European Economic Area: UK Membership

Matthew Pennycook Excerpts

Monday 6th November 2017 Commons Chamber

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to wind up this debate, and I commend my hon. Friend the Member for Aberavon (Stephen Kinnock) and his co-sponsors, my hon. Friend the Member for Lewisham East (Heidi Alexander) and the right hon. Member for Broxtowe (Anna Soubry), for securing it. Each of them made forceful and thought-provoking contributions, and I thank the many other Members who have made excellent speeches.

The Opposition have consistently called for the maximum parliamentary transparency and accountability compatible with conducting the Brexit negotiations, and for Parliament to have more of a grip on the process. That is why we welcome the fact that this debate is taking place, and support the efforts of hon. Members from both sides of the House who have sought to secure greater clarity and certainty about what steps, if any, would be required for the UK to withdraw from the European economic area as a matter of international law. As always in these Brexit debates, we have covered a wide range of issues, but the motion refers specifically to continued membership of the EEA and to whether article 127 of the EEA agreement needs to be formally triggered. It is on that that I want to focus my remarks.

As several hon. Members have said, the EEA is an arrangement that enables three non-EU countries—Iceland, Liechtenstein and Norway—to participate in the EU internal market and allows the 28 EU member states to benefit, as Britain undoubtedly has, from preferential access to their markets as part of that agreement. Formally, the contracting parties to the EEA agreement are the 31 individual counties, although the EU itself was also added as a contracting party in 2004, because the EEA has a mixed agreement. As such, like other EU member states, the UK is a signatory to the agreement.

Article 127 of that agreement, which is the focus of the motion, sets out a basic rule for withdrawing from it. The article requires a contracting party wishing to leave the EEA to provide 12 months’ notification of withdrawal to the other contracting parties to give them time to modify the agreement. Taken at face value, article 127 suggests that the UK will have to give formal notification of withdrawal from the agreement to the other 30 contracting parties if it intends to leave the EEA. As several Members have suggested, the implication is that unless such formal notification is given, the UK will remain a contracting party to the agreement and a participant in the EEA after it has exited the EU.

It is worth briefly considering the implications of that argument, because there are reasons to believe it would not be the quick fix that many assume it to be. At a minimum, if the UK were able to remain a participant in the EEA after it had exited the EU, simply by means of failing to provide formal notification under article 127, it is likely that formal modification of the EEA agreement would still be required. As I sure the House is aware, it would involve an onerous, time-consuming and uncertain process of treaty change and ratification. That is because some parts of the EEA agreement refer to the contracting parties, which could be any of the EEA states, but other parts refer specifically to EU and/or EFTA states.

The situation could not therefore apply to the UK after Brexit unless it joined EFTA, which, as several hon. Members, including my hon. Friend the Member for Ilford South (Mike Gapes) and my right hon. Friend the Member for East Ham (Stephen Timms) have said, would not resolve crucial issues such as the customs union or the Northern Ireland border, and it would not be a straightforward process. I note the comments of the Norwegian Prime Minister in August that joining EFTA, even for a temporary period, would, in her words, be a “challenging and costly” undertaking.

To illustrate the problem that would be created if we attempted to remain part of the EEA simply by letting this lapse, rather than by providing formal notification, it is worth examining article 36 of the agreement. The article makes it clear that the beneficiaries of the right to the freedom to provide services are EU nationals and EFTA state nationals. Hypothetically, if the UK attempted to remain in the EEA as a third type of contracting party, it would therefore be subject to the rules of the EEA agreement, but its citizens and businesses would not benefit, which I do not think anyone in the House would countenance. The EFTA option is therefore the only viable one in the majority legal opinion, but as several hon. Members have said, that is not as straightforward as some would like to suggest.

However, taking a step back, it is not even clear whether the requirements of article 127 apply to a contracting party that has decided to end its membership of one of the two bodies—the EU and EFTA—that enable a state to be party to the agreement in the first place. It is not clear because it has never been tested. It is true that there is no provision in the EEA agreement requiring a contracting party to leave the EEA if it ceases to be a member of the EU or EFTA, but the wording and spirit of the agreement clearly appears to rest on the assumption that only EU or EFTA states can be party to it.

[Sir Edward Leigh]

This is all very interesting as a legal lecture, but is the Labour party in favour of staying in the EEA?

[Matthew Pennycook]

The Labour party’s position is very clear: we want to seek a deal that retains the benefits of the single market and the customs union. We think we should be a member of the single market for the transitional period. Whether the EEA option is the only viable one for doing so during the transition is a question for another day. The wording of the motion on article 127 and continued membership of the EEA is very specific.

In short, the situation is entirely unclear. In the opinion of the House of Commons Library, the majority legal view is that under the present wording of the EEA agreement, it is impossible to be a party to that agreement without being a member of the EU or EFTA. That view has been put forward by a number of experts, including, most prominently, Professor Baudenbacher, the President of the EFTA court. He has argued that there is no scope within the EEA agreement for a third type of a contracting party that is neither an EU nor an EFTA member. The argument has not yet been tested in court.

[Mr David Jones]

Will the hon. Gentleman tell us whether the Labour party agrees with Professor Baudenbacher?

[Matthew Pennycook]

As I have said, this legal opinion has not been tested. Interpretations differ, but I would say that the majority legal view supports Professor Baudenbacher’s assertion that there is currently no way to become a third type of contracting party to the agreement.

The argument has not been tested in court, as I have said. As the House will know, in February 2017 the High Court was asked whether the Government required the explicit consent of Parliament to enable them to leave the EEA, but the application was rejected on the grounds that it was premature since the Government had not then made a final decision on their EEA withdrawal mechanism. As things stand, in the absence of greater clarity, the door is clearly open for future legal challenges against the Government on this issue.

Greater clarity is required, and I have no doubt that the Government are aware of that. I assume their position on this matter is under review. That position has certainly evolved over time. In a response in December 2016 to a written question submitted by my hon. Friend the Member for Nottingham East (Mr Leslie), the Government were clearly interpreting subsection 1 of article 126 of the agreement to mean that the UK is a member of the EEA only in its capacity as an EU member state. As such, we will automatically exit and secede from the agreement when we leave the EU.

However, the Government since appear to have shifted away from that position. According to reports of court proceedings taken from a judicial review application to the divisional court in February, the Government accepted that article 126 did not

“give rise to termination of the EEA Agreement ipso jure [in law]”.

More recently, in responding to a question posed by my hon. Friend the Member for Aberavon on 7 September, the Secretary of State argued that although article 127 does not need to be triggered for the agreement to cease to have effect,

“we are looking at it just to make sure, for clarity purposes, that we meet its requirements.”—[Official Report, 7 September 2017; Vol. 628, c. 285.]

Is the Minister able to tell the House today what progress has been made in that regard? The Government’s latest position appears to be that even if our EU exit does not automatically terminate the EEA agreement in law, any continued signature to the agreement would not equate to functional single market membership.

As my hon. Friend the Member for Lewisham East said in her powerful speech, whatever one’s opinion about whether the UK should be in the EEA, out of it, in it for a few years or in it for decades, it is crucial that we have greater clarity on this matter. I hope that in his summing up, the Minister will shed more light on the Government’s position before we come to the Committee stage of the European Union (Withdrawal) Bill.