Photo Illustration: Tom Hall/Bloomberg

Brexit Bulletin: A Wiggly Red Line

  • U.K. climbs down on role of ECJ, saying it will have no ‘direct’ role
  • ECJ’s jurisdiction has been a sticking point in talks with EU

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Almost a year ago, U.K. Prime Minister Theresa May pledged to make Britain a “fully sovereign and independent country” free of the jurisdiction of the European Union’s highest court.

In January she promised the U.K. would “take back control of our laws” and end the sway of the European Court of Justice.

On Wednesday she will backtrack as her government concedes EU law will have a role in Britain long after Brexit and that it is now seeking only to bypass the ECJ’s “direct jurisdiction.”

The diluting of the onetime “red line” is aimed at unsticking divorce talks with the EU, whose leaders maintain their judges must have a post-Brexit role in resolving cross-border differences over citizens’ rights and trade, among other things. While May will hope voters accept her compromise, she runs the risk of sparking criticism from euroskeptics who view the court as overly activist and an instrument of European subjugation.

“Talk of the ECJ having no direct jurisdiction suggests that the government recognizes that if we are to have a close working relationship with the EU immediately after Brexit and into the future then European judges will continue to play an important role in determining the shape of the laws that could affect us,” said Andrew Hood, a trade lawyer at Dechert LLP.

The U.K. will argue in a position paper today that it would be unprecedented for the EU court to have full jurisdiction over a non-member state, while acknowledging nations outside the bloc sometimes refer disagreements to it. It will list other ways disputes with the EU could be resolved without signaling a preference.

The European Court of Justice in Luxembourg City.
Photographer: Thomas Frey/dpa via AP Photo

The shift is an attempt by May to move talks onto trade and to win a transition after the U.K. leaves in March 2019. The question is whether the bloc will accept it as enough.

Opposition Labour Party lawmaker Chuka Umunna said the government seemed “to be hinting that total judicial sovereignty is impossible” and asked it to rethink its refusal to stay in the single market.

May is likely to hear grumbles from those who campaigned for Brexit. Lawmaker Bernard Jenkin told the Daily Telegraph that “the ECJ should not have any role in interpreting any agreement between the EU and U.K.” The same newspaper also reported May will still reject EU demands that its citizens residing in the U.K. remain protected by the ECJ. Still, the pro-Brexit Sun depicted May as sticking to her guns over the ECJ.

Brexit Latest

Bank of America The investment bank’s executives are divided over where their EU trading hub should be after Brexit, according to people with knowledge of the matter. Equities head Fabrizio Gallo has pushed for Frankfurt as the base for traders working with EU clients, while his fixed-income colleagues Sanaz Zaimi and Bernard Mensah have favored Paris.

Economic Concerns U.K. companies are getting more worried about the economy and feeling less confident about hiring or investing, according to the Recruitment and Employment Confederation. Its index of economic conditions fell to the lowest this year, with a greater proportion of respondents to its survey saying things are getting worse. By contrast, the Confederation of British Industry said yesterday that total factory orders rose for an eighth consecutive month in August, the most prolonged run of gains since 1995. 

Recruitment and Employment Confederation

House Worries | Ten out of 14 economists surveyed by Bloomberg cited political and economic uncertainty as a reason home prices are stalling and predicted they would be stuck in neutral for some years.

Litigation Britain is angling to keep London at the center of European commercial legal disputes, a business which contributes more than £25 billion a year to the economy, according to TheCityUK.

Airports Major airports told the government to strike an early deal on future flights between the UK and the EU, arguing uncertainty over the issue could prompt bookings to fall by as much as 41 percent.

Osborne Former Chancellor of the Exchequer George Osborne told the BBC that the EU now has the “upper hand” in the negotiations after the U.K. reversed its threat that “no deal is better than a bad deal” by seeking a transition.

Devolved Governments The leaders of Scotland and Wales said they will unite to take on the “unashamed” grab of parliamentary power by England. They promised to amend the Repeal Bill although they lack a veto.

More Diplomats Ireland is to double its number of diplomats dealing with trade to protect its economy against Brexit. Prime Minister Leo Varadkar said the plan meant “new and augmented diplomatic missions as well as significantly increased resources for our investment, tourism, cultural and food agencies overseas.”

European Investment The Times reported the European Investment Bank, which financed £6.9 billion of public infrastructure projects in the U.K. last year, has effectively imposed a moratorium on new long-term loans to Britain.

And Finally…

The pound is drawing laughter on the comedy circuit as well as on foreign exchange markets, where it has fallen since the Brexit referendum.

Comedian Ken Cheng won the prize for the best joke at the Edinburgh Festival Fringe with this gag:

“I’m not a fan of the new pound coin, but then again, I hate all change.”

Correction: In Tuesday’s Bulletin we identified Jonathan Portes as an economist at NIESR. He is a professor of economics and public policy at King’s College London and a fellow of The U.K. in a Changing Europe.

Photographer: Jason Alden/Bloomberg

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