After the initial shock of the outcome of the referendum in the UK, in which a slight majority voted for leaving the EU, the UK government has started considering the options of shaping the UK’s trade relationships post-Brexit.
One obvious tool is the conclusion of bilateral trade (and investment) treaties between the UK and its most important trading partners. These could replace any existing or future EU agreements.
Indeed, on 8 July, it was reported that British Secretary of State for Business Sajid Javid started preliminary talks with India about an eventual bilateral trade deal. Reportedly, he is also going to visit the USA, Canada, Japan, South Korea and China and discuss the issue of negotiating trade agreements. The Department for Business, Innovation and Skills is also seemingly intending to triple the number of its trade specialists from 100 to 300 by the end of 2016.
In this context, the relationship between existing and on-going bilateral trade and investment treaties between the UK and the EU is of particular importance.
For example, the UK has concluded bilateral investment treaties with India, China and South Korea. Accordingly, the UK would not have to start from scratch, but could expand the scope of these treaties by adding the trade-related aspects to them.
The EU is currently negotiating free trade agreements with the USA, Canada, Japan and China. The Comprehensive Economic Trade Agreement (CETA) with Canada is now entering the ratification process, whilst the Transatlantic Trade and Investment Partnership (TTIP) with the USA and the agreement between the EU and Japan are still being negotiated. With the increasing resistance against free trade agreements in Europe, it is far from certain that CETA will actually be ratified and enter into force, while it will take years before TTIP, EU-Japan and EU-China are finalised.
The fact that the EU is negotiating on behalf of 28, and, post-Brexit, 27 member states, all of which have to ratify those treaties, makes it a very slow and complicated process to conclude. Hence, post-Brexit UK (negotiating only for itself) should be able to finalise trade deals considerably faster and take advantage of them earlier than the remaining 27 EU member states.
More specifically, when it comes to investment arbitration dispute resolution rules, the UK would no longer be bound to adopt the recently proposed “investment court system (ICS)”, which would replace arbitration by a semi-permanent two-tier court-like system. Indeed, there has never been much enthusiasm in the UK, and likewise in the USA, for this proposal. Hence, by proposing the classical dispute resolution rules in its trade deals, the UK could avoid cumbersome discussions and thus significantly speed up negotiations.
In sum, post-Brexit UK could profit from its competitive advantage of being able to negotiate alone, rather than being dependent on the EU institutions and remaining 27 member states because it could conclude bilateral trade deals much faster than the EU. In this way, post-Brexit UK could counterbalance some of the negative economic impact that it has been enduring directly after the referendum result was announced on 24 June.
For other views on the impact of Brexit on arbitration, see:
- Blog post, Bremaining optimistic: impact on London arbitration following Brexit.
- Blog post, The European Union, investment treaties and investment arbitration post-Brexit.