19 March 2018

The UK and the EU have today made “decisive” progress in negotiations for Britain’s withdrawal from the EU. Brexit Secretary David Davis and EU chief negotiator Michel Barnier today announced that talks have delivered agreement on a standstill transition period, which is expected to last from March 2019 until December 2020. During this period, the UK will remain bound by the rights and obligations of the EU single market and customs union, providing certainty and stability to individuals and businesses immediately after Britain’s exit. Davis and Barnier also confirmed that negotiating chapters on a citizens’ rights deal and Britain’s financial settlement to the EU are now finalised and closed. This marks important progress in negotiations that could not necessarily have been forseen with great confidence even six months ago. However, as both sides made clear, not all questions have been resolved – no agreement has yet been reached on the Irish border issue. This remains a critical obstacle to be addressed before the UK’s formal exit date on 29 March 2019.

What progress was announced today?  

Formal agreement on a transition period was highly anticipated this month. Businesses in the UK had repeatedly warned the government that failure to provide certainty on the transition in March this year would force companies to begin implementing costly and burdensome contingency plans. However, this agreement was not necessarily easily won–the past weeks have seen significant compromise from both sides in order to green-light the transition period.

The UK has accepted that EU citizens arriving during the transition will be able to access the same rights to settled status as those who are already resident in Britain. Equally, the EU’s court of justice will continue to have jurisdiction over the UK throughout the 21-month period. Importantly, these compromises appear to have been accepted by most of the UK parliament, and in some cases were signposted early on – Prime Minister Theresa May laid out the continued role of the ECJ as early as October last year. It is also interesting to note that very few dissenting voices were heard after the UK last week compromised on EU immigration during the transition. This may be because immigration numbers have been falling recently, alleviating some of the political pressure.

But the EU has also had to show more flexibility. Most importantly, it is now clear that the UK will automatically benefit from the EU’s third country FTAs during the transition. Article 122(6) of the EU’s initial draft legal text of the Withdrawal Agreement already seemed to indicate this by suggesting that during the transition “any reference to Member States in the Union law…shall be understood as including the United Kingdom.” This would suggest that the UK de facto continues to benefit from EU third country agreements. However, today’s agreement goes one step further, with the EU including an explicit commitment to “notify the other parties to [the international agreements concluded by the Union] that during the transition period, the United Kingdom is to be treated as a Member State for the purposes of these agreements.” This is an important assurance for the UK – it would have been extremely challenging for the government to find the necessary capacity to renegotiate and conclude the EU’s 40 or so FTAs ahead of exit day.

The EU has also included provisions for the UK to be consulted on new draft EU laws during the transition period – this is an important victory for the UK government to counter claims that it has accepted to make the UK a “vassal state” of the EU immediately after its exit. However a consultation right obviously falls short of any sort of veto right.

A final deal on citizens’ rights and the Brexit financial settlement has also been locked in today. UK and EU citizens’ now have greater certainty that they will maintain the right to remain in their host country post-Brexit. Disputes over the “Brexit bill” – once a highly contentious issue in negotiations – have now also been diffused. This important progress provides a robust political safeguard against a “no deal” scenario in March 2019. If UK-EU negotiations on the Withdrawal Agreement breakdown before March next year, both sides would be forced to explain to their citizens’ that they have rejected a deal that guaranteed their rights and provided them with legal certainty. The EU would also have to explain to all member states, both net-contributors and net-recipients, that they would now have to contend with a £37bn hole in their budget.

For all the progress that has been made today, the issue of the post-Brexit relationship between Northern Ireland and the Republic of Ireland remains unsolved. Davis and Barnier attempted to highlight that the UK and EU start from the same key principles: both restated their commitment to the December joint report in its entirety – this provided three options for ensuring no hard border on the island of Ireland post-Brexit. Both also agreed for the need to include the “backstop” solution to the Irish border – which would see the UK agree to align with relevant parts of the EU single market and customs union in the absence of another agreed solutions – as part of the legal text of the Withdrawal Agreement. The EU also stressed that the continuation of the UK-Ireland Common Travel Area was not in question. However, the difficult question of how to avoid a hard border remained untouched. Instead, both have agreed a timetable to discuss issues related specifically to Northern Ireland and Ireland in the coming month. Unless another agreement can be found between the UK, the EU and the Irish government, this risks once again becoming a flashpoint towards the end of negotiations.

Where does this leave us?

EU27 leaders will gather at a European Council summit in Brussels this Thursday and Friday. They are expected on Friday to sign off on the transition agreement, and formally adopt the EU negotiating guidelines for the future UK-EU relationship. This will provide Barnier with a formal mandate to begin trade and future partnership talks with the UK.

As the EU has repeatedly outlined, a formal agreement on the future bilateral relationship is unlikely to be in place at the point of the UK’s exit next March. Instead, the EU aims to draw up a political declaration on the post-Brexit UK-EU partnership to present alongside the Withdrawal Agreement. UK government officials have also privately suggested they are aiming for a “heads of terms” agreement, rather than a full free trade deal.

Barnier has previously suggested negotiations should be concluded by October of this year to allow sufficient time for the Withdrawal Agreement to be ratified by both sides. Recent reports suggest that this timetable could slip. The UK is reportedly willing for ratification to begin as late as January of next year, giving parliament only a two month period to scrutinise and approve (or reject) the final deal.

On the EU side, for the agreement to enter into force, the European parliament and the leaders of the EU27 must approve the final deal. The draft proposal will first be sent to the European parliament for their consent – the parliament cannot amend the agreement at this stage. It will then be sent to the European Council for the EU27 heads of state and government to officially conclude the agreement. Formally, this only requires the approval of a qualified majority of member states – however, the EU traditionally aims to conclude agreements by consensus. It is important to the note that the EU has also effectively offered Ireland and Spain a veto over the final agreement: the EU has repeated stated it would not support an agreement on the Irish border that did not meet the approval of the Irish government. Equally, Spain must offer its approval for any deal to apply to Gibraltar.

There has been some suggestion that individual member states could also have a say in concluding the Withdrawal Agreement, given it touches on matters of national competence. For instance, the UK’s withdrawal from the EU means that member states will regain powers to manage immigration from the UK post-Brexit – until now this has been held at the EU level under the principle of freedom of movement. However, it is not clear that the Commission is considering allowing member states ratification.

 

Today’s announcements signal important progress in negotiations and reduce the likelihood of a “no-deal” Brexit. However, with the issue of the Irish border still looming up ahead, the road to Brexit is not yet free of obstacles.