Just as the dust began to settle after the first phase of Brexit negotiations the EU and UK moved on to what was supposed to be the relatively easy part: transition. Or, as Theresa May insists on calling it: implementation. Semantic debates aside, agreeing on the nature of the transition could be more difficult than was initially expected.
Both the EU and the UK agree that a short transition period is necessary and should be delivered as a part of the Article 50 withdrawal agreement. Covering the period between the UK leaving the EU in March 2019, and the start of a new UK-EU relationship, the transition will provide both the EU and UK with more time to put in place new systems for things like migration and customs, as well as providing time for negotiation on the future relationship.
On 29 January 2018, the European Council adopted its negotiating directives on transitional arrangements, giving the EU’s chief Brexit negotiator Michel Barnier a mandate to broker a transition deal with the UK in the second phase of talks. In summary, the EU’s position is a time-limited status-quo transition from the Brexit date – expected to be 29 March 2019 – to 31 December 2020, which marks the end of the EU’s seven-year budget cycle.
The EU directive states that the UK will continue to participate in the single market and customs union and will retain the four freedoms including the free movement of people; the acquis should continue to apply in full to and in the UK as if it were a member state, including in respect of the single market, the customs union and Euratom. All existing EU regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will apply, including the competence of the Court of Justice of the EU (CJEU). Any changes made to EU law during this time should automatically apply to the UK, with the same legal effect as in the EU. Additionally the UK will remain bound by all obligations stemming from EU free trade deals and other international agreements. Further, Barnier noted that whether or not the UK continues to benefit from EU free trade deals and other agreements will, in part, depend on the countries party to those agreements and so the UK will have to convince them that the status quo is mutually beneficial – something which shouldn’t pose too many difficulties. Confirmed in the guidelines is the EU’s position that the UK cannot implement any new agreements with other countries during the transition unless the EU gives their approval. The UK hopes to be able to negotiate and even sign new trade deals, though implementing them will have to wait.
Crucially, the UK will no longer be able to participate in the governance nor decision-making of any of the EU institutions, bodies or agencies. While it may be invited to attend some meetings in exceptional circumstances (which are to be defined in the withdrawal agreement), the UK will not be given any voting rights.
While such a “status quo-minus” transition had been mooted throughout the first phase of the Brexit talks, the stark reality of having no decision-making powers or voting rights coupled with the requirement to comply with all EU laws and regulations, including any changes, as well as the CJEU retaining jurisdiction, is likely to be a major point of contention during the negotiations.
Just days before the EU unveiled its guidelines on transition, UK Brexit minister David Davis delivered a speech in which he agreed that existing laws, rules and international agreements should apply to the UK. He added that participating in a customs union should not preclude the UK from formally negotiating and signing new trade agreements – though it is thought that many countries will want to know what the future UK-EU relationship is going to look like before they are willing to finalise a deal with the UK.
While the UK and EU positions on transition share many similarities, some of the details have provoked Brexiters – and even some Remainers – in the UK to claim that the UK would become a vassal state if the government agrees to abide by the rules, constraints and courts of the EU while losing the rights and privileges that are presently enjoyed as a full member state. Practically speaking, a status quo transition emphasises the value of full EU membership by revealing the cost of losing proper representation and influence. This point represents a major domestic challenge for Theresa May, who will have to demonstrate, not least to the Brexiters in her Conservative party, that the UK’s sovereignty remains uncompromised during the transition, while at the same time accepting the EU’s terms.
In his speech, David Davis said that the UK and EU would have to “agree a way of resolving concerns if [EU] laws are deemed to run contrary to [UK] interests and we have not had our say”. Where new EU laws or rules are likely to affect the UK, or could be particularly disadvantageous to UK business, it would be good democratic practice for the UK to have a say in those laws. However, the timing of the transition period should provide a safety net for the UK given that EU legislation from inception to implementation usually takes around two years. In any event, the EU is unlikely to agree to such a demand and the issue is likely to result in tense negotiations.
To many commentators, it now seems obvious that the best way to avoid some of the difficulties. of negotiating the transition is for the UK to request an extension to the Article 50 period. Doing so would be fraught with political difficulties for the UK and EU: Theresa May’s government is eager to leave the EU in March 2019 lest it be accused of betraying the will of the people, and the EU wants a transition that conveniently ends when its budget cycle ends. However extending Article 50 would also address another problem with the transition: two years is unlikely to be enough to reach agreement on a future UK-EU relationship. Furthermore, extending the Article 50 process would likely require a renegotiation of the financial settlement reached in the phase one talks, which could cost the UK as much as €18 billion a year based on 2018 figures.
The future relationship could be relatively simple to flesh out; the fundamental aim will be to manage divergence of laws and regulations given that the starting point would be alignment. This is reinforced by a lack of clear UK plan at this time for different regulation. That being said, the scope of the UK’s ambitions for a wide-ranging relationship suggests that any future relationship deal, or deals, will be a mixed agreement, requiring ratification by the Council, the European Parliament, and the national parliaments of all EU member states as well as some regional assemblies, which will eat into the two year transition period and leave much less time for negotiation.
All of this is underlined by two crucial details: the UK still hasn’t set out in any detail what it wants from its future relationship with the EU, and while the Brexit talks have moved on to phase two, there is still much more work to be done on the phase one issues, which will surely resurface with the drafting of the withdrawal agreement.
On the withdrawal agreement, the biggest issue is Ireland, which is on a special negotiating track to the other issues and is unlikely to be resolved any time soon. The EU will insist on the UK upholding its promises to avoid a hard border, while ensuring the integrity of the customs union and single market – no easy feat. The UK considers the Ireland issue something to be resolved during the talks on the future relationship – something that cannot start with any degree of substance until the UK has left the EU. Reaching an early agreement on this issue would require the UK to set out its post-Brexit end-state goal.
Other withdrawal issues to be resolved include agreement on a Brexit dispute mechanism – how to resolve future disputes about the Brexit deal and whether the CJEU is the ultimate arbiter of any legal conflicts. Having conceded a role for the CJEU on citizen’s rights, the UK desires to quit the court’s jurisdiction in all other matters. The UK’s future relationship with Euratom is similarly uncertain, and the UK’s CJEU red line poses further problems.
It is thought that most of these issues can be resolved without too much controversy, though some in Europe believe that the UK should be acting with a little more urgency.
Before the end of the year, the remaining withdrawal issues need to be resolved, a legal text of the withdrawal agreement is to be drafted and agreed upon, and the framework for the future relationship is to be considered and presented as a political agreement. All of this presents an enormous challenge ahead, supporting the arguments in favour of extending the Article 50 period. The UK’s seeming ambivalence towards its post-Brexit end-state further provides support for an extension. Such an extension would provide more time to complete this to-do list, as well as, crucially, giving the UK further opportunity to consider and debate the future relationship with the EU. This is particularly pertinent given the recent publication of a UK government economic impact analysis, showing that the UK economy would be damaged under all three possible scenarios considered: a comprehensive free trade deal, single market access, and no deal at all.
Extending the Article 50 period would keep options open for a longer period as the shape and outcome of Brexit becomes clearer. Whether the UK would propose it is another matter completely, and there would be practical and political problems associated with doing so, though many commentators believe that the such problems would be much less problematic than those of transition.🔷
(This piece was first published on Medium.)