Are the EU Institutions (about to start) breaching Art 50 TEU & EU public procurement law in the context of Brexit?

The Financial Times has reported that "Brussels starts to freeze Britain out of EU contracts ~ Commission memo tells staff to prepare to ‘disconnect’ UK". According to the FT, an internal European Commission memorandum urges its senior officials to start introducing Brexit considerations in their decision-making, seemingly to avoid “unnecessary additional complications”. As public procurement is concerned, the FT indicates that 

Where legally possible, the [C]ommission and its agencies will be expected in all activities to “take account” of the fact that Britain may be “a third country” within two years, including in appointing staff and in awarding billions of euros of direct contracts for research projects or services.

“Apart from the legal requirement for a contracting party to be established in the EU, there may be political or practical reasons that speak in favour of contracting parties established in a specific member state, not only at the conclusion of the contract, but also throughout the duration of the contract,” the note states.

The FT piece lacks the necessary detail for a full legal assessment and the caveat that this strategy should be undertaken "where legally possible" may well deactivate it [in legal terms]. However, at least in its thrust, this is a rather clear breach of Article 50(3) TEU.

Inasmuch as it states that "The Treaties shall cease to apply to [a withdrawing Member] State ... from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification" (given by the UK on 29 March 2017), unless this period is extended unanimously by the European Council; Art 50(3) TEU does not allow for any anticipatory effects of a decision to withdraw. Until withdrawal and its terms are actually agreed and legally effective, both the withdrawing Member State and the EU Institutions remain bound by EU law in its supremacy, direct effect and the mandate to respect the rule of law (Art 2 TEU). This is an appropriate measure aimed at the preservation of the rule of law in the form of compliance with EU law during the withdrawal negotiations, not least because nobody knows if withdrawal is legally irreversible and unavoidable -- and, quite frankly, every day that goes by without the EU Institutions (as well as the UK) seeking clarification from the Court of Justice of the European Union is a missed opportunity and another blow to the foundations of the rule of law in the EU.

Such prohibition of anticipatory effect goes both in the direction of preventing the 'freeing up' of the withdrawing Member State from compliance with EU law (which is obvious from Art 50(3) TEU itself), as well as in the opposite direction of preventing the EU Institutions from discriminating against the withdrawing Member State. It is clear to me that EU law will always bind the EU Institutions vis-a-vis a withdrawing Member State all the way up to the point of legal withdrawal - and from then onward, the legal regime setting up mutual duties will be that of any transitory arrangements created by the withdrawal agreement, and/or the legal regime governing the "the framework for [the withdrawing Member States'] future relationship with the Union". Violating the absolute mandate of subjection to EU law up to the point of withdrawal would be an infringement of Art 50(3) TEU by the EU Institutions -- if not by itself, certainly in combination with the duty of non-discrimination and equal treatment between Member States of Art 4(2) TEU, as well as the duty of sincere cooperation of Art 4(3) TEU.

In the specific area of public procurement, just as it was illegal for the UK's Department for International Trade to tender contracts screening contractors on the basis of their commitment to support the delivery of Brexit as a cultural fitness criterion (see here), it is also illegal for the EU Institutions to tender contracts on the basis of "political or practical reasons that speak in favour of contracting parties established in a specific member state, not only at the conclusion of the contract, but also throughout the duration of the contract". Article 102 of the Financial Regulation governing the award of contracts by EU Institutions clearly establishes that "All public contracts financed in whole or in part by the [EU] budget shall respect the principles of transparency, proportionality, equal treatment and non-discrimination". Imposing requirements around the Member State of incorporation, registration or sit of a public contractor runs against these general principles.

There may be some specific circumstances or projects (the FT piece mentions the Galileo project) where it would not be possible for public contractors to be based outside the EU, but these are clearly exceptional and need to be subjected to a very strict proportionality analysis. In most cases, particularly for services and research contracts, there is no need for any physical presence in the EU (or elsewhere). This is clearly demonstrated by the coverage of a good number of Brexit-sensitive services markets in the EU's market access concessions under the World Trade Organisation's Government Procurement Agreement (albeit on a reciprocal basis, for obvious trade policy reasons).

Moreover, the extent to which it would be impossible for UK-based contractors to complete the execution of public contracts post-Brexit depends on the existence or not of transitory arrangements, as well as the framework for the future EU-UK relationship (which may well imply mutual coverage of services procurement in WTO GPA terms). Therefore, a decision made now that determined such impossibility and thus served as the basis for the exclusion of UK tenderers from procedures carried out by the EU Institutions would be legally defective.

Beyond these technical issues, it is shocking and worrying to see the EU Institutions engage in what can be seen as trade war by erecting non-tariff barriers against a withdrawing Member State, just as it was worrying and unacceptable to see the UK do that. If both parties to the withdrawing negotiations "prepare" for a disorderly Brexit in this manner, this will be a self-fulfilling prophecy. And the only stopper to such noxious developments is to be found in the rule of law and the EU's and the withdrawing Member States' obligations under the Treaties to comply with EU law until the withdrawal is effective in terms of Art 50(3) TEU. If the European Commission is itself not able to abide in this manner, then my pessimism about the irreversible effects of Brexit on EU law can only plummet even further....

The UK Parliament must force the UK Government to understand the Brexit game before it keeps playing

In terms of Brexit, the week ahead promises to bring new meaning to the ides of March. As clearly explained in last Friday's Commons Library Brexit Briefing, the UK Parliament, and in particular the House of Commons, is faced with a complex set of votes. They have to decide whether to uphold any of the amendments to the European Union (Notification of Withdrawal) Bill (ie "Brexit Bill") introduced by the House of Lords, which concern (a) the status of EU/EEA citizens in the UK, and (b) the legal enshrinement of on a ‘meaningful’ parliamentary vote at the end of the negotiation period. The House of Commons can decide to accept either of these amendments, or rather reject them and put pressure on the House of Lords to backtrack and provide the Government with the "no strings attached" authorisation to keep playing Brexit that David Davis MP has so vocally demanded this weekend.

These are two highly politically charged (and poisonous) issues. They are also highly complex from a legal perspective. More importantly, it must be stressed that they are also very different in nature. The issue of the status of EU/EEA nationals in the UK and UK nationals in the EU/EEA constitutes a known unknown which content is undiscoverable -- because it ultimately depends on future negotiations and, in the absence of explicit political compromises, its legal resolution will depend to a large extent on the ECJ's use of the principle of legitimate expectations in what promises to be protracted and difficult litigation down the line. Differently, the discussion on the possibility of creating a mechanism for 'meaningful' parliamentary decisions after Article 50 TEU has been triggered and, more generally, on whether Parliament can at any later point in time stop or defer the Brexit decision is a known unknown that is however discoverable.

The right time and occasion for such discovery was the Miller litigation before the Supreme Court. However, due to the UK Supreme Court's illegal failure to seek clarification on the implications and (ir)revocability of a notice under Article 50 TEU, this known unknown remains undiscovered. Given this avoidable uncertainty, it is painfully obvious that the debate being had at the UK Parliament is built on no legal foundation whatsoever. Indeed, as the Commons Library put it,

Underlying the whole debate is the unanswered question of whether a withdrawal notification can be suspended or revoked. Although there is a widespread assumption that it cannot, no court has ruled on this and there is considerable opinion that notification could in fact be revoked. The effects of a [parliamentary] vote against a withdrawal agreement (or against leaving without an agreement) would be completely different depending on the answer.

In simple terms, the UK Parliament is now faced with a skewed and asymmetric choice between two options of different legal weight and plausibility and, more importantly, which carry very different risks to the long term interests of the UK and its citizens. On the one hand, assuming irrevocability of an Art 50 TEU notification is a conservative approach to this protracted issue and works as the worse case scenario, and requires Parliament to be ready to approve the Brexit Bill on the basis that a Government's notification to the EU Council carries the (accepted) risk of the UK leaving the EU in two years' time without a deal. This is indeed a realistic scenario, as timely stressed today in the Commons Select Committee on Foreign Affairs' report "Article 50 negotiations: Implications of 'No Deal'". A vote to pass the Brexit Bill explicitly on these terms seems unlikely because MPs can hardly be expected to tell UK citizens that they support Brexit at any cost. However, this is what they would likely be doing, in particular if they passed the Brexit Bill without the House of Lords amendment (b above).

On the other hand, assuming revocability of an Art 50 TEU is a legally very risky strategy that works as a best case scenario, which would allow Parliament to approve the Brexti Bill (with or without the House of Lords amendment) on the hope that they can prevent a calamitous hard Brexit (ie Brexit with no deal) or even a deleterious soft Brexit (ie Brexit with a bad deal) in the future. The problem with this scenario is that it is exceedingly risky and would create a smoke screen to cover the implications of giving an irrevocable notification at this point in time. Moreover, it relies on a moving legal construction that rests either on the Art 50(2) TEU notification being strictly revocable, or in a dynamic understanding of what 'own constitutional requirements' means in Art 50(1) TEU -- to the effect that, as suggested by the now famous "Three Knights Opinion", a conditional notification requiring a further vote in the UK Parliament can be given, even if the condition is not explicitly stated in the notification.

In my view, there are now two options for the UK Parliament to seek to pursue this best case scenario. The first option encompasses a strategy aimed at making it impossible for the UK Government to continue playing Brexit without clarifying whether a scenario where the UK Parliament can have a 'meaningful' vote down the line actually exists, or if it is just normatively-biased wishful legal thinking. In short, to this effect, the UK Parliament needs to approve the Brexit Bill in a way that imposes an obligation on Theresa May PM's Government to notify to the EU Council that a decision to withdraw from the EU has been adopted in principle, but that such decision remains conditional on the UK Parliament's confirmation once the terms of the deal reached at the end of the two year period (or earlier) are settled.

This would, under the duty of sincere cooperation not only make it possible but, in my view, require the EU Council to ask the ECJ whether such notification seemingly in compliance with the UK's own constitutional requirements is a valid notification for the purposes of Art 50 TEU and whether that conditionality binds the EU Institutions and Member States. Rather than hoping for the best in the Irish litigation where Jolyon Maugham QC is trying to achieve this certainty, the way I have just sketched would be the quickest and most guaranteed avenue to (finally) obtain a decision from the ECJ settling the issue once and for all.

The second option is for the UK Parliament to cave in to the existing pressure and authorise the UK Government to give notice unconditionally -- that is, notably, without keeping the amendment introduced by the House of Lords -- and then hope that they got it right when they assumed that the best case scenario was actually in the cards. In my opinion, no responsible member of the UK Parliament (and in particular of the House of Commons) should gamble the long term interests of the UK and its citizens on such optimistic hopes, particularly when there is a way to clear up this uncertainty before it is too late and the process set in motion by an Art 50 TEU notification cannot be legally stopped (under EU law, which is a major risk currently very difficult to assess).

Of course, there would be some short term political cost if the UK Parliament decided to try out the strategy I am proposing. It could be seen as a waste of time if the ECJ's decision on the EU Council's request were to determine that and Art 50 notification can be conditional or revocable. It could also be seen as highly problematic if the ECJ decided the opposite and, after all, the UK Parliament was faced later with the same odious decision that the worse case scenario implies. However, unless the UK Parliament is willing to crash and burn in the worse case scenario, there is value in making the consequences of an irrevocable notification as clear as possible to UK politicians and UK citizens alike. Currently, democratic processes are skewed and distorted by an avoidable legal uncertainty. In my view, it is not wise, nor legitimate, to put pressure on the House of Commons (or later in the House of Lords) to ignore this very significant risk solely in the pursuit of preserving a short term political capital that Theresa May PM and her Government seem too willing to keep for themselves.

Some thoughts on Brexit and its implications

©  Barry Blitt / New Yorker

© Barry Blitt / New Yorker

Brexit occurred and it is difficult to overcome the shock and focus your thoughts on what’s next. 

From a legal perspective, in my mind, the only clear thing is that nothing has yet happened and nothing will happen until Article 50 TEU is formally engaged. With Cameron leaving, the Tory leadership in the air and the Labour leadership under mounting pressure, the problem is though that the EU is going to push hard to receive the Article 50(2) TEU notification as soon as possible. Political pressure has started to mount, although Chancellor Merkel seems intended to at least soften the tone of the opening salvos by representatives of the European Institutions.

Nevertheless, the pain of waiting for an internal UK decision to pull the Article 50 TEU trigger may be too big a bullet to bite, particularly if the bleeding in the financial markets continues and there are further signs of internal destabilising pressures by Eurosceptic groups (from France, the Netherlands, Denmark… or elsewhere). In the end, for the EU, every concession to the UK in this time of turmoil is a very dangerous path—as the echoes of Le Pen’s statement that ‘The UK has started a movement that will not stop’ clearly evidence.

Reasonably, the only way to show ability to manage the situation in an orderly and effective way is to get started as quickly as possible with the negotiations leading to an Article 50(3) TEU withdrawal agreement, either upon request of the (new) UK Government or unilaterally by an EU that may well get to the limit of its patience sooner rather than later and seek ways to construct the necessary notice as served in order to force the UK to sit at the negotiating table. All legal possibilities must certainly be under consideration in different corners of the EU.

In my opinion, and strictly from the perspective of EU law, there are good arguments to consider that a prompt Article 50(1) TEU notification is part of the duty of loyalty and sincere cooperation under Article 4(3) TEU. However, it also seems clear that getting the clock ticking towards the 2-year guillotine when one of the parties is not ready or willing to negotiate may be more than counterproductive. And, more generally, it also seems clear that there is no obvious enforcement mechanism for such duty to notify (if it indeed exists) and that any attempt by the European Commission to bring the UK to the Court of Justice of the European Union would not only be self-defeating but also probably ineffective in the long run. So, all in all, it seems that EU law is very limited in its ability to overcome classic problems of enforceability of international public law when the issues that need addressing are classical problems of strategic behaviour by a sovereign state.

To complicate matters further, the situation is somewhat surreal and difficult to tackle from a legal perspective because the significant complexities of internal UK constitutional law cast a very long shadow on the ‘realness’ of Brexit and the (theoretical) possibilities to disregard the result of the referendum either at the Westminster Parliament or in the corridors of Whitehall. Moreover, as lawyers, we are in danger of falling into a fallacy of presumed effectiveness of the law as we conceive it, particularly if we forget that enforcing EU law against the UK will be particularly difficult and time-sensitive in any given scenario.

Thus, the sad reality is that, more than ever, law is now a slave of politics and the existing legal framework will undoubtedly be bent beyond recognition in order to accommodate whatever is politically feasible at any given point of the impossible to anticipate chain of developments. This creates growing frustration because the impossibility to enforce the legal framework may well lead to its disregard, which threatens to have long-lasting damaging effects on the trust in the rule of law in the UK and the EU.

Hard times for legal pragmatism, which probably advises us to stay away from the craziness of the initial developments after the Brexit referendum and save our thoughts for later, when specific proposals reach the public sphere. However, it is very hard to refrain from commenting, not least because so much is at stake.