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UK-EU Trade Agreement

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Last updated 1st January 2021.

Is this agreement likely to have an effect on the Equality Act 2010 as regards disability discrimination? The agreement deals with the relationship of the UK with the EU after Brexit, from 1st January 2021.

Summary

  • The UK-EU Trade Agreement has a ‘non-regression’ clause requiring the parties not to reduce discrimination protection below 2020 levels if the reduction would affect trade or investment. It also has a clause allowing ‘rebalancing’ – eg proportionate tariffs – if significant divergences in levels of discrimination protection develop. Below Summary of relevant provisions.
  • In both cases, the clauses only bite if the difference in protection affects trade or investment.
  • The Trade Agreement may deter a UK government from proposing at least really major reductions in Equality Act protection: below Effect on future amendments of Equality Act.
  • However I doubt that even the non-regression clause will significantly impact decisions of UK courts in interpreting the Equality Act: below Effect on UK court decisions?

The Agreement

The UK-EU Trade and Cooperation Agreement (pdf, gov.uk) was agreed on 24th December 2020. It applies provisionally from 1st January 2021, but is subject to final agreement by the European Parliament. The UK government has also published a summary of the Agreement (pdf, gov.uk).

I haven’t studied the Agreement in any depth but the following is from what I can see at the moment.

The Agreement can be terminated by either the UK or EU on 12 months notice (Article FINPROV.8). The text is still subject to final legal revision, or ‘scrubbing’ (Article FINPROV.9).

Summary of relevant provisions

There appear to be two main provisions relevant to disability discrimination law, both in Title XI, ‘Level Playing Field’, of Part Two Heading One:

  • a requirement not to weaken labour and social levels of protection in a manner affecting trade or investment between the UK and EU: Non-regression (below); and
  • an ability for either the EU or UK to take rebalancing measures (below) if material impacts on trade or investment between them arise as a result of significant divergences between them in labour and social protection. This could apply if, for example, the EU increases protection but the UK does not.

In both cases the provisions only apply if there is an impact on trade or investment between the UK and EU (a “material” impact in the case of rebalancing).

Also in both cases, any dispute between the UK and EU not resolved by consultation is decided by a separate body, an expert panel or arbitration tribunal. It seems that whether a change in the Equality Act is consistent with the non-regression clause, or whether there should be any tariff consequences from the UK not “keeping up” with a future increase in EU protection, will be a matter to be resolved between the UK and EU, not a matter for the UK courts.

Effect on future amendments of Equality Act

It remains to be seen how far the UK government sees these two provisions as relevant to any decisions on future Equality Act amendments, and wishes to risk action by the EU under them. However the possible consequences of these provisions may well deter a UK government from proposing at least really major reductions in Equality Act protection.

Article 6.3 (below under Non-regression) deals with enforcement. This Article:

Effect on UK court decisions?

I can’t see that the rebalancing clause will affect UK court decisions. This clause does not impose an obligation to avoid significant divergences materially affecting trade. It just says that such divergences may lead to tariffs.

Might the non-regression clause impact decisions of UK courts interpreting the Equality Act? I doubt it will do so significantly – though the approach of the courts remains to be seen and I haven’t researched cases on whether the courts take trade agreements into account in interpreting UK statutes. I particularly feel that a UK court may be reluctant to consider whether trade or investment is affected by any reduction in legal protection. Perhaps it might be different if there is a settled decision on the issue by the Panel of Experts, but (without having researched it) I suspect not.

Even if UK courts were willing in principle to take the non-regression clause into account, presumably there would have to be a ‘space’ allowing them to do so – eg when the Supreme Court or Court of Appeal is deciding whether to disapply a pre-2021 EU Court decision after 2020, or sufficient ambiguity in UK legislation to allow an international treaty to be used in interpreting it. Or s.29 as discussed in the next paragraph?

Section 29 of the EU (Future Relationship) Act 2020 says that existing domestic law of the UK has effect with such modifications as are required to implement the UK-EU Trade Agreement in that law, so far as the Agreement is not otherwise so implemented and such implementation is necessary for the purposes of complying with the UK’s international obligations. Might this incorporate the non-regression requirement into UK law in some way, so that UK courts interpreting the Equality Act must follow it? The effect of s.29 is unclear, to say the least! Even if UK courts were willing to interpret s.29 in that way, it seems unlikely to make a difference in practice. S.29 only applies to existing legislation (normally at 1st January 2021), not to future changes to the Equality Act. The section could theoretically be relevant eg when the Supreme Court or Court of Appeal is deciding whether to disapply a pre-2021 EU Court decision in interpreting the Equality Act after 2020. However it seems unlikely that such a court decision would impact trade or investment – and also in the absence of a Panel of Experts decision how would the court decide whether there is such an impact?

Looking at the two provisions in the Trade Agreement in more detail:

Non-regression

Article 6.2 of Title XI on page 200 of the UK-EU Trade Agreement (pdf, gov.uk) states that the Parties may determine their own labour and social levels of protection in a manner consistent with international commitments (including these provisions), but says:

6.2(2) A Party shall not weaken or reduce, in a manner affecting trade or investment between the Parties, its labour and social levels of protection below the levels in place at the end of the transition period [ie the end of 2020], including by failing to effectively enforce its law and standards. …

6.2(4) The Parties shall continue to strive to increase their respective labour and social levels of protection referred to in this Chapter.

The most important provision here seems to be 6.2(2). It is important that the UK or EU is allowed to reduce protection below 2020 levels if it does not affect trade or investment between the UK and EU. What effect 6.2(4) has is not clear.

Also Article 6.3 says that “for the purposes of enforcement as referred to in Article 6.2” the Parties shall have in place effective domestic enforcement “and provide for appropriate and effective remedies, including interim relief, as well as proportionate and dissuasive sanctions.” Perhaps – though this is not as clear as it might be – Article 6.3 too is limited to reductions below 2020 levels of protection which affect trade and investment.

Article 6.1(1) defines “labour and social levels of protection” to include “fundamental rights at work”, which is likely to include disability discrimination law.

The mechanism for enforcing Articles 6.2 and 6.3 is set out in Articles 9.1 to 9.3 (from page 212). This involves consultation between the UK and EU, and if necessary a decision by Panel of Experts to decide whether there has been a breach and what measures are sufficient to remedy it. Non-compliance could lead to the other Party suspending parts of the Agreement under Article INST.24 (‘Temporary remedies’, starting on page 389), which is applied by Article 9.3 of Title XI.

Article 1.1(4) of Title XI says the purpose of this Title “is not to harmonise the standards of the Parties.”

The UK government summarises these provisions as follows:

Chapter 6: Labour and social standards
91. The Agreement includes reciprocal commitments not to reduce the level of protection for workers or fail to enforce employment rights in a manner that has an effect on trade. This is very much in line with similar “non-regression” clauses in other FTAs and with international norms. The provisions are clear that both Parties have the freedom and ability to make their own decisions on how they regulate – meaning that retained EU law will not have a special place on the UK’s statute books. This Chapter is not subject to the Agreements main dispute resolution mechanism but will instead be governed by a bespoke Panel of Experts procedure.
UK-EU Trade and Cooperation Agreement: Summary (pdf, gov.uk)

Rebalancing

Article 9.4 of Title XI (starting on page 214 of the draft agreement) says that if “material impacts on trade or investment between the Parties are arising as a result of significant divergences between the Parties in [various areas including labour and social protection], either Party may take appropriate rebalancing measures to address the situation”, such as tariffs. Measures must be restricted to what is strictly necessary and proportionate to remedy the situation. If consultation between the Parties fails to produce a mutually acceptable solution, disputes can be resolved through an arbitration tribunal. A Q&A (ec.europa.eu) from the EU says

“This might be relevant, for example in a situation where one Party would significantly increase its levels of protection related to labour or social standards, the environment or climate above the levels of the other Party. This may entail an increase in the costs of production and hence a competitive disadvantage.”

So if the EU increases its discrimination law protections, the UK does not have to increase its own. However if the difference gives rise to material impacts on trade or investment, the EU could seek to apply rebalancing measures such as proportionate tariffs under this provision. A summary by the UK government says:

Title XI: Level playing field for open and fair competition and sustainable development
81. The Agreement’s provisions in this area, implementing commitments made in the 2019 Political Declaration, were the subject of considerable controversy during the negotiations. The EU was forced to drop its ambitious demands for dynamic alignment and for the UK to be legally required to maintain equivalent legislative systems to the EU’s in some areas. The system that has been agreed upon does not compromise the UK’s sovereignty in any area, does not involve the European Court of Justice in any way, and is reciprocal. Both sides have the right to set their own laws, subject to the broad constraints of this Agreement in this area as in any other. And both sides have the right, in certain constrained ways, and subject to arbitration, to take countermeasures if they believe they are being damaged by measures taken by the other Party in subsidy policy, labour and social policy, or climate and environment policy. If such measures are used too frequently either side can trigger a review of these provisions and the trade aspects of the Treaty more broadly, aiming to end with a different balance of rights and obligations.
UK-EU Trade and Cooperation Agreement: Summary (pdf, gov.uk)

Further links

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