Brexit and EU Competition Policy

QC (Hon), Emeritus Professor of Law, King's College London. Many voters in the ‘Brexit’ referendum, myself included, are appalled at the prospect of a UK withdrawal from the European Union: whether we are a majority or a minority will not be known until the early hours of 24 June. Issues of the most profound importance are at stake, for the UK, the EU and, indeed, the wider world. A likely side effect of Brexit would be a second referendum on Scottish independence from the UK, with a high probability that the Scottish electorate would choose to leave. I do not know what the ‘new’ state to emerge from this process would be called: not Great Britain, as that expression includes Scotland; not the United Kingdom, as that is an amalgam of Great Britain and Northern Ireland; and not England, as that would exclude Wales and Northern Ireland. An inelegant—and appropriate—working name is ‘the Residual UK’, as unattractive as the prospect itself. What impact would Brexit have on the competition policy of the EU, the Residual UK and Scotland? Assuming that the UK were to leave the EU, the EU would have to decide what future relationship it wishes to have with the Residual UK. The EEA option? The Swiss option? The Turkish option? The Canadian option (a Comprehensive Economic and Trade Agreement was agreed between the EU and Canada on 29 February 2016)? Specifically in relation to competition policy, Brexit, absent some new arrangement, would bring an end to one-stop merger control under the EU Merger Regulation (and the associated case-reallocation mechanisms in Articles 4, 9, and 22 of that Regulation). The competition authority of the residual UK would also be able to investigate antitrust infringements independently of the European Commission's own investigations under Articles 101 and 102 TFEU. This extra layer of control will not be welcomed by business as it will involve extra expense and uncertainty, and would involve unnecessary duplication of work on the part of competition authorities. A different effect of Brexit would be the departure of the UK from the European Competition Network and the termination of its role in the development of EU competition law and policy. I hope that it is neither presumptuous nor arrogant to suggest that British lawyers, economists, officials, and academics have made positive contributions in this sphere over the years and that the absence of the UK would be a loss. To give two examples of British influence, the UK made major contributions to the debate about the reform of the EU Merger Regulation in the early years of the 2000s and again to the complex issue of the ‘reform’ of Article 102 TFEU later in that decade. Of course, the Residual UK would continue to be heard in the OECD and the ICN (assuming it were to be admitted!); and a cooperation agreement of some kind could be negotiated with the EU, in the same way that the EU has agreements, for example, with the USA, Canada, and Switzerland. However, a cooperation agreement would be very different from being a major player within the current institutional framework of the EU. At the level of the Residual UK and Scotland, I assume that an independent Scotland would establish its own competition regime: indeed, to be admitted as a new Member State of the EU, it would be required to do so; Scotland would then become a member of the ECN. There is something quite attractive about the creation of a Scottish Competition Tribunal, which would inevitably become known as ‘SCOT’: however, Brexit is a high price to pay for this verbal pleasantry. As for the Residual UK, on day one of Brexit, the Competition Act 1998 would remain in place. But if the more extreme Brexiteers were to come to power, I assume that section 60 of the Competition Act, which requires the competition authorities and the courts of the UK to maintain consistency with the general principles and the jurisprudence of the Court of Justice and to have regard to the decisions of the European Commission, would have to be repealed. Many Brexiteers hold the utmost contempt for the Court of Justice, as also for the European Court of Human Rights (which a distressingly large number of people assume to be an institution of the European Union). It seems unlikely that people of this disposition would be willing to leave section 60 in place since Brexit is about the restoration of national sovereignty and freedom from the ‘meddling’ in internal affairs by the Courts in Luxembourg and Strasbourg. Repeal of the European Communities Act 1972 would, of course, bring an end to the direct effect of EU law in the UK, and it would follow that, as a matter of the law of the Residual UK, agreements would no longer benefit from EU block exemption. Under section 10 of the Competition Act 1998, agreements that do not benefit from an EU block exemption because they do not produce an effect on trade between EU Member States benefit from ‘parallel’ exemption under UK law. However, in so far as Brexiteers disdain the application of EU law in the UK, it is not clear that this provision would survive in the new dispensation. Brexit would clearly have a significant effect on competition law and practice. Quite apart from the addition of an extra tier of control over mergers and antitrust infringements, one can predict a significant change in the use of London-based competition law firms. Many EU merger notifications are handled in London on behalf of non-UK merging parties: it must be questionable whether this would survive Brexit—a diversion from London to Brussels seems likely. London is a major centre for standalone and follow-on actions based on infringements of Articles 101 and 102 TFEU, and again it is hard to see how this would survive Brexit, not least since the repeal of the European Communities Act 1972 would mean that an infringement of those provisions would no longer be a tortious breach of statutory duty. The competition that already exists between, in particular, the UK, the Netherlands, and Germany to attract private competition law litigation would shift decisively away from the UK (more precisely from the courts of England and Wales); claimants who have enjoyed the benefits of the helpful damages regime in London will be losers as well as London lawyers and economists. In the meantime, lawyers in London are already requalifying in Ireland in order to preserve the legal professional privilege of their clients: the Court of Justice's judgment in AM&S Europe v Commission of 1982 does not apply to advice from a non-EU-qualified lawyer. This is by no means an exhaustive account of the consequences for competition law and policy in the EU and the UK of Brexit, but it is this author's perception of what inhabitants of the competition law village might wake up to on 24 June 2016.

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