Brexit and references to the CJEU

In a week where we are promised a position paper from the UK Government on the role of the Court of Justice following Brexit, I thought that the attached excellent technical article by Peter Mason (which some CIOT members will have seen) is worth an airing.  Peter identifies some issues which need to be resolved.

Please remember that a “Position Paper” has no force of law, does not represent anything which is agreed between the UK and the rest of the EU, and in reality is little more than a political wish list.

Peter is a Barrister, Chartered Certified Accountant and Chartered Tax Adviser at Cuckmere Chambers. He specialises in optimising the VAT position for businesses, especially in the finance, funds and insurance sectors, as well as for other businesses and non-profit organisations.

He is member of the CIOT indirect tax committee and was on the EU VAT Expert Group. He seeks at all times to work collaboratively with HMRC but where it is not possible to reach agreement on a matter, then he can take a case forward on appeal.
Peter can be contacted at Chambers on +44 (0) 203 858 0043.

UK Provisions

Paragraph 2.3 of the White Paper on the UK’s Exit and New Partnership with the bEU, CM 9417, of 17 January 2017, updated 15 May 2017, states that “We will bring an end to the jurisdiction of the CJEU in the UK. We will of course continue to honor our international commitments and follow international law.”

But how will this work for disputes in progress? Where taxpayers currently pay, and have paid tax, under the EU legal order as transposed into UK law under ECA 1972, they surely have a right to challenge the provision, including a request for a court to make a preliminary reference from the CJEU under article 267 TfEU.

Given it can take one or two years to get to the Tribunal and limitation periods go back four years in VAT (or longer for fraud, up to 20 years) will the courts make a reference and will the CJEU hear it for years to come? There is no guarantee the Court of first instance will refer, and so an appellate process could continue for say four or five years, to the Supreme Court. Are they then prohibited from referring?

Hamlet’s problem, the law’s delay means that cases may not get to the Tribunal, or on appeal, until years after we have left the EU. Does this mean that all currently acquired EU rights are lost?

I have to declare an interest, in that I have current case which in my view, would benefit from a reference. The VAT liability of transactions that have taken place whilst the UK is within the UK being challenged, and the right to request a court for interpretation of a provision of EU law under article 276 TEU, if the court determines that it is necessary, seems to have characteristics of an acquired right that could not simply be replicated in domestic law.

EU Provisions

Importantly, articles 19.1 and 3 TEU state:

Article 19
1. The Court of Justice of the European Union shall include the Court of Justice, the General Court and specialised courts. It shall ensure that in the interpretation and application of the Treaties the law is observed. Member States shall provide remedies sufficient to ensure effective legal protection in the fields covered by Union law.
3. The Court of Justice of the European Union shall, in accordance with the Treaties:
(a) rule on actions brought by a Member State, an institution or a natural or legal person;
(b) give preliminary rulings, at the request of courts or tribunals of the Member States, on the interpretation of Union law or the validity of acts adopted by the institutions;
(c) rule in other cases provided for in the Treaties.

Rule 19 of the Cconsolidated version of Protocol (No 3) on the Statute of the Court of Justice of the European Union states:

Only a lawyer authorised to practise before a court of a Member State or of another State which is a party to the Agreement on the European Economic Area may represent or assist a party before the Court.

These Rules may benefit from further clarification in the light of Brexit. First article 19(3)(a) TEU, which is directly applicable and has direct effect, confers competence to the CJEU in respect of actions brought by a “legal person”. This is not qualified in any way and reads disjunctively in my view with articles 19(3)(b) and (c).

However, representation seems to require that it be made by a lawyer authorised to practise before a court of a Member State. Does this mean that references can continue but that we will need a colleague from another Member State to represent us? That seems do-able in theory.

As regards article 50 TEU, this states:

Article 50 – Treaty on European Union (TEU)
1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union…….
3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2…….

Interestingly, in a European Parliament Briefing, of February 2016, commenting on article 50, stated:

… a withdrawal agreement could contain provisions on the transitional application of EU rules, in particular with regard to rights deriving from EU citizenship and to other rights deriving from EU law, which would otherwise extinguish with the withdrawal.


For a UK taxpayer, I cannot see how in respect of legal events that took place  whilst ECA 1972 incorporated the EU Treaties into domestic law, article 19.3(a) acts in any way to prevent a person who commences a legal action, whether during or after the UK’s membership of the EU, from asking the UK court, if it considers it necessary, to refer a question to the CJEU. This is for the following reasons. First, article 50 TEU is clear that the Treaties cease to apply from two alternative dates, the date of withdrawal agreement or two years after the article 50 notification.

In domestic law, s.16 Interpretation Act 1978 says that the law of today applies to events of today, unless Parliament takes the provision away with retroactive effect.
Therefore, unless there is such an amendment of Treaty obligations with retroactive effect, these should continue to apply up to the leave date. This is confirmed by Article 6 of the 1969 Vienna Convention on the Law of Treaties, which states: “Pacta sunt servanda”: Every treaty in force is binding upon the parties to it and must be performed by them in good faith.

Absence any other transitional arrangements, in my view courts and tribunals seem to be able, for years to come, to make a reference to the CJEU, in respect of legal events that took place up the leave date. This is particularly applicable in the case of a so called “hard Brexit”, where no transitional arrangements have been agreed.

This interpretation is supported by not only the important cases cited in Miller [2017] UKSC 5. Including the Case of Proclamations 1608 and Bill of Rights 1688, but also the leading Privy Council case of Madzimbamuto v Lardner-Burke [5] [1969]1 AC 645. In that case, detention of a subject in Southern Rhodesia under the illegal Ian Smith regime which had usurped power, was held to be unlawful.

The majority opinion stated:

“But the fact that the judges among others have been put in a very difficult position cannot justify disregard of legislation passed or authorised by the United Kingdom Parliament”

I would echo the Privy Council, in particular in the light of Miller. This tells us that rights conferred to a person by Parliament can only be removed by Parliament.

As Parliament has conferred competence to interpret EU law to the CJEU, until that competencies brought home, it must surely reside in Luxembourg, in the same as the legal power to detain Mr Madzimbamuto at that time, resided in the UK, and not with the usurpers of power in his homeland.

I have never understood why those arguing for Brexit and the supremacy of Parliament tried to resist this approach, particularly as the Referendum Act 2015 made no provision for the outcome to be legally binding. The sovereign Parliament’s intention, in enacting the ECA 1972, included the conferring of EU law rights on persons, and accordingly these can only be taken away prospectively in my view, by Parliament itself, unless international agreements, again approved by Parliament in this case (because the rights affect UK law, per Miller) so provide.

What the CJEU does with a reference that a UK court may decide to make after we have left the EU, in the absence of any withdrawal agreement, is however another matter! I would have thought that the CJEU, in calling itself a court of justice, would be minded to hear a case, but it does not write its own rules and the matter is of course very political.

It is to be hoped that as matters proceed, a working arrangement can be agreed. Some countries have very short limitation periods such as the Netherlands, and may not see this as an issue, so it may be important to raise the point as a potential issue at this stage.

Peter Mason