What’s next for the UPC project? Our analysis following the German Federal Constitutional Court decision

The Bundesverfassungsgericht (the German Federal Constitutional Court) has released its long-awaited ruling on the complaint against the German ratification of the UPC Agreement. It has found, by 5:3 majority, that the Act by which Germany was to accede to the UPC Agreement is void, because it was not passed with the required parliamentary majority. Without Germany's ratification, the UPC Agreement cannot come into force. What is likely to happen next, and when?

In theory, the Constitutional Court's objection could simply be overcome by getting the required parliamentary majority for the Act on a second attempt. The Bundestag (the German federal parliament) is still sitting, despite the ongoing Covid-19 crisis. Further, on 26 March 2020, the Federal Justice Minister at the Bundestag said that the Federal Government "will carefully evaluate the decision of the Federal Constitutional Court and examine possibilities to remedy the identified lack of form before the end of this legislative period" (that period runs until approximately October to December 2021).

However, there are a number of reasons that the path is unlikely to be as smooth, or as quick, as this.

First, the UK Government has recently confirmed that, following Brexit, the UK will no longer participate in the UPC system. At a minimum, this means the UPC Agreement will need to be amended, because London is currently expressly named in the Agreement as one of the sites of the Central division. More fundamentally, it may mean that other participating countries are now less keen to press ahead with the UPC project, either in its current form or at all. Striking a legal and procedural balance in the UPC system was the product of years of negotiations between participating countries. With the UK now outside the system, there are some who feel that the compromise reached should also be adjusted.

Second, the Constitutional Court decision explicitly leaves one question open - namely whether Articles 20 and 21 of the UPC Agreement, which grant EU law primacy over national law, are permissible in their current form. They did not need take a decision on this issue given their decision on the parliamentary majority, but we understand that it could still be pursued in future if the necessary majority is obtained from the Bundestag.  That could lead to another long delay.

In our view, the most likely next step is for the signatories of the Agreement to meet to decide whether to press ahead with the UPC project at all, in light of Brexit and the Constitutional Court's decision. If they do wish to press ahead, a decision will need to be taken on the new location for London's part of the Central division. The UPC Agreement will then need to be amended to reflect this new location (and any other renegotiations).  It makes sense to do that before the UPC Agreement is reconsidered by the Bundestag, but it means that there is still a lot of uncertainty as to whether, and in what form, the project will go ahead.

What is clear is that the UPC project is not likely to come into fruition any time soon. Much of Europe is of course now occupied dealing with the escalating Covid-19 crisis. Even if the signatories of the Agreement could resolve the open questions quickly, the UPC project is unlikely to be on high on the Bundestag's agenda in the short term.

Overall, we don't envisage the UPC coming into fruition in the near term, and it is possible it never will.

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