The UK referendum: Brexit and Article 50 of the Lisbon Treaty.

Before making some points about possible outcomes in the UK referendum of June 23 on continued membership or not of the EU, and Article 50 of the Lisbon Treaty, I should state briefly my position on the UK and the EU.

Initial remarks on Europe and the EU

According to Section 2.1. of the 1972 Act of Accession, the UK accepted, and continues to accept, the European Court of Justice claim to primacy of EU law over national law. This supranational concept of the EU is far from being unanimously accepted across the EU, either in theory or in practice. It is most definitely not accepted in UK public opinion. The UK is thus in the position of   subscribing officially via Act of Parliament to a radically supranational view of the EU’s direction of development, while the public remains distinctly uneasy that regulations, directives and ECJ judgments prevail directly, without appeal, in the UK.

The reality of Europe is that it is composed of a mosaic of peoples and states, subscribing to a broad common culture and for the first time in centuries to common precepts of legitimacy (constitutional government, rule of law, freedom of expression..), but in practice highly differentiated by language, religious sensitivities, historical myths-better described as living realities-as well as tax systems, economic activities and national structures.  Europe is what it is; the EU, as distinct from Europe, is trying to make it into something else. Not surprisingly, it is the EU that has to permanently accomodate realities, creating a large gulf between its rhetoric of integration, solidarity and efficiency, and the more humdrum complexities that the EU absorbs.

This was particularly visible during the Constitutional Convention, chaired by former President Valéry Giscard d’Estaing between  2002 to 2004. Grandly hyped as Europe’s answer to the Philadelphia Convention creating the United States federation,  the draft ran to 219 pages,and 448 Articles, compared to the few pages and 7 Articles of the US Constitution. It was meant to bring “Europe” closer to the people; arguably, it made the EU less comprehensible. There should have been little surprise. The draft was a complex compromise between large and small states; federalists and inter-governmentalists; Atlanticists and “Europeanists”; simplifiers and complexifiers; the centralisers of ever closer union and the de centralisers of subsidiarity; élites versus citizens; or those interests favouring harmonization as against others preferring local discretion. The result is a gift to lawyers.

 The Constitutional Court and the European Court of Justice.

The underlying tension in Europe runs between the supranationalists/federalists, à la Jean Monnet, and the proponents of cooperation between national states. The tension is especially visible in the relationship between the European Court of Justice and the supreme national courts. (Franz C. Mayer, The European Constitution and the Courts: Adjudicating European Constitutional law in a multilevel system”, http://www.jeanmonnetprogram.org/archive/papers/03/030901-03.pdf)

The legal positions about exiting from the EU are no exception. In its decision of October 12, 1993, the German Constitutional Court (GVerfG, October 12, 1993, 89 Entscheidungen des BVergGE, 155, para 112) states that “Germany is one of the Masters of the Treaties, who expressed their will to be bound by the indefinitely concluded EU Treaty and in this way established a long lasting membership, which however can be dissolved by an act to the contrary”.

This position is reiterated in the Constitutional Court’s position on the Lisbon Treaty. ( Federal Constitutional Court – Press office Press release no. 72/2009 of 30 June 2009, Judgment of 30 June 2009 Act Approving the Treaty of Lisbon compatible with the Basic Law; accompanying law unconstitutional to the extent that legislative bodies have not been accorded sufficient rights of participation)

The Constitutional Court confirms the compatibility of the Treaty with the Basic Law. But the Court makes the crucial statement that the EU is “an association of sovereign national states” (Staatenverbund), and not a federal state (Bundestaat). If another intergovernmental conference were to be called to create a European democratic polity, Germany’s “accession to a European federal state would require the creation of a new constitution”. “As long as, consequently, no uniform European people, as the subject of legitimisation, can express its majority will in a politically effective manner that takes due account of equality in the context of the foundation of a European federal state, the peoples of the European Union, which are constituted in their Member States, remain the decisive holders of public authority, including Union authority. In Germany, accession to a European federal state would require the creation of a new constitution, which would go along with the declared waiver of the sovereign statehood safeguarded by the Basic Law. There is no such act here.”

Rather, the Court states, “the citizens’ right to determine, in equality and freedom, the public authority affecting them with regard to persons and subject-matters through elections and other votes is anchored in human dignity and is the fundamental element of the principle of democracy. “ To paraphrase the Court’s position, the EU is an alliance, not a democratic state, and the Court reserves its position to keep judging the ambitions of EU integrators against the democratic rights of the German people, of which the Court is a guardian. The German people ultimately are sovereign.

By contrast, the ECJ has claimed that its own judgments override national law.  The Commission acquired powers to represent the EEC in international trade negotiations, and the judges in the European Court of Justice (ECJ), in the landmark case of Flaminio Costa v ENEL [1964] ECR 585 (6/64) acclaimed the supremacy of EEC law over the laws of its member states. It ruled that EC law would not be effective if Costa could not challenge national law on the basis of its (Italian) alleged incompatibility with EC law: “It follows from all these observations that the law stemming from the treaty, an independent source of law, could not, because of its special and original nature, be overridden by domestic legal provisions, however framed, without being deprived of its character as community law and without the legal basis of the community itself being called into question.”

The ECJ continues: “By creating a Community of unlimited duration, having its own institutions, its own personality, its own legal capacity and capacity of representation on the international plane and, more particularly, real powers stemming from a limitation of sovereignty or a transfer of powers from the States to the Community, the Member States have limited their sovereign rights and have thus created a body of law which binds both their nationals and themselves…The transfer by the States from their domestic legal system to the Community legal systems of the rights and obligations arising under the Treaty carries with it a permanent limitation of their sovereign rights”. The implication is that such an abrogation includes the right to exit, once joined.

At the time, and fifty years on, this position of the ECJ remains highly contentious. In 1964, de Gaulle brushed aside the ECJ’s supra nationalist bid for power, just as in 1965 he boycotted the Council of Ministers, unless the Commission bowed to his wishes, The EEC five all pretended to be horrified at de Gaulle’s “nationalism”, but in practice, they were no less national than de Gaulle’s actions. One of the reasons for the UK becoming an official champion of supra nationalism was to get the Five’s support to enter the then EEC; another, equally credible, is that Prime Minister Heath, and his team of negotiators, believed that only a supranational EU would answer to Europe’s’ structural deficiencies.

As the UK parliamentary website states:(http://www.publications.parliament.uk/pa/cm201011/cmselect/cmeuleg/633/63304.htm)“ Section 2(1) means that provisions of EU law that are directly applicable or have direct effect, such as EU Regulations or certain articles of the EU Treaties, are automatically “without further enactment” incorporated and binding in national law without the need for a further Act of Parliament. Section 2(1) applies to EU law now and as it develops in the future “from time to time” either by Treaty revision “created by” or interpretation by the Court of Justice of the EU “arising under”. So, when a EU Regulation enters into force, it automatically becomes part of national law, as it does in the other 26 Member States on the same day. The uniqueness of section 2(1) is that it gives effect to directly applicable or effective EU law without the need each time for implementing legislation, as would usually be required for the incorporation of other obligations assumed under international law by a dualist State. The domestic courts are obliged to give full effect to section 2(1), in the light of the case law of the Court of Justice (section 3(1)”.

Only in 1975, under President Giscard d’Estaing, did France recognize the supremacy of EC law over French ordinary courts; France’s supreme administrative court, the Conseil d’Etat, only accepted the supremacy claim in 1990, and then with reservations, predicated on the principle embedded in all French Constitutions since the Revolution, that France is “Une et Indivisible”. In Germany, the ECJ supremacy claim led to a direct clash with the German Constitutional Court, that was partially settled in 1986, when, in the so called Solange II case, the German Constitutional Court held that so long as EU law had a level of protection of fundamental rights substantially in concurrence with the protections afforded by the German constitution they would no longer review specific Union acts in light of their own constitution.

But reticence remained: in the European Constitution, Article I-6 of the European Constitution stated that “The Constitution and law adopted by the institutions of the Union in exercising competences conferred on it shall have primacy over the law of the Member States.” (http://www.cvce.eu/obj/the_treaty_establishing_a_constitution_for_europe-en-4eb2765d-720c-4358-a5fe-e318d06562f1.html) The European Constitution was voted down by voters in two founding member states, France and The Netherlands

 

The Lisbon Treaty and Article 50.

After defeat in the referendum, the Constitution was rejigged as the Lisbon Treaty, a treaty being a document freely entered into by sovereign states, whereas a constitution writes the rules for a sovereign territory. The supremacy clause duly found its way into an annex. The legal opinion of 22 June 2007 
on which this annex to the Lisbon Treaty is based, declares: “It results from the case-law of the Court of Justice that primacy of EU law is a cornerstone principle of Union law. According to the Court, this principle is inherent to the specific nature of the European Community. At the time of the first judgment of this established case law (Costa/ENEL,15 July 1964, Case 6/641) there was no mention of primacy in the treaty. It is still the case today. (My italics) The fact that the principle of primacy will not be included in the future treaty shall not in any way change the existence of the principle and the existing case-law of the Court of Justice.” (http://en.wikisource.org/wiki/Consolidated_protocols,_annexes_and_declarations_attached_to_the_treaties_of_the_European_Union/Declarations#17._Declaration_concerning_primacy)

In other words, the Court claims supremacy, but that supremacy is not recognized in any Treaty form. For the member states, it is a provisional convenience. In the case of the German Constitutional Court, it is a provisional convenience subject to permanent oversight. To the German Court, the ECJ is not the EU’s Supreme Court; it is for the UK.

One novelty in the Lisbon Treaty is Article 50, which makes provision for the voluntary secession of a member state. Arguably, prior to the Lisbon Treaty, the ECJ could be argued to disapprove of any member state assuming its sovereign rights to exit, rights which the ECJ would presumably maintain had been curtailed by subscription to the concept of “ever closer union”. Article 50.1. states categorically that: “Any member state may decide to withdraw from the Union in accordance with its own constitutional requirements”.

Since the article has never been applied, there is much speculation about what it signifies. The most accessible route to interpreting these viewpoints would be to place them along a spectrum ranging from supporters of “ever closer union”, to supporters of the rights of constitutional states.

  1. The constitutionalist would argue that the member state has the right to repeal its own legislation. This statement holds a variety of possible interpretations: I favour the idea that the government revise the wording of Section 2.1. re establishing clearly that the Crown in Parliament is sovereign, and that EU regulations, directives, rulings are subject to oversight. This would amount to providing the UK public with a protective barrier against the growing flood of EU actions; would be in line with the German Constitutional Court’s own position; and would be compatible with the UK staying in the EU. Reportedly this was the issue on which David Cameron and Boris Johnson disagreed. My reading of this(not the only one possible) is that Cameron cleaves to the Heath position, that the direction of EU policy is supranationalist. Yet Cameron argues that he has the components of a commitment by the EU not to oblige the UK to subscribe to the practicalities ensuing from “ever closer union”. The difference between my concept and my interpretation of Cameron’s concept is that in the first case, revision of Section 2.1. of the 1972 Act, the agenda is entirely in the UK government’s hands; in the Cameron position, the agenda is in the hands of the EU institutions and member states. A harder line position than mine would hold that the UK does not need the Lisbon Treaty to exercise the right of withdrawal; it always had it. The reasons for rescinding the Treaty would be that it no longer services its purpose; the EU is dysfunctional; its workings has revived German primacy; the way it operates has generated the highest level of unemployment since the early 1930s, in complete disregard of the Treaty commitments to full employment across the Union.
  2. The supporter of “ever closer union” would be able to point to the fact that Article 50 now brings the EU provisions on exit into line with international law. Article 54 of the Vienna Convention on the Law of Treaties states that the termination of a Treaty or the withdrawal of a party may take place: a. in conformity with the provisions of the Treaty; or (b) at any time by consent of all the parties after consultation with the other contracting states. (Vienna Convention on the Law of Treaties, http://www.oas.org/legal/english/docs/Vienna%20Convention%20Treaties.htm) In other words, by placing the wording of 50.1. in the context of the overall article, the legislator seems to be saying two things: one is that the presumption is that the procedure outlined in the Article is to be consensual in spirit.; the other is that the provision for unilateral action by the exiting member state means that it can walk away from the negotiations if the 27 member states-as has been suggested-should try to make a negative example of the UK in order to deter other possible exiters. This is not entirely without precedent in view of the way that the EU has treated: Cyprus; Greece; the Ukraine, and Russia. The legislator may be paraphrased as saying, it’s best to exit in a consensual manner, advantageous to all participants; but if the consensual approach is flouted, outcomes can get unpleasant.

An Out victory in the June 23 referendum would thus appear to result in Prime Minister Cameron using the Royal prerogative to notify the European Council, as outlined in Article 50.2. The process of exit, in the Treaty, is thus embedded both in national and in EU law. Article 50.2. states:

“A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.”

There are some points worth making on this article. The negotiation between the exiting state and the EU is through the European Council, that is the 27 member states, and the exiting state. Mention of Article 218 (3) treats the exiting state from the start as a third party, and the resulting framework agreement will be the result of a qualified majority vote, after obtaining the consent of the European Parliament. What this implies is that the exiting state has a clear incentive to cultivate a favourable coalition of member states, ready to achieve a non punitive outcome. It is also the case that the exiting state has an incentive under this Article to keep on good terms with the Commission. Article 218.3 stipulates that

“The Commission, or the High Representative of the Union for Foreign Affairs and Security Policy where the agreement envisaged relates exclusively or principally to the common foreign and security policy, shall submit recommendations to the Council, which shall adopt a decision authorising the opening of negotiations and, depending on the subject of the agreement envisaged, nominating the Union negotiator or the head of the Union’s negotiating team.”

In fact, jumping a bit ahead of the discussion, Article 50.4 provides a further incentive for the exiting state to cultivate the Commission. Article 50.4 states that the exiting state shall not participate in the discussions of the European Council

In Article 50.3, the legislator specifies the framework for timing during the process of exit.

“The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.”

Cameron has interpreted this, in his statement of February 22 in the House of Commons, as meaning that Article 50 will be triggered immediately and that the process of exit will begin “forthwith”’. An immediate trigger fits with Cameron’s strategy to have the public vote what appears to be a straight In or Out decision. Clearly, the public is being invited to vote for an unknown quantity, Out, against what is presented as a known quantity, In. The unknown is compounded by the ambiguity of the options on timing: one option is for both sides to allow the two years to drag by, then to expire; the broader context of the Article makes clear though that the expected outcome is a new framework agreement; another outcome could be that the member states could vote unanimously to extend the two years. I would propose that this clause be dubbed the Purgatory Clause, whereby the repentant sinner can repeat rosaries for an indefinite period of time, conditional on good behavior, before full repentance is demonstrated by activation of Article 5.5. This states that “If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.”

The hitch here is that Cameron has stated that he wishes to redefine the relationship between the UK and the EU. If exit is to occur, there would be no EU changes to any Treaty, just a new framework agreement between the EU and the UK. But if the UK were to repent of its ways, Article 46 states : “the conditions of admission and the adjustments to the Treaties on which the Union is founded, which such admission entails, shall be the subject of an agreement between the Member States and the applicant State.”

So what may be concluded from the above: the EU is shrouded in ambiguity, and yet the UK public is being offered a black and white choice; the ambiguity is a godsend to lawyers, but their varied positions are inherently political; it is clear that the EU legislator has extended his reach to include both entry and exit into the ambit of EU law; it is also clear from the lack of Treaty validation of ECJ supremacy claims that EU law has mud feet, and yet is central to the Article 50 process, because the member states will continue to give lip service to the ECJ claims that they dispute; not least, it is clear as the Open Europe “war game” illustrated that a UK exit will excite passions. Cameron has stated that he will not step down in the event of an Exit result. He intends therefore to be at the helm and setting the agenda for a new relationship, for which he claims, maybe correctly, that he has already negotiated some key components.

This may then be the point where the battle in the Conservative party gets very sour. Johnson has the support of the constituency organisations. They vote, with the MPs, for the leader. Cameron has tied his flag to the In camp: paradoxically, Johnson says he wants what Cameron wants, a new relationship. It is very difficult, if not impossible, to distinguish between personal rivalries, and the strait clash of different visions of what makes the UK and Europe tick.

The key point in this story is when Johnson exited from 10 Downing Street, and said he would join Out. He said so because he claimed that Cameron was not for changing the wording in the 1972 Act of Accession. This, in my view, would have been by far the simplest outcome, and would readily deliver Cameron a stunning victory. The UK public is for international co operation, but is distinctly uneasy at being legislated for by people whom they cannot punish through the ballot box. Had this position been taken, the UK could have acquired the protection provided the German public by a vigilant Constitutional Court against the relentless ambitions of the champions of “ever closer union”. So far, in my opinion, these ambitions have prompted “ever greater disunion”.

There are many other threads to this discussion. The most important thread to my mind is that Germany is on top and Europe is in trouble. The question UK leaders should be asking: in that case, what are the UK’s long term interests?

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About Jonathan Story, Professor Emeritus, INSEAD

Jonathan Story is Emeritus Professor of International Political Economy at INSEAD. Prior to joining INSEAD in 1974, he worked in Brussels and Washington, where he obtained his PhD from Johns Hopkins School of Advanced International Studies. He has held the Marusi Chair of Global Business at Rensselaer Polytechnic Institute, and is currently Distinguished Visiting Professor at the Graduate Schoold of Business, Fordham University, New York. He is preparing a monograph on China’s impact on the world political economy, and another on a proposal for a contextual approach to business studies. He has a chapter forthcoming on the Euro crisis. His latest book is China UnCovered: What you need to know to do business in China, (FT/ Pearson’s, 2010) (www.chinauncovered.net) His previous books include “China: The Race to Market” (FT/Pearsons, 2003), The Frontiers of Fortune, (Pitman’s, 1999); and The Political Economy of Financial Integration in Europe : The Battle of the Systems,(MIT Press, 1998) on monetary union and financial markets in the EU, and co-authored with Ingo Walter of NYU. His books have been translated into French, Italian, German, Spanish, Chinese, Korean and Arabic. He is also a co-author in the Oxford Handbook on Business and Government(2010), and has contributed numerous chapters in books and articles in professional journals. He is a regular contributor to newspapers, and has been four times winner of the European Case Clearing House “Best Case of the Year” award. His latest cases detail hotel investments in Egypt and Argentina, as well as a women’s garment manufacturer in Sri Lanka and a Chinese auto parts producer. He teaches courses on international business and the global political economy. At the INSEAD campus, in Fontainebleau and Singapore, he has taught European and world politics, markets, and business in the MBA, and PhD programs. He has taught on INSEAD’s flagship Advanced Management Programme for the last three decades, as well as on other Executive Development and Company Specific courses. Jonathan Story works with governments, international organisations and multinational corporations. He is married with four children, and, now, thirteen grandchildren. Besides English, he is fluent in French, German, Spanish, Italian, reads Portuguese and is learning Russian. He has a bass voice, and gives concerts, including Afro-American spirituals, Russian folk, classical opera and oratorio.
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One Response to The UK referendum: Brexit and Article 50 of the Lisbon Treaty.

  1. A very helpful article.

    66% of eligible voters in the UK who did not vote either in the referendum or a properly constituted manner pursuant to UK primary legislation to have their rights, granted 40 years ago, under UK and EU law removed by a single political party exercising dubious executive powers not granted under primary legislation in the UK Parliament.

    Without full Parliamentary scrutiny of any single interest group to force a proposal upon the non eligible voters (0 to 18 year olds) is undemocratic. For they are currently persons under UK and EU law and must be represented if their rights under the UK Human Rights Act 1998 are not to be ignored. That is one of the duties of Parliament. The first task of the proposed Britexit splinter group masquarading under the Conservative flag of convenience is to abolish the Human Rights Act. Ironical given the Hague Convention was largely drafted by UK lawyers. Also ironical is that the presence of Polish people in the UK should be the focus of complaint when the UK sacrificed so much to honour treaty obligations with independent Poland in 1939. Something the Poles have not forgotton and are equally bemused about current comments by the anti immigration lobby.

    The Conservative party is living up to what Ivor Crewe and Anthony King describe as “The Blunders of Governments” (one world publications).

    Like

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