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Wednesday, May 18, 2022

EU move to take UK to court fuels Brexiteers’ arguments

EU move to take UK to court fuels Brexiteers’ arguments

Brussels takes London to top EU court over Romanian state aid scheme amid sensitive Northern Ireland talks.
A decision by the EU to take Britain to court for the first time after Brexit is poorly timed given the fragile Northern Ireland protocol talks, experts warned.

Former British Brexit Minister David Frost said a move by the European Commission to refer the U.K. to the Court of Justice of the EU (CJEU) in relation the “Micula brothers” saga is “extraordinary” and “political.” The referral supports his argument that the EU court should not have jurisdiction in Northern Ireland, Frost said on Thursday.

The Commission in Brussels on Wednesday referred the U.K. government to the CJEU, the bloc’s highest court, claiming that a U.K. Supreme Court ruling ordering the Romanian government to pay compensation to investors who lost out on state subsidies “breached the principle of sincere cooperation” and was illegal under EU law.

The Commission’s referral decision comes in the midst of sensitive negotiations on post-Brexit Northern Ireland trade rules, in which the U.K. is trying to limit the role of the CJEU in the region. Commission officials said the decision was not linked to the Northern Ireland talks.

But Frost, a long-time opponent to the supremacy of the CJEU, hit back by saying the Commission’s move was “proof as to why it is not safe to live under European Court of Justice jurisdiction, in Northern Ireland or anywhere else.”

The Tory peer and former chief Brexit negotiator for the U.K. criticized the CJEU’s “very expansive view of its own role,” warning the British government “must think carefully how it engages with the process now.”

Alexander Rose, a lawyer at DWF who specializes in subsidy control, said the EU risks coming across as “petty and vindictive” by making this move after Britain’s exit from the EU. He questioned the timing of the decision by the Commission, arguing it “plays into the hands of EU’s critics” and comes at a time when German and Polish courts “have been challenging the primacy of EU law.”

“The arguments we’ll hear are likely to add fuel to that fire,” Rose said. “This action appears unnecessary and ill-judged given the wider context.”

The case dates back to 2008, when a private investment tribunal forced Romania to pay tens of millions of euros to Ioan and Viorel Micula, two investors who run a drinks-to-biscuits food empire in northern Romania.

When Romania joined the EU, Bucharest terminated an investment incentive scheme to comply with EU state aid law. However, an investment tribunal argued the brothers, as Swedish passport holders and therefore foreign investors, had a right to those subsidies as they had “legitimate expectations” that those incentives would be available.

The investment tribunal forced Romania to pay a hefty compensation to the Miculas, but the Commission considered that the payment was state aid and ordered its recovery. In 2019, the EU General Court annulled the Commission’s decision, arguing that EU law was not applicable for the period before Romania’s accession to the EU in 2007.

The ruling by Britain’s top court was issued during the Brexit transition period, leading to questions as to whether it may have been different if the U.K. was still part of the EU.

With its referral decision, the Commission wants the CJEU to determine whether Britain broke the law by adjudicating a legal question that was already before EU courts. If the CJEU rules that was indeed the case, it could fine the U.K.

Brussels argued that the U.K. Supreme Court’s judgment “has significant implications for the application of EU law to investment disputes.”

Under the Brexit Withdrawal Agreement, the Commission may, within four years after the end of the Brexit transition, initiate proceedings before the CJEU if it considers that the U.K. has failed to comply with the EU treaties before 2021.

Steve Peers, professor of EU law at the University of Essex, said the Commission did not need to take Britain to the CJEU now.

“The timing is odd because the Commission won an appeal two weeks ago in the EU courts, but the appeal didn’t fully end the litigation,” he said. “There’s still another few years until the litigation gets settled in the EU courts and the Commission could still wait until the end of the four-year period.”
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