Much attention has been generated by recent proposals concerning post-Brexit dispute resolution between the UK and EU. One idea that has not garnered the same amount of attention involves greater reliance on bodies like the Basel Committee or IOSCO to solve disputes as to whether conditions for mutual recognition and market access for financial services have been satisfied.
Notably, international standard-setting bodies are not formally equipped with dispute resolution powers. Instead, these bodies rely on “peer review” processes whereby member countries examine one another’s laws to determine their compliance with international best practices. Still, the judgments of standard setting bodies, which are at times made public, can help incentivize compliance to the extent to which market participants price regulatory risk. As a result, upgrading peer review to an actual system of dispute resolution carries a considerable amount of intuitive logic.
There are, however, some limitations. Peer review systems as currently configured are designed to evaluate compliance with global standards, not EU law or other cross border arrangements. And the UK has has not infrequently decided to “gold plate” national approaches in ways that go beyond global minimums, while at the same time has under-implemented EU directives in ways that serve the interests of the City of London. As a result, the UK and EU would have to determine the appropriate baseline minimum for satisfying equivalence, even where relatively prescriptive international standards may be available.
My hunch is that establishing such a baseline would likely be a deceptively complex and labor intensive exercise. International financial standards have been negotiated, often explicitly, as nonbinding arrangements. Indeed, it’s one of the primary reasons why so many global arrangements and accords have been able to be promulgated in the first place. But relying on international standards for the resolution of EU-UK disputes would generate the very opposite negotiation dynamic since informal rules would have to be transposed into formal international law, or carry the force of international “law” by dint of dispute resolution judgments. Both the UK and EU would consequently have to conduct a thorough review of existing international standards, and likely memorialize additional explanatory codes, interpretative memoranda or regulations tailored to the UK-EU relationship—especially since global rules reflect the wider interests of the G20 and other nations.
This is not to say that international standards could not play a useful role in developing principles or expectations for facilitating mutual recognition and cross-border market access. But it’s unlikely that they would serve as off-the-rack solutions on which post-Brexit dispute resolution could be based.