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The United Kingdom and the European Union are finding it hard to agree on how to cope with future developments, such as changing regulations or offering subsidies or tax breaks to attract inward investment, which might under conditions of unfettered free trade have an impact on competition in their respective markets.

Such issues matter in the relationship between the UK and the EU, because of their proximity and economic interactions, so much more than in, say, the EU/Canada relationship. The UK is attached to the EU by a land border with Ireland, direct rail services, a tunnel under the Channel and hundreds of daily flights and ferries.  To take the simple issue of how long lorry drivers should be allowed to work before having a rest. You don’t see Canadian lorries on UK or Continental roads.

Because what happens in the EU affects the British economy in innumerable significant ways, and vice versa, it makes sense to look ahead and try to prevent future crises by a mechanism designed to anticipate and de-dramatise them. Devising such a mechanism is essentially a technical exercise, surely not beyond the ingenuity of the able negotiators on both sides.

We envisage a solution based on a clear undertaking by both sides to strive to avoid unfair competition brought about by disparities in economic regulation or public intervention in the economy (state aid), and to respond sympathetically to each other’s concerns.  Whether one side’s actions would be liable to have such an effect for the other is bound to be a matter of judgment. This needs to be assessed soberly; it should not be seen as automatically justifying the application of sanctions.

The UK and the EU should agree to consult each other systematically on proposed relevant legislative and regulatory changes and financial measures. The relevance should be determined on the basis of a threshold of economic impact on UK-EU competition which both sides would agree to add to their domestic impact assessment processes.

Substance could be given to such cooperation by the establishment of a Standing Committee on Regulatory Developments and Competition, composed of UK and Commission civil servants (perhaps as a sub-committee of the Joint Committee under the agreement), which might also include some independent experts. The Standing Committee’s task would be to consider developments before they occur and form a preliminary view on whether they raise “serious doubts” about unfair competition between the Parties. Any such doubts would be communicated to the Joint Committee under the Agreement. If the Joint Committee failed to resolve the issue within a stipulated time limit (which could be relatively short, if a reasonable case were made for urgency), it would be open to the Party expressing concern to adopt provisional protective measures. The measures would be subject to an appeal to an arbitral tribunal, before which the onus would be on that Party to establish their necessity. If it succeeded, the measures would be confirmed. If it failed, the measures could be maintained but compensation would be payable to the other Party, which would also have the right to impose countervailing measures.

In our view, a mechanism of this kind would avoid all but the most serious (and genuine) disagreements, while preserving the sovereign rights of both the UK and the EU ultimately to determine social and economic policy as they see fit.

Sir Alan Dashwood QC is a barrister in Henderson Chambers. He is Emeritus Professor of European Law at the University of Cambridge and was formerly a Director in the Legal Service of the EU Council.

Sir Jonathan Faull is Chair of European Public Affairs, Brunswick Group, and was formerly a Director General in the European Commission.

This article was originally published in The Daily Telegraph, Business Section, 14 December 2020.