Episode 5: Legal Ops...Real Stories with Phillip Norah
The difficulties of strategic planning for legal functions when they are too busy fighting fires.
The following is an edited version of a presentation delivered to UK Transport in Europe (UKTiE) at the House of Lords on 5 September which sought to highlight legal considerations to be confronted in Brexit negotiations.
In her Lancaster House speech on 17 January 2017, the UK Prime Minister set out 12 priorities for the UK during the forthcoming Brexit negotiations. These included:
This article discusses the inter-relationship between taking control of laws, in particular ending the jurisdiction of the Court of Justice of the European Union in the UK, and retaining market access for aviation.
At present UK airlines have the right to fly to and from the EU via Regulation 1008/2008. Furthermore as community carriers, UK airlines have the right to fly between other EU member states. UK airlines will of course want to maintain the right to fly to and from the EU after Brexit. Ideally, UK airlines would like to retain the ability to fly between other EU member states after Brexit, although for some that may be less important.
How can they go about doing that?
At the end of the two year Article 50 period (and leaving aside arguments as to transitional arrangements), the EU Treaties will cease to apply to the UK. The UK government plans to repeal the European Communities Act 1972, which gives effect to the EU Treaties in the UK, upon Brexit. Regulation 1008/2008 would cease to have effect in the UK with the repeal of the European Communities Act. But the UK government plans to transpose EU derived legislation into UK law via the EU (Withdrawal) Bill so that the UK would have more time to decide what to appeal, amend and replace after Brexit. In principle that seems a sensible approach. There are obvious issues with the extent to which the Bill grants powers to the government to legislate with limited parliamentary scrutiny but something like the EU (Withdrawal) Bill was always going to be needed.
However that does not help a UK airline wishing to fly to the EU as Regulation 1008/2008 is inherently reciprocal – the UK can legislate to permit airlines to fly to the UK; it cannot compel EU member states to allow UK airlines to fly to the EU.
One option to retain market access is for the UK to remain a member of the European Common Aviation Area following Brexit. The Multilateral Agreement on the establishment of a European Common Aviation Area (the ECAA Agreement) does grant non-EU signatories the right to fly to and from the EU and also, subject to certain transitional provisions, intra EU. The UK is already party to this as an EU member state but would withdraw from the agreement upon Brexit. Could the UK re-join in its own right?
Here we come up against the UK Prime Minister’s two Lancaster House priorities. First the ECAA Agreement requires the participating countries to effectively sign up to the European aviation acquis. Secondly the ECAA Agreement also involves a role for the Court of Justice of the European Union. It provides that a court of a contracting party can refer questions of interpretation regarding EU derived legislation to the CJEU if that court considers this necessary to give a judgment. The CJEU can determine disputes between contracting parties which cannot be resolved by the joint committee appointed to administer the ECAA Agreement. The CJEU has also exclusive competence to determine the legality of decisions by EU institutions in respect of the European aviation acquis. Would the two Lancaster House priorities preclude the UK from acceding to the ECAA Agreement?
At first sight the requirement that signatories to the ECAA Agreement sign up to the European aviation acquis would appear to present no problem for the UK. The UK will initially sign up to the whole of the European aviation acquis on day one of Brexit as the EU (Withdrawal) Bill will preserve this within UK law.
However signing up to the European aviation acquis as envisaged by the ECAA Agreement is very different from what is contemplated by the EU (Withdrawal) Bill. For example, the ECAA Agreement assumes that references to the European Aviation Safety Agency remain just that, rather than a reference to a domestic aviation authority. Currently the EU (Withdrawal) Bill is silent as to the extent to which the UK would or indeed could continue to participate in EASA and the extent to which EASA functions will be assumed by the CAA. More problematic is the reference in the ECAA Agreement to the continued powers of the EU institutions in respect of rights which affect actual or potential air services – with any determination of the legality of the decisions of those institutions being subject to the exclusive jurisdiction of the CJEU.
There is then the issue of future regulatory divergence after Brexit – either by the creation of new law, amendment of existing law or changes in interpretation of that law. Regulatory divergence would alter an otherwise level playing field - to perhaps secure a competitive advantage for the divergent state.
With respect to the creation of new law, although the ECAA Agreement provides for the incorporation of the aviation acquis into the domestic law of its contracting parties, it is expressly without prejudice to the rights of the contracting parties to unilaterally adopt or amend legislation in the field of air transport subject to the principle of non-discrimination and non-contravention of the ECAA Agreement. It contains a mechanism whereby there is information and an exchange of views with respect to new legislation or amendments to legislation. The Joint Committee established to administer the ECAA Agreement then decides whether the legislation is in accordance with the ECAA Agreement, whether it should be adopted by contracting parties or whether measures need to be taken to safeguard the proper functioning of the ECAA Agreement. But would this be sufficient to satisfy the UK priority to “take control of our laws”? For example could the ECAA Agreement compel the UK to have to accept EU legislation with which the UK did not agree?
Another example of where regulatory divergence could occur is with respect to the jurisdiction of the Court of Justice of the European Union – the ultimate arbiter of EU law.
To illustrate this, consider the example of Regulation EU261 on compensation for denied boarding and cancellation and the problem of bird strikes.
The ECAA Agreement provides for contracting parties to accede to EU261. However one of the key features of that regulation is the extent to which it has been interpreted by the Court of Justice of the European Union.
Article 5(3) of EU261 provides that the airline does not have to pay compensation with respect to a cancelled flight if the airline can prove that the cancellation was caused by extraordinary circumstances. This is not defined in the Regulation and one area of controversy was whether a flight cancelled or delayed as a result of a bird strike would constitute such an extraordinary circumstance.
The UK courts had generally held that a bird strike would not constitute an extraordinary circumstance for the purposes of EU261 and that airlines would have to pay compensation. However the CJEU held recently in the case of Pešková v Travel Service AS that a bird strike could constitute an extraordinary circumstance.
The Pešková v Travel Service AS judgment was delivered in May 2017 and we reviewed this judgment in the last edition of Norton Rose Fulbright’s Legalflyer publication. As such under the EU (Withdrawal) Bill in its current form, EU261 would continue to be interpreted in accordance with the judgment after Brexit – it would form “retained case law” and the judgment could only be overturned in the UK by the Supreme Court of the UK.
However, what would have been the case if, instead of the Pešková v Travel Service AS judgment having been delivered in May 2017, the judgement had been delivered in May 2019 – i.e. after Brexit. In those circumstances the UK courts would not have been bound by the decision although they could take it into consideration.
It can be seen from this example how easy it is for regulatory divergence to start to emerge after Brexit even where the UK has incorporated the European acquis into UK law on day one.
The recent paper on enforcement and dispute resolution mechanisms issued by the UK government contained some interesting options for consideration with respect to the role of the Court of Justice in the European Union in the UK after Brexit. In the Lancaster House speech the UK Prime Minister referred to ending the jurisdiction in the UK of the Court of Justice of the European Union. In the recent paper on enforcement and dispute resolution there was a slight amendment to the language used. The UK government paper refers to ending the “direct” jurisdiction of the Court of Justice of the European Union in the UK although no real explanation of what that means was given. In particular the paper referred to other dispute resolution mechanisms in international agreements such as that in the EU-Moldova Agreement where an arbitration panel established under that agreement must request the CJEU to give a ruling where a dispute concerns the interpretation of EU law. It also cited agreements where voluntary references can be made to the CJEU for a binding determination of the meaning of substantive EU law.
So does ending ”direct jurisdiction” in this context leave room for the CJEU to retain some sort of role in the interpretation of EU-derived law to the extent that the UK has chosen to incorporate it in order to gain market access? Is the obligation to “take back control of laws” satisfied so long as the UK cannot become party to a dispute before the CJEU against its will?
The intention of this article is not to pretend that becoming party to the ECAA Agreement is an easy solution to the challenges of Brexit for UK airlines. There are other issues within the ECAA Agreement which could also run up against the two Lancaster House priorities of the UK Prime Minister, including continuing involvement of EU institutions and agencies – notably EASA. Furthermore it is by no means certain that the other parties to the ECAA Agreement would accept the UK as a contracting party in any event.
There are obviously alternatives to secure market access for UK airlines, such as the potential negotiation of a bespoke air services agreement, although that may not offer the same wide ranging rights as would be secured under the ECAA Agreement and certainly would not do so without the UK having to accept the EU aviation acquis - again confronting the very same issues discussed above. The backdrop to this is the overall issue of timing – is there time to negotiate a bespoke deal?
In addition this is by no means an attempt to give a comprehensive analysis of all of the legal issues impacting aviation and Brexit. However the take control of laws vs market access debate extends across the whole range of issues covered by Brexit – including the form of Brexit itself – so called “hard Brexit” vs becoming party to the European Economic Area Agreement, for example.
In conclusion, it is time to examine more closely what is meant by taking back control of laws and what this means for market access. Consideration will need to be given to the extent to which the UK is happy to accept compliance with EU law because as a matter of practice that is what the UK would do anyway; wants to retain influence to shape the future development of that law (and whether or not this would be possible at an international level outside of participation in EU agencies); wants to retain its membership of EU agencies (including EASA); and, of course, the extent to which the UK can accept some role for the CJEU.
Those are ultimately political choices but they need to be informed by an understanding of the legal options and consequences.
The difficulties of strategic planning for legal functions when they are too busy fighting fires.
In this issue, we again cover a broad spectrum of important issues in international arbitration, with a focus on international arbitration developments and important revisions to major arbitral rules and guidance.
© Norton Rose Fulbright LLP 2021