17 October 2019

The UK Government and the European Commission today published the text of a revised Withdrawal Agreement and a revised Political Declaration, coming just in time for the start of today’s European Council Summit. The revised deal is expected to be brought before the House of Commons on Saturday. The Government also released a unilateral declaration concerning the operation of the ‘consent mechanism’ contained in the new Protocol on Ireland and Northern Ireland.

While the successful negotiation of a new deal represents a political victory for Prime Minister Boris Johnson – including the re-opening of the Withdrawal Agreement – the reality is that both sides have made compromises to get to this stage. The Prime Minister still faces a huge challenge in winning the support of a majority of MPs in the House of Commons, particularly as the Democratic Unionist Party (DUP) has confirmed that its MPs will vote against the deal. Some of the so-called ‘Spartans’ in the European Research Group (ERG) have indicated they will support the deal – in spite of the DUP’s opposition – but the Government will still need to secure the support of a number of Labour MPs to get it through Parliament, many of which see this as a “harder” Brexit than Theresa May’s deal.

There is also the question of time. While the Prime Minister may be open to a short technical extension to get the deal ratified, he has ruled out asking for an extension on any other basis. There is speculation that he may seek to persuade the EU not to grant an extension (other than the purposes of ratifying the deal) to force a choice between this deal, revoking Article 50, or No Deal. However, the possibility of a General Election before ratification cannot be ruled out, and it is also possible that the House of Commons could take further action against the Government before 31 October.

The key features which distinguish the new Brexit deal from the previous one negotiated by Theresa May are that:

  • The backstop has been replaced with a ‘frontstop’ special arrangement for Northern Ireland which will come into force immediately after the end of the transition period. It ensures that Northern Ireland will leave the EU’s Customs union along with the rest of the UK, but the UK will have to enforce EU Customs procedures at points of entry into Northern Ireland. Northern Ireland’s consumers will be able to benefit from UK tariff rates and trade deals with third countries, and businesses there will continue to enjoy unfettered access to the market in Great Britain. The region will also follow the EU’s regulatory framework in certain respects, meaning there will be no regulatory or customs border with the Irish Republic.
  • The special arrangements will be subject to the consent of the people of Northern Ireland and include an exit mechanism, with the devolved Assembly being granted the right to opt out of the Northern Ireland-specific procedures on the basis of a majority vote. The absence of a ‘DUP veto’ – requiring cross-community support for the continuance of the arrangements after 4 years – may explain why the party felt that the consent provisions were not sufficient to secure their support.
  • The Withdrawal Agreement no longer includes a customs union as the default basis for the future UK-EU relationship, which was included under the backstop. The potential future UK-EU relationship is only addressed in the non-binding Political Declaration, which points to a free trade agreement rather than a customs union, but this is a matter which will remain open to negotiation in the transition period, presumably after a UK General Election. Consequently, the level playing field obligations that accompanied the proposed UK-EU customs union under the backstop have been removed in the revised Withdrawal Agreement and to the Political Declaration as an issue for further negotiation in the context of the future UK-EU relationship.

Open Europe’s Dominic Walsh has produced a “track change” document which compares the new Protocol to the backstop negotiated by Theresa May. Although large parts of the Protocol text are unchanged, there are two important points to consider:

  • Many of the unchanged sections are not related to trade in goods – for example, provisions on the Common Travel Area, the Single Electricity Market, and some of the arrangements for the implementation and governance of the Protocol. These parts of the Protocol were never controversial.
  • Other provisions, notably regulatory alignment on goods, are the same as before in a technical sense, but are now subject to the consent of the Northern Ireland Assembly.

The rest of the Withdrawal Agreement is unchanged. The standstill transition period lasts until December 2020, with the option of extension up to December 2022; the references in the Protocol to transition extension have been deleted, but their legal basis elsewhere in the Withdrawal Agreement remains. The financial settlement is unchanged, although the extension to Article 50 means that the total payment is likely to be in the region of £33 billion, not the oft-quoted “£39 billion” figure. The provisions for citizens’ rights, Gibraltar and governance are as before.

A summary of the key aspects of the new Protocol on Ireland/Northern Ireland is detailed below.

 

Customs

  • Northern Ireland is part of the customs territory of the UK, and can be included in UK FTAs with third countries – provided those FTAs do not disrupt the Protocol.
  • There will be no customs duties or checks on trade between NI and the EU, including Ireland. NI will continue to apply the Union Customs Code.
  • Goods moving from GB to NI, or from outside the EU to NI, will only be subject to checks and duties if they are “at risk” of being subsequently moved into the EU.
  • By default, goods moving to NI from outside the EU are considered to be “at risk” of subsequently entering the EU – with some exceptions:
    • Personal property of UK residents, and consignments of negligible value, are not subject to any duties.
    • The Joint Committee of UK and EU representatives will establish criteria for further exemptions from duties, particularly for goods which will not be subject to commercial processing in NI.
  • Customs duties collected by the UK on GB-NI trade are not paid to the EU. Instead, the UK may reimburse NI traders whose goods can be shown not to have entered the union, and compensate or waive other costs for traders (subject to EU rules on state aid).

 

Regulations

  • NI remains aligned with certain single market regulations covering trade in goods and agri-food products, as previously. However, this would now be subject to consent from the NI Assembly, which can decide to opt out of EU alignment.
  • Previous clauses on ‘protection of the UK internal market’ remain. The UK is not prevented from ensuring unfettered market access for goods moving from NI to GB. The EU and UK also commit to use their “best endeavours” to facilitate trade and minimise checks between NI and GB as far as possible.

 

Consent/exit mechanism

  • The Protocol applies for an initial four years after the transition period – i.e. until 31 December 2024 if the transition is not extended, and 31 December 2026 at the latest.
  • Within 2 months before this end date, the UK will test democratic consent for the continued application of Articles 5-10 of the Protocol (the customs and regulatory arrangements, plus VAT, the Single Electricity Market and State Aid) from the NI Assembly.
  • If the Assembly is not sitting at the time, the UK government will recall the Assembly’s members for a special plenary vote on the arrangements.
  • Neither community has a “veto.” Consent to continue the arrangements requires a simple majority of Members of the Assembly present and voting. If this consent is given, the arrangements will continue for a further four years.
  • Alternatively, if there is cross-community consent to continue the arrangements, they will continue for a further eight years.
  • In either scenario, consent will continue to be tested on a rolling basis, with votes every four or eight years.
  • If the Assembly votes (by simple majority) against the arrangements continuing, then a two-year “cooling off period” begins, after which the arrangements will cease to apply. The earliest date at which the arrangements could end is therefore 31 December 2026.
  • During this two year period, the UK and the EU will put in place alternative measures. In doing so, they may consult the institutions created by the Good Friday Agreement, including the Assembly.

 

Future Relationship

  • The UK-EU relationship is only addressed in the Political Declaration, which is non-binding. The future relationship is subject to negotiations in the next phase, and, most likely, the outcome of an imminent General Election. Although the Political Declaration makes reference to the UK leaving the single market and customs union, it would be open to a future UK government to negotiate a closer relationship if it so wished.
  • The parties envisage a future relationship based on an “ambitious, broad, deep and flexible” Free Trade Agreement, with zero tariffs or quantitative restrictions, together with co-operation on security, foreign policy and defence.
  • Unlike the previous Political Declaration, there is no reference to a customs union as the baseline of the future relationship. References to the UK considering alignment with EU regulations to facilitate trade have also been removed. However, the parties remain committed to co-operation on customs arrangements, and to going beyond WTO agreements in the reduction of non-tariff barriers.

 

 

Level-Playing Field

  • Binding all-UK commitments to non-regression in the areas of social and environmental policy, tax, competition and state aid have been removed from the Withdrawal Agreement.
  • The only level-playing field commitments in the Protocol apply to Northern Ireland alone, and even here only on state aid.
  • The level-playing field obligations in the previous deal were only included in the Withdrawal Agreement because of the presence of a UK-wide customs union in the backstop, which gave the UK tariff-free access to the Single Market. Without a binding UK-wide customs union, there was no reason for binding commitments to level-playing field measures.
  • However, the two sides commit to a level-playing field in the Political Declaration, as part of the future relationship. This will be subject to negotiation in the next phase; the closer the future relationship, the stronger the corresponding obligations. Both sides will seek to link level-playing field commitments to levels of market access.

The table below compares the new Protocol on Ireland/Northern Ireland to the previous versions of the backstop – not just that negotiated by Theresa May, but the March 2018 proposal by the EU Commission for a Northern Ireland-only backstop. (If you cannot see the PDF reader below, please click here to access the table).

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