Accessing the EU’s Financial Services Market in the Event of a No-deal Brexit

Bartlomiej Kulpa, LLM (Twitter: @KulpaBart)

Introduction

Since Boris Johnson took the helm as British Prime Minister, a no-deal Brexit has become the most likely scenario. The UK-based financial services firms are waiting to hear if they will be able to serve clients in the EU 27, and if so, on what basis. Currently, the UK-based financial services firms rely on the so-called passporting rights. According to The Economist, 5,476 financial services firms based in Britain used 336,421 European passports to sell their products in the EU in 2016. By comparison, approximately 8,000 financial services firms based in the EEA used 23,535 European passports to sell their products in the UK. This proves that the removal of passporting rights as well as uncertainty over what will replace them amount to an existential threat.

The Concept of a European Passport             

A European passport is a right granted under the Single Financial Market Directives, such as MiFID II (The Markets in Financial Instruments Directive 2014/65/EU), to an EEA institution licenced in an EEA Member State. The European passport enables financial services firms to act on a cross-border basis within the EEA. If Britain leaves the EU without a Brexit deal, the UK-based financial services firms will lose the passporting rights and consequently full access to the single market. In other words, they will be treated as third country financial services firms.  

   

Articles 34 and 35 of MiFID II form the legal basis for the passporting rights. Article 34 provides for freedom to provide investment services and activities in another Member State if such investment services and activities are authorised by the competent authorities of a home Member State. As regards Article 35, that allows financial services firms to provide services in another Member State through the right of establishment of a branch provided that such services are authorised by the competent authorities of the home Member State. Pursuant to Articles 34 and 35, a financial services firm must notify the competent authorities of the home Member State of its intention to provide services in another Member State. In other words, the financial services firm must apply for a licence. Subsequently, the competent authorities of the home Member State inform the competent authorities of a host Member State of the financial services firm’s intention to serve clients in the latter.    

  

There is no doubt that the advantages of the concept of a European passport easily outweigh the disadvantages. Firstly, one licence enables financial services firms to obtain access to 31 countries which have a population of over 500 million consumers (this will be reduced after a Brexit). From a legal point of view, this means that a financial services firm that has been granted a European passport is not required to obtain a domestic licence in every Member State. Secondly, the concept of a European passport helps to keep business costs down. Thirdly, the concept of a European passport is free from political influence. Fourthly, the range of clients and investors is not limited in scope. In other words, the concept of a European passport does not only apply to professional investors but also to retail investors. Lastly, a home Member State regulator cannot revoke the European passport and the European passport is granted for a period of time with no fixed limit.

Further, it should be noted that the concept of a European passport does not have the qualities to be described as a single European passport. If it qualified as the single European passport, then financial services firms would be allowed to undertake cross-border activities throughout the EEA without taking any further actions. A good example of a single administrative act with EEA-wide effect is a European trademark granted by the European Union Intellectual Property Office (EUIPO).

The Equivalence Regimes       

The EU has operated the equivalence regimes (also known as the third country regime or TCR) in relation to financial services firms based outside of the single market under the relevant Single Financial Market Directives and Regulations, the USA being the prime example, for some years. In accordance with Articles 46-49 of MiFIR (The Markets in Financial Instruments Regulation (EU) No 600/2014), the equivalence regime is based on an equivalence decision made by the European Commission (EC) and the register of third country financial services firms kept by the European Securities and Markets Authority (ESMA). As regards the former, the EC’s equivalence decision states whether, firstly, the prudential and business conduct requirements that are legally binding in a third country have equivalent effect under EU law and whether, secondly, the legal and supervisory arrangements of the third country ensure that financial services firms authorised by the competent authorities of that third country comply with the legally binding prudential and business conduct requirements. Once the EC has made the equivalence decision in favour of a particular third country, financial services firms based in that third country need to register, within a transitional period of three years under Article 54 of MiFIR, with the ESMA. As a result, third country financial services firms are able to operate as a European hub. It should be noted that Member States shall not impose any additional requirements on such firms and shall not treat them more favourably than firms based in the EU.       

Moreover, it should be emphasised that the equivalence regime enables third country financial services firms to provide investment services and activities only to eligible counterparties and professional clients. This means that, unlike the concept of a European passport, the equivalence regime does not apply to retail clients. What is more, the EC can revoke an equivalence decision at any time if divergences between a regulatory framework of a third country and the regulatory framework of the EU appear.

One could argue that in the event of a no-deal Brexit the equivalence regime would be more attractive for smaller financial services firms. As practice proves, multinational financial services behemoths, which have used Britain as the gateway to the single market, have already relocated to the EU 27 or are in the process of setting up offices there as part of their Brexit strategy.

As far as the resolution of disputes is concerned, third country financial services firms shall, before providing any services or activities to the EU-based clients, offer to submit any disputes relating to the aforementioned services or activities to the jurisdiction of a court or arbitral tribunal in one of the Member States (Article 46(6) of MiFIR). In other words, such firms shall offer a forum in the EU where their right to conduct litigation could be exercised. If Britain were to access the single market via the equivalence regime in the event of a no-deal Brexit, then the English courts would not have any jurisdiction over disputes relating to such services or activities. In practice, this would result in London facing a struggle to retain its position as a global centre for securities litigation.         

Although the equivalence regime would allow the UK-based financial services firms to access, in the event of a no-deal Brexit, the single market, the equivalence regime suffers from a few drawbacks. Firstly, the equivalence regime is a unilateral mechanism. To put it simply, it only depends on the EU whether it recognises as equivalent the regulatory standards of a third country. Secondly, since an equivalence decision is made by a political body, namely the EC, various political factors can impact the equivalence assessment. Thirdly, the EC’s equivalence decision cannot be reviewed by a court.

        

The European Passport Light

The next issue that merits attention is the so-called ‘European passport light’ as set out in Article 47(3) of MiFIR. A third country financial services firm can rely on the European passport light if the following conditions have been met: (i) the EC has made an equivalence decision in favour of a particular third country; and (ii) the third country financial services firm has been granted the authorisation to establish a branch in one of the Member States pursuant to Article 39 of MiFID II. As a result, the third country financial services firm will be able to provide services and activities to eligible counterparties and professional clients in other Member States without the requirement to establish a new branch for each additional Member State. In the same way as the equivalence regime, the European passport light does not apply to retail clients. However, unlike the equivalence regime, the European passport light is not based on the requirement to register with the ESMA.         

  

The MiFID II Own Initiative Principle

Article 42 of MiFID II creates an exception to a Member State’s imposition of an authorisation requirement, which is enshrined in Article 39 of MiFID II, for a third country financial services firm where that firm provides investment services or activities at the exclusive initiative of a retail or professional client. The MiFID II Own Initiative Principle is coterminous with the reverse solicitation test. Compared to the equivalence regime, the MiFID II Own Initiative Principle applies to retail as well as professional clients. However, from a practical point of view, the MiFID II Own Initiative Principle does not seem to be useful for big financial services firms that intend to actively gain a market share. Furthermore, any marketing to EU-based clients triggers the EU rules for providing financial services and consequently the need for obtaining an EU licence.    

  

Conclusion

It seems that the equivalence regime is the only workable arrangement that could replace the concept of a European passport in the event of a no-deal Brexit. Unless the UK government creates ‘Singapore upon Thames’, the process of making a decision whether post-Brexit Britain’s regulatory regime is deemed to be equivalent should be relatively straightforward. However, one should remember that the equivalence regime does not apply to retail clients and the EC can revoke an equivalence decision at any time. Therefore, the equivalence regime would not fill the gaps created after the cessation of the application of a European passport to the UK-based financial services firms.

Further reading:

M Lehmann and D A Zetzsche, Brexit and the Consequences for Commercial and Financial Relations between the EU and the UK, 20 September 2016. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2841333;

H Nemeczek and S Pitz, The Impact of Brexit on Cross-Border Business of UK Credit Institutions and Investment Firms with German Clients, 1 February 2017. Available at: https://ssrn.com/abstract=2948944;

The Economist, London’s reign as the world’s capital of capital is at risk, 29 June 2019. Available at: https://www.economist.com/finance-and-economics/2019/06/29/londons-reign-as-the-worlds-capital-of-capital-is-at-risk.              

Barnard & Peers: chapter 14, chapter 27

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Third Time Lucky? The new law on extension of UK membership of the EU

Professor Steve Peers, University of Essex

Introduction

One of the many recent controversies about the Brexit process has been about the ‘Benn-Burt bill’, a new Act of Parliament that was fast-tracked through the legislative process earlier in September against the government’s wishes. It requires the Prime Minister to request a further extension of the UK’s EU membership; he has said that he will not do so. Some believe (wrongly) that the new law bans a ‘no deal’ exit from the EU.

To explain and analyse the new law, given the broad public interest, this blog post takes a question and answer format. At the end, there’s a longer discussion of the linked question of whether the UK would have to nominate a new European Commissioner in the event of an extension of EU membership.  

Q             Does the bill ban a no-deal outcome?

A             No. Its main purpose is to provide for the possibility of a further extension of EU membership. However, to avoid a no deal outcome it is necessary at some point – whether before Oct 31 or at a later date if membership is extended – to either ratify a withdrawal agreement or revoke the notification to leave the EU. The new law makes no mention of revoking that notification, and although it refers expressly to the possibility of parliament voting again on whether to accept a withdrawal agreement, it does not require Parliament to accept an agreement (or even to vote on whetherto accept one).  It also provides for the possibility of parliament voting to accept no deal – although this seems unlikely given that Parliament passed this Act with the express intention of avoiding an imminent no deal outcome.  

Q             Does the new law block Brexit?

A             No.  As noted already, it provides expressly for the possibility of Parliament voting again on whether to accept a withdrawal agreement, or Parliament voting to accept no deal. Both of them are forms of Brexit. Also as noted already, it does not refer in any way to the revocation of the notification to leave. Nor does it refer to another referendum on whether to leave. Although some supporters of the bill support another referendum, the bill itself is silent on this. Extending EU membership to another date still leaves intact the possibility of leaving on that date with no deal (as the default position), or leaving at that date or earlier if a withdrawal agreement is ratified.

Q             Does Boris Johnson have to request an extension of EU membership?

A             In principle, yes (if he’s still the Prime Minister). He must request an extension to January 31 2020. However, there are exceptions. If Parliament votes for a withdrawal agreement or for a no deal no later than 19 October, then the obligation to request extension is never triggered. If Parliament votes for either before 30 October, then the obligation to request extension ceases to apply: the Prime Minister in that case ‘may modify or withdraw the request’.

It seems unlikely that Parliament would vote for no deal (given that the new law was backed by opponents of this outcome), but what about a withdrawal agreement? Here’s there’s an apparent loophole, as pointed out by Jolyon Maugham: it’s possible that Parliament could vote in principle to approve a withdrawal agreement, thus disabling the obligation to request an extension, but then not pass further measures in time for the agreement to be fully ratified by October 31. (See further Maugham’s analysis of the limited time available to pass the further measures).

According to the ‘Kinnock amendment’ added to the Act, the request has to be for the purpose of passing a bill to implement the withdrawal agreement, including provisions giving effect to inter-party talks, particularly possible amendments to the political declaration on the EU/UK future relationship (discussed here).  However, this is not reflected in the letter of request which the Prime Minister must send (the letter is a Schedule to the new law), and does not impact upon the separate obligation to accept (subject to an unrelated exception) an extension decision if the EU adopts one. There’s no explicit obligation to hold a vote on a withdrawal agreement, or to publish and/or vote on a bill to implement that agreement.

Q             Does the EU have to extend membership?

A             No. That’s up to the political discretion of the EU. It must act to adopt an extension decision with the unanimous vote of the 27 Member States’ heads of State and government (not including the UK). (I commented earlier on the legal issues of the first extension decision and the second extension decision.) It remains to be seen what the EU will do; remember that rumours about Member States vetoing extension proved to be unfounded in spring.  The European Commission and European Parliament have no formal role in the extension decision, although they can express a point of view that might influence national leaders.

Q             Does Boris Johnson have to accept an extension of EU membership, if the EU adopts one?

A             Yes, subject to a veto by Parliament. If the extension is to the date of January 31, the Prime Minister must accept it. Otherwise it’s possible for Parliament to veto it. It’s therefore false to claim, as some did, that the UK will be obliged to accept any extension decision, no matter what (see further my Prospect article on this point).

Some have argued that Johnson could veto the extension decision as a member of the European Council. This is false: Article 50(4) says that only the remaining Member States vote on this issue. The UK’s role comes at the stage of accepting that decision or not; and the new law specifically regulates that issue.

What if the EU sets conditions for extension? The CJEU has established in its Wightmanjudgment that the current status of a Member State cannot change during any extension; demanding that a Member State gives up its opt outs, etc would violate that principle.

There is a complicated question of the UK appointing a European Commissioner, which would conversely arguably be simply a matter of complying with its existing obligations as a Member State. I discuss this further below.

In the event that a modest extension goes ahead before the next election, this would shoot the fox of those arguing that the new law could mean the ‘imposition’ of a potentially indefinite or very lengthy extension, since it would be obvious that this had not taken place in practice.

Q             Would national law have to be changed to give effect to the extension of EU membership?

A             Yes.  The new law obliges this to take place automatically. The recent ‘commencement order’ setting the date of Brexit of October 31 would equally be delayed coming into force, as Professor Mark Elliott has explained.

Q             What else happens if an extension decision is adopted?

A             The UK will leave the EU on the new date without a deal, unless a further extension is granted, or it ratifies a withdrawal agreement, or it revokes the notification to leave the EU. It could also leave the EU beforehand if it ratifies a withdrawal agreement. Furthermore, some believe that the departure date can or must be brought forward to an earlier date if the UK requests it, but this interpretation is disputed. Note that, according to the Wightman judgment, the UK can revoke its notification to leave unilaterally, so cannot be subject to conditions like giving up opt-outs in return for staying.

The new law is silent on any of these further developments, including any further extension request. However, it does state that if an extension (presumably of any length) is granted, then the government must publish a report by 30 November 2019 on the progress of negotiations on the UK’s relationship with the EU. It must also table a motion in the Commons and the Lords about the report. If that motion is amended or rejected, the government must publish a further report by 10 January 2020 with a plan for further such negotiations. In any event, the government must make a further report on the progress of negotiations every 28 days starting on 7 February 2020 unless an agreement with the EU is reached or the House of Commons passes a resolution otherwise.

Politically, of course, developments in the period after an extension might be affected by a general election and/or a possible change of government.

Q             What if Boris Johnson refuses to comply with the law?

A             Politically, there might be challenges in Parliament. However, attempting to change the government in a short space of time might be legally and politically difficult. So might a further attempt by Parliament to pass another law circumventing the Prime Minister’s refusal to act. If the Supreme Court accepts that there are no judicial limits on the prorogation of Parliament, the government might advise the Queen to prorogue it again, which would cut off any attempts at legislation or confidence votes.

Legally, the possibility of non-compliance has already been brought before the Scottish courts, in a pending case.  It remains to be seen what remedies courts might be willing to order in order to enforce the law. Interim measures might be made in the event that the clock runs out before any appeals can be heard and/or decided.

Some have argued that the new law is illegal, because it infringes too much upon the executive’s power over international relations. If such an argument is raised in litigation, it would remain to be seen if a court accepts it; but the advocates of this view have not pointed to any precedents in which a court struck down an Act of Parliament on such grounds.

Q             Does the Act violate EU law?

A             No. This is an incredibly weak legal argument. Article 50 says nothing about a request for an extension, and therefore nothing about how a request must be made. It does refer to the withdrawing Member State accepting a request, but says nothing about how that process of acceptance takes place. It refers to national constitutional requirements determining whether a notification of leaving the EU is sent, but does not define what those requirements are. In the Shindler case (discussed here), the EU courts have said that it’s up to the UK’s legal and political system to define what these requirements are, and whether they have been met.

However, it’s possible that the EU might have legal or political doubts about considering a request for extension that is not from the Prime Minister in person. This remains to be seen.

Q             Does the UK have to appoint a European Commissioner?

A             It’s complicated. Article 17 TEU says that there shall be Commissioners equal to 2/3 of the number of Member States, but the European Council can change this number. It did so in 2013, with a decisionthat says that the number of Commissioners is equal to the number of Member States. The preamble refers to the Commission having ‘one national of each Member State’. Article 17 says that Commissioners must be appointed ‘on the basis of the suggestions made by Member States’.

At the time of the second extension, it was debated whether the UK would have to hold elections to the European Parliament. It was decided that it would, since the usual obligations of membership continued to apply. Logically the same applies to another extension of membership as regards the Commission.

There are several legal issues and possibilities though. EU law does not expressly state that a Member State must nominate a Commissioner, although arguably that is an implicit obligation. This could be enforced by legal proceedings, which could in principle be fast-tracked. The EU might be willing to approve an extension without a nomination (although that might be legally challenged), or to overlook the absence of a nomination if the extension is short. On previous occasions, the appointment of a new Commission has been delayed for a few months or weeks for various reasons. It is not clear whether or not the actions of a Commissioner lacking in numbers would be legal or not; but the new Commission could hold off from making proposals until the status of the UK was clearer. Most obviously, the European Council could amend the law so that only 27 Commissioners need to be appointed (that requires a unanimous vote, including the UK, although there can be extensions).

The notion of appointing a Commission with two Commissioners from another Member State might be challenged in light of the preamble to the decision on the number of Commissioners, which (as noted above) refers to one national of each Member State. Another notion of appointing a British Commissioner whom the government did not suggest might be legally problematic, due to the reference in the Treaty to making appointments based on ‘suggestions’ from Member States. Politically, either of those two outcomes might backfire politically on Remain advocates, for obvious reasons.

Analogies with non-replacement of retiring Commissioners on previous occasions don’t work, because the Treaties have an explicit procedure for non-replacement in those cases, and this is distinct from appointment of a new Commission.

It would remain to be seen how the EU might try to address these issues in the event that it wishes to adopt an extension decision and the UK is unwilling to suggest a nominee for the new Commission. Politically, the refusal to nominate a Commissioner might be intended to deter the EU from offering an extension decision in the first place. Time will tell whether it becomes an issue in practice.

Barnard & Peers: chapter 27

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Prorogation of Parliament: Conflicting judgments in England and Scotland

Alan S. Reid, Senior Lecturer in Law, Sheffield Hallam University. The author welcomes comments on the blog at a.s.reid@shu.ac.uk.

The A-Z of Scots Law: From Avizandum to the Zany Antics of Boris Johnson

The recent, zany antics of Prime Minister Boris Johnson are being subject to intense interrogation by the Scottish legal system. The case of Cherryhas seen the decision to prorogue the UK Parliament declared unlawful and the Prime Minister’s reported defianceto refuse to comply with the specific terms of the European Union (Withdrawal) (No.2) Act2019 will be litigated upon in the Scottish courts next week. This new statute is designed to avoid a No-Deal Brexit on Halloween. It requires the Prime Minister to send a letter to the European Council requesting an extension to the Article 50 TEU negotiating period by the 19th of October 2019 if there is no deal in place (or no vote by parliament approving a no deal outcome) between the UK and EU by that date. 

These developments have exposed non-Scots lawyers and the general public in the UK to a whole new lexicon. In the Cherry case, they were treated to the terms ‘Avizandum’ and ‘stymie’ and in the prospective case forcing Boris Johnson to comply with the 2019 law, the general populace encountered the Latin term ‘nobile officium’.

The term ‘Avizandum’ is a Scots law term of art indicating that the court will take time to consider its judgment and deliver its reasoning at a later date. The word ‘stymie’ has been used in the case of Cherry to refer to the fact that proroguing Parliament will frustrate Parliament’s ability to scrutinise the work of the Executive while it is suspended. The etymology of ‘stymie’ is Scottish and refers to someone who can’t see very well and it was adopted as a golfing term to refer to a ball that prevents their opponent from having a clear shot at the hole. Thus, it is an apposite term for the actions of a Prime Minister attempting to deflect Parliament’s attention away from a No-Deal Brexit.

The ‘nobile officium’ is an ancient power of the supreme court of Scotland (the Court of Session) to offer an equitable remedy for pursuers when there is a perceived deficiency in the law.

This blog will discuss the significance of the unanimous decision of the Scottish judges in Cherry to declare the Prime Minister’s prorogation of Parliament unlawful, compare and contrast this with the English High Court’s decision to refuse to rule on the matter in Miller 2 and the potential ramifications of these cases for the Supreme Court hearing on Tuesday the 17th of September 2019. (For an overview of the prorogation case law with links, see here).

The original Cherrycase (discussed here) was the first legal test of Boris Johnson’s decision to prorogue Parliament. At first instance, Lord Doherty roundly rejected the petitioner's pleas, holding that the decision to prorogue was an exercise of prerogative power (ie non-statutory) by the executive (the Government) that was non-justiciable (ie not amenable to review by a court), since it involved matters of high policy and political judgment. Thus, such matters were best left to be resolved in the political arena, primarily by the Prime Minister being held accountable for his actions by his equals in Parliament and subsequently by the electorate at the ballot box.

South of the border, Gina Miller, Shami Chakrabarti and Sir John Major instigated a similar claimagainst prorogation in the English High Court. At this level, both courts were at one on this point: the decision of the Prime Minister to prorogue was a classic exercise of prerogative power that was non-justiciable, since it involved matters of high policy and political judgment (see the Miller justifications at paras. 38, 42 and 60, the dicta of Lord Doherty in Cherry 1 at paras. 25 and 26 and the Scottish case law of MacCormcick v Lord Advocate 1953 SC 390, Gibson v Lord Advocate 1975 SC 136 and Lord Gray’s Motion 2000 SC (HL) 46). In their view, there were no legal standards from which to judge the legitimacy of the decision to prorogue (para. 51). The justifications for such an approach are plentiful and eminent. The long line of judicial precedent confirming such an approach stretch from de Freitas v Benny ([1976] AC 239), R v Secretary of State for Foreign and Commonwealth Affairs, ex parte Everett [1975] 1 QB 811 the GCHQ case through to A v Secretary of State for the Home Department [2005] 1 AC 68 (aka the Belmarsh case) and the case of Shergill v Khaira [2014] UKSC 33.  In the Belmarsh case, Lord Bingham famously declared that:

“The more purely political (in a broad or narrow sense) a question is, the more appropriate it will be for political resolution and the less likely it is to be an appropriate matter for judicial decision. The smaller, therefore, will be the potential role of the court. It is the function of political and not judicial bodies to resolve political questions.”

Further, as I discussed last week, the dissenting judges in Miller 1offered a stark warning to judges willing to embark on evaluations of matters involving high policy. Lord Reed expressed the view that:

“It is important for courts to understand that the legalisation of political issues is not always constitutionally appropriate, and may be fraught with risk, not least for the judiciary.”

The English High Court heeded such warnings and tersely stated in the first paragraph of its judgmentin Miller 2 that:

“It is not a matter for the courts.”

The non-justiciability argument appeared to have won the day north and south of the border. And further, to the west, beyond the Irish Sea, the High Court of Northern Ireland in Belfast decided not to rule on the prorogation issue at all, in a case brought by Raymond McCord.

Further, the English High Court also considered at the same time that, even if the contested order to prorogue had been reviewable, a number of legitimate and plausible reasons had been put forward by the Prime Minister that supplied sufficient reasoning for the prorogation (para. 51). Primarily, it is entirely normal and expected that a new Prime Minister would desire a Queen’s Speech in order to give legal effect to their policy priorities. Further, in the present instance, even with prorogation, there would still be time to debate and scrutinise Britain’s withdrawal from the EU; there would already be reduced Parliamentary time to scrutinize, given that the prorogation would fall in the middle of the traditional  party conference season when Parliament is recessed; and finally, the previous Parliamentary session had been one of the longest in living memory.

In the face of such insurmountable odds, it appeared that all was lost for the Remain Alliance. The activities of the Prime Minister were beyond legal reproach, even if not beyond political or ethical reproach. And yet...

The original decision of Lord Doherty in the Outer House of the Court of Session in Scotland was immediately appealed against. On Wednesday the 11th of September 2019, the three judges of the Inner House dropped their bombshell unanimous decision – the decision of the Prime Minister to prorogue Parliament was justiciable and upon subsequent forensic examination it had been found wanting.

The Scottish judges did not hold back, using rather forceful language to condemn the events laid before them. Lord Brodie found that the decision to prorogue was an ‘egregious case’ of improper behaviour (para. 91) falling well below the generally accepted standards of behaviour expected of public authorities and figures.

At first glance, the remarkable decision of the Scottish Supreme Court flies in the face of received legal orthodoxy. Proroguing Parliament is a classically political act, thus protected from legal challenge. So how do lawyers, north and south, square this circle?

The answer comes down to one of approach and the classification of the question that came before the courts in the three jurisdictions of the UK. As I discussed earlier, the question of the justiciability of royal prerogative powers is no longer a binary one, ever since the GCHQ case. Now, the test for justiciability rests on the nature of the prerogative power in question. The more legalistic in nature the power is, the easier it is for the courts to assume jurisdiction. Conversely, the more political or non-legal the power, the harder it is for the court to assume jurisdiction over that decision-making power. However, this sliding scale argument just outlined, does not help much in explaining the diametrically opposed judgments north and south of the border. Indeed, on this view, the English and Scottish courts should have been at one.

Legal clarification to this confusing situation may come, ironically some may say, from eminent Sassenach(used here in a non-pejorative sense) legal jurists, Professor Paul Craig and Professor Mark Elliott. Both Professor Craig and Elliott have cogently and eruditely explained the constitutional dilemmas borne out of Boris Johnson’s premiership. From their perspective, for the courts to absolve themselves from adjudicating upon a matter of such momentous proportions would be a gross dereliction of judicial duty (See Professor Craig’s view on this in his blog Prorogation: Three Assumptions of the 9th of September). The dangers to the UK constitution posed by the behaviour of Boris Johnson both necessitate and justify judicial involvement. This situation is such a singular affront to the democratic principles of the UK’s unwritten constitution that a judicial response is both right and necessary (See Professor Craig’s blog Prorogation: Constitutional Principle and Law, Fact and Causation, of the 31st of August).

To provide for no legal redress in this pivotal moment would create a legal vacuum and indirectly give succour and implicit legitimation to the decision of the Prime Minister (see the discussion of these matters by Alan Greene in his blog Miller 2, Non-justiciability and the Danger of Legal Black Holes, available here). For Professor Elliott, the sweeping, blanket refusal of the English High Court to entertain any possible review of the decision to prorogue is legally suspect on two main grounds. First, because the refusal to adjudicate goes against the liberalising tendency of the extant judicial precedence on non-justiciability, which is incrementally lessening the scope and reach of the non-justiciability barrier and, secondly, and in my opinion more forcefully, the judgment in Miller 2 misconstrued the legal question before it (see Professor Elliott’s blog Prorogation and justiciability: Some thoughts ahead of the Cherry/Miller (No. 2) case, available here).

Thus, the argument for intervention can be justified by looking at the questions before the UK courts from a slightly different perspective. The argument runs that the English High Court focussed, incorrectly, on the evaluation of the exercise of the discretionary power to prorogue. From this perspective, the English High Court fixated on the practical aspects of the decision to prorogue, asking itself questions about the justifications offered for the prorogation and the reasonableness of the length of time of the prorogation.  Therefore, the purpose of the judicial review appears to be one of substitution, that is the court is putting itself in the shoes of the Prime Minister and declaring whether it is reasonable for the Prime Minister to have asked for such a long period of prorogation. If that is so, then traditional legal orthodoxy kicks in: courts are not there to be a substitute for a bad decision maker, particularly when that decision is not made according to legal principles or considerations but rather, is a decision based on pure politics. Such decisions, rightly, cannot and should not be subject to supervision and substitution by the courts. The Inner House of the Court of Session chose another path for adjudication.

The Inner House, having reviewed the legal authorities, considered that the prerogative power to prorogue Parliament was justiciable (para. 31). The Court of Session approached the question from first principles of the UK constitution. The Court of Session asked a different question to that of the English High Court, namely does the legal power exist and if so, what are its boundaries? Questions about the scope of legal powers are classic judicial review questions that need resolution. Indeed, the fundamental grundnorm of the UK unwritten constitution is observance of the rule of law.

Lord Drummond Young, at para. 102, summed up this fundamental truth concisely when he said:

“The rule of law requires that any act of the executive, or any other public institution, must be liable to judicial scrutiny to ensure that it is within the scope of the legal power under which it is exercised.”

In applying this principle to the present case, the Scottish court was being asked if the exercise of the prerogative power to prorogue Parliament was being used for a purpose that was objectively outwith its scope (para. 104). This question could be answered by the Scottish court since the UK case-law evidenced a great deal of judicial flexibility in responding to these types of questions (see the case of Pham v Home Secretary [2015] 1 WLR 1591). In answer to this question, given the voluminous redacted information submitted to the court by Her Majesty’s Government, the answer must be yes: the Prime Minister had prorogued Parliament for an improper purpose, namely to stymie Parliamentary debate, oversight and scrutiny of the UK’s withdrawal from the European Union.

Regardless of their view on the justiciability and merits or otherwise of the case, the seriousness of the case, according to the Scottish judges, absolutely required a robust judicial response in any case. The actions of the Prime Minister had been an egregious case where there had been a clear failure to comply with generally accepted standards of behaviour of a public authority (see para. 91). The exceptional seriousness of the case would require the court to act.

It can be argued that the Scottish judges were not engaged in usurping power from Parliament. On the contrary, the Scottish judges, rather than emasculating Parliament, were, by delivering judgment, empowering Parliament.

The finding of the Inner House means that the decision to prorogue Parliament was illegal and as such the Order in Council is of no legal effect, that is the decision is void ab initio. However, given the constitutional significance of the case and its brethren cases in Belfast and London, the Lord President declined to enforce the judgment at once, given that all these judgments were the subject of an appeal to the Supreme Court of the UK. If the Supreme Court were to ultimately follow the dicta of the Inner House, then the judgment in Cherry 2 would be fully enforced and applied at that date.

The outcome of the conjoined appeals at the Supreme Court of the UK on Tuesday the 17th of September is far from certain. The Scottish judgment is a constitutional first: the first time a serving Prime Minister has been found guilty of acting illegally in relation to the proroguing of Parliament.

What is certain is that the 11 justices of the Supreme Court will once again make UK constitutional history after the hearing on Tuesday week.

Barnard & Peers: chapter 27

Photo credit: parliament.uk

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