BREXIT – when economic lunatics take over the asylum!

For detailed commentary and links to published articles please visit the Brexit page at www.diplomaticlawguide.com

A two year interim period red line is not practical.

First, ‘[the] Brexit negotiations will take much longer and be far more complicated than many British politicians realise. One set of talks will cover Britain’s legal separation from the EU, the second a free trade agreement (FTA) with the EU, the third interim cover for the UK between its departure from the EU and the entry into force of the FTA, the fourth accession to full membership of the WTO [i.e. regularising the UK’s scheduled commitments as an independent member of the WTO], the fifth new FTAs to replace those that currently link the EU and 53 other countries, and the sixth co-operation on foreign, defence and security policies.’ [There is also a seventh ‘global’ dimension]. Charles Grant, Director of the Centre for European Reform, in his article ‘The Brexit negotiations: the UK government will have incentives to compromise’ published in the CER Insight.

Second, the negotiation of trade regulatory matters has not yet begun. [The] Brexit debate is currently far too focused on tariffs. All the debate was about tariffs. But tariffs are a minor aspect of doing business internationally today. The problem is on regulatory issues. The UK has to negotiate some kind of arrangement that can help to continue to ensure that UK regulatory standards will still be seen as equivalent. Without that it’s too easy for the EU to simply say ‘no, that doesn’t apply anymore’. Professor Stephen Woolcock.

Third, as negotiation of Britain’s WTO schedules could prove harder to negotiate than Brexit, and needs to be sorted out prior to the expiry of any interim period, the idea of an arbitrary two year interim period is vacuous. What work, if any, has been undertaken in relation to regularisation behind the scenes?

Note that Britain is currently a member of the WTO via the EU. Full members must deposit ‘schedules’ of tariffs, quotas, subsidies and other concessions on market access with the WTO. The UK will have to negotiate its own schedules, initially with the other 27. The tariff negotiation could be simple, if the British followed what the EU currently does. But dividing up quotas, on say New Zealand lamb imports, would be more complicated. And then the new British schedules would need the approval of all 163 WTO members, since the organisation’s decisions require consensus. So if one member (for example, Argentina or Russia) wanted to create difficulties, it could block the British schedules. British officials hope that such difficulties do not arise, but reckon that it will be hard work to sort out WTO membership within the two years of the Article 50 negotiation.

‘One of the most important questions for UK businesses and investors is whether the UK could trade under WTO rules as soon as it exits the EU. In my opinion the answer is twofold. First, the UK would most likely lose market access on goods in certain countries and face legal challenges by some WTO members unless it negotiates with both the EU and the WTO members its status as an independent member of the WTO. Second, in relation to the UK – EU trade relationship, if there is no FTA in place on the date the UK exits the EU, it is highly likely that both sides will treat each other on WTO terms (including MFN tariff rates). Due to the EU’s current trade restrictions to third countries, this is not a desirable outcome for either side…The current EU schedule of commitments is the so-called “EU-15” of 2012. The fact that this is an outdated schedule is likely to complicate matters in the UK’s future WTO negotiation because the EU schedule of concessions and commitments regarding agricultural products, domestic support and export subsidies does not reflect the enlargement of the EU (from 15 to 28 Member States). This means that the UK – EU allocation of commitments will likely lead to a series of requests by third countries seeking new compensation from the EU and the UK. How will third countries react to the UK-EU distribution of concessions is anybody’s guess. But at least one can expect the following: it is highly unlikely that WTO members will challenge the UK’s rights, concessions or commitments on industrial goods, export subsidies entitlements including those on agricultural exports or its schedule of services. The challenge, however, is likely to focus on the EU’s agricultural commitments related to tariff rate quotas (TRQ’s) to third countries such as Australia, Argentina, Brazil, China, New Zealand, Thailand, Uruguay and the U.S. TRQ’s are volumes that can be imported with a low or zero tariff. Imports above the quota quantity enter with a higher tariff rate. The UK and the EU would need to negotiate a distribution of the EU’s TRQ’s. This would be problematic to third countries. They may find the redistribution of the EU’s TRQ’s as unfair because it would reduce their access to the EU market as a result of the UK’s exit. The TRQ’s are likely to become the most contentious issue in the UK’s re-establishment of its legal status as an independent member of the WTO. Now let us assume that the UK is unable to agree on new commitments with other WTO members on the day it exits the EU…In the case of UK exports to WTO markets including the EU (in case there is no trade agreement in place yet), one would expect WTO members (including the EU) to apply MFN rates to UK products. But this raises doubts as to whether the UK can trade under MFN tariffs without having to make any concessions or commitments to WTO members. Because the UK would be trading on MFN without being forced to grant concessions and TRQ’s to the rest of the WTO members and, thus, creating an unfair scenario for the other WTO members, it is possible that the UK may be subject to MFN restrictions by other WTO members until it regularises its legal status which can only occur once it has negotiated a new schedule of commitments.

An additional uncertainty, in this case a legal one, is the legal process under the WTO rules to re-establish the UK as an independent member of the WTO, in particular with regard to the distribution of commitments. There is no provision in the WTO framework which covers the particular situation of the UK. The closest provision seems to be Article 28 of GATT which provides for the modification of schedules. Whether this provision applies to the particular case of the UK is not entirely clear. Despite these complexities, WTO members could allow the UK to trade under WTO rules on an interim basis (one or two years) without a schedule of commitments while it concludes the negotiations with all individual WTO members.

Having said all the above, it must be stressed that nothing prevents the UK negotiation in the WTO from being simple and straightforward. This will depend entirely on the political will of the WTO members on whether they want to make the UK’s life outside the EU easy or complicated.’

Brexit: Challenges for the UK in negotiating an FTA with the EU (a trade negotiator’s perspective) by Luis González García.

Fourth, the Government should have developed and agreed a principled position and negotiating strategy based upon evidence before triggering Article 50. However as far as I am aware no evidence based review was undertaken prior to triggering Article 50, or has been undertaken since. Because there is no evidence based strategy it follows that there is no consistent plan to deliver it. In other words, at present, no coherent, rational, and practical plan for negotiating Brexit, has been agreed in Cabinet and approved by Parliament.

‘To be more than an optimistic slogan, Global Britain needs to rest on a clear, evidence based strategy. And once we have the strategy, we will need a consistent plan to deliver it… [Our] strategy should not be opportunistic or reactive, but based in principles. Brexit makes it even more important for the UK to have an international trade system with rules ensuring non-discrimination, fair competition and enforcement. Alone, we will be less equipped to cope in a trade environment driven by the bilateral and power based instincts of the new US administration and China, or indeed the sheer trading weight of the future EU. That is why we should remain a strong supporter of the WTO, and resist any temptation to short-circuit rules to score quick successes…’ The Tacitus Lecture 2017 – ‘The World is Our Oyster? Britain’s Future Trade Relationships’ delivered by Sir Simon Fraser.

Trade negotiations, which are intrinsically linked to: freedom of movement; the rights of EU citizens living and working in the UK; and the Irish border, depend upon a decision being made about whether Britain stays in the single market and customs union. Until this has been decided a coherent trade model cannot be proposed to the EU. The practical real world consequences of political indecisiveness on this issue include the following:

1.        a UK-EU FTA cannot in practice be agreed and implemented;

2.        businesses in the UK cannot undertake long-term planning because they cannot know the extent to which Britain will remain integrated with the EU post Brexit (which will have a direct impact on foreign investment and jobs); and

3.        likewise, because they cannot know the extent to which the UK’s hands will be tied by the terms of a FTA with the EU, no other state (including the US, India, China, and Australia) can practically agree comprehensive terms of a FTA with the UK – which in any event, cannot be agreed and implemented until the UK-EU FTA has been implemented, which in itself may take 3-4 years post agreement on terms following the tabling of a trade model.

The Peterson Institute for International Economics who analysed how long it took the US to agree 20 bilateral trade deals concluded: (i) one and a half years, on average, and (ii) more than three and a half years to get to the implementation stage. https://www.weforum.org/agenda/2016/07/how-long-do-trade-deals-take-after-brexit/

= 5 years.

It is therefore not inconceivable that the first trade agreement with a non-EU trade agreement counter-party will be concluded and implemented sometime between 2024 and 2029/2030 (if e.g. the conclusion of a bespoke trade agreement with the EU takes e.g. 7 years from commencement of negotiations. Negotiations are unlikely to commence before October 2017 and the EU position appears to be that negotiations will only commence and take place in parallel if progress is made on the divorce settlement first, and crucially, the divorce bill.

7 years from 29 March 2017 is 29 March 2024. Add 5 years = 2029. Factor in delay in commencement = 2029/2030.

Logistically, there is also a huge gap between the scale of negotiations to be undertaken and the resources actually available to undertake them, which will take time to fill through recruitment and training:

1.        ‘The EU currently has existing PTA’s with 52 countries, and it is negotiating trade agreements with another 72 countries. In case of Brexit, the UK would therefore need to re-negotiate or start new bilateral negotiations on 124 trade agreements, plus one additional trade agreement re-defining its own trade status as a third country vis-à-vis the EU. If we limit the focus to the top-50 trade partners of the UK, who account for 92% of all UK trade, 41 of them do have some trade agreements or ongoing negotiations with the EU. 18 of the UK’s top 50 trade partners are EU countries, one (Norway) is an EEA country, one (Turkey) has a customs union agreement with the EU, eight countries have existing EU PTAs in place and 13 countries are currently negotiating EU trade agreements. This would translate into a minimum of 24 negotiations to be concluded.’ Leaving the EU would mean renegotiating more than 100 trade agreements by Pia Hüttl and Silvia Merler.

2.        124 trade agreements x 5 years each = 620 years. Hypothetically, all 124 could be negotiated within 5 years (if negotiated in parallel). How many trade negotiators does the UK need to resource this? ‘The EU typically sends 20 commission negotiators to any round of trade talks, backed up by between 25 and 40 technical experts… The UK has 40 trade negotiators, compared with the 550-strong trade department in Brussels’: https://www.theguardian.com/business/2016/aug/17/brexit-trade-deals-gruelling-challenge-taking-back-control. Assuming that each UK negotiating team will include at least around 25 negotiators (plus technical experts), 124 x 20 = 2,480 negotiators. One former EU trade negotiator Miriam Gonzalez Durantez, estimated more precisely (17 August 2016) that for the progressive negotiation of priority agreements (i.e. not all 124) the UK would need an operational cadre of least 500 negotiators. How many do we have? Lord Price, the former minister for trade and investment said that the Government had about 40 trade negotiators, compared with the 550 employed by the EU. Yet even these figures may exaggerate the number of people qualified to go into the room for Britain and agree trading deals for a post-EU era. Lee-Makiyama estimates that there cannot be more than 200 actual negotiators in the world as a whole. This shortfall will require the civil service to look far and wide, and is indicative of the kind of skills shortages Whitehall will struggle with in the years ahead. Dealmakers have to know what strategy they will use, if they will scope out the negotiation, what they will scope, and how they will do it. They must have an idea of what they want to propose, in what order, and which sections of a trade deal they want to debate first. Developing an understanding of how to do this can take years.

‘Serious multilateral negotiating experience is in short supply in Whitehall, and that is not the case in the Commission or in the Council.’ Sir Ivan Rogers.

As talks with the EU about the structure and terms of a FTA have not even commenced, and only 12 months remain in the Article 50 negotiating window (including Christmas 2017, Easter 2018, and the 2018 summer break during which MP’s do not sit in the House of Commons), it is respectfully suggested that the primary ambition of the forthcoming Conservative Party conference should be to agree a unified position on whether Britain is to stay in or leave the single market and customs union.

If this is not achieved, the likelihood is that no interim period can be agreed with the EU in which businesses can undertake planning with certainty. In which case there is likely to be an exodus.

This is a chance for the Government to demonstrate that the Conservatives are still the party of business – a vote-winning kudos which they appear to be handing to Labour on a plate.

If Britain falls over the economic cliff edge then:

1.        there appears to be a real likelihood that Labour with the support of Lib Dem votes could win the next general election, resulting in increased capital taxation (i.e. the depletion of personal wealth);

2.        that there will be less tax revenue available to fund public expenditure i.e. because of an exodus of businesses (particularly in the financial services industry); and

3.        that Britain could be bankrupted by Labour.

In which case if Theresa May and her government bring about the economic de-stabilisation of Britain what was Brexit for and all about? What did it achieve?

Carl Islam LLM (Exon) (International Business Law), Barrister, 1 Essex Court, Temple, London, is the founder of the Diplomatic Law Guide (www.diplomaticlawguide.com) which appears on page 1 of the following pages of Google:

  • ‘bilateral and regional trade agreements law’; and
  • ‘trade agreements lawyer’,

and is listed on the website of the United States ‘American Foreign Service Association’ (the ‘AFSA’) based in Washington DC underneath the heading ‘Codes of Conduct from Other Services/Countries’ (http://www.afsa.org/ethics).

Since July 2016 he has been researching and writing a new book for publication in 2018 about the ‘Structuring Drafting & Negotiation of FTA’s’.

Prior to entering private practice as a commercial solicitor and subsequently as a Barrister, Carl worked in-house for the Rolls-Royce Industrial Power Group and for Alstom (in Paris), structuring, drafting, and negotiating major contracts which were awarded in Malaysia, India, and China.

Rectification of wills

I am the guest speaker at the Barlow Robbins Solicitors annual Contentious Probate Seminar in Guildford on 9 November. I am speaking about ‘Rectification of Wills’ and set out below my presentation note.

Rectification of wills

Carl Islam, Barrister, TEP, author of the ‘Contentious Probate Handbook’ (published by the Law Society), www.ihtbar.com

I will speak briefly about:

  • The court’s power to rectify a will set out in section 20 Administration of Justice Act 1982
  • The approach of the court
  • Clerical error
  • Failure to understand instructions
  • Ascertaining the intentions of the testator

The court’s power to rectify a will set out in section 20 Administration of Justice Act 1982

  • Section 20 of the Administration of Justice Act 1982 enables the court to order a will to be rectified so as to remedy a failure to carry out the testator’s intentions in consequence of either:

(i)                a clerical error; or

(ii)               a failure to understand his instructions.

  • Section 20(1) requires the court to examine three questions:

(i)      what were the testator’s intentions with regard to the disposition in respect of which rectification is sought;

(ii)     whether the will is so expressed that it fails to carry out those intentions; and

(iii)    whether the will is expressed as it is in consequence of either:

(a)      a clerical error; or

(b)     a failure on the part of someone to whom the testator has given instructions in connection with his will to understand those instructions.

The approach of the court

In Kell v Jones [2012] Judge Cooke stated,

The approach of the court to the question of rectification was agreed by both counsel to be that which was summarised by Mr Justice Chadwick as he then was, in Re Segelman in 1996, as involving the resolution of three questions:

(1)      What were the testator’s intentions with regard to the dispositions in respect of which rectification is sought;

(2)      Secondly, whether the will is so expressed that it fails to carry out those intentions;

(3)      Thirdly, whether the will is expressed as it is in consequence of either:

  1. clerical error; or
  2. a failure on the part of someone, to whom the testator has given instructions in connection with his will, to understand those instructions.

It is accepted that the burden of proof is on the person seeking rectification in so far as all these matters require to be established. As to the standard of proof (which is primarily applicable to the evidence required to establish the testator’s intentions, given that that must be established by evidence extrinsic to the will in the nature of matters in relation to applying for rectification) that is accepted to be, again as Mr Justice Chadwick summarised it:

“Although the standard of proof required in a claim for rectification made under section 20(1) of the 1982 Act is that the court should be satisfied on the balance of probabilities, the probability that a will which a testator has executed in circumstances of some formality reflects his intentions is usually of such weight that convincing evidence to the contrary is necessary.”

Thus, the contrary intention of the testator must be established by convincing evidence.’

Clerical error

  • In Bell v Georgiou & Anor [2002] which was expressly endorsed and approved by Lord Neuberger in Marley v Rawlings [2014], Mr Justice Blackburne said that, ‘a clerical error occurs when someone, who may be the testator himself, or his solicitor, or a clerk or typist, writes something which he did not intend to insert or omits something which he intended to insert… The remedy is only available if it can be established not only that the will fails to carry out the testator’s instructions but also what those instructions were.
  • The court must consider three issues:

(i)      what the deceased’s intentions were;

(ii)     whether the will fails to carry them out; and

(iii)    whether the failure to do so, was the result of a clerical error?

  • In Re Segelman [1996] Chadwick J distinguished between three situations, the first two of which engage s.20 and the third of which does not:

(i)      the introduction of words into a will through lack of care without advertence to their significance and effect;

(ii)     the introduction of words to which the draftsman has applied his mind but in relation to which he has failed to understand his instructions; and

(iii)    the introduction of words to which the draftsman has applied his mind with a proper understanding of his instructions but which (perhaps through failure properly to understand the law) did not achieve the objective which he and the testator intended.

  • Marley v Rawlings [2014] was the first case on rectification of wills to reach the Supreme Court. Lord Neuberger stated the following:

(i)      The best judicial summary of the effect of the cases so far decided on s.20(1)(a) was given by Blackburne J in Bell v Georgiou [2002]:

‘The essence of the matter is that a clerical error occurs when someone, who may be the testator himself, or his solicitor, or a clerk or a typist, writes something which he did not intend to insert or omits something which he intended to insert. … The remedy is only available if it can be established not only that the will fails to carry out the testator’s instructions but also what those instructions were.’

(ii)     If, as a result of a slip of the pen or mistyping, a solicitor (or a clerk or indeed the testator himself) inserts the wrong word, figure or name into a clause of a will, and it is clear what word, figure or name the testator had intended, that would undoubtedly be a clerical error which could be rectified under s.20(1)(a). It is hard to see why there should be a different outcome where the mistake is, say, the insertion of a wrong clause because the solicitor cut and pasted a different provision from that which he intended. Equally, if the solicitor had cut and pasted a series of clauses from a different standard form from that which he had intended, [there is no apparent reason] why that should not give rise to a right to rectify under s.20(1)(a), provided of course the testator’s intention was clear.

(v)     The expression ‘clerical error’ is not one with a precise or well-established, let alone a technical, meaning. The expression also can carry a wider meaning, namely a mistake arising out of office work of a relatively routine nature, such as preparing, filing, sending, organising the execution of, a document (save, possibly, to the extent that the activity involves some special expertise). Those are activities which are properly described as ‘clerical’, and a mistake in connection with those activities, such as wrongly filing a document or putting the wrong document in an envelope, can properly be called ‘a clerical error’.

(vi)    ‘Clerical error’ is an expression which has to be interpreted in its context, and, in particular on the assumption that s.20 is intended to represent a rational and coherent basis for rectifying wills. The expression ‘clerical error’ in s.20(1)(a) should be given a wide, rather than a narrow, meaning.

(vii)   Rectification of other documents (including unilateral documents) is not limited to cases of clerical error, however wide a meaning that expression is given. Accordingly, given that there is no apparent reason for a different rule for wills, it would appear appropriate that the grounds for rectification is as wide for wills as the words of s.20(1) can properly allow.

(viii)  There is no apparent limit on the applicability of s.20(1)(b), which supports the notion that s.20(1)(a) should not be treated as being of limited application. However, s.20(1)(b) also has a potential limiting effect on the ambit of s.20(1)(a), in the sense that s.20(1)(a) should not be given a meaning which significantly overlaps with, let alone subsumes, that of s.20(1)(b).

(ix)     Sections 17 to 21 of the 1982 Act are all aimed at making the law on wills more flexible and rendering it easier to validate or ‘save’ a will than previously. Section 17, which re-enacts s.9, is concerned with the ‘relaxation’ of formalities; sections 18 and 19 introduce greater flexibility in relation to the effect of the testator’s marriage and death of his issue; s.20 introduces rectification for the first time for wills, and s.21 permits the testator’s subjective intention to be taken into account for the first time. The whole thrust of the provisions is therefore in favour of a broad interpretation of a provision such as s.20(1)(a).

Where a will draftsman knew what he wanted to achieve, and thought wrongly, that he was doing so, i.e. where he made a mistake advertently, then the mistake is not a ‘clerical error’ (Kell v Jones [2012]), and a claim for rectification will fail notwithstanding that the expression ‘clerical error’ should be given a wide, rather than a narrow, meaning following the Supreme Court decision in Marley v Rawlings.

Failure to understand instructions

(i)      ‘A failure to understand the testator’s instructions involves a misunderstanding or breakdown in communication between the testator and the person who is drafting or writing out his will. It is to be distinguished from the situation where the draftsman understands his instructions but uses inappropriate language in seeking to give effect to them, as where he introduces words into a will to which he has applied his mind with a proper understanding of his instructions but (perhaps through a failure properly to understand the law) they do not achieve the objective which he and the testator intended.’ (Hodge, Paragraph 8-48).

(ii)     This ground is limited to cases where the draftsman fails to understand the instructions given, and thus has a limited scope. It does not cover circumstances where the testator fails to understand the legal effect of the words actually used or where the draftsman uses the wrong technique in drafting the will, even though he has understood the intentions of the testator correctly.

(iii)    The conclusion to be reached by the court about whether the draftsman had failed to understand the testator’s instructions is ‘to be arrived at on the balance of probabilities but bearing in mind a strong bias in favour of the conclusion that a duly executed will evidences the intention of the testator.’ (Goodman v Goodman [2006].

Ascertaining the intentions of the testator

(i)      It is the testator’s intention at the date of the will that falls to be considered, rather than as at the date of his death.

(ii)     It should be borne in mind that the remedy of rectification is available to correct mistakes in the expression of the testator’s intentions, and not for lack or vision, perception or knowledge. ‘One cannot look at circumstances that were not foreseen by the testator at the time he made his will, speculate as to what he might have done in those circumstances, and then supply words to meet those circumstances.’ (Hodge, paragraph 8-43).

(iii)    Whilst the standard of proof required is that the court should be satisfied on the balance of probability, ‘the probability that a will which a testator had executed in circumstances of some formality reflects [his] intentions is usually of such weight that convincing evidence to the contrary is necessary.’ (Re Segelman [1996]).

(iv)    The evidential burden of proving that the testator’s will failed to carry out his true intentions, is particularly difficult to discharge where he has drafted his own will without the benefit of independent professional legal advice because:

(a)      there is unlikely to be any documentary evidence of the testator’s intentions other than the will itself; and

(b)     there may not be a witness who was privy to, and can provide evidence of, the testator’s true testamentary intentions.