EU Shipping Law

Vincent Power

Document

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CHAPTER 48 Brexit

A. Introduction

48.001 This chapter considers selected1 implications of Brexit2 for European Union (“EU”) shipping and ports law.3 48.002 “Brexit” is the term used to describe the withdrawal or secession of the United Kingdom of Great Britain and Northern Ireland (“UK”) as well as Gibraltar from the EU and the European Atomic Energy Community (“EAEC”). 48.003 It is widely anticipated that the UK will leave the EU on 29 March 2019 (i.e. Brexit) but it is not inevitable.4 However, for the purposes of this chapter, it is assumed that the UK will leave the EU on that date and at 23:00 hours (UK time). It is worth noting that all the arrangements relating to Brexit have not been agreed at the time of writing. It is even possible that all arrangements for the UK’s withdrawal and the post-Brexit arrangement will not be concluded before the UK actually leaves the EU.5 This chapter relies on the position as it is understood at the time of writing. 48.004 Brexit would affect the maritime sector more immediately and more obviously than many other economic sectors. If there is more or less trade because of Brexit then the maritime sector will be an obvious indicator by virtue of the levels of trade which would be carried by ships and transported through ports. If there is a diversion in trade

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patterns (e.g. more or less trade is moving through the UK6 or, alternatively, by-passing the UK and instead going between EU ports only7) then shipping and ports will be barometers of the changes due to Brexit. Equally, if there are more or fewer passengers moving because of Brexit then that could also be evident in the shipping and ports sector. Therefore the shipping and ports sector is a bellwether or early warning system for the impact (whether positive or negative) of Brexit on the economy generally or parts of the economy. 48.005 The essence of the change is that UK shipping and port interests would no longer have the rights and privileges of EU membership because the UK would become, after leaving the EU, a “third country” or “third State” under EU law (i.e. it would no longer be an EU Member State). Those in favour of Brexit would argue that UK shipping and port interests would be rid of the bureaucracy and burden of EU law. However, many of the rules (e.g. those EU environmental and safety rules relating to vessels (of whatever flag) entering EU ports would still apply as would EU competition law where trade in the EU was affected) and the UK would not be part of the EU’s decision-making process in regard to any of the rules which the EU would adopt or amend after the UK leaves the EU but which would still impact on the UK and its interests (e.g. shipping companies). It is unclear whether, in this context and indeed generally, the UK would be a simple “third State” or will have a special and deeper relationship with the EU than most other third States – whether it has a more enhanced relationship is dependent on the terms of the arrangements which the EU and the UK agree. 48.006 It is very difficult to contemplate how all that has been done over the last five decades8 to integrate the UK into the EU could be undone – and replaced – in two years (i.e. the time between issuing the so-called “Article 50” notice under the Treaty on European Union (“TEU”) on 29 March 2017 and the UK leaving the EU on 29 March 2019). It took the UK 12 and two attempts to join a much simpler European Communities in 1973 so a total reversal now, after all the EU law that has been grafted on to the UK system, seems very difficult to imagine in a very short timescale. And yet those who supported “Brexit” claiming that the EU was inefficient and incapable of making decisions efficiently now believe that the EU and the UK could agree a “Withdrawal Agreement” and a “Relationship Agreement” in 23 months. 48.007 There will certainly be – and already are – commercial implications because of Brexit. As a backdrop, it is quite likely that there will be some reduction in trade volumes due to the uncertainty leading businesses and consumers to invest and consume less during the uncertainty. The vote in favour of Brexit has had a negative effect on business and consumer sentiment generally (but not universally) leading to a reduction in trade so it is quite likely that there will be commercial consequences. While UK exporters have benefited in the short term from being able to sell exports from the UK more competitively because of the fall in the value of sterling, this is not likely to be sustained in the

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long run because the cost of imports (particularly imported raw materials) is rising (because of the fall in the value of sterling) and hedging arrangements will come to an end. It is also unclear how the UK economy would fare if tariffs (even at the World Trade Organization (“WTO”) levels) were imposed on exports from the UK.9 While supporters of Brexit would say that there has not been the dramatic impact on the UK economy that some Remainers foresaw, it is probably more accurate to recall that it is still too early to see the full impact on the UK economy – the UK is still a Member State of the EU, the country is still part of the internal market/customs union, no post-Brexit arrangements between the EU and the UK have yet been finalised and the consequences of these decisions take time to manifest. 48.008 As well as commercial implications, there could also be operational implications to Brexit with, for example, new shipping routes being opened to bypass the UK and any customs posts which it might have – for example, all other things being equal, it would make sense to open more shipping routes between Ireland and the Continent of Europe than to have goods delayed at UK, Irish and Continental European ports due to customs operations which would otherwise slow down the movement of goods. 48.009 As mentioned at the outset, the purpose of this short chapter is to consider the legal implications of Brexit on shipping and ports. Obviously, a great deal of this analysis is purely speculative and preliminary in nature given the fact that the post-Brexit political and legal landscapes have not yet been negotiated let alone agreed. The chapter is also naturally selective given that it is impossible to identify each and every implication of Brexit for the shipping and port sector. There are dire warnings on both sides of the “Remain” and “Brexit” debate. Ultimately, it would be as wrong to see the UK as being a wilderness outside the EU10 as to see the EU as an entity on the brink of collapse simply because the UK could be leaving because, in reality, the situation is more nuanced and sophisticated than either of those extreme views. The EU will be weaker because of a departure by the UK but the UK’s departure would not cause the EU’s demise; indeed, some would argue that the EU would prosper without the “slowest wheel on the wagon”.11 It is also clear that the UK would be weaker by virtue of leaving the EU (e.g. leaving the world’s largest internal market) but it is unlikely to become an economic wilderness simply because of Brexit.

B. Chronology of Brexit

48.010 In the immediate aftermath of the ending of the Second World War, there was an intensification of the movement towards European integration. There had always been a desire to integrate Europe but the horrors and loss of life in the Second World War (which had been the third time that France and Germany had fought each other since 1870) meant that there was a further intensification of the move towards integration. This found expression in the establishment of the Council of Europe in 1950 (which still

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survives today but which is mainly concerned with human rights),12 the European Coal and Steel Community (“ECSC”) in 1952, the EEC in 1957, and the EAEC (or “Euratom”) in 1957. While the Council of Europe included the UK (indeed, the UK was central to its establishment), the UK was not important in the formation of the ECSC, the EEC or the EAEC – indeed, the UK was very much an outsider. Equally, the shipping sector was not particularly important to these organisations. It is very likely that shipping was not important for the ECSC, EEC and EAEC in the initial years because there were few shipping services between the initial six Member States (i.e. Belgium, France, Germany, Italy, Luxembourg and the Netherlands) although there were shipping services between five of those six countries as well as between the EU and the rest of the world. Ports were also heavily regulated and largely State-owned. The ECSC, EEC and EAEC were largely (but not entirely) successful so it was not surprising that the UK eventually wanted to join the three European Communities.13 The UK applied in 1961 to join the European Communities but that application was vetoed by General De Gaulle’s France. The UK applied again in 1967 and this time it was successful. The UK signed the Treaty of Accession in Brussels on 22 January 1972 which had the effect, following ratification, of bringing the UK into the European Communities the following year. 48.011 On 1 January 1973, the UK acceded to the three European Communities: (a) the EEC; (b) the EAEC; and (c) the ECSC. There had already been six other Member States of those communities (namely, Belgium, France, Germany, Italy, Luxembourg and the Netherlands) – these six were the founding Member States. The UK joined those six founding Member States on the same day as Denmark and Ireland. Since then, the EEC has become the European Union and the ECSC has ceased to exist with its activities and functions being absorbed by the EU.14 The arrival of the UK and Denmark (two significant shipping nations) in 1973 meant that shipping was more of an issue for the then European Communities than it had been before then.15 48.012 Ironically, while other countries which accede to the EU generally have referendums of the people before joining to determine whether the people wish to join the EU, the UK only had a parliamentary vote in 1972 and proceeded to acceded on that basis. It was not until 5 June 1975, two years after acceding, that the UK had a referendum of its people on whether it should remain in the then European Communities; on that occasion a majority (67.2%) voted in favour of remaining in the European Communities. Politicians were deeply divided on the issue and politicians from the same party voted in different ways on the issue. The fact that a referendum was needed at all and that there was such division among politicians was reflective of the relative unease in many parts of the UK about membership of what was to become the EU. This is indicative of the fact that the outcome of the Brexit Referendum on 23 June 2016 was not such an unusual phenomenon as many people now suspect.

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48.013 While the UK was a very important Member State of the EU, it was always a somewhat semi-detached one. It sought carve-outs or exemptions from various EU rules. It did not join the EU’s Economic and Monetary Union and therefore did not adopt the euro as its currency (unlike all the other major EU Member States). It had fought for a rebate of some of its financial contributions to the EU. It did not take as active a part in the EU as the likes of France and Germany. Over time, there was growing Euro-scepticism and, indeed, Euro-phobia in the UK. This found some expression in parts of the UK’s Labour Party (particularly in the 1970s and 1980s)16 but was most pronounced in parts of the UK’s Conservative (or Tory) Party and ultimately led to the establishment of the separate United Kingdom Independence Party (“UKIP”) which has the avowed aim of taking the UK out of the EU and took votes from both the Labour and Tory parties (but particularly, the latter). UKIP attracted significant but minority support; for example, it attracted 12.5% of the total vote in the 2015 General Election.17 UKIP was not an isolated phenomenon because in 1994 Sir James Goldsmith had formed the Referendum Party which advocated that there ought to be a referendum on the UK’s membership of the EU. The Referendum Party won 810,860 votes or 2.6% of the total votes cast in the 1997 General Election. While the Referendum Party was disbanded after Goldsmith’s death in 1997, the thread of Euroscepticism/Europhobia was still present, and growing, in UK political discourse. 48.014 The Tory Party was divided deeply because of its pro- and its anti-EU factions over several decades; indeed, the internal debate within the party and the external threat from the UKIP were serious threats to the survival and well-being of the Tory Party and its various leaders over four decades. 48.015 Ultimately, the then Tory Party leader and UK Prime Minister, David Cameron, announced on 23 January 2013 that a Conservative government would hold an “in”/“out” referendum on EU membership before the end of 2017, on the basis of a renegotiated package between the EU and the UK, if (and this was important) the Conservative Party was re-elected in the 2015 General Election. His aim was probably three-fold: put the issue of the UK’s continued membership to rest and thereby quell dissension in his own party, secure re-election but also discourage people from voting for UKIP in the 2015 General Election.18 It was an attempt to “lance the boil” once and for all. Following the Conservative Party’s victory in the 2015 General Election and the return to 10 Downing Street of David Cameron as Prime Minister, he commenced negotiations with the EU on revised terms of membership. In hindsight, the package agreed in February 201619 was too little, too late and too limited. It did not do enough to sway voters in the UK who had concerns about the EU and, ultimately, was hardly mentioned

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in the subsequent referendum. Following the agreement on the package, Cameron announced in a speech to the House of Commons on 22 February 2016 that there would be a referendum on 23 June 2016.20 It was a divisive campaign. Those who advocated that the UK should remain in the EU were more inclined to adopt a “negative” approach about the dangers of what would happen if the UK did leave rather than a more positive or upbeat approach about the positive value of remaining. By contrast, those who campaigned for the UK to leave the EU spoke positively and optimistically about “taking back control” and “winning back sovereignty” but glossed over a great many of the details and consequences. Many commentators and politicians from all sides believed that the result would be a majority for the “Remain” side of the argument but it was not to be. 48.016 On 23 June 2016, 33,577,342 people voted in only the third ever UK-wide referendum. The question the people were asked was a deceptively simple one: “Should the United Kingdom remain a member of the European Union or leave the European Union?” A total of 17,410,742 (or 51.89% of the valid vote) voted in favour of leaving the EU while 16,141,241 (or 48.11%) voted in favour of remaining in the EU. In the immediate aftermath of the result, the pound sterling fell sharply in value against other currencies, the value of shares fell worldwide but they fell particularly sharply in the UK and, ultimately, David Cameron announced, the morning after the referendum, his intention to step down from the job of UK Prime Minister given that he had campaigned to remain but a majority of those who voted had opted to leave. While he had intended to stay for a few months more until September 2016, he was replaced on 13 July 2016 by Theresa May who had been Home Secretary in Cameron’s government and had campaigned, relatively mutely, for the UK to remain but now saw it as her mission to deliver the Brexit which a majority of the UK’s voters had chosen. 48.017 While referendums are rare in the UK, it is true that never have so many voters in the UK ever opted for a single proposition as they did on 23 June 2016 in regard to Brexit. Equally, the margin of 51.89% to 48.11% is seen as being tight but it is comparable to the Swiss margin to reject membership of the European Economic Area (“EEA”) (50.3% to 49.7%) (a decision which has never been reversed) and comparable to the margin in Greenland (53% to 47%) (a decision which has also never been reversed). 48.018 The UK government then began its preparations for Brexit.21 In July 2016, the UK government established a new government department, the Department for Exiting the European Union (“DExEU”). The Department was headed by David Davis MP who became central to the UK’s negotiations with the EU. Theresa May announced that the UK would not seek membership of the Internal/Single Market or the EU’s Customs Union after it left the EU even though this was not articulated to any great extent during the referendum campaign. The UK was intent on repealing the UK’s European Communities Act 1972 but then incorporating the EU law existing on the day it left the EU into UK domestic law; however, this does not really align EU and UK law because there will be an almost immediate growing divergence between the two regimes.22

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48.019 The EU also began its preparations for the Brexit negotiations and to date, at least, the EU preparations have been more effective. The EU has had a clear, consistent and reasoned approach to the negotiations while the UK has altered course at different times and not achieved a great deal of what it set out to achieve. The European Commission was given the critical role with a task force headed up by Michel Barnier.23 The European Parliament is also critical but more in terms of voting because the European Commission is really driving the negotiations. The EU has published a series of detailed documents on the process as well as its negotiated mandates.24 48.020 On 29 March 2017, the UK submitted to the EU the UK’s notification of its intention to withdraw from the EU pursuant to Article 50 of the TEU. A popular misconception – in parts of the media and among some politicians – was that the triggering of Article 50 meant that the UK will leave precisely two years after it was triggered. This is not necessarily so. Article 50 of the TEU provides:

“1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.
3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.
4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.

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