The UK`s withdrawal agreements from the EU are covered by the withdrawal agreement (WA) concluded by the UK government and the EU in October 2019. The VA was ratified by the UK and THE EU in the days leading up to the UK`s withdrawal on 31 January 2020, and came into force immediately after the UK`s withdrawal. At first glance, the reference system appears to be in place in the withdrawal agreement. However, this is not new for the EU. Indeed, the reference mechanism of the withdrawal agreement resembles reference models in some association agreements between the EU and the former Soviet states (cf.B. Article 403 of the EU-Moldova Association Agreement). More generally, there are at least theoretical dispute resolution clauses that contemplate a reference from an arbitral tribunal to a permanent tribunal. Section 5 of Part XI of the 1982 Law of the Sea Convention (`LOSC`) provides for a system for resolving disputes relating to mining in the international seabed area. Section 188, paragraph 2 of the LOSC indicates that disputes relating to the interpretation or application of contracts relating to activity in the seabed area may be subject to arbitration proceedings under the CNCI rules. The central element of section 188, paragraph 2 of the LOSC is that the arbitration tribunal refers issues relating to the interpretation and application of the LOSC for binding decision to the Seabed Disputes Chamber. Reference mechanisms in dispute settlement clauses in international treaties are a rare feature and are generally not tested where they exist.
However, for the EU institutions, the reference mechanism seems to offer a pragmatic solution if a party is not willing to accept the exclusive jurisdiction of the Court of Justice. The Council`s guidelines of 25 February 2020 for the negotiation of a new partnership agreement with the United Kingdom are proof of this pragmatism. Disputes over the new partnership agreement are referred to an arbitration tribunal; but « a dispute should raise a question of interpretation of EU law. . . . the Court of Arbitration should refer the matter to the Court of Justice as an exclusive arbiter of EU law for a binding decision. It is true that some non-COMMUNITY states absolutely do not want to accept the participation of the ECJ, if only through a reference mechanism. But there are many areas in which direct dialogue between the arbitration tribunals and the Court of Justice could have the advantage of reconciling competing interests, if only in the area of future investment protection in the EU internal market. The VA also establishes a dispute settlement procedure in which the UK and the EU disagree on the interpretation or application of the agreement, but which will come into force after the end of the transition period.
In the event of a dispute, the UK and the EU will first try to resolve it in the Joint Committee. If this is not possible, the dispute may be referred to an arbitral tribunal which can make binding decisions. The European Court of Justice (ECJ) will present interpretations of EU law issues to the body. Non-compliance may lead to the imposition of a lump sum or outstanding penalty and non-compliance would give the complainant the right to suspend certain contractual obligations or elements of other agreements between the UK and the EU. If it is the law applicable to the dispute, nothing will change, even if the transitional provisions of the withdrawal agreement do not apply. The United Kingdom has adopted legislation to incorporate Rome I and Rome II into English law, in accordance with the law applicable to contractual and non-contractual obligations (modification, etc.). (withdrawal from the EU) Regulations 2019 (which come into force at the end of the transition period instead of the original withdrawal date) and the English court will therefore apply the same rules as currently to determine the applicable law. Of course, the EU courts will continue to apply Rome I and Rome II, so that a choice of English law is effective in the