Stubbing out duty free
The UK Government recently decided that, post-Brexit, maintaining the duty-free exemption solely for goods heading to non-EU destinations was discriminatory and therefore did not comply with the UK’s international trade obligations under the General Agreement of Trade and Tariffs (the “GATT”). This spelt the end for duty-free shops at airports and other borders.
Heathrow Airport and others sought to challenge this on the basis that the UK Government had misinterpreted the GATT. In response, the UK Government argued that the issue was not one that the Courts could or should decide. The UK Government asserted that, although it had agreed to the GATT, the GATT had yet to be incorporated into domestic UK law (i.e. there is no GATT Act), and therefore could not be ruled upon in the English courts.
The High Court disagreed (see here).
The Court conceded that they cannot strike down decisions solely because they do not comply with unincorporated treaties. The reason for this is that unincorporated treaties have yet to be translated into domestic law by Parliament; they have merely been signed by the Executive. It is a key principle of our democracy that only Parliament can change the domestic law that binds citizens. If the courts were to scrutinise the compliance of executive actions with unincorporated treaties in isolation, then unincorporated treaties would effectively be being applied as domestic law by the back-door, without any say of Parliament.
Nevertheless, the Court determined that in certain circumstances, once the UK Government asserts that it is taking a particular decision because of the UK’s unincorporated treaty obligations, then that assertion could be interrogated and, if the assertion is found to be untenable, the decision could be impugned. In the present case, the UK Government had said that it was removing duty-free to comply with its obligations under the GATT, and a number of factors militated in favour of the Courts assessing whether that assertion was correct. In particular:
- The UK Government had evinced a firm intention to adhere to the GATT.
- The position taken by the UK Government in relation to its obligations under the GATT was directly relevant to the decision to abolish duty-free.
- Although the GATT itself has not been formally incorporated into domestic law (there is no GATT Act) it was nonetheless, necessarily, reflected in subordinate legislation.
- The GATT was a prescriptive, hard edged set of rules that were intended to be legally certain and predictable and have binding effect in specific situations.
- The mere existence of an international alternative dispute resolution mechanism did not preclude the English Courts from interpreting the GATT.
Despite this, the High Court found that the UK Government had in this case interpreted the UK’s international obligations under the GATT correctly, so the decision stood.
Is this case law right?
This line of case law could result in unintended consequences:
- The existence of the right to challenge is predicated on the UK Government asserting that it is taking the decision based on its understanding of the UK’s international obligations. If on the contrary, the UK Government is silent, or asserts that it is taking a decision despite the UK’s international obligations, then those affected by the decision have no avenue of challenge.
- Further, this case law could potentially undermine the robustness in which the UK Government assesses the compliance of its decisions with the UK’s international obligations, and the UK Government’s willingness to be transparent as to its decision-making process.
Notwithstanding this, the case serves as a timely reminder. With increasing regularity, the UK Government is seeking to justify actions by reference to the UK’s international obligations; it is vital that businesses are equipped to scrutinise such justifications to ensure that they can engage with, influence and if necessary challenge the decisions that affect them.
Authored by Julia Marlow and Louis Biggs.