Careful what you wish for #127

As the ‘Article 50’ litigation continues on whether the government can start the process of leaving the EU without further endorsement by Parliament, now the issue has arisen of whether leaving the EU means that the UK will necessarily leave the EEA too.

A key aspect of this issue is whether the UK is in the EEA Agreement in its own right or only by virtue of its membership of the EU. If the former, then it remains part of the EEA agreement even if it leaves the EU, if the latter then the EEA agreement ceases to apply to the UK if it leaves the EU.

Hugo Dixon is very keen on the ‘four freedoms’ that the single market aspires to base itself upon and as these aspirations are shared by the EEA Agreement and spelled out in its first Article, he is on the side of the argument that the UK is in the agreement in its own right.

Hugo sketches out the argument on his InFacts site and seems enthusiastically to endorse further litigation in relation to the EEA agreement, further noting

I’ve outlined elsewhere why I think that the UK is only part of the EEA Agreement so long as it is in the EU. But my point here is to observe what it might mean in practice if I were wrong — as I do like to consider all sides of an issue and the ramifications of whatever both sides propose. So lets get to it …

The EEA Agreement is made between its Contracting Parties who are listed in the agreement as the European Community, named individual countries who are the present EC member states, and named individual countries who are the present EFTA states (Iceland, Liechtenstein and Norway). The Articles of the agreement then refer variously to ‘the Contracting Parties’, ‘EC member states’ and ‘EFTA states’.

If Hugo is right that the UK would continue to be party to the agreement even if it were to leave the EU because the UK would still be a Contracting Party, it would of course no longer fall within ‘the EC member states’ (as it wouldn’t be one) and would not fall within ‘the EFTA states’ either because this is specifically defined in the agreement as meaning Iceland, Liechtenstein and Norway. That much seems unarguable. So lets look at the basic provisions in the agreement for each of the four freedoms and think how they might pan out.

First the freedom of movement of goods. Nice and clear that so long as the UK is a Contracting Party, there will be free movement of goods between the UK and everyone else. Excellent news for Hugo!

Second comes the freedom of movement for workers. Hmm. The agreement only provides for freedom of movement for workers among EC Member States and EFTA States. Nothing at all about any other Contracting Party, so no free movement to or from the UK. Not so good.

Third is free movement of services. Double Hmm. This rather seems to say that a national of any EC member state or any EFTA state is free to provide services throughout the territory of the Contracting Parties (i.e. including in the UK) but there is nothing at all to secure a similar freedom for a national of a Contracting Party that is neither an EC member state nor an EFTA state (i.e. no freedom for UK nationals to provide services). Pretty bad really.

Finally comes freedom of movement of capital. Well, sadly like for services, residents of the EC member states and EFTA states can freely move their capital around the Contracting Parties (including the UK), but nothing secures freedom for UK residents to move their capital around because they are not (any more) residents of an EC member state nor of an EFTA state. Really pretty bad.

All together now …..

Be Careful What You Wish For.

Errata: Para 6 incorrectly had Commission as a Contracting party when Community was meant. Now corrected, thanks @StevePeers, as also a number of typos.

Addendum: This was a late-night ‘thinking aloud’ write and could perhaps have done with a final spelling out to draw the threads together. My suggestion is that far from the prime minister struggling to take us out of the single market merely by leaving the EU, if the UK retained rights under the EEA Agreement as a Contracting Party when no longer an EC Member State these rights would extend only to freedom of movement for goods. There would be no right to freedom of movement for UK workers to other parties to the EEA agreement, but nor would their workers have any right to come to the UK. For services, their nationals would have the right to provide services to the UK, but UK nationals would have no reciprocal right to provide services to them. For capital, their residents would have the right to move capital to and from the UK, but UK residents would have no right to move capital to and from them. If this were so, the UK would have very limited access to the markets of the other parties to the agreement and much less access to their markets than they would have to the UK market. Not quite the worst of all worlds, but not good at all.