#Brexit

Second Time Around: EU Membership for Scotland is More Difficult, Not Less

And so here we are again. A second independence referendum now seems more likely a question of when, and not if. Those of us who fed into the debate in 2014 are already preparing to do so again. And while the issues remain remarkably the same, the context has changed entirely.

I did not involve myself in the politics of the 2014 referendum at all. In part because I genuinely didn’t make up my mind until the month before. However, as I also contributed towards the academic debate surrounding independence I did not want to appear too partisan.

In 2014, Dr. Daniel Kenealy and I wrote a paper in the European Law Journal, considering the issues surrounding an independent Scotland’s prospective European Union membership. We argued that, although Scotland’s continued membership of the European Union would not be automatic, it was highly likely that it would continue without interruption.

However, that was then, and this is now. And while the issue of EU membership is likely to feature heavily in the debate on Scottish independence once again, the context has changed considerably.

Timing

Nicola Sturgeon wants to time a referendum such that it will be held towards the end of the UK’s Brexit negotiations, but before the expiration of the two year time limit. This is, purportedly, so that Scotland can have a “genuine” choice between independence with EU membership, or union without.

However, this makes little sense for a number of reasons.  Much has been made of the length of time these negotiations might take. Such negotiations almost always go down to the wire, and Article 50 TEU allows for the possibility of seemingly-indefinite extension.

A cynic might take the view that the real reason behind the proposed timing is to ensure the referendum takes place before people acclimatise to Brexit and realise that the sky hasn’t actually fallen in. It is notable that the proposed timeframe is far shorter than the SNP felt necessary in 2011 to conduct a campaign that fully explored the issues.

Furthermore, the timing makes even less sense if the object of the referendum is to allow voters a “genuine choice”, because no such choice will exist. Unless the First Minister seriously proposes that a new state could be set up and continued membership of the EU negotiated within the space of a month, Scotland WILL be leaving the EU one way or the other. The choice on offer will be between Brexit inside the union and Brexit outside of the union, with potential for EU membership further down the line. This, of itself, poses a whole host of new issues that did not exist in 2014.

Sincere Co-operation

The position of a territory seceding from a state that itself is seceding from the EU is vastly different from a territory seceding from a fully-fledged Member State. In the latter circumstance, that secession would result in a considerable dislocation in the EU’s single market, which its institutions, and the Member States, would be legally obliged to seek to avoid. As Dr. Kenealy and I argued in 2014

“[t]he need to avoid such a dislocation represents not merely a pragmatic reason for the EU to enter negotiations with Scotland immediately following a ‘Yes’ vote but also a legal reason. Article 4 makes clear that if such negative externalities, as would be created by Scottish expulsion, threaten to compromise the attainment of the EU’s goals, then steps must be taken to avoid them. The task of ensuring that the Single Market does not suffer any sudden, sharp dislocation is one that flows from the Treaties. To allow the EU to stumble, unprepared, into such a scenario by refusing to address the issue of an independent Scotland until Independence Day, would be a violation of the principle of sincere cooperation, bordering on a dereliction of duty by the Commission and the Member States.”

This statement, however, clearly does not apply mutatis mutandis to a post-Brexit scenario. The unavoidable dislocation has already taken place. There is no impending hole in the EU’s single market that the institutions, or the Member States are obliged to seek to avoid.

This does not mean that there is no chance that institutions and Member States will not seek to make and independent Scotland’s transition into the EU as smooth as possible. Certainly, post-Brexit, some within the EU – most notably, Guy Verhofstadt – have made such overtones, seemingly to spite the UK. While a desire to stick-it to the UK among officials may well work to Scotland’s advantage, it doesn’t come close to the EU-wide legal obligation to work co-operatively with a seceding Scotland that previously existed.

Good Will

You wouldn’t have thought it by the end of the campaign, but the first independence referendum actually came about in a spirit of remarkably good will. The SNP, to everyone’s surprise, won a majority in the Scottish Parliament elections with a clear manifesto commitment that an SNP majority in the Scottish Parliament would mean an independence referendum. This, of itself, is at odds with the more equivocal commitment contained within the SNP’s 2016 manifesto.

The year following the referendum, the UK Government and the Scottish Government signed the Edinburgh Agreement, under which the Secretary of State would make an order under s.30 of the Scotland Act 1998 to grant Holyrood the legislative competence to hold a referendum that would “deliver a fair test and a decisive expression of the views of people in Scotland and a result that everyone will respect.”

The present circumstances could hardly contrast more starkly. The First Minister and the Prime Minister appear to be engaged in a game of constitutional “chicken”, and it’s not clear which party, if either, will blink first.

In 2014 I argued, quite sincerely, that from the moment Scotland voted ‘Yes’ its closest ally would be the rest of the United Kingdom. This was not out of some misplaced belief in David Cameron’s (or, more likely, his successor’s) magnanimity; but quite simply because it would be in the UK’s interests. With a similar outlook and so many shared interests, Scotland would likely be a close ally of the UK in the European Council and Council of Ministers, much like Ireland. I have little doubt that the UK Government would have gone to bat for Scotland’s continued membership of the EU. In the present circumstances such good will seems unlikely, and insofar is the EU is concerned, utterly fruitless in any event.

Currency

In 2014 I did not think it was at all likely that Scotland would be compelled to join the Euro. This was not  because I believed that Scotland would inherit the UK’s opt-out, but because the SNP had been explicit in their intention to continue using the Pound Sterling, whether in a formal currency union or not. As Scotland would have not have had an independent currency it would not have been possible for Scotland to join the Euro.

However, having been the Yes campaign’s key weakness in 2014, it is now clear that the “use the Pound, one way or the other” approach is unlikely to be used again. Any plans for independence would likely have to include a plan for an independent currency and central bank. Consequently, the main barrier to Scotland’s being compelled to join the Euro evaporates. All new members of the EU (and make no mistake, Scotland will be a new member) are obliged to eventually join the Euro.

While it is the case that it is possible to contrive to not join, by keeping your currency out of ERM II, as Sweden does, it is unlikely that Scotland would be able to get away with this for too long. The SNP may have to prepare itself to be able to sell the prospect of Scotland using three different currencies within the space of a decade.

Conclusion

The First Minister wishes to present the choice she wishes to put before the Scottish people as between independence within in the EU, or Brexit within the UK. Scotland’s continued membership of the EU was one of the key issues of the 2014 independence referendum, and it is likely that it will be once again. However, while the issues may well be the same, the context is vastly different; and this changed context turns Scotland’s continued membership of the EU from likely in 2014, to nearly impossible in 2019.

Scotland will be leaving the EU. The reality is that the only choice on offer is between Brexit within the UK, or without it. Whether we like it or not, this is the new reality to which Scots voters need to become accustomed, and about which the First Minister needs to be honest. Only then will we have a rational debate about Scotland’s future.

They Took Our Jobs! The free market bias of the European Court of Justice and the dismemberment of workers’ rights

giphy“We have surrendered our sovereignty to the European Court of Justice” is the one of the most common arguments in favour of leaving the European Union of the Tory right. This, I have argued before, is somewhat surprising given that the consequence of that loss of sovereignty is the removal of Member States’ liberty to depart from a free-market, pro-private enterprise, capitalist ideology. The cardinal offender, in the minds of Jacob Rees-Mogg, et al. is the European Court of Justice (ECJ), with their fondness for distasteful European ideas such as rights, etc. It is true that the ECJ is imbued with a broad power to bind the courts of the Member States, and that that power might not be so objectionable if it were exercised in a manner that is ideologically neutral. However, while it is certainly the case that the ECJ is not ideologically neutral, what the Rees-Moggs and the Borises of this world seem to ignore is that the ideology the Court has consistently chosen to impose is the pro-enterprise ideology that Rees-Mogg and Boris so favour.

Article 3 of the Treaty on European Union (TEU) provides that one of the aims of the EU is to pursue a “highly competitive social market economy”. The ideological ambiguity in this objective is no accident – the consensus in favour of European unity at the Communities’ outset was so broad that the objective of unity was paramount to all other ideological concerns. As the ECJ is a fan of the purposive approach to legal interpretation, it therefore, inevitably, falls to the court to resolve the conflict between the “social” and “free market” objectives of the Union. It is clear from the decisions of the Court that the ECJ favours the free market over social objectives.

Though the Court’s ideological leanings have been evident since the days of Cassis de Dijon, in keeping with the other EU institutions, the ECJ became more overt in expressing its ideological preferences in the mid-1980s. In Zaera, the Court stated that the objective contained within Article 3 of “raising the standard of living” within the Union was not a directly effective right or an objective per se, but rather that it was an expected consequence of the operation of the single market. In other words, the only increases in living standards that the EU Treaties mandate are those that occur by accident through the operation of the market, and that any artificial attempts at raising living standards are (presumably) illegal where they interfere with the operation of the market. The decision to favour one objective of Article 3 while surgically neutering another is an ideological preference.

While we frequently hear claims from the left about how much the EU has done for workers’ rights (ignoring the fact that many of the rights that they provide already existed in the UK, and in the case of holidays the UK provides more the minimum mandated by the EU) there appears to be a collective ignorance amongst many on the left as to the ECJ’s total dismemberment of collective labour rights. Two seminal cases in the past decade exemplify this: International Transport Workers’ Federation and Finnish Seamen’s Union v Viking Line ABP (Viking) and Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet (Laval).

In Viking, Viking Line ABP operated a ship between Finland and the Estonia, and planned to change the registration of the ship from the former to the latter in order to avail of a lower minimum wage in for Estonian workers. The International Transport Workers’ Federation opposes all “reflagging” for convenience, and instructed all of its international partners not to deal with Viking. Viking sought an injunction in the High Court of England and Wales on the grounds that the industrial action infringed upon their right of freedom of establishment under Art. 56 TFEU.

Similarly, in Laval, the the Swedish government awarded a contract to build schools to a Latvian company, Laval, who posted workers from Latvia to work on sites alongside Swedish workers. The Swedish Building Workers’ Union demanded that Laval sign their collective labour agreement, which would provide Latvian workers with far better protection than they would have been entitled to under the Posted Workers’ Directive. Laval refused, and so the builders’ union, along with the electricians’ union, called a strike in order to picket Laval’s sites. Laval sought an injunction under Art.56 as the pickets prevented them from doing business in Sweden, thereby infringing upon their right of freedom of establishment. The Court held, inter alia, that the Posted Workers’ Directive only entitles workers to the rate of pay the higher of the rate of pay they receive in their home country or the minimum wage in the host country, irrespective of whether or not that wage is significantly lower than the wage received by domestic workers. In effect, you can undercut domestic workers by importing labour even when it’s prima facie discriminatory.

In both Viking and Laval the Court held that there exists in EU law a fundamental right to industrial action. Naturally in cases such as these, that right to industrial action comes into conflict with the employers’ right of freedom of establishment. Normally in cases such as this, where two rights are in conflict and the scales are evenly balanced, the Court will grant the Member State a wide margin of appreciation. Resolving the conflict between two rights is, ultimately, an ideological, and therefore, a political task, and not a role that a court such as the ECJ should be performing. This is the approach that the Court had previously taken in cases such as Schmidberger and Omega.

However, in Viking and Laval, the Court held that the right to industrial action is subject to the right of freedom of establishment, it must pursue a legitimate aim, and it must be proportionate. In other words, you’re allowed to strike provided it’s not too inconvenient for your employer! And there I thought the whole point of a strike was for it to be inconvenient.

These are just some examples of the court’s preference for corporations over workers. There exist plenty of other examples of the Court’s ideological preferences in the field of labour law (such as Rüffert), as well as scores of examples where State Aid, Public Procurement, and Competition law are concerned, which I intend to write about in a subsequent blog. What’s clear from all of this, however, is that if anyone should be enraged by the European Court of Justice, it’s not the Jacob Rees-Moggs of this world, it’s the left.