The EU-UK TCA from a UK perspective…

This blog considers UK expectations and fears regarding what might happen in the wake of Brexit and how the conclusion of the EU-UK Trade and Cooperation Agreement (TCA) might allay such concerns or otherwise. It does so by considering the labour clauses in the TCA with reference to the reference made to International Labour Organization (ILO) and European Social Charter standards, considering also the importance of enforcement of labour standards. It concludes by considering the likelihood of the EU taking action against the UK and potential changes to UK labour standards that might trigger such a response.  

1. What did we expect and fear?

In 2016, Michael Ford QC in his advice to the Trades Union Congress (TUC) advised that if the referendum was won by ‘vote Leave’ then:  ‘All the social rights in employment currently required by EU law would be potentially vulnerable.’

Working time regulation was certainly at risk, given a private members’ bill from a Conservative MP (Christopher Chope) presented in 2015 which had sought reforms which would violate EU law. Notably, that Bill has been presented again in the current session of Parliament, although it is not (yet) supported by the current Government. 

Michael Ford also flagged the potential for diminishing:

• Information and consultation rights
• Health and safety laws and even
• Aspects of discrimination law

After the referendum – where 52% of those voting voted in favour of leaving the EU…. the European Union (Withdrawal) Act 2018 spawned further concern.

On the one hand, all EU law would remain in force at the date of British exit of the EU, such that the UK has retained after Brexit workers’ rights placed in our primary and secondary legislation derived from EU law, regarding matters such as discrimination, health and safety, information and consultation and working time. But these entitlements are now subject to repeal or amendment, depending on the current Government’s political agenda. Further, there is scope for amendment of EU-derived law by ‘subordinate legislation’. These so-called ‘Henry VIII’ ministerial powers enable evasion of parliamentary debate and so diminish protection for workers’ rights, while offering potential for autocratic government. 

Past judgments of the Court of Justice of the EU remain pertinent after withdrawal (under s.6), but no future judgment will be binding, nor will there be scope for references to be made to the Court. Moreover, there is now no right of action under domestic law based on the general principles jurisprudence of the Court, such as the right to an effective remedy. (See  Schedule 1, para. 3.) Further, the EU Charter of Fundamental Rights, which had set out various workers’ rights, is no longer part of domestic law (due to s.5) – although, of course, Council of Europe instruments ratified by the UK remain applicable – notably the European Convention on Human Rights (the ECHR) and the European Social Charter. The ECHR has domestic legal effect by virtue of the UK Human Rights Act 1998.    

Also, Brexit will not have any obvious effect on UK labour laws which were adopted independently of the EU social acquis, such as laws on: 

• collective bargaining and industrial action or 
• on the national minimum wage (or as it is now termed erroneously a ‘living wage’) or
• unfair dismissal  (for example)

Because these are not derived from EU law. They remain (as they were previously) vulnerable to amendment and repeal.

A ‘bonfire of workers’ rights’ is still seen by some as being threatened (and that was a newspaper headline in March 2021). Nevertheless, here we are a few months after Brexit (and the TCA) and we have had no new employment legislation since 1 January 2021 and (controversially) there was no Employment Bill mentioned in the Queen’s speech, which sets the agenda for UK legislation for the next parliament.

This is despite promises in the Conservative election manifesto  (see esp. pp 37 – 39) to ‘build on existing employment law with measures that protect those in lowpaid work and the gig economy’ and improve family friendly policies.

There is just a mention in the Trade Act 2021 of the need to ensure that if a trade agreement refers to employment and labour, then the provision must be consistent with present UK levels of statutory protection – s.2(6) and (7).

The failure to contemplate an Employment Bill is concerning, since Covid-19 has exposed inequalities and discrimination in the UK labour market, which need to be addressed. But also for many, the absence of an Employment Bill is a relief because the systematic repeal of EU-derived employment law is not (it seems) imminent. And the question is why not?

This may have something to do with the Effect of the TCA, and in particular Part Two – Heading 1 – Title XI: Level playing field for open and fair  competition and sustainable development in the TCA – especially Chapters 6, 8 and 9 – which I’ll briefly discuss here.

Despite a right to regulate in Article 387(1), there is also a weak non-regression clause in Article 387(2), which does not refer directly to the EU social acquis but rather more generally to ‘labour and social levels of protection’ and the Party’s (the UK’s) own laws. Of course, due to the EU (Withdrawal) Act 2018, these include UK labour laws derived from the social acquis as EU negotiators will have known. 

• From EU to other European and international labour standards

But in an excellent policy brief for the ETUI, Keith Ewing, Lord John Hendy QC and Nicola Countouris have made a very pertinent point. While the EU February 2020 negotiating mandate sought to preserve ‘Union standards as a reference point’, there seems to be an aversion in the TCA to mention of EU law in relation to labour standards, which comes through even more strongly in Chapter 8.

Instead, there is reference to the 2008 ILO Declaration on Social Justice for a Fair Globalization (in Article 399(1)), ‘internationally recognised core labour standards, as defined in the fundamental ILO Conventions’ (in Article 399(2)) and ‘implementing all the ILO Conventions that the United Kingdom and the Member States of the Union have respectively ratified and the different provisions of the European Social Charter that, as members of the Council of Europe, the Member States of the Union and the United Kingdom have respectively accepted’ (in Article 399(5)).

Now these ILO and ESC standards do not have direct legal effect in the UK in the same way that, prior to Brexit, EU law would have done. Ford therefore said in 2016 that he thought these a poor substitute as a regulatory basis for UK labour law. 

There have also been claims that the ‘core labour standards’ and the principles they protect are too nebulous to be of much use – at the time this was signed off by Boris Johnson’s Conservative administration the assumption may well have been that these were not legally binding commitments.

However, we have seen from the EU-Korea Expert Panel findings (dated 20 January 2021) that standards such as principles of freedom of association under the 2008 ILO Declaration – which might not usually give rise to binding commitments under international labour law – may, in the context of specific wording in a trade agreement, have that effect.

This shift in focus also coincides with UK courts’ referring more to ILO standards– for example, ILO Recommendation No. 198 on the Employment Relationship was heavily relied upon in the Court of Appeal to give a professional foster carers’ union the capacity to be registered as an independent trade union [National Union of Professional Foster Carers v The Certification Officer [2021] EWCA Civ 548]. This was done by drawing on a European Court of Human Rights judgment, which had made reference to ILO Recommendation No. 198 when interpreting Article 11 of the ECHR. [App. no. 2330/09 Sindicatul “Pastorul Cel Bun” v Romania judgment of 9.7.2013] It is arguably an interesting manifestation of what Virginia Mantouvalou highlighted as a desirable integrated approach, offering new influence perhaps to neglected ILO standards which may even have a wider impact than EU law did, for example on collective labour rights. 

Of course, as Ewing, Hendy and Countouris point out the UK is in longstanding breach of ILO and ESC standards and the compliance of certain EU member states is questionable too. That raises questions as to how this will be played out in practice. 

• The scope of non-regression commitments – a plea for enforcement?

On the scope of non-regression commitments, it has been noted in an extremely helpful working paper for the Brexit Institute from Paola Mariani and Giorgio Sacerdoti, that Article 388 of the TCA requires, in their words ‘an effective system of labour inspections in accordance with its international commitments relating to working conditions and the protection of workers; effective administrative and judicial proceeding’ – and (as the provision itself states) ‘appropriate and effective remedies, including interim relief, as well as proportionate and dissuasive sanctions’.

This is precisely what the UK does not have at the moment. There is currently no Director of Labour Market Enforcement in office – the post has been left vacant, even though the most recent (temporarily appointed) incumbent was willing to stay on until a replacement was found. This is at a time when exploitation of the most vulnerable workers is occurring in the context of an economic crisis prompted by coronavirus. Also, as noted above, there is no Employment Bill planned for this Parliament, which means that there are no immediate plans for a Single Enforcement Body for workers’ rights as was promised in the 12019 Conservative Party manifesto. The UK’s Employment Tribunal system is over-burdened and struggling with almost Dickensian delays, more reminiscent of ‘Bleak House’ than contemporary expectations of access to justice. 

The UK is already in breach – and many in the UK would be grateful for a prompt from the EU for this Conservative Government to get its house in order. Piet Eeckhout has argued that the EU Future Relationship Act 2020 gives implementation powers to UK courts, but I am not so sure that despite the Supreme Court’s bold intervention on employment fees, they can do much more generally about enforcement of workers’ rights. 

• The scope for retaliatory rebalancing – what might prompt this?

Action could be taken against the UK by the EU potentially through two mechanisms. Under Articles 389, 408 and 409, resolution of any disagreement in the context of labour and social provisions is not to be determined by the standard arbitration process, but rather through consultations and potentially a  ‘panel of experts’ whose findings will be non-binding (see Article 409). More influential may be the rebalancing measures that can be taken where there is alleged breach (under Article 411) of significant divergence from labour standards commitments which has a ‘material impact on trade or investment between the Parties’. Such measures could include tariffs. 

Bearing in mind only partial EU MS compliance with certain key ILO and ESC provisions, there is unlikely to be EU action unless UK deregulatory action is severe (or there is some other ulterior purpose). Ewing and others have referred to this as a pattern of ‘mutually assured transgression’ or at least ‘mutually assured non-compliance’. Certainly, I am not convinced that minor amendments to working time or even discrimination measures will trigger EU action. What could do this – perhaps – are the UK Government’s plans around ‘freeports’… which would seem to have both a trade and a labour dimension.

Manoj Dias-Abey and I have written about the Government’s freeport proposals in the context of treatment of immigration and migrant workers. These will be ‘export processing zones’ (that the Government lauds as ‘special economic zones’). Such EPZs are now notorious worldwide for their “regulatory flexibility” relating to labour standards. The Government is enthusiastic about creating new jobs through freeports but is silent on the role that third country service providers and temporary movement of natural persons (under GATS Mode 4) might play in freeports. It has been said that the national living wage will need to be paid, but otherwise despite the intervention of the Parliamentary International Trade Committee with a report in April 2021 requesting further information, little more has been said.

This may be the kind of policy initiative where retaliatory rebalancing might arise, so we should watch this space. It is to be hoped that the TCA may operate as a deterrent to deterioration of labour standards in freeports. For the time being, our worst fears have not been realised and so we will hopefully wait and see.

This blog is a summary of the presentation delivered at an LLC web seminar on 21 May 2021. Thanks go to the organisers, other presenters and attendees.