Brexit & Procurement: Transitioning into the Void?

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Dr Pedro Telles and I are putting the last touches to a new paper on Brexit and procurement (see here for an earlier analysis). In this working paper, we concentrate on the implications of the draft transition agreement of March 2018, as well as some of the aspects of a potential future EU-UK FTA. The abstract of the paper, which is available on SSRN and on which we sincerely invite any feedback, is as follows:

On 29 March 2017, the UK notified its intention of leaving the EU. This activated the two-year disconnection period foreseen in Article 50 TEU, thus resulting in a default Brexit at the end of March 2019. The firming up of a draft agreement on a transition period to run until 31 December 2020 can now provide a longer timescale for the Brexit disconnection, as well as some clarity on the process of disentanglement of the UK’s and EU’s legal systems. The draft transition agreement of 19 March 2018 provides explicit rules on public procurement bound to regulate ‘internal’ procurement trade between the UK and the EU for a period of over 15 months. However, the uncertainty concerning the future EU-UK relationship remains, and the draft agreement does not provide any indication on the likely legal architecture for future EU-UK trade, including through public procurement. The draft agreement has thus not suppressed the risk of a ‘cliff-edge’ disconnection post-Brexit, but rather solely deferred it. The transition is currently not into an alternative system of procurement regulation, but rather into the void. There have also been very limited developments concerning the UK’s and EU’s repositioning within the World Trade Organisation Government Procurement Agreement (WTO GPA), which creates additional legal uncertainty from the perspective of ‘external’ trade in procurement markets due to the absence of a ‘WTO rules’ default applicable to public procurement.

Against the backdrop of this legal uncertainty, this paper critically assesses the implications for public procurement of the March 2018 draft transition agreement. In particular, the paper identifies three shortcomings that would have required explicit regulation: first, the (maybe inadvertent) exclusion from the scope of coverage of the of the draft transition agreement of procurement carried out by the EU Institutions themselves; second, the continued enforcement of the rules on contract modification and termination; and third, the interaction between procurement and other rules. The paper also and flags up some of the areas for future EU-UK collaboration that require further attention. The paper then goes on to revisit the continued uncertainty concerning the EU’s and UK’s position within the WTO GPA. It concludes that it is in both the UK’s and the EU’s interest to reach a future EU-UK FTA that ensures continued collaboration and crystallises current compliance with EU rules, and to build on it to reach a jointly negotiated solution vis-a-vis the rest of WTO GPA parties.

The full details of the paper are as follows: P Telles & A Sanchez-Graells, 'Brexit and Public Procurement: Transitioning into the Void?' (April 20, 2018) SSRN working paper https://ssrn.com/abstract=3166056.

Legal Archaeology: Timing of Brexit, CJEU case law & substantive public procurement rules

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At the extremely thought-provoking conference "Trade Relations after Brexit: Impetus for the Negotiation Process", I had the chance to present some thoughts on the regulatory challenges that Brexit poses for EU public procurement regulation, and to explore potential solutions that could/should be designed in the context of an agreement regulating future EU-UK relationships. I already posted my general views here. However, the discussions at the conference made me think in more detail about the specific challenge of fostering substantive coordination post-Brexit--which is an unavoidable challenge if the UK is to have any sort of meaningful access to the EU internal market, and all the more in the context of an ambitious FTA.

Of course, this challenge is not all that peculiar to the area of public procurement, and the general problems that section 6(2) of the European Union (Withdrawal) Bill (EUWB) creates concerning the non-bindingness of the future case law of the Court of Justice have been extensively discussed by others. Indeed, by establishing that 'A court or tribunal need not have regard to anything done on or after exit day by the European Court, another EU entity or the EU but may do so if it considers it appropriate to do so', if unchanged, the EU (Withdrawal) Act would create a level of legal uncertainty that nobody desires--first and foremost, prominent UK Judges such as Lord Neuberger.

However, it seems to me that, should Brexit day come some time in 2019 or 2020, the effects of the EUWB could be rather undesirable--unless, of course, UK courts decided to systematically (and voluntarily) keep a close eye on the CJEU future case interpreting the 2014 Public Procurement Package. Why is that?

The UK transposed the 2014 Public Procurement Package by copying it out, primarily into the Public Contracts Regulations 2015 [A Sanchez-Graells, 'The Implementation of Directive 2014/24/EU in the UK', in S Treumer & M Comba (eds), Implementation of Directive 2014/24, vol. 8 European Procurement Law Series (Edward Elgar, forthcoming). ]. Thus, barring any intervening 'fine-tuning' of the transposition, on Brexit Day (and until such time as the PCR2015 are reformed, or EU procurement law subject to further revision), the domestic UK rules will be perfectly aligned with EU public procurement law. However, and rather counterintuitively, this cannot by itself ensure substantive coordination in the foreseeable future. How come?

As things stand, and unless I have missed something, the CJEU is yet to issue any judgment interpreting the three Directives included in the 2014 Public Procurement Package (Dirs 23, 24 and 25/2014/EU). On occasion, the Court has indirectly taken into consideration some of the reforms the 2014 Package brought about, but most of the rules where there is a sharp distinction between the pre-2014 and the post-2014 rules (which sometimes involve a 'flexible recast' or implicit reform of case law that got incorporated to the new Directives) remain untouched. Enter the EUWB.

According to section 6(3) EUWB, "Any question as to the validity, meaning or effect of any retained EU law is to be decided, so far as that law is unmodified on or after exit day and so far as they are relevant to it—(a) in accordance with any retained case law and any retained general principles of EU law, ...". So, when confronted with the need to interpret the PCR2015 (identical to the 2014 Package), the UK Courts will only be able to rely on 'old' CJEU case law, which may or may not be a good proxy of the interpretation the CJEU would (will) make of the revised rules, in particular where there is a clash between such 'old' case law and the new rules [for extended discussion, see GS Ølykke & A Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar, 2016)].

Moreover, given the different techniques of statutory interpretation applicable in the UK and those the CJEU tends to follow, even the most willing UK court may find itself carrying out complex exercises in 'legal archeology' to ascertain the extent to which the 'old' case law buried under the new rules is of any use in the construction of the latter. Oddly enough, should the UK courts--willingly, due to convenience, or inadvertently--give more weight to the 'old' case law than the CJEU itself (which could decide to go by the literal tenor of the new rules, even if they deactivate previous jurisprudential positions, to show deference to the EU legislators) the UK could end up with 'purer' EU public procurement rules than the EU itself. Surely not what the drafters of section 6(2) and (3) EUWB had in mind.

Of course, this hypothetical scenario is bound to lose relevance as time goes by and the CJEU has the chance to engage in the direct interpretation of the 2014 Package--and a long transition period may do away with the peculiarity derived from the current 'estimated' timing of Brexit and the recent reform of EU public procurement law. More generally, all in all, this is probably highly theoretical or even absurd, but I think it militates in favour of a flexible mechanism for UK courts to (voluntarily, sure) send references on interpretation to the CJEU post-Brexit, if there is to be substantive coordination--not solely on procurement, but in all areas of 'regulatory allignment' of a flavour or other, in the context of the agreement for future EU-UK relationships. Will the next wave of negotiations raise to this challenge?

Post-Brexit Procurement: new European Commission (short) guidance, and some broader thoughts

The European Commission has published its 18 January 2018 Notice to stakeholders on 'Withdrawal of the United Kingdom and EU rules in the field of public procurement' (the 'Brexit and procurement notice). This notice is without prejudice to the previously disclosed European Commission position paper on the effects on procurement procedures that are on-going on Brexit day, and of current negotiating efforts to agree on a EU-UK withdrawal agreement. The notice simply sets out the legal implications that would result from a 'cliff-edge' scenario, which the Commission considers necessary in 'view of the considerable uncertainties, in particular concerning the content of a possible withdrawal agreement'.

The Brexit and procurement notice is thus what I would call a 'no deal information sheet'. It sets out the effects that would arise from a UK EU exit without a ratified withdrawal agreement and without an extension of the 2-year period following the Article 50 notification of 29 March 2017. Thus, the Brexit and procurement notice is necessarily limited in its scope and simply lays out the immediate consequences of the UK becoming a third country with no access to the single market. Those effects would result in a significant loss of economic advantages and procedural guarantees in all procurement procedures subject to EU law that started on 30 March 2019 or thereafter.

It is important to stress that those effects would not be mitigated by WTO rules (the general default position in other trade areas) because general WTO rules do not cover public procurement--which is rather covered by a separate multilateral agreement within the context of WTO membership, the  Government Procurement Agreement (WTO GPA). As detailed in a recent article, the UK is not a party to the WTO GPA and it would need to seek fresh accession after Brexit [see P Telles & A Sanchez-Graells, 'Examining Brexit Through the GPA’s Lens: What Next for UK Public Procurement Reform?' (2017) 47(1) Public Contract Law Journal 1-33]. 

Consequently, in the absence of a withdrawal agreement or transition period, as of 30 March 2019, there would be no legal framework ensuring privileged access to the single public procurement market for UK economic operators. This is clearly spelled out in the Commission's Brexit and procurement notice, which highlights the following consequences:

  • UK economic operators will have the status of operators from a third country with which the EU does not have any agreement providing for the opening of the EU procurement market. The consequences of this may not be immediately obvious, but one that I would raise is their potential loss of the right to challenge procurement decisions against their interests in the EU jurisdictions that operate strict reciprocal mechanisms (for a survey and additional analysis, see here). Other consequences would follow from the unwinding of important administrative collaboration mechanisms, which I discuss below.
  • In utilities procurement, covering the areas of water, energy, transport and postal services, tenders offering more than 50% of products originating from the UK may be rejected--given that the Utilities Directive affords this possibility where the third country does not afford comparable and effective access for EU undertakings to its markets, which would be the situation in a 'no-deal' UK EU exit. Even if not subject to outright rejection, tenders including more than 50% UK content would be disadvantaged because the contracting entities shall not award them the contract if there are equivalent offers with less than 50% of the products originating in third countries.
  • In defence procurement, there would also be significant impacts for UK tenderers, as the Defence and Security Procurement Directive allows EU Member States to decide whether or not to allow economic operators from third countries to participate in their defence and security procurement procedures. Equally, even if UK tenderers were allowed to participate, EU Member States would no longer have to accept their UK security clearances on grounds of mutual recognition. As the Commission stresses, this may lead to the exclusion of operators relying on a UK security clearance in EU defence and security public procurement procedures, unless and until they obtained additional ones from the relevant EU Member State.

These may seem minor issues, but I would certainly argue they are not. In particular because those effects would be mirrored in domestic UK procurement, where EU economic operators would face equivalent consequences. In written evidence submitted to a House of Lords enquiry last year, I made some observations that are as relevant now as they were then:

  1. Bilateral UK-EU procurement-related trade can be estimated at around 15% of the total value of procurement, or close to 2.5% of GDP. This includes both direct and indirect cross-border procurement-related trade. The magnitude is larger if access to WTO GPA markets is considered.
  2. The UK’s exposure to public procurement-related trade in services in the EU is particularly relevant; the UK alone accounts for 84 % of the total value procured at EU level in awards of more than 100 million euros (approx. £85 mn).
  3. Losing the possibility of this cross-border trade would clearly be detrimental to the UK public sector, which would be at risk of not obtaining top quality services and/or facing increased prices from reduced competition amongst domestic suppliers. UK businesses would also be negatively affected if they lost the option of direct and indirect trade in services to the EU.
    .......
  4. ‘Hard Brexit’, ie no trade agreement of any kind combined with loss of WTO GPA membership, would imply loss of access to EU and worldwide procurement markets, for services but also for goods and works. This would likely have a major impact both on the UK public sector and in its business community, particularly that reliant on cross-border direct and indirect procurement-related trade.

These are serious and very worrying potential implications of the type of scenario covered by the Brexit and procurement notice, which should prompt renewed and continued efforts on both the UK and EU side to at least reach an agreement on withdrawal terms that facilitates continued frictionless procurement-based trade. I say at least because my personal view is that Brexit should be stopped (for a persuasive case, see Prof Syrpis' post). But in the absence of that better solution and in the alternative, there is clearly value to be preserved in finding a better solution to the alternative 'do-deal' scenario.

In that regard, I am honoured to have been invited to speak at the conference 'Trade Relations after Brexit: Impetus for the Negotiation Process'  and have the chance to offer my views on what regulatory challenges arise from the current situation, and to propose some potential solutions. These are my draft slides for the talk, and I probably will post a more detailed account after the conference. As indicated in the slides, some of the areas of immediate worry should concern administrative cooperation and remedies mechanisms. However, as also indicated there, all my analysis (and everyone's) is purely speculative in the absence of an agreed position on the basic elements of the future EU-UK relationship. Thus, everything there needs to be taken with a pinch of salt.

 

 

Examining Brexit Through the GPA’s Lens: What Next for UK Public Procurement Reform?

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Dr Pedro Telles and I have just published 'Examining Brexit Through the GPA’s Lens: What Next for UK Public Procurement Reform?' (2017) 47(1) Public Contract Law Journal 1-33 and, thanks to the permission of the American Bar Association, made it available through SSRN https://ssrn.com/abstract=3076543. This is the abstract:

The United Kingdom has formally started the process of leaving the European Union (so called Brexit). This has immersed the UK Government and EU Institutions in a two-year period of negotiations to disentangle the UK from EU law by the end of March 2019, and to devise a new legal framework for UK-EU trade afterwards. The UK will thereafter be adjusting its trading arrangements with the rest of the world. In this context, public procurement regulation is broadly seen as an area where a UK ‘unshackled by EU law’ would be able to turn to a lighter-touch and more commercially-oriented regulatory regime. There are indications that the UK would simultaneously attempt to create a particularly close relationship with the US, although recent changes in US international trade policy may pose some questions on that trade strategy. Overall, then, Brexit has created a scenario where UK public procurement law and policy may be significantly altered.

The extent to which this is a real possibility crucially depends on the framework for the future trading relationship between the UK and the EU. Whereas ”EU-derived law” will not restrict the UK’s freedom to regulate public procurement, the conclusion of a closely-knit EU-UK trade agreement covering procurement could thus well result in the country’s continued full compliance with EU rules. Nonetheless, this is not necessarily a guaranteed scenario and, barring specific requirements in future free trade agreements between the UK and the EU or third countries, including the US, the World Trade Organisation Government Procurement Agreement (GPA) seems to be the only regulatory constraint with which future UK public procurement reform needs to conform. However, the position of the UK under the GPA is far from clear. We posit that the UK will face a GPA accession process and GPA members may see Brexit as an opportunity to obtain new concessions from the UK and the EU, which could be both in terms of scope of coverage or regulatory conformity. Further, given the current trend of creating GPA plus procurement chapters in free trade agreements, such as the US-Korea FTA, the GPA regulatory baseline will gain even more importance as a benchmark for any future reform of public procurement regulation in the UK, even beyond the strict scope of coverage of the GPA. Given the diversity of GPA-compliant procurement systems (such as the EU’s and the US’), though, the extent to which the GPA imposes significant restrictions on UK public procurement reform is unclear. However, we argue that bearing in mind the current detailed regulation in the UK might itself limit deregulation due to the need to comply with the international law principle of good faith as included in the 1969 Vienna Convention on the Law of Treaties and, to a certain extent, the United Nations Convention Anti-Corruption. 

The aim of this paper is to try to disentangle the multi-layered complexities of Brexit and to explore the issues that Brexit has created in the area of international public procurement regulation, both from the perspective of ‘internal’ EU law-related issues and with regard to broader ‘external’ issues of international trade regulation, as well as to assess the GPA baseline regulatory requirements, and to reflect on the impact these may have on post-Brexit public procurement reform in the UK.

UK Government's Position Paper on CJEU jurisdiction: A Short List of Tricky Issues

Earlier today, the UK Government has published its position paper on the jurisdiction of the CJEU post-Brexit: Enforcement and dispute resolution - a future partnership paper (23 August 2017). The paper has been received as constructive by eg David Allen Green and Prof Armstrong, and Prof Peers has stressed on twitter that there is a clash of redlines despite the effort the paper makes to distinguish issues of enforcement (of individual rights) and dispute resolution (between the UK and the EU). I am sure I have already missed some useful reactions and that the commentary on the position paper will keep piling up in the coming hours.

With this post, I only intend to highlight some of the tricky issues that I have identified on first reading of the paper. They are presented in the same order of the relevant paragraphs of the paper where they first appear, but this does not necessarily reflect their level of trickiness.

  1. The way the position in EU is depicted may be too simplistic, in particular concerning the acceptance of international dispute resolution agreements. For example, paragraph 20 refers to the Association Agreements with Ukraine and Moldova as instances where the EU has accepted submission to binding (international) arbitration mechanisms.

    However, taking the EU-Ukraine Agreement as example, the arbitration mechanism is limited due to the need to ensure CJEU supremacy when it comes to interpretation of EU law. In that regard, Art 322(2) clearly establishes that '[w]here a dispute raises a question of interpretation of a provision of EU law [relating to regulatory approximation contained in Chapter 3 (Technical Barriers to Trade), Chapter 4 (Sanitary and Phytosanitary Measures), Chapter 5 (Customs and Trade Facilitation), Chapter 6 (Establishment, Trade in Services and Electronic Commerce), Chapter 8 (Public Procurement) or Chapter 10 (Competition), or which otherwise imposes upon a Party an obligation defined by reference to a provision of EU law], the arbitration panel shall not decide the question, but request the Court of Justice of the European Union to give a ruling on the question. In such cases, the deadlines applying to the rulings of the arbitration panel shall be suspended until the Court of Justice of the European Union has given its ruling. The ruling of the Court of Justice of the European Union shall be binding on the arbitration panel'. Given that these are matters that would be at the core of an EU-UK agreement, the extent to which agreeing on binding internal arbitration would circumvent (direct) CJEU jurisdiction to interpret EU law and identical provisions can be questioned.

    This is however presented in very soft terms in the position paper. In relation with the EU-Moldova Agreement, and under the heading 'Provision for voluntary references to CJEU for interpretation', the position paper indicates that '[t]his approach can apply in respect of both judicial and political dispute resolution models. For example, Article 403 of the EU Moldova Association Agreement requires that an arbitration panel established to resolve disputes shall, where the dispute concerns interpretation of EU law, refer the question to the CJEU and be bound by its interpretation' (para 56, emphasis added); and that 'In the case of the Moldova Association Agreement, the responsibility to make a reference rests with the arbitration panel ... These examples do not involve one party to the agreement deciding, unilaterally, to seek a binding interpretation of the agreement from the CJEU' (para 58). While this is *technically* correct, it is also presented in a misleading way because should an arbitration panel not seek the CJEU's interpretation, whcih it is required to do so, the final award would clearly not be enforceable. Ultimately, in my view, the restrictions derived from the need to ensure the CJEU's position as sole interpreter of EU law create a much harder and relevant restriction on the design of international arbitration or other dispute resolution mechanisms than the image that evaporates from the position paper.

    In fairness, this is somehow recognised in para 38 of today's position paper: 'there are limitations to the matters on which the EU can subject itself to the binding decisions of a quasi-judicial or judicial authority, like an arbitration panel. The arbitration panel cannot adjudicate on matters of interpretation of EU law so as to bind the EU and its Member States'. However, this is not followed by a view on how to resolve this limitation, should the future EU-UK agreement be subjected to international arbitration--maybe this is just aimed at creating space for negotiations, but a clearer position of the UK Government on the acceptance (or not) of a reference mechanism to the CJEU as part of arbitration-based dispute resolution mechanisms will be needed sooner rather than later and the answer seems constrained to a binary yes/no ...
     
  2. Whether the EU would accept to the creation of another, parallel court, like the EFTA Court can be highly questioned. The assumption in para 21 that the EFTA court is a 'model' that can be replicated seems to me difficult to accept. In my opinion, the only way of benefiting from that solution would be for the UK to become a member of the European Economic Area (which the UK Government does not want to pursue), or else for the EFTA Court to be reformed to expand its jurisdiction to the EEA + UK (which seems unlikely). In my opinion, the creation of another institution with EFTA Court features but with jurisdiction only for the EU-UK relationship does not seem plausible.

    This has a major effect on the viability of post-Brexit coordination of UK and CJEU case law as discussed in paras 46-51 of the position paper because, as is clear from all the examples in that section, the mechanisms for mutual coordination of jurisprudence have so far only been accepted within the scope of the EEA (+ Switzerland). Outside of the scope of the EEA / EFTA Court jurisdiction, it seems difficult to see the EU accepting this type of mechanisms, which are the historical result of a different time of the European integration process. Moreover, the UK government seems to point at differential approaches to case law coordination when it indicates that 'extent to which this approach may be valuable depends on the extent to which there is agreement that divergence should be avoided in specific areas' (para 51). It seems difficult to accept that the EU can tolerate divergence in any areas that are considered of relevance in the context of the future EU-UK relationship (and those not relevant, are likely to be or end up outside of the framework).
     
  3. The position that 'in both the UK and the EU, individuals and businesses will be able to enforce rights and obligations within the internal legal orders of the UK and the EU respectively, including through access to the highest courts within those legal orders. This would be the case in respect of both the Withdrawal Agreement, including an agreement on citizens’ rights, and the future partnership' (para 23) seems to simplistic to me. First, because this is precisely one of the redlines of the EU's negotiating position, which has indicated that there has to be a 'possibility of administrative or court proceedings to be initiated post-exit for facts that have occurred before the withdrawal date' (para 16 of EU negotiating guidelines), which implies the need to preserve CJEU intervention for the interpretation of the relevant EU law provisions as they applied at the time of the material facts. Second, because litigation is likely to raise complex issues of conflict of laws that can hardly be addressed unilaterally by either of the legal systems.

    As recognised in yesterday's position paper on cross-border civil and commercial litigation: 'Ending the direct jurisdiction of the CJEU in the UK will not weaken the rights of individuals, nor call into question the UK’s commitment to complying with its obligations under international agreements; where appropriate, the UK and the EU will need to ensure future civil judicial cooperation takes into account regional legal arrangements, including the fact that the CJEU will remain the ultimate arbiter of EU law within the EU' (para 20, emphasis added). The same will, of course, happen in every other dimension of legal relationships and, consequently, the same mechanism to 'take account of the position of the CJEU' will need to be extended universally. In my view, this is far away from the streamlined assumption that litigation will be contained in either of the jurisdictions.

    Interestingly and confusingly, para 24 of today's position paper takes a different approach and stresses that 'Ending the direct jurisdiction of the CJEU in the UK will not weaken the rights of individuals, nor call into question the UK’s commitment to complying with its obligations under international agreements. The UK’s commitment to the rule of law has been built over centuries, and reaffirmed time and again by effective, independent courts. That commitment to the rule of law means that anyone seeking redress within the UK’s legal systems will know they will be judged by clear rules applied in accordance with the law by the UK’s expert, independent and internationally respected judiciary.' The extent to which both position papers are in contradiction, or the extent to which the UK government can seriously aim to create CJEU-friendly mechanisms for civil and commercial matters and simultaneously CJEU-avoiding mechanisms for eg public law seems to me to be prone to provoke more than a few headaches for anyone trying to solve the puzzle.
     

Overall, I think that the conclusion in the position paper that 'there are a number of additional means [not involving the direct jurisdiction of the CJEU] by which the EU has entered into agreements which offer assurance of effective enforcement and dispute resolution and, where appropriate, avoidance of divergence, without necessitating the direct jurisdiction of the CJEU over a third party' (para 67) may be overstated and that the position paper, while more flexible than could have been expected, still seems to head full steam ahead for a clash with the unique position of the CJEU in interpreting EU law and preserving individual (citizens') rights. Time will tell.

Scoping the impact of Brexit for NHS procurement

NHS England spends over £20 billion every year on goods and services, which typically accounts for around 30% of the operating costs of each hospital. A significant part of the remainder of NHS non-salary budget involves the commissioning of health care services. This expenditure and commissioning is controlled by NHS procurement rules, which in part derive from EU law. Different procurement rules apply in different countries within the UK, and both Scotland and Northern Ireland both have separate regulatory schemes. Even though this post only focuses on the situation in England, some issues reflect broader concerns in the UK context. Generally, NHS procurement rules are regularly criticised for imposing excessive red tape and compliance costs on the NHS, and calls for NHS procurement reform to free it from such strictures are common.

In this context, Brexit could be seen as an opportunity to overhaul NHS procurement and to move away from the perceived excesses of EU law (see eg Cram: 2016). However, I think that it is far from clear that such reform could not fit within the blueprint of EU law, and that most of the constraints on NHS procurement rather derive from independent decisions adopted by the UK over the last 25 years. Moreover, from an economic perspective, Brexit will probably hurt the functioning of the NHS (including its procurement), with or without significant regulatory reforms.

This post is based on my presentation at the event Brexit, Regulation and Society, held by ManReg: The Manchester Centre for Regulation, Governance and Public Law (slides at the bottom of this post), and concentrates on two issues. First, does EU law prevent significant reforms of NHS procurement and, if so, can Brexit suppress such constraints? Second, is the way the Brexit process is unfolding conducive to an improvement of NHS procurement, both from an economic and a regulatory perspective?

Starting point, where were we before Brexit?

Since the 1990s, in England, the activities of the NHS have been characterised by a peculiar purchaser-provider split. Some branches of the NHS act as purchasers or commissioners of health care services (currently, clinical commissioning groups, or CCGs), while other branches of the NHS (trusts and foundation trusts) act as providers of health care services and compete with private providers in some markets. The activities of these entities are overseen by NHS Improvement as sector regulator.

The purchaser-provider split policy was introduced with the aim of creating an “NHS internal market” to generate competition-based incentives for the improvement of service delivery and cost management. However, the system has been permanently evolving (a ‘continuous revolution’, Maynard:2016), and this has both created increased scope for public-private competition (Odudu: 2012; Hunter: 2016), and notable difficulties in keeping pace with the successive waves of NHS procurement re-regulation.

Currently, NHS procurement is primarily covered by two sets of domestic rules (as well as a large volume of soft law). The core bodies of rules applicable to NHS procurement are:

Additionally, given the organisation of the system as a mixed market with public and private suppliers in different forms of competition for different services, NHS procurement is also subject to a host of EU and UK competition rules, such as:

  • The Competition Act 1998 and the Enterprise Act 2002 (as domestic statutes that replicate, to a large extent, substantive EU law prohibitions); and the
  • Treaty on the Functioning of the EU, including State aid rules – and in particular those for the financial support to the provision of Services of General Economic Interest.

On the whole, this results in a rather complex regulatory setting that is commonly criticised as imposing significant constraints on the way NHS procurement is carried out. However, it is important to stress that these constraints ultimately depend on the existence of the purchaser-provider split and the establishment of a mixed market for health care services—which are decisions independently made by successive UK governments rather than an EU imposition. There is nothing in EU law that obliges member states to open up public services to competition, and the UK could move back to a fully integrated public system without infringing EU law. In other words, EU law is not the cause of any shortcomings identified in the existing regulation of NHS procurement of health care services.

Could Brexit alter the situation?

Given the above, in regulatory terms, the short answer is that Brexit should mostly not have any meaningful effect on the regulation of NHS procurement. Significant reforms are possible under current EU law. They would however require political drive and changes in funding schemes. Indeed, already before the referendum, it was clearly stressed that “leaving the EU is an irrelevance when it comes to what many regard as the creeping marketisation of the NHS” (Hunter: 2016; and in similar terms, later reiterated by McKenna: 2016; Taylor: 2016).

Leaving the single market would not lift constraints on the reform of NHS procurement, or NHS governance more generally, but it could affect it in practical terms. Indeed, it was clear that Brexit could have negative operational impacts for NHS procurement. This would be the case both if: (1) the “NHS internal market” was kept, because exiting the EU’s single market could have negative impacts on private competition in health care provision, including in the market for health care insurance in the UK; or (2) if the “NHS internal market” was to be dismantled, since the acquisition of equipment and supplies from outside the UK would face barriers and additional costs (Hall: 2017), which can only be exacerbated by the negative impact of Brexit on the economy, both in terms of economic slowdown and inflation (which are now materialising; ONS: 2017).

NHS (procurement) in the Brexit and general election campaigns

NHS funding featured prominently in the political campaign leading to the Brexit vote. Most discussion concentrated on the level of funding for a cash-strapped NHS. However, the deeper impacts of Brexit on the NHS – in particular those of a hard Brexit that implied the UK’s exit from the EU’s single market and customs union – received much less attention (not least because leaving the single market was back then explicitly rejected as an option for the future).

Nonetheless, it was clear that any impact of Brexit on NHS procurement was compounded by the uncertainty surrounding the framework for UK-EU trade post-Brexit. This was not clarified during the Brexit campaign, and the following plans unveiled by the UK Government failed to provide any further specifics. Neither the Brexit White Paper nor the Great Repeal White Paper reduced such uncertainty. The Brexit White Paper simply stated that the Government’s intention is to “not be seeking membership of the Single Market, but … pursue instead a new strategic partnership with the EU, including an ambitious and comprehensive Free Trade Agreement and a new customs agreement.” The Great Repeal White Paper only included one mention of procurement as an example of a ‘negative procedure’ for the adjustment of EU-derived law post-Brexit.

This situation continued during the recent electoral campaign, where issues around NHS funding were more prominent than issues surrounding reform of the NHS system, including NHS procurement. However, there seemed to be some commonality to the long-term strategic goals of both main political parties around a correction (to different degrees) of the current market-based purchaser-provider split system. Both the Conservative and the Labour manifestos pledged more funding for the NHS. Both alluded to a change of system.

Labour promised to “reverse privatisation of our NHS and return our health service into expert public control [including the] repeal [of] the Health and Social Care Act  … and [making] the NHS the preferred provider”. The contours of this proposal are rather vague. However, in terms of NHS regulation, this would seem to suppress public-private competition for the provision of health services (possibly excluding the application of competition law) and the NHS procurement regime, by mandating provision of services by the NHS (at least as preferred provider).

The Tories indicated that they would “consult and make the necessary legislative changes. This includes the NHS’s own internal market, which can fail to act in the interests of patients and creates costly bureaucracy. So we will review [its] operation … and, in time for … the 2018 financial year, we will make non-legislative changes to remove barriers to the integration of care”. This seems even less clear, but could imply a simple reform of NHS procurement policy with the aim of maximising the effectiveness of the concept of ‘patient interest’ under the NHS Regulations (No 2) 2013.

Interestingly, both changes to the purchaser-provider split seem possible within the constraints of the existing EU regulatory framework, and they seem to require political choices unaffected by Brexit – with the obvious exception of funding, which is directly (and negatively) affected.

Brexit … one year on – What now?

Almost a year after the UK’s vote to leave the EU, and after the surprising result of the General Election, the only thing that can be said with a minimum of confidence about the impact of Brexit on NHS procurement is that uncertainty prevails (similarly, Simpkin & Mossialos: 2017), and the economic impacts are probably going to be both negative and severe. This seems to run in the opposite direction of the aims (and promises) of those supporting Brexit.

The situation may have been worsened as a result of the General Election, as the Tory government is seeking to reach an agreement with the DUP for support of a minority Conservative government. Either way, this seems likely to require concessions in terms of funding for public services in Northern Ireland, which could impact plans to boost investment in the NHS in England. However, there is no clear indication that other reforms of NHS procurement should necessarily be altered. The question thus remains: Will NHS procurement be reformed along the lines of the Conservative manifesto and, if so, what will that entail?

On-going reforms and uncertainties

Assuming continuity of recent policy developments, it is worth stressing that, since the adoption of the Five Years Forward View for the NHS in England in 2014, the system has been progressively reoriented. Current reforms are geared towards experimentation with the so-called sustainability and transformation plans (STPs), which aim to suppress the purchaser-provider split, including through the creation of accountable care organisations (ACOs). Recently, Stevens (CEO NHS England) clearly indicated this goal by stressing that STPs “will for the first time since 1990 effectively end the purchaser-provider split, bringing about integrated funding and delivery for a given geographical population”. The strategy is still not clearly spelled out and there are open questions concerning its feasibility and/or desirability (Hare:2017).

However, even if this strategy was completely carried out, it seems unlikely that the NHS would not have to comply with procurement rules at all. While a suppression of the purchaser-provider split would potentially allow for a derogation from the NHS Regulations (No 2) 2013, the NHS would still need to buy a number of goods and services from the market. Thus, the reforms to NHS procurement refer to the suppression of a layer of complication and constraints in NHS governance (that derived from the purchaser-provider split), but not a complete shielding of the NHS from procurement and competition rules.

These would remain particularly relevant in terms of new investments in physical and IT architecture for the NHS, which have been pledged by the Conservatives (and by Labour). Expenditure of NHS funds would remain subject to the strictures of the Public Contracts Regulations 2015, which could only be reformed or derogated post-Brexit in the absence of a UK-EU free trade agreement covering procurement.

Overall assessment

In view of all this, I would reach two conclusions. First, that the discussion surrounding the regulation of NHS procurement needs to concentrate on the fundamentals of the potential alternative models: ie a system of integrated NHS governance subject only to public law checks and balances, vs a mixed market system for the provision of health care services for the purposes of the NHS (including some form of purchaser-provider split) subject (also) to market regulation. Most of the pre-Brexit and current discussion conflates elements of both models without acknowledging that both fit within the EU regulatory framework and, consequently, decisions on the model that should be adopted (and the regulatory implications that follow) exclusively depend on UK political decisions.

Second, that the broader economic context in which NHS procurement takes place has a deep influence on the ability of the NHS procurement function to support the provision of high quality health care services. From that perspective, the deterioration of the economic climate created by Brexit and the uncertainty surrounding the future UK-EU trading framework are damaging NHS procurement as much as they are damaging the UK’s economy and public sector more generally. In this context, whichever reforms of the NHS model that may follow from the above will be negatively affected by Brexit. In these circumstances, I find limited space for hope for an improvement in the functioning of the NHS, including its procurement function, at least in the medium term.

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.

A disappointing Brexit White Paper makes for disappointing comments

Theresa May's Government has published the White Paper on The United Kingdom’s exit from and new partnership with the European Union earlier today. It is an extremely disappointing document that, unfortunately, only allows for disappointing comments. The only remarkable aspect of the Brexit White Paper is the number of dimensions in which it is disappointing.

Its timing is probably one of its most disappointing aspects. Given that the House of Commons debated the European Union (Notification of Withdrawal) Bill and voted its passing to Committee stage only yesterday, today's publication of the Brexit White Paper mimics an absurd claim of power by the Government over the Parliamentary scrutiny of Brexit (the power to unduly limit and restrict it).

On the contrary, publication of the White Paper before the Parliamentary debate would have created the double effect of avoiding the impression that Government is only very reluctantly complying with the UK Supreme Court's requirement for Parliamentary approval of the giving of notice under Article 50 TEU (which would have been positive for the Government), but would also have allowed MPs to criticise the Government for the appallingly poor quality of the document (as per below, which would have been clearly negative for the Government) before even moving to the discussion of amendments.

Clearly, then, the timing of the publication of the Brexit White Paper demonstrates the Government's insecurity about its content and its overconfidence about the ability to push for (hard) Brexit no matter what. In my view, this is a dangerous combination of attitudes.

The content of the Brexit White Paper is also extremely disappointing. It is not more than a minimally expanded version of the speech given by Theresa May PM some weeks ago, coloured with some superficially analysis macroeconomic data, and most of its sections are simply a very superficial account of the current state of EU law coupled with the (unfounded) hope and half promise that Theresa May PM's Government will obtain a great deal from the EU.

Twitter is already full of criticism based on obvious mistakes in the Brexit White Paper, and I am sure that the analysis that will emerge in blogs and newspapers in the next few hours and days will not be more positive. However, I also find it unlikely that much of the criticism will be able to go beyond general issues or points already raised against Theresa May PM's speech, as the Brexit White Paper has not brought any meaningful additional detail that we can analyse. In any case, it may be worth highlighting that I found the sections on the creation of an alternative dispute resolution mechanism to substitute the ECJ's jurisdiction (section 2 plus Annex A) and on trade with the EU (section 8) particularly disappointing.

Section 2 on 'Taking control of our own laws' is very confusing and seems to me to miss several important points. The fundamental issue it does not address is the extent to which future case law of the ECJ will still need to be applied and followed by UK courts and in the UK more broadly, simply as a result of the incorporation of EU law into domestic law, or as an non-renounceable element of the EU's regulatory architecture of the single market.

This has implications in a number of dimensions, such as the difficulty in coordinating the effects of the Great Repeal Bill (which is meant to consolidate EU law into UK law as of the time of withdrawal) with the effects of the ECJ's interpretation of EU law, which is most frequently not time bound and thus has retroactive effect. A simple example would imply a situation where UK withdrawal from the EU happens in 2019 and later, say in 2021, the ECJ interprets a provision of EU law that was incorporated into UK law by the Great Repeal Bill. In that case, lawyers will feast with the litigation that will ensue from the difficult issue of determining the interpretation to be given to the 'nationalised' provision of EU law and the extent to which it would be consistent with the (Parliamentary) intention of using the Great Repeal Bill to 'download' EU law into UK law without any amendment at that point (or barring ulterior Parliamentary intervention or explicit reform through secondary legislation).

But even without going that far in creating a severance between UK and EU law, there is an unknown number of trade-related areas that will require continued compliance with ECJ case law as a technical matter and as far as the UK intends to have any access to the single market. For example, if the UK wants to engage meaningfully in trade with the EU, one of the main issues will be the need for continued compliance with technical standards (to which the Brexit White Paper also refers, but in a confusing or slightly misleading way in section 8), and these are bound to be increasingly subject to ECJ interpretation, particularly after the assertion that they are part of EU law and thus subject to its jurisdiction in the recent case of James Elliott Construction Limited v Irish Asphalt Limited (C-613/14, EU:C:2016:821).

Disposing of these very relevant difficulties in a simple paragraph that boasts that "We will bring an end to the jurisdiction of the CJEU in the UK. We will of course continue to honour our international commitments and follow international law." is a grossly misleading oversimplification.

Section 8 on 'Ensuring free trade with European markets' is not better. From a legal perspective, the point I find most internally contradictory in this section is the fact that the Brexit White Paper indicates continuously how several areas of regulation of the internal market for services hinge on the existence of a single regulatory framework at EU level, on legal certainty (which is logically and legally based on the interpretation of that regulatory framework by the ECJ) and on an effective system of civil judicial cooperation as well as cooperation between regulators and independent enforcement agencies.

Not get bogged down on detail, I fail to understand how this is a model that can be replicated without the need for the UK to comply with EU law (as interpreted by the ECJ, see above) and, even if that is possible, how could that be in line with a reduction of red tape and administrative burden for companies that would, by implication, need to comply with more than one regulatory framework--unless they were only active in the UK. Generally, the logic of wanting to create mutual recognition and at the same time pushing for regulatory disparity seems starkly at odds with the logic of regulatory architecture of the single market. Similar problems arise with the Brexit White Paper veiled insinuation that the UK can still be member of pan-EU agencies despite not being a Member of the EU/EEA. Overall, this section simply does not offer a logic that could pass critical muster.

From that perspective, the Brexit White Paper correctly identifies that "Unlike other trade negotiations, this is not about bringing two divergent systems together. It is about finding the best way for the benefit of the common systems and frameworks, that currently enable UK and EU businesses to trade with and operate in each others’ markets, to continue when we leave the EU through a new comprehensive, bold and ambitious free trade agreement." But it is plainly wrong in the implications it tries to derive from this. The blatantly obvious impossibility of this logic is that, whereas in other types of trade negotiations the harmonisation of systems will result in a reduced administrative burden for both the public and private sectors, in this case the need to dissociate a truly integrated system into two coordinated systems will necessarily create those burdens for both the public and the private sector. And this is what makes this negotiation so riddled with impossibilities and so suicidal: it is a negotiation to move from a win-win to a lose-lose scenario, and the only thing the negotiating parties can hope is to minimise the loss. In my mind, this is an irrational process to engage with, and the only justification for it is that Theresa May PM's government hopes for benefits that no one else identifies. If nothing else, the Brexit White Paper has done nothing to provide evidence of the existence of those potential gains or of the feasibility of the (under-worked) plans to unleash them.

Overall, thus, I find the Brexit White Paper extremely disappointing. And I can only blame myself for having had any hopes that it would not be so.

 

 

ECJ new recommendations on the initiation of preliminary ruling proceedings sends clear signal to UK Supreme Court that the Miller case must be referred

The Court of Justice of the European Union (CJEU) has published today a new set of Recommendations to national courts and tribunals, in relation to the initiation of preliminary ruling proceedings [2016] OJ C 439/1. This is a very timely document, which clarifies the circumstances under which a reference for a preliminary ruling can or must take place, as well as the basic parameters that those requests must meet in order to effectively enable the CJEU to issue preliminary rulings, including in cases requiring particularly expeditious handling.

In the context of the Brexit related litigation before the UK Supreme Court in the appeal of the High Court's Miller decision, these Recommendations are particularly timely and relevant. There has been a very intense discussion by distinguished legal scholars about the existence or not of an obligation to refer the case to the ECJ for interpretation of Article 50 TEU--and, in particular, in relation with the (ir)revocability of an Art 50(1) notice in view of Art 50(2) TEU. The positions are too wide to discuss here (see this very useful compilation of materials), and I hold the relatively minoritarian view that the UK Supreme Court is under an absolute and inexcusable obligation to request a preliminary ruling on the interpretation of Article 50 TEU.

I find additional support for my view and the underlying interpretation of the CILFIT test in para [6] of the CJEU's Recommendations, which very clearly indicates that:

Where a question is raised in the context of a case that is pending before a court or tribunal against whose decisions there is no judicial remedy under national law, that court or tribunal is nonetheless required to bring a request for a preliminary ruling before the Court (see third paragraph of Article 267 TFEU), unless there is already well-established case-law on the point or unless the correct interpretation of the rule of law in question admits of no reasonable doubt (emphasis added).

Para [3] is also relevant in its stress that:

The jurisdiction of the Court to give a preliminary ruling on the interpretation or validity of EU law is exercised exclusively on the initiative of the national courts and tribunals, whether or not the parties to the main proceedings have expressed the wish that a question be referred to the Court (emphasis added).

In my opinion, the CJEU has sent the clearest possible message to the UK Supreme Court: they expect a request for an interpretation of Article 50 TEU. And the UK Supreme Court will be well advised to do so as soon as possible, once all intervening parties have presented their arguments. Tertium non datur.

Is the UK moving towards 'innovative small business' procurement set-asides? Would it be a desirable move?

PM Theresa May announced yesterday that the UK Government is to look at how its own public procurement can be used to drive innovation in small businesses that “not only spurs innovation in the public sector, [but] gives new firms a foot in the door”, as part of a review into the Small Businesses Research Initiative (SBRI). It is not clear what innovation in small businesses means, as it could both refer to technologically-innovative small businesses, or to diverse or new forms of small businesses (as part of social or economic innovation more generally).

It is worth noting that PM May indicated that the UK could follow the example of the US government, which concentrates its small business policy in the Small Business Administration (SBA) and the small business set aside of federal government contracts. This seems to indicate a preference for the second type of small business policy (ie a policy for diversity in small businesses, or in support of new business governance forms, on which see here).

In the US, the current, government-wide procurement goal stipulates that at least 23% of all federal government contracting dollars should be awarded to small businesses. This figure is further broken down into additional targeted sub-goals for: Women Owned Small Business (5%), Small Disadvantaged Business (5%), Service Disabled Veteran Owned Small Business (3%) and Historically Underutilized Business Zones (HUBZone) (3%). Notably, none of these set asides are technology-innovation driven, but rather aim to support targeted social groups through a reverse discrimination approach in the award of public contracts.

It is also possible that what PM May had in mind is closer to a policy to provide support for technological innovation-driven small businesses, particularly as she said the review would look at how they could “increase its impact and give more innovators their first break”. 

This is a policy that, even without the industrial policy pressures related to Brexit and its surrounding negotiations and attempts of political capture by economic interest groups, other political parties are seeking to explore in other EU countries. For example, in Spain, a proposal to introduce set-asides of 3% of public contracts for 'legally certified innovative SMEs' was floated recently (see criticism by Dr Pedro Telles and myself here). Thus, a certain trend seems to be emerging in the area of innovation oriented industrial policy, which seems to be the early 21st century hype.

One of the main hurdles to the creation of small business set asides in EU countries derives from EU public procurement law itself, which simply bans this option. Further, the EU's negotiating position in international procurement treaties, and in particular in the WTO Government Procurement Agreement (GPA), have locked in an anti-SME set-aside policy approach (as discussed by K Dawar and M Skalova, 'The Evolution of EU Public Procurement Rules and its Interface with WTO: SME Promotion and Policy Space' in GS Ølykke & A Sanchez-Graells, Reformation or Deformation of the EU Public Procurement Rules (Elgar, 2016)]. 

For the UK, then, the prospect of Brexit may change the legal situation and open the door to an unrestricted 'innovative small business' set-aside policy. But this would only be possible provided the UK exited the single market and resiliated the EU's WTO GPA commitments and negotiating position regarding SME set-asides. This does not seem a likely, and indeed is not a desirable scenario, so the exploratory policy announcement made by PM May may well result in no relevant policy after all. In any case, and more importantly, before aiming to the develop such a policy, the UK would be well advised to think hard about this and try to gain a more sophisticated understanding of the US' system.

Far from the rosy picture painted by PM May and others, the US federal government's set-aside programme is permanently criticised for the opacity of its direct and indirect costs to the tax payer [very clearly, see [AG Sakallaris, ‘Questioning the Sacred Cow: Reexamining the Justifi cations for Small Business Set Asides’ (2006–2007) 36 Public Contract Law Journal 685; and K Loader, ‘The Challenge of Competitive Procurement: Value for Money versus Small Business Support’ (2007) 27 Public Money and Management 307].

The system has clear explicit costs in terms of its administration and the litigation ensuing classifications of businesses as small or not (or innovative or not) in the first place. Additionally, and simply put, the main implicit cost of a small business set-aside programme, be it for innovative enterprises or of a general nature, is that it reduces competition for public contracts, and the reduction of competition resulting from this artificial division of the market comes at a cost in terms of potential higher contract prices as well as reduced incentives for innovation for non-small businesses [generally, see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 60-77]. Thus, this is a very expensive system to run and, in a scenario of ever stronger competing pressures for public funds, legitimate questions can be raised about its desirability.

Moreover, already under the existing UK and EU rules, there are plenty opportunities to engage in a small business friendly management of public procurement without creating set aside programmes (see, for instance, the work of the Procurement of Innovation Platform). Providing better access to public procurement for small businesses has the advantage of making the process more accessible to all interested bidders and, in the end, has the potential of unlocking stronger competition for public contracts. This, of course, is also not a cost-free policy and it requires investment in training and skills in the public sector. However, this is bound to be a much more productive investment in the long run.

Overall, then, following PM May's announcement of the inclusion of government procurement in the innovation review, in my opinion, the best path to follow is to think seriously about how public procurement law can really be simplified and transformed in a way that benefits from technological development and with a view of closing the shortage of skills and human resources in the public sector. This is something that can and should be done independently of Brexit, and which can benefit every public procurement system (for my general ideas, see here). Conversely, starting a path of creation of set asides--and, more generally, the emerging policy of piecemeal deals to appease specific business interests--is only bound to leave the UK taxpayer worse off, Brexit or no Brexit (but particularly in the event of Brexit).

Why an appeal of the High Court Parliamentary approval Brexit judgment will bring the litigation to the cjeu?

The High Court has today issued its Judgment in the dispute about the UK Parliament's necessary approval of a Brexit notification--see R (Miller) -V- Secretary of State for Exiting the European Union [2016] EWHC 2768 (Admin). It has ruled that such Parliamentary approval is indeed required as a matter of UK constitutional and public law. The Government has already announced that it will appeal this decision to the UK Supreme Court (UKSC). The implications of such an appeal are important and need to be carefully considered. One such possible consequence is that the appeal (indirectly) brings the case to the docket of the  Court of Justice of the European Union (CJEU).

In my view, an appeal of the High Court's Judgment before the UKSC will indeed trigger a legal requirement under EU law for the UKSC to send a reference for a preliminary ruling to the CJEU. I have rehearsed most of my arguments on twitter earlier (see here and here) and this posts brings them together.

Basic EU Law Background

Article 267(1)(a) TFEU establishes the monopoly of interpretation of the CJEU and it indicates the Court shall have jurisdiction to give preliminary rulings concerning the interpretation of the Treaties. Article 267(2) then goes on to enable the domestic courts of the Member States to issue request preliminary rulings from the ECJ where questions of interpretation of EU law are raised before them and they consider that a decision on the question is necessary to enable them to give judgment. However, that discretion of domestic courts to request preliminary rulings from the CJEU does not apply to the courts or tribunals of a Member State against whose decisions there is no judicial remedy under national law. In that case, Article 267(3) indicates that where a question on the interpretation of EU law is raised, the highest court  shall bring the matter before the CJEU.

The uncertainties surrounding the interpretation of Art 50 TEU before the High Court

One of the extremely complex issues concerning the UK's potential withdrawal from the EU following the Brexit vote of 23 June 2016 concerns the interpretation of Article 50 TEU (on this, see here). One of the difficult sub-questions concerns the (ir)reversibility of an Art 50 TEU trigger notification. This is an essential element for an assessment of the UK's constitutional requirements for the delivery of such notification, as the High Court's Judgment makes clear.

Indeed, as a preliminary issue, in today's Judgment, the High Court has addressed the problematic interpretation of Art 50 TEU. Unanimously, the High Court has indicated that "Important matters in respect of Article 50 were common ground between the parties: (1) a notice under Article 50(2) cannot be withdrawn once it is given ..." para [10]; and that "Once a notice is given, it will inevitably result in the complete withdrawal of the United Kingdom from membership of the European Union and from the relevant Treaties at the end of the two year period, subject only to agreement on an extension of time ..." para [11].

There are two ways of interpreting the High Court's dealing with the argument on irreversibility of an Art 50 notification. First, that the High Court takes this approach in para [11] because it is common ground between the parties ex para [10]--what I would call the UK procedural approach. Second, that the High Court has of its own interpreted an Art 50 notification to be irreversible ex para [11], which happens to align with the common position of the parties in para [10]--what I would call the EU substantive interpretation approach.

The UK procedural approach is saved by the High Court's discretion under Art 267(2) TFEU to consider that the interpretation of Art 50 TEU is actually not necessary for it to adjudicate the matter at hand because this is not part of the controversy between the parties. However, the EU substantive interpretation does trigger some issues because, having recognised the interpretation of Art 50 TEU as an important aspect for the adjudication of the case, the High Court should not have taken it upon itself to interpret it and should rather have requested a preliminary ruling from the CJEU. However, unless under a very expansive interpretation of the principle of sincere or loyal cooperation in Art 4(3) TEU, this does not amount to a breach of EU law.

The uncertainties surrounding the interpretation of Art 50 TEU before the UK Supreme Court

Now, in case of an appeal of the High Court's decision before the UKSC, in my opinion, the referral to the CJEU is legally unavoidable (I will not deal for now with arguments of judicial politics or pragmatic views on the UKSC's likely course of action). Even if the parties do not challenge or even raise to the UKSC's consideration the matter of the (ir)reversibility of and Article 50 notification, it is a logical given that the UKSC needs to take a stance (even if implicit) on this point in order to be able to rule on the case. If it quashes the High Court's decision, it needs to clarify the points of law which the High Court would have gotten wrong--one of which concerns the irrevocability of an Art 50 notification. if it upholds the High Court's decision, it is (implicitly) accepting the assumption that an Art 50 notification is irrevocable. Either way, the UKSC cannot escape a substantial (implicit) consideration of the interpretation of Article 50.

In my view, this engages the UKSC's obligation to request a preliminary ruling from the CJEU under Article 267(3) TFEU and not doing so triggers a risk of infringement of EU law by the UK due to the acts (or omission, in this case) of its highest court.

Semi-Advanced EU Law Background

The UKSC's obligation to request a preliminary reference from the CJEU is controlled by the so-called CILFIT test, which establishes that "a court or tribunal against whose decisions there is no judicial remedy under national law is required, where a question of [EU] law is raised before it, to comply with its obligation to bring the matter before the Court of Justice, unless it has established that the question raised is irrelevant or that the [EU] provision in question has already been interpreted by the Court or that the correct application of [EU] law is so obvious as to leave no scope for any reasonable doubt. The existence of such a possibility must be assessed in the light of the specific characteristics of [EU] law, the particular difficulties to which its interpretation gives rise and the risk of divergences in judicial decisions within the [EU]" (283/81, EU:C:1982:335, para 21).

What does this mean for the UKSC in the Brexit litigation in case of appeal?

In short, my understanding of the CILFIT test is that a highest court of a Member State (the UKSC) must request a preliminary ruling on the interpretation of the Treaties to the CJEU and has no discretion not to do so unless: (a) the question is (objectively) irrelevant for the adjudication of the case, or (b) the provision has already been interpreted by the CJEU, or (c) there is no scope for reasonable doubt in the interpretation of the provision. None of these apply in the specific case of the Article 50 litigation.

First, it is inconceivable to me to argue that the interpretation of Art 50 and the (ir)revocability of a notice under it is irrelevant for the adjudication of this case. A different issue would be whether the UKSC could pragmatically sidestep the need to engage in that interpretation, either by presuming its content (the EU substantive interpretation approach mentioned above), or by insisting on the fact that it is common ground to the parties to the litigation and, therefore, the issue of the (ir)revocability of the notification is not (formally, explicitly) raised before it (the UK procedural approach.

However, in my opinion, neither of these avoidance strategies would meet the basic requirements of good faith in the interpretation of the CILFIT test, coupled with Article 4(3) TEU, which requires the domestic court to assess the need to request a preliminary ruling "in the light of the specific characteristics of [EU] law, the particular difficulties to which its interpretation gives rise and the risk of divergences in judicial decisions within the [EU]". The interpretation of Article 50 TEU is, to put it simply, the most relevant EU constitutional law issue since the OMT litigation and one of the top, if not the top, EU constitutional law issue since the entry into force of the Lisbon Treaty. Engaging in semantics in the analysis of the first prong of the CILFIT test against this background (ie, stretching the narrow interpretation "irrelevant") seems to me logically and legally unacceptable.

Second, it is plain that Art 50 has not been interpret by the CJEU yet. And, thirdly, it is also plain that there is scope (massive scope, a gaping hole) for reasonable doubt in the interpretation of Article 50 TEU. Thus, the so-called acte claire doctrine (ie the counterbalance of the CILFIT test) simply does not apply here.

Overall, in my opinion, the UKSC has an absolute and inexcusable obligation to request a preliminary ruling on the interpretation of Article 50 TEU from the CJEU the moment the appeal against the High Court's Judgment (eventually) reaches its docket. Otherwise, the UKSC risks triggering an infringement of EU law and eventually creating liability in damages under the Kobler / Traghetti del Mediterraneo strand of case law on State liability. Again, I am not dealing with the arguments on the likelihood of an actual infringement case brought forward by the European Commission, or the CJEU's eventual decision. I am, for now, simply stressing the state of EU law, which the UKSC would be well advised to bear in mind and uphold, unless it aims to contribute to the deterioration of the rule of law in the UK and the EU (which is something that keeps me awake at night).

Brexit, the limits of law and legal scholarship

Brexit has created a very troubling and destabilising environment for legal researchers in the UK and beyond. This is particularly true for those directly concerned with EU and international law, as well as constitutional and public law, but it is quickly expanding to all other areas of legal scholarship, such as human rights law or jurisprudence. Brexit has created shock waves that will continue to hit legal academia at least for the coming 5 to 10 years, and not only in terms of its focus as a discipline.

This not only jeopardises the development of previous research plans and the completion of on-going research projects, but also exposes the limits of law and legal scholarship in a way that I considered unimaginable before 23 June 2016. But then, most of what Brexit has brought had never crossed my mind or seemed outlandish. The following are just a few thoughts of what really worries me at the moment, not only as an EU lawyer, but more generally as a legal scholar. Of course, I am also an EU citizen living in the UK, which adds one layer of implications for me personally. However, I hope I can disentangle both dimensions.

Hard Brexit as a coup against the rule of law

We have been waiting all summer for the dust of the referendum to settle and to see what the UK Government and the UK Parliament made of the result and how they formulated their strategy going forward. What is starting to emerge, particularly from the Government's approach and its toying with the idea of a hard Brexit, is worryingly taking the shape of a coup against the rule of law. It is also starting to encapsulate xenophobic and racist elements of the Brexit campaign that are now presented as reasonable policy choices within mainstream movements, rather than being denounced as extreme and contrary to the very basic values of British society--unless they are now made to represent what they seemed to stand against until very recently.

There is an absolute disregard for the acquired rights of millions of people and the rhetoric that no basic protection is guaranteed and all individual and collective rights are on the table and prone to be used as bargaining chips simply goes against basic principles of legal certainty, prohibition of retroactive effects of rules that significantly impinge on individual rights, good faith and sincere cooperation duties under EU and international law. And the troubling part is that the mechanisms that would ordinarily protect those rights and these principles--mainly, cases brought before the Court of Justice of the European Union and the European Court of Human Rights--would not only be too slow off the Brexit mark, but also unlikely to provide effective protection against the actions of what is emerging as a bully State (or at least a bully Government) willing to disregard any legal consequences of its ill-thought policies.

Some of this is not strictly speaking a Brexit byproduct, but a result of the added or twin process of departure from European human rights instruments and standards. It is also compounded by the complexities of UK (unwritten) constitutional law and the absence of a domestic constitutional court strictly speaking, which starts to paint a scenario where the UK Government seems to believe that it can shape the future system of protection (or less) of human rights in the UK without any constraint or respect for the status quo. For a country that promoted human rights internationally in the past, this is such a return to the cave that it is hard to believe that this is actually happening. And the UK highest courts seem to be the only ones (potentially) able to bring a torch to the cave and force the Government out of it. Whether they will do it, or at least pass the issue on to Parliament, is everybody's guess.

"The first thing we do, let's kill all the lawyers" ~ William Shakespeare's Henry VI. 

As lawyers and legal scholars, we are now under the double attack and accusation of being both experts and agitators of the public space. What I would have thought were two of the most precious treasures legal academia and legal practice can protect (knowledge and independence of action) seem to have turned against us. We had to endure the Lord Chancellor and Secretary of State for Justice spit in our faces that “people in this country have had enough of experts”. The Prime Minister now also wants to protect the British Army (and Government, ultimately) from "activist left wing human rights lawyers"--but, not necessarily because of their ideology, but because they "harangue and harass" Britain's armed forces.

It is obvious that having a dissenting voice (particularly if it is informed and shouts evidence-based arguments), or contributing to the proper functioning of the system of checks and balances that a State based on the rule of law depends upon, now make you a public enemy. This really worries me because legal academia (and legal practice, but maybe to a lesser extent) will now be pushed towards a dangerous path to potentially becoming a place of fear and suppression of ideas and arguments that run contrary to what is now accepted as the official discourse or the policy of the day. We need to react against this and do it quickly, firmly and with all our intellectual might. If we fail to do this, there should be no need to kill all the lawyers, because we will (or should have) committed intellectual suicide already.

Brexit as Moby Dick

The final aspect that really worries me is that we will now probably be obsessed with Brexit. And to some extent we will have to if we are to discharge our moral and social duty of resisting the coup against the rule of law and against legal academia and practice as their stewards--against legal scholars and jurists as a collective that must contribute to keeping the Government in check under the rule of law. But this is very likely to also become our white whale, a permanent chase in a run with a moving finish line, something that is so much bigger than us and our capacities that eventually exhausts us and makes us drown (or feel we are drowning).

This obsession will also impoverish our legal scholarship beyond Brexit and drain our energy and absorb our time in ways that will make us stop pushing the boundaries of knowledge we were exploring before 23 June 2016. This is, in itself, one of the Brexit tragedies. By creating this black hole of legal problems and this immense pressure on the structures for the creation and dissemination of legal knowledge, Brexit has already put a heavy burden on law and legal scholarship. Like the value of the currency, which has been on free fall and already moved back the equivalent of almost the entire span of my lifetime, this will take very many years to recover, and I worry that it may never reach the level it had before the Great Repeal Bill was announced.

A final thought

I wish I got all of this wrong. If I have, then ignore it. Treat it as the dark thoughts of someone too personally affected by Brexit. But if I haven't, then please see this as a call for action. Join the conversation, so we can collectively think about ways of getting out of this.