LONDON — The UK and EU should set up a powerful new court to resolve disputes post-Brexit and another to promote regulatory co-operation as part of a free trade, according to UK financial group.
A report published on Tuesday by the International Regulatory Strategy Group (IRSG) called for a “bespoke” free trade agreement which allows UK and EU-based firms to sell products without taxes or tariffs in each other’s markets. IRSG is sponsored by the City of London Corporation and lobbying group TheCityUK, who between them speak for the bulk of the UK’s financial services industry.
The UK is keen to strike a free trade deal with the EU when it leaves the bloc, but the details of such an arrangement are currently unclear. The EU’s chief negotiator Michel Barnier has warned that Britain cannot expect a “bespoke” free trade deal.
However, the fact Britain has the same regulatory standards as the EU — and will initially retain them once it leaves — means there is some optimism in the UK that a favourable trade deal can be established.
To facilitate such a deal, which would apply to all sectors, the IRSG said the UK should push for two new bodies.
The first would be the “Forum for Regulatory Alignment” which would focus on “assessing and managing regulatory change.” For example, if new global standards needed to be implemented within a particular sector, the UK and EU would co-operate through the forum to introduce a “co-ordinated’ and “aligned” response.
When the UK or EU planned to introduce a regulatory change, it would first have to assess its impact on alignment and would notify the forum if the change was “potentially material.”
The second new mechanism would be a new “dispute resolution body” which is “primarily judicial in nature” that could enforce the terms of the EU/UK agreement. The report says the purpose of the body would be “to reach a definitive and binding decision on a particular issue when the parties have been unable to agree [on] a position between themselves.”
The report was not conclusive on the suggested consequences of a finding by the new body, but it suggested that payment of compensation or retaliatory measures could be viable.
‘There is no appetite for a bonfire of regulations’
While favourable to the needs of the City, the proposals are likely to anger many pro-Brexit ministers and voters. Foreign Secretary Boris Johnson has repeatedly said that Britain should not continue to align its laws to the EU post-Brexit.
Prime Minister Theresa May, who campaigned for Remain, has repeatedly rejected the authority of supra-national courts such as the European Court of Justice, suggesting she may be unwilling to bend to the will of any new international arbitration bodies.
IRSG chair Mark Hoban warned that failure to promote co-operation on regulatory issues would make London less attractive and push firms to other financial centres.
“There is no appetite in the City of London for a bonfire of regulations,” said Hoban, according to a Telegraph report.
“If London were to lose its crown as the world’s leading financial hub, activity will move to centres such as New York or Singapore — not elsewhere in the EU,” he said.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.