21 November 2018

Dr Emily Lydgate is a lecturer in Law at the University of Sussex and a fellow of the UK Trade Policy Observatory.

Even if the draft Withdrawal Agreement is ultimately rejected, it provides more clarity on what the European Union (EU) and the United Kingdom (UK) want in future relationship negotiations. Notably, it has prompted the EU to develop its call for a ‘level playing field’ in the areas of environmental and labour standards, State Aid and competition policy into a set of binding commitments now agreed by the UK Government. This blog examines the requirements for environmental standards and regulation. The EU has already indicated that it will seek ‘Level Playing Field’ commitments in any agreement, including a ‘Canada-style’ deal. These environmental commitments will likely comprise a minimum standard that the EU will require in any negotiated future relationship.

The Withdrawal Agreement proposes an approach to dealing with environmental governance that is novel for an EU trade agreement. The most powerful obligations concern UK domestic environmental monitoring and enforcement. In advance of the forthcoming UK Environmental Principles and Governance Bill, UK proposals for an ‘environmental watchdog’ remain vague; the Withdrawal Agreement commits the UK Government to environmental enforcement that is arguably stronger than what it has agreed domestically.

What is the backstop?

The Withdrawal Agreement’s Protocol on Ireland/Northern Ireland (the ‘Protocol’), popularly known as the ‘backstop’, provides a two-tiered approach to keep the intra-Irish border open and allow for minimal border checks between Northern Ireland and the rest of the UK. The UK is committed to apply the backstop if there is no future relationship agreed; but alternatively, it can seek to extend the transition period. The first tier commits Northern Ireland to a customs union as well as alignment with a very broad range of EU regulation designed to prevent the need for border checks.[1]

The second tier is a UK-EU customs union. This was a UK objective, in order to cut down on border checks between Northern Ireland and the rest of the UK. The EU attached to this customs union so-called ‘level playing field’ requirements. [2] These bring about (differing) levels of regulatory cooperation for environmental and labour standards, State Aid, taxation and competition policy.

Environmental protection for the ‘level playing field’

As environmental regulation imposes costs, there is an incentive for governments to give their industries a competitive advantage by lowering their standards. The EU has tried to prevent this problem in existing trade agreements by including ‘non-regression’ clauses; these prohibit trade partners from weakening or not enforcing environmental laws to benefit trade or investment. This approach, as applied in the EU’s Free Trade Agreements (FTAs) with countries such as Canada, Korea and Japan, is often described as soft or cooperative: non-regression is not enforceable through the main dispute settlement mechanism of the agreement and the emphasis is on formalising dialogue between the Parties.[3] Both the UK and the EU have called for stronger non-regression commitments in their future relationship,[4] and the Protocol delivers on this.

1. Non-regression in the level of environmental protection (Annex 4, Article 2)

The Protocol commits the UK not to lower the level of protection provided by ‘common standards’ in listed areas. Listing areas by theme and not by Directive creates some ambiguity in their precise scope. However, thematically, the list covers nearly every area of the EU environmental acquis, exceeding the scope of coverage of, for example, the EEA Agreement.[5] It covers ‘laws, regulations and practices’, encompassing not only formal rules and regulation but also their implementation. It is thus a remarkably broad interpretation of what is required for a level playing field.

Despite this comprehensive coverage, there is no requirement for harmonization with specific legislation, which permits the UK and EU to diverge – as long as they maintain equivalent levels of protection. In practice, establishing this equivalence is likely to prove challenging. Much EU environmental regulation is complex and process-oriented, focusing on ecosystem or life-cycle management, and including public participation requirements and economic instruments. This gives rise to questions such as: is the level of protection outcome-based, or does it encompass procedural requirements? If the UK adopted different regulatory strategies – moving from emissions limits to tradeable permits, or giving manufacturers greater scope to self-certify that they had met emissions limits – would the EU be able to argue that this constituted a lower level of protection? What if the UK decides to ‘cut red tape’ and reduce costs by reducing the requirements for monitoring and the frequency of public consultation?

However, this broad approach is supplemented by a very targeted approach covering the classical area of concern for the level playing field: industrial pollution and emissions. It states that the Joint Committee, which is charged with implementing the Protocol, will negotiate emissions limits in three areas: certain atmospheric pollutants, sulphur content of marine fuels and industrial emissions. Notably, the emphasis here is on quantitative limits, though the industrial emissions requirement also includes a commitment to ‘best available practices’.

Assessing derogation from agreed quantitative limits is likely to be much more feasible than what is envisaged above. Also, negotiating an emissions limit, rather than simply transposing from current EU legislation, circumvents potential issues with assessing the common level of standards, such as whether these flow from EU Member States’ formal commitments, or their achievements in practice. Notably, this commitment applies as soon as the Withdrawal Agreement comes into effect and not (as with the rest of the environmental commitments) at the end of the transition period.

The Protocol also states that Parties commit to the core environmental principles listed in the Treaty on the Functioning of the European Union (‘TFEU’). Here the Parties state that they ‘shall respect’ these principles. The UK has agreed to ‘have regard to’ these principles in its 2018 Withdrawal Act, wording which has come under criticism for potentially weakening their influence in UK domestic law (the TFEU, in contrast, states that EU environmental policy shall be ‘based on’ these principles.). The inclusion of this commitment to environmental principles contributes to the holistic approach to environmental governance outlined above.

The Protocol also requires the UK to implement a system of carbon pricing ‘of at least the same effectiveness and scope’ of the EU Emissions Trading Scheme (‘ETS’). Notably, this does not commit the UK to linking to the ETS, as long as it is able to meet this outcome commitment; it maintains the ability to adopt alternatives, such as a Carbon Tax, instead.

All of these obligations are exempted from the dispute settlement mechanism of the Withdrawal Agreement, an issue examined further below.

2. Monitoring and enforcement related to environmental protection (Annex 4, Article 3)

The environment is a closely-integrated EU policy area, and the UK Government has stated that it will be unable to transpose a third of EU environmental regulation due to its inability to replicate the functions of EU bodies and agencies.[6] Even when the UK successfully transposes EU regulation, it will not be the same. Many environmental Directives rely upon ongoing reporting and evaluation from the Commission; as the UK is well aware, the Court of Justice of the European Union (CJEU) can enforce compliance, including through administering fines.

The next part of the agreement is unilateral – it applies only to the UK, and not the EU. Noting that the EU has the Commission and the Court of Justice to uphold the ‘common standards’ identified above, it commits the UK to ensure ‘effective enforcement of…its laws, regulations and practices’. This includes enabling administrative and judicial proceedings by public authorities and members of the public. It also commits the UK to provide for effective remedies including sanctions that ‘…are effective, proportionate and dissuasive and have a real and deterrent effect’. It states that this UK body should be able to initiate inquiries of breach by the Government, and bring legal action with a view toward an ‘adequate remedy’.

The UK has stated that it will create an environmental watchdog to replicate the enforcement and monitoring functions of the EU. The Withdrawal Act commits the UK to an environmental body that can pursue legal proceedings against ‘Ministers of the Crown’ (the central UK Government). Remarkably, the Protocol expands on this commitment, additionally requiring that members of the public be able to pursue administrative and judicial proceedings for violations of environmental laws (which will also provide scope for NGO action). Also, it states that the environmental watchdog (an independent body) must be able to bring legal action against the Government ‘with a view to seeking an adequate remedy’. This goes beyond what the UK Government has agreed to domestically.

Enforcement of environmental provisions

The non-regression commitments of Article 2 are exempted from arbitration under the dispute settlement mechanism of the Protocol.  This means that there can be no sanctions for non-compliance. However, the monitoring and enforcement commitments of Article 3 are enforceable.

As argued above, in some respects this uneven approach will likely prove more feasible, as the unbounded non-regression commitment contained in Article 2 would have been difficult to enforce in practice. Assessing equivalent level of protection for divergent, complex, process-oriented regulation would prove complex, whilst examining effective enforcement is more straightforward.

Also, there is scope for the EU to pursue a perceived derogation from common standards under Article 2 as a failure of monitoring and enforcement under Article 3. Article 3(1) clearly states that the benchmark for UK effective enforcement is its ability to uphold the common standards referred to in Article 2(1).

Why is it innovative?

The environmental commitments in the Protocol allow for substantial divergence between UK and EU environmental regulation, but impose an enforceable commitment on the UK to achieve effective monitoring and enforcement. They are thus a halfway-house between full alignment with EU environmental regulation, the approach followed in, for example, the Ukraine Association Agreement and the EEA Agreement, and the non-regression requirements that the EU has currently in its more arm’s length trade agreements with countries like Canada and Korea. These obligations reveal that the EU views securing effective UK environmental protection as an important strategic objective of its overall trade relationship with the UK.

 

Footnotes

[1] Listed in Annex 5.

[2] For background, see: Emily Lydgate, ‘Tilting the playing field? The asymmetry in the UK and EU regulatory ‘ask’”, UKTPO blog, 27 July 2018, https://blogs.sussex.ac.uk/uktpo/2018/07/27/asymmetry-in-the-uk-and-eus-regulatory-ask/; Martin Nesbit and David Baldcock, ‘Non-regression and environmental legislation in the future UK-EU relationship’, IEEP, October 2018, https://ieep.eu/uploads/articles/attachments/b951ce87-3dcd-4043-85bd-026119d50628/Non-regression%20and%20equivalence%20-%20October%20corrected.pdf?v=63706303892

[3]  See, eg, Axel Marx, et al. (2016), ‘Dispute Settlement in the Trade and Sustainable Development Chapters of EU Trade Agreements’, Leuven Centre for Global Governance Studies, pp. 1-102.

[4] The UK called for an enforceable non-regression requirement in July 2018; ‘Framework for the UK-EU partnership: Open and Fair Competition, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/734935/2018-08-17_F_O_Competition_Slides_FINAL.pdf; In a speech on 18 April 2018, Barnier stated that UK-EU non-regression requirements would exceed those in existing EU trade agreements: http://europa.eu/rapid/press-release_SPEECH-18-3162_en.htm

[5] The EEA Agreement excludes the Habitats and Birds Directives; this list includes nature and biodiversity conservation.

[6] Environmental Audit Committee, ‘The Future of the Natural Environment After the EU Referendum’, Sixth Report of the Session, 14 December 2016, p. 18.  https://publications.parliament.uk/pa/cm201617/cmselect/cmenvaud/599/599.pdf

 

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