The Isle of Man – in or out?

It will be difficult for the Isle of Man to resolve its post-Brexit relationship with the EU, says Prof Michael Keating, until Britain's position is clearer. 
 
Brexit has shed light on parts of the constitutional arrangement across these islands that normally receive little attention. Issues that have been taken for granted or managed informally have risen to the surface and demand a definitive resolution. Indeed, in many ways Brexit challenges the informal constitution, with its myriad lacunae and silences that have allowed the islands to muddle through.
 
The Isle of Man is not part of the United Kingdom. Having historically come under the suzerainty of Norway, Scotland and England, it is now a Crown Dependency. It has full domestic self-government but the UK is responsible for its defence and external relations. Until the 1950s, it was treated internationally as part of the metropolitan territory so that UK international treaties applied automatically. Since then, it has been allowed to opt into treaties at its discretion and has been developing its own international presence, subject to UK permission. This is regulated by an agreement of 2008.
 
At the time of UK accession, the Isle of Man opted not to join the (then) European Communities; but without staying entirely outside. The position of the Crown Dependencies was not a crucial issue in the negotiations and they were treated rather as an afterthought. Protocol 3 of the accession treaty and law contains the main provisions but has rarely been tested. The main provisions were incorporated into Manx legislation in an act of 1973.
 
The Isle of Man is in a customs union with the UK and within the EU customs union. There is free trade in goods and agriculture. Otherwise, the Treaty on the Functioning of the European Union states that ‘this Treaty shall apply to the Channel Islands and the Isle of Man only to the extent necessary to ensure the implementation of the arrangements of those islands set out in the Treaty concerning the accession of new Member States to the European Economic Community and to the European Atomic Energy Community signed on 22 January 1972.’
 
It remains unclear exactly what parts of EU law apply in the Isle of Man but it has in practice incorporated large parts of the aquis communautaire into its law to secure market access. This happens variously through direct application (notably through the customs union); Protocol 3 obligations; following UK law which itself is modelled on EU law; legislation to secure equivalence; and voluntary adoption. As it is not inside the Single Market, it does not enjoy free trade in services, but seeks regulatory equivalence as far as possible. Hitherto, this has meant equivalence with both the UK and the EU. There remain, however, uncertainties for example over the application of state aid provisions or product standards. 
 
The Isle is part of the Common Travel Area (CTA) with the UK and Ireland so that there are no passport controls with the UK. Europeans, coming to Man, would need to show passports on entering the CTA. It is not, however, part of the EU freedom of movement of workers provisions but has a system of work permits.  In order to ensure non-discrimination, these apply equally to UK and EU citizens. 
 
Like the other Crown Dependencies, Man has thrived as a low-tax jurisdiction and has come under pressure for greater transparency in regard to financial services, corporate taxation and tax competition. 
 
The UK’s Withdrawal Bill does not apply to the Isle of Man, which therefore has to legislate for its own adjustment after Brexit. Since it is not clear just how much EU law does apply, it is not enough simply to declare continuity until such time as it wants to change the law, which is what the UK has done. Nor can the Manx authorities decide which parts of EU law to retain or repeal until the UK has decided on its position, as it does not want to create legal and regulatory differences with the UK, which is far and away its main trading partner. The more UK and EU law diverge, the more difficulties are posed for the Isle.
 
There is a series of sectors affected by Brexit. The Isle of Man has a large financial services sector, which has access to both the EU and UK under equivalence provisions. There may be a need for passporting to secure continued access to EU markets.  Unlike the other Crown Dependencies, the Isle of Man has a significant manufacturing base, including making high-technology aircraft parts. This requires access to UK and EU markets and could be put into doubt by UK withdrawal from the Customs Union. It cannot negotiate its own trade deals or customs arrangement; it is recognized within the World Trade Organization but only in association with the UK. Agriculture, formerly important, is a small sector now but linked to European markets. Manx fisheries are treated as part of the UK zone and quota within the Common Fisheries Policy (CFP) but remain the competence of the Man government, which conforms to most CFP provisions voluntarily. On-line gaming is an expanding sector, currently nationally regulated but there are concerns about future European rules.
 
For over forty years, the Isle of Man has balanced self-government with convergence on EU and UK provisions, using whatever instruments were most convenient. Should EU and UK regulations diverge, this will put increasing pressure on the island and raise the question of how well its constitutional provisions allow it to manage its own affairs as a self-governing territory within the Atlantic archipelago. In matters such as fisheries, there is a growing interest in cooperation with its immediate neighbours in the two parts of Ireland, Scotland and Wales, rather than merely the link to London. The British-Irish Council has opened new horizons and may presage more horizontal cooperation across the islands. Like other Atlantic islands, it is finding its own way in a complex and interdependent world, steering between the metropolitan, European and global poles. 
 

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post by Michael Keating
University of Aberdeen
24th August 2017
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