The most important part of dispute resolution will be preventing disputes in the first place. The institutional framework is designed to facilitate dialogue and consultation to prevent disputes and to resolve those that do arise. Of course, where this fails to resolve an issue, a more formal mechanism may be required. There are likely to be some parts of the relationship that do not involve binding commitments, and dispute resolution provisions will not be included in those parts of the partnership.
Where a dispute between the EU and the UK arises either party would refer it for consideration by the Joint Committee in the first instance. Additionally, there will be parts of the agreement that provide for recourse to an independent arbitration panel. For example, on the future economic partnership the UK is seeking an arbitration mechanism that is completely independent that will ensure that any disagreements about the purpose or scope of the agreement can be resolved fairly and promptly.
lnternational agreements commonly provide for arbitration processes for some aspects of the agreement but not for others. For example, the EU-Ukraine Association Agreement provides for disputes under the Agreement’s Deep and Comprehensive Free Trade Agreement to be resolved by an arbitration panel, whereas disputes concerning other aspects, such as security cooperation, are resolved by a joint committee only. So the parties should consider the merits for each aspect of the agreement of independent, binding arbitration as an option for resolution of disputes.
Where a dispute arises which concerns the interpretation of provisions of the agreement which are identical in substance to EU law, it may be appropriate for the Joint Committee, or the arbitration panel, to seek an interpretation from the CJEU. This will only occur when both parties agree that this would be beneficial and enable resolution of the dispute in question. This interpretation will be binding on the Joint Committee or arbitration panel. But significantly, it will then be for the Joint Committee or arbitration panel to determine the ultimate decision on the dispute in question – it will not be for the CJEU to decide on the outcome of the dispute.
Where a dispute arises which concerns whether the UK and EU’s outcomes are equivalent, there would of course be no need for an interpretation to be sought from the CJEU, as it would not be a question of EU law.
This ensures that disputes can be resolved in light of the correct interpretation of the relevant law, and that the agreement is applied consistently. This is without prejudice to any specific governance and dispute resolution arrangements that may be required in certain areas of cooperation, or for particular agreements.
The provisions for resolving disputes in the future partnership should be without prejudice to other routes of dispute settlement envisaged in other international agreements. For example, if a party chooses not to use the bilateral dispute resolution mechanism in the agreement, but to instead take the dispute to the WTO (in the circumstances where this option is available) then the WTO’s processes, timelines and non-compliance measures will apply. There will need to be a clear “fork in the road” where the party chooses which route it is taking.
Where breaches of the agreements have been found by the dispute settlement process, and compliance is not forthcoming within a reasonable period of time, non-compliance measures may be required. ln some areas of the agreement where cooperation does not include binding commitments, non-compliance provisions would not be required.
ln these instances, the party in question will be able to request appropriate non-compliance measures to mitigate any harm caused by the other party’s breach of the agreement. Where such measures cannot be agreed by the Joint Committee, a party may suspend relevant obligations, oi parts of the agreement on a temporary basis. Such measures or suspension should be temporary, proportionate and localised to the area of the agreement that the dispute concerns so as to avoid unnecessary harm to the functioning of the wider relationship.
The specific nature of the non-compliance measures will be subject to negotiation, but could take different forms. Different non-compliance measures will be needed for different parts of the agreement. ln some instances, suspension of obligations or parts of the agreement may make sense. In others, financial penalties may be more appropriate.
This reflects a number of precedents. For instance, the US has included financial compensation in eleven free trade agreements, including US-Australia and US-South Korea. Typically, such compensation is an alternative to the suspension of the benefits of the agreement. By contrast, in the Schengen Association Agreements, elements of the agreement – for example a specific provision, or cooperation on an EU security tool – can be temporarily suspended until a dispute is resolved.
ln practice, measures or suspension should be rarely used, and when used should be limited, with priority given to those measures which cause least damage to the functioning of the agreement, To this end, any measures taken should end once any non-compliance has ended, and where there is ongoing non-compliance, measures should be renewed by notifying the Joint Committee.
The agreement should make provisions for either party to take appropriate measures where the application of the partnership agreement would create significant economic, societal or environmental difficulties. Such safeguard measures should be strictly limited in scope and duration to that which is necessary to remedy the difficulty.
As a consequence of safeguard measures being taken, it may be that there is an imbalance caused in the agreement in question. ln this event, and where relevant for the area of cooperation, one party may take steps to remedy this through rebalancing measures, which in turn will be subject to independent arbitration if necessary.