UK Constitutional Law Association

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Sam Fowles: The Trade Bill 2018: A Step Towards Parliamentary Control of Treaty Making?

The Trade Bill 2017-19, currently undergoing its second reading in the House of Lords, marks a significant step in the evolution of the UK’s constitution in that it gives Parliament a greater say in the making of international trade agreements (“ITA”) than ever before. Constitutional law and international trade are rarely spoken of in the same breath. This approach is outdated. ITA constrain domestic policy-making. Investment chapters prevent governments from pursuing policies that will negatively impact on the interests of international investors.[1] These often go beyond the public law rights enjoyed by citizens of the state in question. The rights conferred are enforced in ad-hoc international tribunals which, although generally only empowered to award compensation often make awards of such size as to make the policy in question unviable. This means that, in practice, tribunals exercise power in a manner similar to the High Court through judicial review. Given that, as a result of Brexit, the UK must negotiate a significant number of new trade agreements, it is increasingly important for academics, policy-makers, and practitioners to be aware of the constitutional impacts of international trade.

An ITA, like any other treaty, must be ratified if it is to take effect in international law. Ratification is a matter of domestic law. In the UK the ratification of treaties falls within the Royal Prerogative. Per part 2 of the Constitutional Reform and Governance Act 2010 (“CRAGA”), however, the government must lay a treaty before Parliament for at least 20 days before it may be ratified. Parliament can delay (but not prevent) ratification if it passes a resolution to that effect. This formalises an older convention by which ministers laid a treaty before parliament before ratifying with the Royal Prerogative. In practice this means that ITA (and other treaties) are almost exclusively ratified without a vote in Parliament.

The original draft of the Trade Bill would have extended the government’s powers in relation to ITA, both formally and in practice. The Bill concerns ITA with states that currently have ITA with the EU. The government’s policy is to agree new ITA with those states, on substantively the same terms, immediately after Brexit (“rollover agreements”). On this reasoning there is no need for any significant scrutiny of rollover agreements because they will be no different from the ITA to which the UK is currently a part as a member of the EU. On this basis section 2 of the Trade Bill gives the government the power to implement rollover agreements with secondary legislation. This includes a power to alter primary legislation if that legislation is “retained EU law”. Schedule 2 of the Bill provides that legislation made under section 2 will be subject to the negative scrutiny procedure. This means that, in practice, Parliament will never vote on the legislation and it will be subject to only minimal scrutiny.

The problem with the government’s rationale was that there is no guarantee that third states will agree to make an ITA with the UK on the same terms as the equivalent agreement with the EU. The Trade Bill, as introduced to the Commons, made no provision for this eventuality. The result was that the Bill empowered the government to implement (potentially) a substantially new trade agreement with only the very minimum of parliamentary scrutiny.

To address this issue a series of amendments were proposed. These were primarily sponsored by Jonathan Djanogly MP but were supported by a broad coalition of MPs and NGOs including Dominic Grieve, Geraint Davies and 38 Degrees. The amendments fall into two suites, each suite making a substantive change to the Bill. The first suite introduced reporting requirements. These compel the government to report to Parliament any “substantial” differences between a rollover agreement with a third state and the equivalent agreement between that state and the EU. The second suite created a “sift and scrutiny” procedure (similar to that found in Schedule 7 of the EU (Withdrawal) Act 2018). This would have, inter alia, required the Secretary of State to submit any regulations made to implement a rollover agreement, that differed substantively from the equivalent EU-third state agreement, to a parliamentary committee empowered to decide whether the implementing instrument should be subject to the negative or affirmative scrutiny procedure.

The government accepted the first suite of amendments and reporting requirements are now to be found in sections 3-5 of the Bill. With regard to the second suite of amendments, the government arguably went beyond the suggested “sift and scrutiny” procedure. Schedule 2(4) of the Bill now provides that all measures to implement a rollover agreement are subject to the affirmative procedure (the stronger of the two procedures available under the “sift and scrutiny” amendments).

These amendments, while only applying to a subsection of ITA, nevertheless represent an evolution of Parliament’s role in the making of international agreements. First, they place an unprecedented burden on the government before a treaty can be ratified. Where, under section 20 of CRAGA, the government must merely lay a treaty before Parliament for a period of 20 days (without comment), section 3 of the Trade Bill now requires the Secretary of State to make a report to Parliament, detailing any significant differences between the proposed rollover agreement and the equivalent EU-third state ITA, and explain the reasons for those differences. This changes the nature of pre-ratification scrutiny because, for the first time, the Secretary of State is formally required to provide Parliament with analysis and justification for certain parts of an ITA.

Second, they require Parliament to play an active role in the scrutiny of implementation measures. Subjecting statutory instruments to the affirmative scrutiny procedure is hardly revolutionary. On the other hand, the government will have a powerful disincentive to ratify an ITA if Parliament will refuse consent for the measures necessary for its implementation (thereby putting the UK immediately in breach). Given the pre-ratification reporting requirements, Parliament will be able to express its disapproval in advance of ratification. This will carry substantial weight because comes with the implicit threat of withholding consent for implementing measures. While, in form, this represents a relatively minor increase in Parliament’s powers, it’s impact is potentially significant in practice.

The constitutional importance of these amendments should not, of course, be overstated. They only apply to a subset of ITA and the reporting and scrutiny requirements only apply to rollover agreements with “significant” differences from the equivalent EU-third state agreements. This gives the Secretary of State a degree of discretion as to whether the additional scrutiny requirements apply. It is possible that the nature of a “significant” difference will need to be clarified by the courts. Further, given that ITA can, in some cases, have a public policy impact akin to that of primary legislation, it is arguable that even the enhanced scrutiny provided by the Djanogly amendments does not begin to approach the level of scrutiny required.

That said, these provisions nevertheless represent a chipping away at the divide between domestic policy (subject to scrutiny by Parliament) and foreign policy (the sole preserve of the Crown). This is the right direction of travel. The divide between domestic and foreign policy is a relic of a 19th century constitutional settlement, made in a time when events in other parts of the world generally had little or no effect on the day to day lives of people at home. That is no longer the case. In today’s globalised world, foreign policy decisions are increasingly akin to domestic policy in terms of their impact. They should, therefore, be subject to equivalent democratic scrutiny. This issue is additionally relevant in the light of Brexit. The result of which is that a suite of decisions that would formerly have been taken at EU level (and therefore subject to democratic scrutiny by the European Parliament) will fall within the class of “foreign policy”, effectively taking certain policy areas out of the purview of democratic scrutiny. Trade is one such area. If the UK constitution is to be fit for purpose in the 21st century, it must evolve to address the challenges of globalisation. The (amended) Trade Bill represents a small, but nevertheless important, step in the right direction.

[1] I set out this analysis more fully in my Foreign Policy Centre paper “How Investment Treaties Have a Chilling Effect on Human Rights” (FPC, 2016), available here.

Dr Sam Fowles is a barrister at Cornerstone Barristers and a Fellow at the Foreign Policy Centre. He acted for 38 Degrees, an NGO supporting the Djanogly amendments, during Parliament’s consideration of the Trade Bill.

(Suggested citation: S. Fowles, ‘The Trade Bill 2018: A Step Towards Parliamentary Control of Treaty Making?’, U.K. Const. L. Blog (14th Sept. 2018) (available at https://ukconstitutionallaw.org/))

2 comments on “Sam Fowles: The Trade Bill 2018: A Step Towards Parliamentary Control of Treaty Making?

  1. ATKINS, Martyn
    September 14, 2018

    DJANOGLY, for goodness’ sake.

  2. Pingback: Brexit Highlights 10 – 16 September 2018 | Middle Temple Library Blog

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