the ILA, at point no

14 treaties, are based on the personal capacity of states. In such a situation, automatic continuity is not warranted. 68 Whether the WTO Schedules are interpreted as being multilateral or bilateral agreements, it is clear that consent of the other WTO Members is probably required in case of a secession. This would effectively mean that the UK, upon leaving the EU, would continue its WTO membership without any country-specific goods or services Schedules, necessitating a (lengthy) renegotiation with its trading partners The accession process for separate customs territories within the WTO Acceptance under Article XXVI:5(c) GATT From the above, it is clear that international practice on state succession is far from settled, with various possible scenarios (mis)fitting the Brexit scenario. Some more WTO-specific inspiration might be drawn from Article XXVI:5 GATT which contains a specific provision with regard to the acceptance of the GATT by metropolitan territories and custom territories acquiring full autonomy. The relevant text provides: (a) Each government accepting this Agreement does so in respect of its metropolitan territory and of the other territories for which it has international responsibility, except such separate customs territories as it shall notify to the Executive Secretary to the CONTRACTING PARTIES at the time of its own acceptance. [ ] (c) If any of the customs territories, in respect of which a contracting party has accepted this Agreement, possesses or acquires full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement, such territory shall, upon sponsorship through a declaration by the responsible contracting party establishing the above-mentioned fact, be deemed to be a contracting party. It seems worthwhile to consider whether the UK can be deemed a customs territory in respect of which a contracting party has accepted [the GATT], thereby allowing for the automatic accession as provided for in Article XXVI:5 GATT. Limited information can be found on what should be considered a separate customs territory in the sense of this Article. 69 The Panel in the EC Trademarks and Geographical Indications dispute held (in interpreting footnote 1 of the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS)) that the European Communities could not be considered as separate customs territory, as [t]he European Communities does not form a separate part of the territory of a country. 70 However, the UK does form a separate part of the country-like entity the EU is within WTO context. 71 We therefore argue that the automatic accession procedure as set out in Article XXVI:5(c) might provide some guidance as to the position of the UK after Brexit. 68 The treaty would have to be seen as an entirely new legal document, even when the content remained the same. Report of the International Law Commission on the Work of its Twenty-Sixth Session, 6 May to 26 July 1974, UNDoc. A/9610/Rev.1 (1974), at points 237, A separate customs territory has been defined by the panel in EC Trademarks and Geographical Indications as a territory for which a GATT Contracting Party, now a WTO Member, has international responsibility, and is distinguished from a metropolitan territory. See Panel Report, EC Trademarks and Geographical Indications, supra note 40, para Ibid., para Ibid. 14

15 The automatic acceptance of the GATT by customs territories acquiring autonomy (mostly former colonies) was used frequently, by no less than 63 of all 128 GATT Contracting Parties in Several elements of Article XXVI:5(c) GATT merit some more elaboration and application to the Brexit context: (i) it is required that the customs territory acquires full autonomy in the conduct of its external commercial relations. This will most probably be the case when the UK leaves the EU: as it will no longer be part of the EU s single market and customs union (i.e. without a soft Brexit, allowing the UK to remain within the customs union), the UK will resume full autonomy in its commercial relations; (ii) a declaration by the responsible contracting party establishing the independence is required. 73 It will therefore be required that the EU notifies the WTO of the UK s independence after the successful completion of Article 50 TEU procedure; (iii) acceptance of the independent customs territory as a contracting party to the GATT is automatic. 74 Important to the UK s position in the WTO post-brexit is the question of what rights and obligations would be applying to the UK (as elaborated on above) under the framework of Article XXVI:5(c) GATT. As held in the Working Party report on Article XXXV Application to Japan, there could be no doubt that a government becoming a contracting party under Article XXVI:5(c) does so on the terms and conditions previously accepted by the metropolitan government on behalf of the territory in question. 75 Autonomous customs territories were therefore expected to take on the same rights and obligations as the metropolitan territory, including the Schedule of concessions. 76 This required the drafting of a new Schedule continuing the earlier concession with all changes being purely formal modifications or rectifications. 77 It was held by the GATT Panel that [Jamaica, upon accession to the GATT 1947,] had acquired the rights and obligations which had previously been accepted by the United Kingdom in respect of the territory of Jamaica. This meant that Jamaica assumed the rights and obligations involved in the application to it of the General agreement by the United Kingdom before Jamaica became independent. 78 A more recent example illustrates the automatism with which accession under Article XXVI:5 are accepted: considering communications both by Switzerland as well as Liechtenstein, declaring the latter s full autonomy in its external commercial relations, the certification by the Director- General states: since the conditions required by Article XXVI:5(c) have been met, Liechtenstein has become a contracting party on 29 March 1994; its rights and obligations 72 WTO, GATT Analytical Index (WTO Publications, Geneva, 2012), p. 919, < visited on 19 May It is required that this responsible Contracting Party is a Member of the GATT, as become clear in the discussion on the accession of Taiwan before the accession of China. In this discussion it was raised that Taiwan has never been in the GATT as a colony or dependent territory represented by its suzerain State. See S. Chan, Taiwan 's Application to the GATT: A New Urgency with the Conclusion of the Uruguay Round 2 Indiana Journal of Global Legal Studies (1994) p An a contrario reasoning could apply to the UK s situation, it having effectively being represented by the EU within the WTO framework. 74 See the wording deemed to be a contracting party. Since 1963 this automatic acceptance was simplified: requests were no longer referred to the contracting parties, but submitted to the Director General, who certified that all conditions were met and submitted this certification to the Council at the first meeting. The newly independent customs territories were considered contracting parties from the moment of independence or the date of receipt of the certification by the Director-General. See, WTO, GATT Analytical Index, supra note 72, p GATT, Report of the Working Party on Article XXXV Review, 6 September 1961 (nineteenth session), L/1545, para WTO, GATT Analytical Index, supra note 72, p As set out in the GATT decision of 26 March 1980, Procedure for modification and rectification of Schedules of tariff concessions, L/4962, para GATT Panel Report, Jamaica Margins of Preference, L/3485, para

16 date from 29 March To this day, Switzerland and Liechtenstein share their goods Schedule. In order to allow newly autonomous customs territories to adapt to their new independence and to consider their future trade policy and relationship to the GATT, a de facto application of the GATT was allowed, continuing the pre-existing concessions as applicable before independence. Various recommendations regulated this de facto application, allowing first up to two years of de facto application 80, and after 1961 no longer imposing a time limit but requiring the Director General to submit a report if the de facto application surpassed a period of three years. 81 Important to note in this regard is that even though the substantive provisions (including the Schedules of the metropolitan territory ) applied, this was not the case for the procedural provisions of the GATT Any notification obligations within the GATT therefore do not apply to those states de facto applying this agreement. 83 Moreover, every contracting party could decide for itself whether it wanted to apply the GATT to the State de facto applying the GATT and this decision did not need to be notified to the GATT. 84 Contracting parties applying the GATT de facto could moreover not participate in the resolution of disputes. 85 Lastly, for organizational purposes, the de facto GATT Contracting Party could only attend GATT meetings if it had requested and obtained observer status (except for its participation as an observer at the annual sessions of the contracting parties). 86 An excellent example of the GATT 1947 law and practice as set out above is the independence of Namibia from South Africa. On 20 April 1990, South Africa notified the GATT of the fact that Namibia had become an independent State on 21 March 1990 (using the wording acquired full autonomy in the conduct of its external relations and of the other matters provided for in the General Agreement ). 87 Soon after, it was recognised that Namibia was already de facto applying the GATT, in conformity with the recommendations mentioned above. 88 On 15 September 1992, the GATT was notified of Namibia s wish to be deemed a Contracting Party in accordance with Article XXVI:5(c) GATT. Namibia submitted that it satisfied all requirements, and it was immediately recognised as a contracting party. 89 In line with practice set out above, Namibia took over South Africa s specific commitments under the GATT. 90 The certification of Namibia s Schedule of Concessions was even postponed because of an ongoing examination of South Africa s Schedule, regarding the 79 GATT, Certification by the Director-General, Admission of Liechtenstein as a Contracting Party, 5 April 1994, L/ GATT, Recommendation of 18 November 1960, Application of the General Agreement to Territories which Acquire Autonomy in Commercial Matters, 9S/16, GATT, Recommendation of 11 November 1967, 15S/64; the last report provided by the Director- General dates back to 1991: GATT, De Facto Application of the General Agreement. Report by the Director-General, 28 June 1991, L/ It should be noted that de facto application in this context has never been defined by the contracting parties, this remark as well as those below are based on consequent practice. WTO, GATT Analytical Index, supra note 72, p WTO, GATT Analytical Index, supra note 72, p Ibid. 85 Ibid. 86 Ibid. 87 GATT, Status of Namibia. De Facto Application of the GATT, 20 April 1990, L/ GATT, Namibia Becomes the GATT s 105 th Contracting Party, 15 September 1992, GATT/ Noteworthy: Namibia was retroactively recognised as a contracting party: its rights and obligations date from 21 March GATT, Admission of Namibia as a Contracting Party. Certification by the Director-General, 17 September 1992, L/7081. The certification stated: A new Schedule XC relating to Namibia and comprising the concessions specified in Schedule XVIII-South Africa will formally be established through the procedure of certification of modifications and rectifications relating to schedules to the General Agreement. 16

17 approval of its HS format. 91 Interesting to note here is that, when considering both South Africa s as well as Namibia s Uruguay Round Goods Schedules, even though Namibia took over South Africa s bound tariff rates, it did not include any of the tariff quotas that can be found in South Africa s Schedule. A very similar example can be found in the independence of Brunei Darussalam from the United Kingdom in 1984 and its consequent accession to the GATT in In that instance, the contracting parties were informed of Brunei s independence since 31 December 1983 on 7 February Brunei had been applying the GATT on a de facto basis, before finally being admitted as a GATT contracting party on 9 December 1993, with its rights and obligations dating back to 31 December Contrary to the document reporting on Namibia s accession as a Contracting Party, no explicit reference is made to the UK s Schedule of concessions being taken over by Brunei. 94 An earlier independency, that of Suriname from the Netherlands (in 1975), led to the accession of Suriname to the GATT on 22 March 1978, which necessitated the creation of a new Schedule of Concessions comprising the concessions specified in Section E of Schedule II Benelux. 95 If it is deemed that the GATT 1947 (albeit slightly ambiguous) practice regarding the accession of newly autonomous separate customs territories is transposable to the secession of the UK from the EU, at least some guidance would be available to fill the void between the moment the UK leaves the EU and the moment it successfully renegotiates its Schedules. Applying GATT 1947 practice would be in accordance with Article XVI:1 WTO Agreement, which sets out that the WTO shall be guided by the decisions, procedures and customary practices of the GATT 1947 Contracting Parties. The UK would therefore be able to apply the WTO Agreements on a de facto basis, maintaining the EU s Schedule of concessions in goods and (in extending this practice) the EU s Schedule of commitments in services, until agreement has been reached as to its own Schedules Accession under Article XXXIII GATT and Article XII Marrakesh Agreement Reference should also be made to the alternative way of accession available to a separate customs territory possessing full autonomy in the conduct of its external commercial relations as can be found in Article XXXIII GATT and Article XII of the Marrakesh Agreement. Both Articles require accession to be based upon terms agreed between [the acceding Member] and the contracting parties/wto. The Marrakesh Agreement no longer allows for the automatic accession of separate customs territories in the sense of Article XXIV GATT. 96 But even in the times of the GATT, newly independent customs territories had the choice between the automatic accession through acceptance in Article XXIV GATT and the negotiated classic accession as found in Article XXXIII GATT. 97 Several examples can 91 GATT, Admission of Namibia as a Contracting Party. Certification by the Director-General. Addendum, 25 November 1992, L/7081/Add GATT, Status of Brunei Darussalam, 7 February 1984, L/ GATT, Admission of Brunei Darussalam as a Contracting Party. Certification by the Director- General, 9 December 1993, L/ Regardless of whether Brunei took over the UK s goods Schedule, it can be noted that Brunei s Uruguay goods Schedule does not contain any tariff quotas. 95 GATT, Admission of Surinam as a Contracting Party. Certification by the Director-General, 22 March 1978, L/4648; GATT, Fourth Certification of Changes to Schedules. Schedule LXXIV Suriname, 8 June 1978, L/ Therefore, we do not argue that Article XXIV:5 GATT could apply directly to a newly independent UK. The reference to this Article merely serves as a source of inspiration for dealing with this unique situation. 97 WTO, GATT Analytical Index, supra note 72, p

18 illustrate the relationship between both GATT Articles. The accession of Cambodia via Article XXXIII GATT was prompted by Cambodia s desire to no longer be bound by France s Indo-China Schedules of concession. 98 The choice was however not always open. Neither Slovenia nor Serbia and Montenegro could accede to the GATT under Article XXVI:5(c) GATT, as their predecessor State no longer existed and could therefore not sponsor their accession. 99 However, accession via Article XXXIII GATT did not always require a (re)negotiation of Schedules of concessions. As a first example, Bangladesh s accession via Article XXXIII GATT did not require a renegotiation of Schedules, due to unusual circumstances and was accepted on the same terms as applied before its independence. 100 A similar case applied to Czech Republic and the Slovak Republic after the Czech and Slovak Federal Republic ceased to exist, necessitating an accession under Article XXXIII GATT. 101 The US representative mentioned three conditions to accept that accession negotiations were unnecessary: (1) that the defunct State had a high level of obligations under GATT with a bound tariff schedule at meaningful levels; (2) that the new States were fully willing and able to accept an identical level of obligations and the same tariff schedule; and, (3) that the new States were not contemplating important reorientations to their basic trade and economic policies which would nullify or impair trade opportunities enjoyed by other contracting parties in their markets. 102 The Schedule of Concessions of Czechoslovakia was annexed to both States Protocol of Accession. 103 A transitional agreement was drafted to allow for an interim application 104 of the GATT to both States in view of the exceptional circumstances, until the entry into force of their Protocols of Accession. 105 It remains to be seen whether a similar approach, including no need for renegotiation and interim application, will be applied to the UK when it has to discuss its independent Membership at the WTO Customs Union in the sense of Article XXIV GATT EU enlargements The GATT provides an exception to the general obligation of non-discrimination, allowing Members to enter into customs unions or free trade areas. For trade in goods, these regional trade exceptions are incorporated in Article XXIV GATT, which sets out the requirements for 98 GATT, Accession of Cambodia. Statement by the Representative of the Royal Government of Cambodia at a Meeting of the Contracting Parties on 30 October 1958, 1 November 1958, L/ See respectively, GATT, Minutes of the Meeting held in the Centre William Rappard on 14 July 1992, 4 August 1992, C/M/258, p. 4, stating: In Slovenia's case, however, there was no legal and internationally-recognized entity of the former SFRY that could make the necessary declaration on its behalf under Article XXVI:5(c). ; GATT, Minutes of the Meeting held in the Centre William Rappard on 16/17 June 1993, 14 July 1993, C/M/264, p. 3, stating: The Council considers that the Federal Republic of Yugoslavia (Serbia and Montenegro) cannot continue automatically the contracting party status of the former Socialist Federal Republic of Yugoslavia in the GATT, and therefore decides that the Federal Republic of Yugoslavia (Serbia and Montenegro) should apply for accession to the GATT. 100 For a discussion on the application of Article XXXIII GATT to Bangladesh s accession, see GATT, Minutes of the Meeting held in the Palais des Nations, Geneva, on 25 October 1972, 1 November 1972, C/M/81, pp. 2-3; GATT Summary Records of the Sixth Meeting held at the Palais des Nations, Geneva, on 7 November 1973, 13 November 1973, SR.28/6, pp GATT, Summary Record of the Third Meeting held at the International Conference Centre, Geneva, on 3 December 1992, 5 January 1993, SR.48/3, p Ibid. 103 GATT, Czech Republic and Slovak Republic. Protocols of Accession. Decisions of 3 December 1992, 16 December 1992, L/7156,. 104 Interim application entailed application of the GATT, participation in all activities of the Contracting Parties and their subsidiary bodies, but not participation in the decision-making process. 105 But limited application to 6 months. See GATT, Czech Republic and Slovak Republic. Interim Application of the General Agreement. Decision of 3 December 1992, supra note

19 the formation of such customs unions that are consistent with Members obligations. The EU, even though being far more than just that, is in itself also a customs union. 106 Article XXIV GATT requires a customs union to be understood to mean the substitution of a single customs territory for two or more customs territories, while (i) eliminating duties and other restrictive regulations of commerce with respect to substantially all the trade between the constituent territories of the union and (ii) applying the same duties and other regulations of commerce by all members to the customs union to the trade of territories not included in the union (i.e. common external tariffs). The EU fits perfectly within this definition as it applies a uniform system of customs duties on imports from outside the EU and within the EU single trading area, all goods (imported or domestically produced) circulate freely. 107 Even though no express provisions exist regarding the change in membership of a customs union in the sense of Article XXIV GATT, practice in EU enlargement could guide the way. Even though the Marrakesh Agreement expressly included the EU as a Member to the newly established WTO, the Understanding on the Interpretation of Article XXIV GATT 108 does not foresee any procedures for evolving membership of the EU or other customs unions. The only paragraph that seems of (limited) relevance in this regard is Article XXIV:6, which provides in the possibility of renegotiations under the procedures set forth in Article XXVIII GATT in case of an increase of any duty when forming (and, as seen from practice, enlarging) the customs union. 109 In case of an increase of duty pursuant to a new (member to a) customs union, other WTO Members can request negotiations to seek compensatory adjustment. If these negotiations fail, the customs union must offer compensation, taking the form of reduction of duties on other tariff lines. Only after these procedures can a Member exercise its right to withdraw substantially equivalent concessions. 110 The very first invocation of Article XXIV:6 GATT was done in the context of the formation of the European Economic Community (EEC) with its initial six member states, which prompted negotiations on the (new) Schedules of the EEC. 111 Other major renegotiations in the context of this paragraph happened when the EEC expanded to nine member states. Following the treaty establishing its enlargement, the EEC sent out a communication stating its willingness to renegotiate under Article XXIV:6 GATT. 112 With regard to tariff quotas specifically, the communication stated: the concessions at present bound in Schedules XL and XLbis, of the European Economic Community and of the European Coal and Steel Community respectively, are the concessions offered for application to the customs territory of the enlarged Community, subject to appropriate adjustments in the amounts of the tariff quotas indicated in those schedules of concessions. These adjustments are those required because of the accession of new member States which were formerly beneficiaries of the tariff quotas in question". 113 In the context of these renegotiations, bilateral negotiations were conducted and bilateral agreements were concluded with various other contracting parties. Similar renegotiations were held during the process of further enlargement of the EU in 1981 (accession of Greece) and 1986 (accession of Spain and Portugal). Interesting to note here is that it is reported that for both accessions no agreement could be reached with all 106 P. Van den Bossche and W. Zdouc, The Law and Policy of the World Trade Organization: text, cases and materials (Cambridge University Press, Cambridge, 2012) p European Union, Customs, 15 May 2017, <europa.eu/european-union/topics/customs_en>, visited on 19 May Added to clarify Article XXIV GATT in the light of the changed economic circumstances of See the text of Article XXIV:6 GATT. Article XXVIII GATT contains the provisions regarding the modification of Schedules of existing Members. 110 Bridges, WTO Challenges Emerge Over EU Expansion, 6 October 2004, < visited on 19 May A. Hoda, Tariff Negotiations and Renegotiations under the GATT and the WTO: Procedures and Practices (WTO publications, Geneva, 2001), p Ibid., p GATT, Article XXIV:6 GATT renegotiations. Communication from the Commission of the European Communities, 11 January 1973, L/

20 contracting parties. 114 Similarly, at the third instance of enlargement of the EU (accession of Austria, Finland and Sweden) in 1995, objections were raised to the EU s proposal of a new Schedule of Concessions. Again, the EU had to engage in bilateral negotiations, not all of them leading to an agreement. 115 The single largest increase of EU membership occurred in 2004, with the accession of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. Here as well, the EU notified this enlargement and allowed countries to invoke Article XXIV:6 GATT to negotiate compensation for the increase of tariffs on certain products in the newly acceded EU member states, for an extended period of 12 months. 116 Renegotiations of the Schedule accounting for this expansion took 12 years, with the EU-25 Schedules being issued by the WTO on 14 December Therefore, since the enlargement of the EU to 27 Members with the accession of Bulgaria and Romania, no consolidated Schedule has been agreed upon. 118 Formally, the applicable Schedule to EU trade in goods is the CLXXIII (173) Schedule (EU-25) as released end of This delay in certification of renegotiated Schedules of concession of the EU, presents a dark forecast of the issues that both the UK and the EU will encounter once Brexit becomes a reality. Even though it did not prevent the formation of the customs union (the Schedules of the acceding member states were effectively withdrawn), it does create uncertainty as to the effects of EU enlargement upon its external tariffs and the compensation for other WTO Members. Contrary to enlargement, there is no precedence for a shrinking of the EU. Therefore, it is still unclear what steps must be taken by both the EU and the UK to amend their Schedules to the new reality of the Brexit. Especially the questions of what Schedules would apply to the UK, pending its renegotiation with the various WTO Members remains unanswered Plurilateral Agreements - Government Procurement Agreement 2014 The plurilateral agreements negotiated within the WTO context do not apply to all WTO Members, contrary to the WTO Covered Agreements. The WTO plurilateral agreements (the Agreement on Trade in Civil Aircraft (1980) and Government Procurement Agreement (updated in 2014)) are based on the principle of non-obligatory accession and require WTO Members to expressly become party to them. This creates the unusual situation where the EU is a party to the Government Procurement Agreement, but not the United Kingdom. 119 Even though it is recognised that the EU is a party to the 2014 Government Procurement Agreement on behalf of its member states, this does not mean the member states are individually bound by this agreement A. Hoda, supra note 111, p Ibid., p Instead of the normal 6 months. WTO Council for Trade in Goods, Article XXIV:6 Negotiations. Enlargement of the European Union. Communication from the European Communities, 30 September 2004, G/L/ P. Ungphakorn, 12 years on, EU s certified WTO goods commitments now up to date to 2004, Trade beta blog, 5 February 2017, <tradebetablog.wordpress.com/2017/02/04/after-12-years-eu-25- goods-commitments/>, visited on 19 May Even though, in the meantime EU membership expanded again with the accession of Croatia in This is different for the Agreement on Trade in Civil Aircraft, that includes both the UK as well as the EU in its membership. After Brexit, the UK can simply continue its membership to this agreement, which is why it is not part of this discussion on the plurilateral agreements. 120 Most recently in WTO Committee on Government Procurement, Decision Pursuant to Article XXIV:6(a) of the Agreement on Government Procurement, 27 June 2013, GPA/

21 The analyses made in the earlier sections of this paper therefore do not automatically apply here, as the specific situation is different. The UK cannot fall back on its individual membership, nor can it directly be held responsible for the obligations under this agreement (as can be done for the erga omnes partes obligations in the WTO Covered Agreements). It is therefore proposed that the UK must accede to the 2014 Government Procurement Agreement as a new party, succeeding in the rights and obligations of the EU. 121 The crucial difference here is that the UK was never a party in its own right to the GPA Therefore, the law and practice on state succession apply even more clearly. 122 For the rules on customary international law on treaty succession we refer to what has been discussed under Section Therefore, as a seceded state, the UK would not necessarily automatically accede to the 2014 GPA but would have to expressly ratify it as a new party. This is however something that can easily be settled in the agreement between the UK and the EU in the context of Article 50 TEU. There is some practice indicating that in case of a dismantling union, the (ex) members of that union remain bound by the trade agreements entered into by that union, in case of a clear continuity of the entity involved. 123 Taking all of this into account, we therefore argue that legal certainty would be best served if both Parties agree upon the UK s succession to the 2014 Government Procurement Agreement. 3. THE LEGAL OPTIONS OF THE UK IN ITS ECONOMIC RELATIONSHIP WITH THE EU This section will discuss the legal options the UK has in determining its economic relationship with the EU. While negotiations between the EU and the UK are still ongoing, the UK cannot proceed to negotiate new commitments within the WTO. Since there is no precedent of a Member of the WTO leaving an integrated customs union such as the EU, while remaining in the WTO, it is not entirely certain that legally the UK and the EU indeed have to conclude an agreement before WTO negotiations between the UK and the WTO membership can commence. However, it is a logical consequence of the economic relationship that has been construed between the member states of the EU. Within the WTO, the European Commission speaks on behalf of all EU member states. Agreement between the EU and the WTO membership are conducted based on the expectation that there is a single tariff rate applied at the outer borders of the EU and a single market to which trade rules on inter alia market access are applied. The UK s commitments within the WTO are intertwined with the commitments of the EU. Leaving the EU will not only affect the commitments made between the UK and the WTO membership, but will equally affect the EU s commitments and its relationship with other WTO Members. Hence, the EU and the UK first have to agree on a division on important issues such as agricultural subsidies and a division of tariff rate quote (mostly on agricultural products). 124 Keeping this reality in mind, we will now proceed to discuss the options available between the EU and the UK to come to such an agreement. In principle, five options could be explored: (i) A customs union (such as the one between the EU and Turkey), (ii) a bilateral free trade agreement (FTA), such as the EU-Singapore agreement or the new EU-Canada Comprehensive Economic Trade Agreement (CETA), (iii) an agreement based on standard WTO-tariffs, (iv) a bilateral Swiss-style agreement in which all issues would be negotiated 121 L. Bartels, supra note 18, p Granted, still under the caveat that the EU is indeed not a State, but a customs union. 123 UN Secretariat, Succession of States in respect of bilateral treaties: third study prepared by the Secretariat [III. trade agreements], 24 March 1971, UN Doc A/CN.4/243/Add.1, para Institute for Government, Brexit Brief: 10 things you need to know about the World Trade Organization, 31 October 2016 < instituteforgovernment.org.uk/brexit/brexit-brief-10-things-knowabout-world-trade-organization-wto>, visited on 19 May

22 separately, (v) a membership of the UK to the European Free Trade Association (EFTA). Although these are the legal possibilities open to the EU and the UK, not all of these options are equally feasible. In the ongoing debate on Brexit, a number of critical issues were identified as forming the foundation of the arguments for the majority of the voters to vote in favour of leaving the EU. Less interference of the EU was called for, specifically on the development of rules limiting the sovereignty of the UK, getting rid of the high EU membership fee, gaining more independence on international trade and limiting immigration, both originating from within the EU and outside. 125 Not all the five options mentioned fully do justice to these political objectives. Broadly speaking there are two different routes available to the UK in its approach towards establishing a new relationship with the EU. These two different routes have been called a soft Brexit and a hard Brexit. The difference between the two hinges on the question whether the UK remains, in some form or another, within the internal market of the EU or not. As the name gives away, a hard Brexit would opt for leaving the internal market altogether as well as access to the customs union of the EU. Taking this route means that the UK would establish a Free Trade Agreement (FTA) with the EU or would trade with the EU on the basis of its MFN WTO commitments. A soft Brexit, on the other hand, would entail staying in the internal market of the EU. The difference between the two routes is that a soft Brexit would leave most of the UK trade-related commitments unchanged. The UK would have common external tariffs with the EU and would at the very least enjoy preferential market access. Relations with third states would not be much altered either. Within the soft Brexit route three options exist: establishing a customs union with the EU, joining the EFTA or developing a Swiss like bilateral agreement. 126 In light of the formal notification under article 50 TEU and the subsequent (leaked) response by the European Parliament, a hard Brexit appears the more obvious route. After the formal article 50 TEU notification, the European Parliament drafted a Brexit resolution which was leaked. From this document it became clear that there will be a transitional deal after 2019 (when the negotiations on the withdrawal agreement should be concluded) preventing the enforcement of custom controls and trade barriers directly after Brexit formally takes effect. This will be a limited deal; it will not exceed three years and should not be seen as membership to the customs union. The UK is also prevented from commencing negotiations on free trade agreements with third countries and bilateral talks with individual EU Member States. 127 A hard Brexit has become even more likely since it is expected political support for Brexit will increase after early elections on the 8 th of June 2017 as called for by Prime Minister Theresa May. 128 The most likely scenario is thus the UK leaving the internal market of the EU, which raises questions regarding both the UK s and (to a lesser extent) the EU s position within the WTO. For the sake of completeness it should be mentioned that a hard Brexit would also raise some internal constitutional challenges in the UK Debating Europe, Arguments for and against Britain leaving the EU. <debatingeurope.eu/focus/arguments-britain-leaving-eu/#.wcxefcreyqy>, visited on 19 May A. Sims, What is the difference between hard and soft Brexit? Everything you need to know, The Independent, 3 October <independent.co.uk/news/uk/politics/brexit-hard-soft-what-is-thedifference-uk-eu-single-market-freedom-movement-theresa-may-a html>, visited on 19 May D. Boffey, supra note 46. See also Press Release European Parliament, Red Lines on Brexit Negotiations, European Parliament News < visited on 19 May A. Dewan, UK Prime Minister Theresa May to Seek Early Election, CNN, 18 April 2017 < visited on 19 May The UK in a Changing Europe and Political Studies Association, Brexit and Beyond, How the United Kingdom Might Leave the European Union, The UK in a Changing Europe for Political Studies 22

23 Because a hard Brexit is by now the more likely option, we will first address the options available under the condition of a hard Brexit. Second, we will look at the options available under a soft Brexit. For each of the different options we will attempt to evaluate if this would lead to the preferred result, keeping the core issues of the Brexit debate as mentioned in mind A Hard Brexit A Bilateral Free Trade Agreement between the UK and the EU A bilateral FTA between the UK and the EU would entail establishing a new bilateral agreement which focusses on trade in goods based on reduced tariffs. The advantage of this approach, from the perspective of the UK, is that the country could adopt non-tariff barriers and impose tariffs on some trade in goods between the EU and UK (the same is true when the UK chooses to adopt the WTO commitments as basis). It would also leave the UK free to commence FTA negotiations with other countries. However, this option is no longer available as a quick fix considering that a withdrawal agreement including discussions on trade relations between the EU and the UK would most probably be considered a mixed agreement. A mixed agreement needs the approval of each individual parliament of each member states to approve the agreement, on top of the approval needed by the Council and the European Parliament (EP). In a decision of 16 May 2017 the Court of Justice of the EU (CJEU) on the EU-Singapore Free Trade Agreement, it was decided that free trade agreements including provisions on non-direct foreign investment and a regime for investorstate dispute settlement fall within the category of mixed agreements. 130 The decision will probably have consequences for the future EU-UK relationship. The EU is likely to pursue a less comprehensive trade agreement, excluding certain areas such as non-direct foreign investment, to avoid a lengthy political discussion EU-UK trade based on standard WTO-tariffs Compared to the FTA-option, the option to fall back on standard WTO terms might be more feasible. Instead of negotiating a bilateral treaty between the EU and the UK, the UK would fall back on the WTO commitments it already has established within the WTO. In a post- Brexit situation, these commitments would regulate trade between the EU and the UK. As elaborated on in section 2 of this paper, it is currently unclear how the new UK Schedules should be drafted. If the UK would take the clean slate approach, one option would be to adopt a duty-free import approach, such as Hong Kong and Macau. The downside of such an approach is that the commitments would have to provide duty-free access across the board, which does not allow for the UK to protect its trade interests. 132 In case the UK would base its Schedule on the commitments previously applying to it under the EU Schedule, the problem of the division of quantitative commitments arises. A division of quota between the Association of the UK, p. 4. <ukandeu.ac.uk/wp-content/uploads/2016/11/brexit-and-beyond-how-the- UK-might-leave-the-EU.pdf >, visited on 19 May Court of Justice of the European Union (CJEU), Opinion pursuant to Article 218(11) TFEU, Free Trade Agreement between the European Union and the Republic of Singapore, 16 May 2017, C , paras. 238, 292, 293 <eur-lex.europa.eu/legalcontent/en/txt/?qid= &uri=celex:62015cv0002(01)>, visited on 19 May A. Beesley, EU Singapore Ruling Charts Possible Brexit Path, The Financial Times, 16 May 2017 <ft.com/content/f9cf18e4-3a1b-11e7-ac89-b01cc67cfeec>, visited on 19 May The Guardian, WTO chief says post-brexit trade talks must start from scratch, The Guardian, 7 June <theguardian.com/business/2016/jun/07/wto-chief-brexit-trade-talks-start-scratch-eureferendum>, visited on 19 May

24 EU and the UK means amending the EU s existing bilateral TRQs, which requires the consent of its WTO trading partners. It is not likely that an importing state will accept these changes without asking for something in return. The more obvious solution here would be that the EU maintains its bilateral TRQs and the UK would lose market access. Import TRQs could be more easily divided between the EU and the UK, assuming there is sufficient political will among the EU member states to allow for such a division. The same is true for the domestic support commitments made within the EU. 133 The division of TRQs would then have to be put towards all WTO Members to be agreed upon. Such agreement cannot automatically be assumed. Different countries depend to a different extent on the market access gained through exporting to the UK and, by extension, the EU. When the latter benefit falls away because of a Brexit, maintaining TRQs as they were will be less attractive for certain WTO Members because they would not grant equal market access to the European market as before the Brexit. This warrants the payment of compensation. 134 An interesting case in this regard are the Economic Partnership Agreements (EPAs) concluded by the EU. The UK has a trade interest in maintaining preferential access with the African, Caribbean and Pacific Group of States (ACP countries) under these agreements for the import of sugar. As far as the preferential access concerns Least Developing Countries (LDCs), the UK could maintain current preferential access since this would be allowed under the WTO Enabling Clause. 135 With respect to other ACP countries, the UK would have to amend current commitment. 136 Finally, and maybe most importantly, the fall back option leaves the UK without any preferential access to the EU market. Trade relations would be governed by the same rules as trade with, for example, China. Lack of any preferential access would be very unfavourable for both the UK and the EU, considering the significant trade interests at play between both Members. These challenges and the uncertainty of the outcome of the negotiations lead to the conclusion that falling back on the WTO commitments does not provide the most preferable situation from a UK perspective. The UK s minister responsible for the Brexit has already announced that he will try to prevent this option from ever taking place A Soft Brexit Despite the fact that a hard Brexit appears to be more feasible, for the sake of completeness the other options will be discussed here. A soft Brexit entails that the UK would in some form keep its access to the internal market of the EU. For those that were in favour of the UK cutting ties with the EU, a soft Brexit will not be the preferred option because it will never give the UK as much freedom and sovereignty as a hard Brexit. On the other hand, a soft Brexit would keep much more of the status quo than its counterpart, leading to less uncertainty and probably less economic and social turmoil. There is therefore something to be said for exploring the options the UK has when pursuing a soft Brexit. There are three 133 A. Matthews, WTO dimensions of a UK Brexit and agriculture trade, CAPReform.eu, 5 January <capreform.eu/wto-dimensions-of-a-uk-brexit-and-agricultural-trade/>, visited on 19 May Ibid. 135 Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries, Decision of 28 November 1979, L/ T. Burri, Free Movement of Persons and Brexit- some Swiss experience from which the United Kingdom could benefit, 10 August 2016, p. 12, <papers.ssrn.com/sol3/papers.cfm?abstract_id= >, visited on 19 May A. Spence, Brexit Minister: UK will strike trade deal parallel to article 50 process, PoliticoEU, 20 October <politico.eu/article/brexit-minister-uk-will-strike-trade-deal-parallel-to-article-50-process/>, visited on 19 May

25 options in this case: establishing a customs union, a bilateral Swiss-style agreement and joining the EFTA Customs Union A customs union between the UK and the EU would likely be similar to the EU-Turkey customs union that has existed since 31 December The customs union between the EU and Turkey provides common external tariffs for all industrial goods. Agriculture, services and public procurement are excluded from the customs union. Some bilateral concessions are applied to agricultural products. It is also foreseen that Turkey aligns itself to some of the internal market areas, such as trade defence instruments and industrial standards. 139 Between 1996 and 2002, the negotiations regarding the customs union were extended to include guidelines on the liberalisation of services and public procurement, but these negotiations were suspended in The UK and the EU could pursue a similar customs union agreement. Establishing a customs union would most likely provide the UK with preferential market access in crucial areas. However, it would still limit the access of the UK to the EU s goods market. It would be excluded from any other deals made by the EU. The EU-Turkey customs union does not include provision on the free movement of people, but it is unlikely that this would also be the case in a EU-UK customs union. Some provisions on immigration will have to be included, considering the ties both countries have. The UK would then benefit from free movement of high skilled workers, for example to provide free access to European financial talent. It would try and restrict the inflow of low skilled workers, which is not something the EU is likely to agree upon. In this regard it should be remembered that the EU is a stronger trading bloc than the UK, leading to the UK having to make concessions while negotiating the terms of the customs union. In light of these political realities, it is doubtful whether the establishment of a customs union would leave the UK more flexibility than its full EU membership in pivotal areas such as immigration and agriculture. On the other hand, a customs union would not impose the same level of institutional commitments as membership to the EU. Seeing the priorities in the debate prior to the Brexit referendum, it is likely that this is not a feasible option A bilateral Swiss-style agreement in which all issues would be negotiated separately A bilateral agreement mirroring that between the EU and Switzerland forms the middle ground between the option to establish a customs union and membership to the EEA- EFTA. 141 The main difference between the latter and a bilateral agreement is that the objective of the EEA is to maintain an internal market. A bilateral agreement does not have that objective. The absence of an institutional structure and the different overall objective justify that certain discriminatory acts are allowed within the context of a bilateral accord that 138 Decision No. 1/95 of the EC-Turkey Association Council of 22 December 1995 on implementing the final phase of the Customs Union (96/142/EC) (EC- Turkey Customs Union Agreement) : <avrupa.info.tr/fileadmin/content/downloads/pdf/custom_union_des_eng.pdf>, visited on 19 May See Section I read in conjunction with Annex 8 (on protection of intellectual, industrial and commercial property) and Section III, article 44 and beyond (trade defence instruments) of the EC- Turkey Customs Union Agreement. 140 European Commission, Trade, Policy, Countries and Regions, Turkey <ec.europa.eu/trade/policy/countries-and-regions/countries/turkey/>, visited on 19 May The European Economic Area (EEA) unites the EU member states and the three European Free Trade Association (EFTA) States (Iceland, Liechtenstein and Norway) into an Internal Market. 25

26 would be prohibited within the EEA-EFTA structure. 142 The difference between a Swissstyle bilateral agreement and a FTA as discussed above lies in the fact that the former has a much broader scope than regular FTAs. This is the reason that it is worth mentioning this option under the soft Brexit route. The relationship between the EU and Switzerland is based on the EU-Swiss FTA of 1972 and is further arranged in a number of bilateral agreements, commonly called the Bilaterals. 143 Membership to the EEA was rejected in 1992, whereupon the EU and Switzerland negotiated an agreement covering seven sectoral agreements (Bilaterals I). Free movement of persons, technical trade barriers, public procurement, agriculture and air and land transport are included within the scope of this agreement. The seven agreements are bundled; if one falls, they all become void. 144 The second set of sectoral agreements (Bilaterals II) was concluded in 2004, including a wide ranging area of topics such as the participation of Switzerland in Schengen and Dublin, agreements on taxation, processed agricultural goods and Swiss financial contribution to economic and social cohesion in the new EU member states. In total there are around a 100 bilateral agreements in existence between Switzerland and the EU, managed by 15 Joint Committees. 145 The upside for the UK when choosing the option to negotiate bilateral agreements, in the same fashion as Switzerland, is that it could pick and choose in principle which topics would be included. In practice, the EU is not willing to cooperate in such a cherry picking structure. More importantly, the chances are very slim that the EU would be willing to leave out an agreement on immigration. In its approach towards Switzerland, this was one of the topics the EU insisted on to be included in the Bilaterals. 146 The agreement between Switzerland and the EU does not accept a migration quota. 147 It should also be kept in mind that a bilateral agreement would make the UK more vulnerable, as there is no supervisory system in place (which is the case for a EEA-EFTA membership, as explained below). And, as previously stated, the negotiations for such a bilateral agreement would likely take a relatively long time A membership of the UK to the European Economic Area (EEA) and the European Free Trade Association (EFTA) The EEA and/or EFTA membership is the most feasible option when a soft Brexit route would be pursued. The EFTA is an association between Iceland, Liechtenstein and Norway, which together are part of the European Economic Area (EEA), uniting the countries and the EU member states in an internal market. Membership to the EEA would mean complying with the EU legislation on the four freedoms (free movement of goods, services, persons and capital) and provides market access to all the other 30 EEA states. The EEA includes provisions on cooperation on research and 142 See for example Case C-351/08 Grimme [2009] ECR I-10777, paras EC-Switzerland Free Trade Agreement, 22 July 1972 O. J. L300, 31/12/1972, p <trade.ec.europa.eu/doclib/docs/2007/january/tradoc_ pdf>, visited on 19 May T. Burri, supra note European Commission, Trade, Policy, Countries and Regions, Switzerland.<ec.europa.eu/trade/policy/countries-and-regions/countries/switzerland/>, visited on 19 May T. Burri, supra note Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons, in force 1 June 2002, O.J. L 114/6 of 30 April 2002), 21 June C. Burke et al., Life on the Edge: EFTA and the EEA as a Future for the UK in Europe, 22 European Public Law (2016) p

27 development, education, social policy, the environment, consumer protection and more. Equal rights between the citizens and economic operators of the EEA and those of the EU internal market are guaranteed. 149 Membership to the EEA-EFTA would accommodate many of the important issues central in the Brexit debate. The EEA-EFTA does not cover the Common Agricultural Policy, the Common Foreign and Security Policy or the customs union. It would leave the UK free in these regards to pursue its own policy. The EEA-EFTA also allows the UK to influence future legislation of the EU. The main downside, from the perspective of the UK, would be that the country would still have to cooperate in the free movement of persons (as part of one of the four freedoms) and would not be free to curb immigration. An upside of joining the EEA is that the UK s national legal system would already incorporate most of the provisions, accession would move along quickly and without much change to the current situation. 150 A complication to the accession could be that the UK is currently already a member of the EEA, under the EU pillar. Changing its status would, therefore, require consent of the EEA states and the EU member states. 151 From the perspective of the EU, EEA membership would also be advantageous. As the level of integration between the EEA-EFTA and the EU is quite high, the EU would probably find it less difficult to convince its member states of the agreement, as it would not reward the UK for leaving the EU. 152 The EEA-EFTA binds the UK more than all the other options discussed. The trade-off between obligation and preferential access would probably ensure the EU membership that the UK did not get an easy out. Membership to the EEA would also entail membership to the EFTA, requiring the consent of the current EFTA states. 153 This should not be too difficult, as membership of the UK to the EFTA would increase the leverage of the EFTA as a whole and as said the UK is already legally prepared to comply with the provisions of the EFTA due to its (former) membership to the EU. In fact, the UK would re-join the EFTA, after it left in 1973 as a founding member to become a member to the European Economic Community. A ratification of the EFTA by the UK government would be sufficient to ensure membership. 154 EFTA membership would also require the UK to join the Surveillance and Court Agreement, the Agreement on a Committee of Parliament of the EFTA States and the Standing Committee Agreement. 155 This is a commitment to supra-national institutions, not directly in line with the wish of the Brexit voters. Then again, the UK would no longer be subject to the Court of Justice of European Union (CJEU) and the institutional framework of the EFTA is less forceful compared to that of the EU. 156 Decisions taken by the EU are not automatically applicable in the EFTA states. 157 Overall, the membership to the EEA-EFTA seems to provide a good balance in which much of the benefits of EU Membership are conserved, while at the same time ensuring less supra-national interference. 158 An important downside, however, is the obligation to adopt the four freedoms of the EU. Since immigration was one of the more 149 EFTA, EEA Agreement < visited on 19 May C. Burke et al., supra note 148, p Ibid., p Ibid. 153 Article 126 Agreement on the European Economic Area, OJ No L 1, , p The European Free Trade Association, Convention establishing the European Free Trade Association, done at Stockholm on 4 January 1960, amended at Vaduz on 21 June C. Burke et al., supra note 148, p See Protocol 35 to the EEA Agreement, On the Implementation of EEA Rules, See also Case C-300/01 Salzmann II, ECRI-4899, paras (2003). 157 Decisions are only applicable after a Joint Committee Decision, Paragraph 3, EEA Agreement, Protocol 1 on Horizontal Adaptations, C. Burke et al., supra note 148, p

28 important topics in the Brexit debate, it is politically undesirable for any new relationship between the EU and the UK to include the free movement of people in such a way CONCLUSION Unfortunately, but as expected, our research did not yield a clear and enforceable result: it is still highly unclear what the UK s position in international economic law will be once it has left the EU definitively. It is however hoped that the reader has gained some insight on the difficulties both the EU and the UK will be facing in the context of international economic law once Brexit has been completed, and that some options that both parties should take into account when discussing their future economic relationship have successfully been highlighted. As a GATT Member and original WTO Member, the erga omnes WTO obligations will remain applicable to the UK, during the whole Brexit process and afterwards. The main issues are created by the lack of UK-specific goods and services Schedules, as required by Articles II GATT and XX GATS. Especially the quantified tariff commitments create unclarity as to their distribution and transposability. We have highlighted several options that could be considered by both parties when negotiating the consequences of Brexit. Firstly, the rules on state succession in public international law would most likely lead to the UK departing from a clean slate, having to renegotiate its Schedules. In doing so, consent by other WTO Members will be required for such Schedules to be certified. Secondly, WTO practice that could inform the WTO Members on the UK s position in the WTO post-brexit takes the form of the accession process for newly autonomous separate customs territories. Several interesting elements could be noted, that would help avoid a legal limbo for the UK: (i) accession by the UK would be automatic; (ii) the UK would renegotiate its commitments on the basis of current EU Schedules, thereby not having to enter into negotiations departing from a clean slate ; (iii) while the process of renegotiations is ongoing, a de facto application of the EU s Schedules would provide for clarity and certainty. Thirdly, the practice of EU enlargement and the specific provisions regarding customs unions in the GATT point again to the need for renegotiation of Schedules. Both the EU and the UK can (and should) propose their amended Schedules, but they must be open to renegotiation under Article XXIV:6 GATT and they will probably have to offer compensation (in the form of lowering duties) or will be subject to withdrawal of other Members concessions. The downside to following this practice when dealing with Brexit is that much obscurity remains if no agreement can be reached with all WTO Members who have notified their interest under Article XXIV:6 GATT and that renegotiations will probably take a very long time. In the meantime, it could be suggested that the UK opt for a de facto application of the EU Schedules currently in force. Our analysis has thus not yielded any conclusive results on the way forward within the WTO. It could however be argued that the practice regarding separate customs territories would best further clarity and legal certainty. The argument can be raised that treaty continuation is critical when dealing with an important trading nation like the UK, to ensure that trade agreements continue to apply. 160 A similar observation can be made with regard to the options for the future economic relationship between the UK and the EU. Despite the fact that a hard Brexit is likely to occur, we would cautiously advocate for the EEA-EFTA option for several reasons: (i) this would cause the least disruption to the currently existing economic relationship (which considerably 159 T. Burri, supra note 136, p D.B. Majzub, supra note 37, p

29 furthers the economic interests of both the EU and the UK); (ii) many of the currently existing rights and obligations of the UK would continue to exist, but it would have more autonomy regarding its agricultural policy, national security, etc. We readily admit that from the UK perspective (especially taking into account the issues that have been raised during the Brexit campaign) this is not an ideal solution since the UK will still have to pay financial contributions and comply with (future) EU regulations. This might indeed not fit within the UK s idea of less EU interference. The alternative would be a hard Brexit, with the UK cutting all membership ties with the EU and opting for a general FTA, as it would with all of its trading partners. Whether such an FTA would include beneficial provisions for the UK will very much depend on the EU s political will in this regard. So far, relations between the EU and the UK have not been optimal, giving way to a scenario in which the EU adopts a tough stance towards the UK. A compromise could be to opt for a Swiss-style bilateral agreement: it would give the UK the (symbolic) feeling of being able to cut the strong ties with the EU, but would allow the EU to impose enough obligations upon the UK to avoid a complete cutoff. 29

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