30 November 2016

A brave new world? Trump and Brexit – implications for New Zealand

The election of Donald J Trump and the UK Brexit vote both herald a new era of world affairs with implications for NZ.
New Zealand International Law
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Last night's election of Donald J Trump, five months after the UK Brexit vote, heralds a new era of world affairs. The past week has seen not only the historic US election, but also a constitutionally significant decision about implementing the Brexit vote. In this Brief Counsel, we examine the potential implications of both developments for New Zealand.

Trump and the TPP

The New Zealand Government will now be assessing, on a range of fronts, how it can work with the new US administration. Perhaps the most pressing issue is whether there are any prospects of the TPP Agreement – the legislative outworkings of which are proceeding through the New Zealand Parliament (with the Trans-Pacific Partnership Amendment Bill having passed its second reading on 3 November) – being ratified by the United States.

Given President-Elect Trump's staunch opposition to the TPP (highlighted in an economic plan released in September: "there will be no Trans-Pacific Partnership, even if the President and Congress are reckless enough to pass it in a lame-duck session against the will of the American people"), and his decisive victory which appeared to contribute to Republican majorities in the House and the Senate, the prospects seem very low indeed.

This will have New Zealand considering Plan B. That includes the Regional Comprehensive Free Trade Partnership and potential bilateral deals with India, the European Union and the United Kingdom. These are all still some distance off, especially in the current global environment, which is no doubt why Trade Minister Todd McLay has spoken recently instead about New Zealand needing to refocus its efforts on making the most of existing trade deals. A refreshed New Zealand trade policy strategy is due to be released soon. We will report on the detail and implications of that strategy once it comes out.

Free trade optimists may say that there is still a chance – albeit an outside one – of an audacious bid by the Obama administration to seek to secure fast-track Congressional approval during the lame-duck session that runs from now until the current Congress reaches the end of its constitutional term on 3 January 2017. This has been President Obama's stated intention. Members of the House and the Senate may sense that, unless they act now, US trade policy will become increasingly isolated under Trump presidency. President-Elect Trump himself stated in August that "trade has big benefits, and I am in favour – totally in favor – of trade".

However, any lame duck attempt now appears highly remote. Although the US Trade Representative Mike Froman stated last week that, if the House and Senate leaders bring forward a vote, he believes the numbers are there, Senate Majority leader Mitch McConnell reiterated after the election his reluctance to consider TPP in the lame duck session, saying: "[TPP] is certainly not gonna be brought up this year". Senator Jeff Sessions, who appeared on-stage with President-Elect Trump last night, has declared the TPP "dead", with no prospect of passing either in the lame duck session or any time next year.

Brexit and Parliamentary Sovereignty – implications for NZ?

The role of Congress in giving effect (or not) to the TPP raises the question of which body – the executive or Parliament – controls which aspects of foreign relations.

A three-member panel of the English High Court considered that question last week and held that the UK Secretary of State does not have power to give an Article 50 notice for the United Kingdom to withdraw from the European Union.

The Court's conclusion will be surprising to many. The decision is being appealed directly to the Supreme Court, and will be heard on 8 and 9 December 2016. It is important not only for the United Kingdom, but also for New Zealand, a country which relies extensively on its networks of international treaties.

Although the English tabloid press has been quick to characterise the decision as political or sinister, it is – in fact – a bold affirmation of a central tenet of parliamentary democracy – the concept of Parliamentary sovereignty. As such, the decision draws on the famous 1976 New Zealand case of Fitzgerald v Muldoon, where the Prime Minister's announcement that the national superannuation scheme was suspended was held unlawful as statutory laws could be amended or suspended only by Parliament.

The complicating issue in the Brexit case (as Miller v Secretary of State will come to be known) is that, unlike Fitzgerald v Muldoon, the High Court needed to determine not only who makes laws, but how Parliamentary sovereignty intersects with another constitutional principle, which is the executive's power to conduct foreign affairs.

It is well-established that, just as Parliament makes and unmakes domestic laws, the executive makes and unmakes international treaties. For instance, in New Zealand, although Parliamentary select committees examine New Zealand's proposed treaties and recommend whether they should be ratified, the decision on ratification falls to the executive and not to Parliament.

But what happens when the unmaking of a treaty requires the unmaking of a domestic law? The question in the Brexit case was whether, having subsequently enacted legislation to implement the United Kingdom's accession to the European Union, the Article 50 decision to withdraw now needed to be made by Parliament. The answer was yes, because the United Kingdom's withdrawal from the relevant EU Treaties would, in particular, undo or modify the legal effects brought about by the European Communities Act 1972.

As the Court held (at [25]):

An important aspect of the fundamental principle of Parliamentary sovereignty is that primary legislation is not subject to displacement by the Crown through the exercise of its prerogative powers. But the constitutional limits on the prerogative powers of the Crown are more extensive than this. The Crown has only those prerogative powers recognised by the common law and their exercise only produces legal effects within boundaries so recognised. Outside these boundaries the Crown has no power to alter the law of the land, whether it be common law or contained in legislation.

All of this sounds very fine. But the decision has the potential to mark a significant incursion into the foreign relations powers of the executive. Many treaties are ratified at international law, and subsequently incorporated by statute, in whole or in part, into domestic law. This would be true of most of New Zealand's free trade agreements, for which the tariff schedules (at least) are typically domestically incorporated by statute. Few would consider, however, that the Government of the day lacks the power to withdraw New Zealand from its treaties merely because of a consequential statutory incorporation. The conventional view would be that the executive retains the power at international law to make and unmake treaties. If the treaty is unmade, then the underpinning for the statute falls away. But the tail does not wag the dog.

Here, the High Court relied on its understanding of the European Communities Act 1972 as a "constitutional statute" and canons of interpretation that: (1) unless Parliament legislates to the contrary, the Crown should not have power to vary domestic law; and (2) the Crown's prerogative powers to conduct foreign relations operates only on the international plane. Applying these principles, the Court held that in enacting the European Communities Act 1972, the United Kingdom Parliament intended to legislate to introduce EU law into domestic law in a way that could not be undone by the exercise of Crown prerogative power (at [92]).

This is a bold conclusion, the wider legal implications of which – for other treaties and statutes – remain unclear. No doubt the principles will be further explored and refined in the forthcoming appeal. In the meantime, New Zealand should take note, as the constitutional discussion in the United Kingdom has the potential to influence New Zealand law, particularly in an MMP system where the Government does not ordinarily command an outright Parliamentary majority.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

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