Menu

Brexit: will it be the final denouement on 31 October? The EU/UK negotiating context

FIDE FUNDACION INTERNATIONAL CONGRESS AT JESUS COLLEGE, OXFORD – 16 September 2019. PRESENTATIONS BY CHRISTOPHER MUTTUKUMARU CB AND PROFESSOR DERRICK WYATT QC


Brexit: “no deal” or Nirvana? At Fide’s recent International Congress at Jesus College, Oxford, Christopher Muttukumaru and Derrick Wyatt discussed whether it is likely that there will be a “no-deal” Brexit and what its immediate aftermath will be.



A “Do or die” [1]- the UK is leaving on 31 October (UK Prime Minister): as of 19 September, what appears to be the EU/UK negotiating context?
 
New UK Prime Minister Boris Johnson says he will not agree to any extension of UK membership of the EU beyond 31 October. The reason he gives for this is that unless there is a risk of no-deal, the EU will not renegotiate the withdrawal agreement which it agreed with Theresa May’s government. Boris Johnson says it is essential to re-negotiate that agreement. Here is some of the background.
 
The Government of Theresa May negotiated a withdrawal agreement (the “May Agreement”) with the EU. That agreement deals with the UK exiting from the EU. It does not include an agreement on trade between the UK and the EU after Brexit – though there is a non-binding political declaration indicating likely features of such an agreement.
 
The withdrawal agreement has four main components:
 
  1. The rights of UK and EU citizens in the EU and the UK after Brexit (with the jurisdiction of the CJEU maintained for a temporary period after Brexit over the rights of EU citizens resident in the UK)
  2. A financial settlement identifying the UK share of a number of EU liabilities which would arise after Brexit.
  3. A transitional period (the UK to remain part of the single market and customs union, after Brexit, until the end of 2020)
  4. The “Irish backstop” (to avoid the possibility of hard border between Ireland and Northern Ireland at the end of the transitional period, the UK would remain in a modified customs union until alternative arrangements had been included in the future trade agreement between the UK and the EU)
 
But the UK Parliament has rejected the May agreement three times, with Boris Johnson (before he became Prime Minister) reluctantly voting for it the third time around, but subsequently stating that it could not pass the UK Parliament. There is a majority in the UK Parliament against a no-deal, but there may be no majority for any particular withdrawal agreement.
 
When Boris Johnson succeeded Theresa May as Prime Minister on 24 July 2019, he declared that he wished to reach a withdrawal agreement with the EU without the “Irish backstop,” though some of his MPs say they would not vote for other elements of the May withdrawal agreement in any event – some, for example, would object to the temporary continuation of jurisdiction of the CJEU over the rights of EU citizens in the UK.
 
Boris Johnson seems to have softened his position on the backstop since he is now proposing an alternative arrangement which would see Northern Ireland in a special economic relationship with Ireland, in which Northern Ireland would adopt EU rules on food and livestock in order to avoid border checks between Northern Ireland and Ireland. This approach would not avoid border checks for goods other than food and livestock. For other goods no specific proposals have been published, but on 19 September the Johnson government shared confidential technical “non-papers”[2] with the EU Commission on potential solutions to the customs treatment of goods at the border.The Johnson government has already stated it would keep any necessary customs infrastructure away from the border itself. The Johnson government does not accept that Northern Ireland could remain in the EU customs union, even on a temporary basis.
 
The EU originally stated that it would not re-open the agreement it reached with the government of Theresa May, but the fact that Commission officials are having “talks” with UK officials on alternatives to the backstop indicate that the EU will re-open the May agreement if it thinks it has to. But the EU says it is still waiting for the UK to make alternative proposals, in writing, that are as effective as the backstop. Is the EU about to shoot itself in the foot? The purpose of the Irish backstop is to guard against the risk of a hard border in 2021, after the end of the transitional period, in the event that UK and the EU have not agreed an alternative to the backstop by that time. But if the EU’s insistence on the backstop leads to a hard border on 1 November, the backstop strategy will have failed, and it would surely be better to adopt the rest of the withdrawal agreement, including the transitional agreement (and the financial settlement and citizens’ rights agreement), and continue to discuss the Northern Ireland/Ireland border issue in the context of negotiations on the future trade agreement.
 
The latest extension of the UK’s membership of the EU under Article 50 TEU will come to an end on 31 October 2019. But the UK Parliament has passed a law requiring Prime Minister Boris Johnson to request and accept a further extension of UK membership of the EU if he has not secured a deal with the EU by 19 October. The law actually lays down the wording of the letter which the Prime Minister is obliged to send to the President of the European Council! Yet Boris Johnson continues to say that he will not agree to an extension. Does this mean he will simply refuse to comply with the law?
 
Even if there is a no-deal Brexit, this is unlikely to mean that negotiations will simply come to an end. The UK and the EU will want to put in place a future trade agreement, and the issues of citizens’ rights, a financial settlement, a potential transitional period, and the Irish border with Northern Ireland, will not go away.
                The Johnson Government does not have a majority in Parliament. Opposition parties have blocked a general election because they want Boris Johnson to agree to an extension of EU membership first. But a general election is likely to take place in November.
               Here are some of the key questions concerning the negotiations:
  1. Can Boris Johnson avoid requesting an extension of UK membership of the EU, leaving open the possibility of a no-deal on 31 October?
  2. Will the UK Parliament change its mind about the May Agreement and pass it after all rather than face a no-deal Brexit?
  3. Will the EU re-negotiate or drop the Irish backstop if a hard border seems inevitable after 31 October?
  4. Will negotiations for a withdrawal agreement continue after a no-deal Brexit as a precondition to any future trade agreement between the UK and the EU?
  5. Will a general election in the UK reset the UK’s political algorithm for Brexit?
  6. In the next part of the presentation, there follow some observations and preliminary conclusions on some of these key questions .
 
B In the light of the first and second key questions identified above, could there be an exit without a deal in view of the new UK legislation which requires the UK Prime Minister to seek a delay to the exit date if there is “no deal”?
 
  1. On 9 September, as mentioned above, the UK Parliament  passed a bill now entitled European Union (Withdrawal)(No 2) Act 2019[3]. It provides that the UK Prime Minister must ask the EU for an extension of the date of UK exit in two cases[4].
  2. First,  if there is an agreement with the EU on withdrawal, it must be approved by the UK House of Commons and debated by the UK House of Lords [5]. Alternatively, secondly, if there is a failure to  agree on a withdrawal agreement, that failure must be approved by the UK House of Commons and debated by the UK House of Lords[6]. If neither approval has been given,  on or before 19 October 2019  the UK Prime Minister must seek an extension of the withdrawal date under Article 50(3)[7].
  3. While it is true that the UK Prime Minister must seek and accept an extension, if offered[8], he has publicly said that he would not be prepared to seek an extension. That may be political bravado.
  4. More seriously, there remains a roadblock  in the negotiations and time is running out to reach a deal before 31 October. Even if , contrary to current probability, there were a successful renegotiation of the Irish backstop in the Withdrawal Agreement by 31 October, it is unlikely  that its ratification and implementation by the UK Parliament could be achieved by 31 October if the renegotiated deal is approved at the European Council meeting to be held 17/18  October;
 
  1.  Moreover it is open to question whether the EU would agree to an extension . Since an extension has to be agreed by unanimity, it is wholly uncertain what the EU’s attitude might be.[9] Much would depend on the EU’s judgment whether, if there were an extension, it would resolve the impasse in the UK Parliament. The EU is unlikely to concede any major points in the negotiations unless it is reasonably sure that the UK Parliament will approve the EU/UK consensus. Given the plethora of views expressed in Parliament thus far, the outcome is uncertain.
  2. At this stage, therefore, it would be wise to plan on a “no deal” exit.
                C In the light of the fourth key question identified above, what would “no deal”  mean on 1 November 2019? What is likely to happen to the Withdrawal   Agreement and its associated Political Declaration ?
  1. First the EU/UK Withdrawal Agreement. No deal would mean that the UK would leave without a EU/UK Withdrawal Agreement;
  2. If there is no effective Withdrawal Agreement , the UK would not enjoy the benefit of a transition period which, on the UK Government’s own stated position, would have avoided the cliff edge scenario which will now face the UK on 31 October if it leaves without a deal;
  3. If there is no effective Withdrawal Agreement, the EU could lose the benefit of those provisions which (a) would have governed  the calculation and payment of the “divorce bill”, albeit reduced by reason of the delays since the original date of exit on 29 March ; (b)  would have protected an open border between the Republic of Ireland and Northern Ireland  ;  (c) would have fully  protected EU and UK citizens’ rights;  and (d) would have provided for an orderly withdrawal from the EU institutions. For the purposes of the FIDE Congress, the UK Government’s Operation Yellowhammer report on no deal preparations in the UK assumes that a “no deal” outcome would “disrupt the flow of personal data from the EU…”[10]
  4. Secondly the draft EU/UK Political Declaration. Article 50 of the Treaty on European Union anticipates that there must be a withdrawal agreement (“shall negotiate and conclude…”), “taking account of the framework for its future relationship with the Union”. The inference is that the two are interlinked.  If the UK leaves without a deal, it is probable that it would lose the benefit of aspects of the EU/UK Political Declaration.
  5. Would the absence of the Political Declaration matter?  Some aspects of the Political Declaration are very thin on detail. Their loss may not matter. Other aspects are harder-edged and would provide for  a positive  framework for future negotiations on a permanent trading relationship with the EU;
  6. Thirdly, would there be a legal vacuum in UK national law? If the UK leaves without a Withdrawal Agreement, the provisions of the European Union Withdrawal Act 2018 (“EUWA”) would apply. What does the EUWA achieve? The EUWA would repeal the European Communities Act, 1972, which was the basis on which the UK became a member of the European Economic Community.
  7. Importantly, the EUWA is based on a new statutory model which would retain or convert EU law into UK national law.  That would have the effect of managing the legal vacuum which would otherwise exist. But, as a result, EU law would be frozen as a matter of UK national law unless the UK Government can, after exit,  persuade Parliament to enact changes to the preserved  EU acquis.
  8. The freezing of EU law will provide for a degree of legal stability in the UK. But much will depend on its untested workability and on the quality of statutory instruments which, sector by sector,  have been made under EUWA powers over the last year in order to cure deficiencies in the new statutory framework ;
  9. If the UK leaves without a deal, the consequences for two of the three devolution settlements would be potentially serious. The Northern Ireland economy is likely to suffer if, at the border,  the free movement of workers is regulated or if tariff barriers are established or if Single Market controls are enforced. A no deal exit would almost certainly provoke the Scottish Government into seeking a second referendum on Scottish independence.
 
DIn the light of the fourth key question what would a “no deal” future look like beyond the immediate aftermath of exit?
 
  1. Even if the UK Government is able to achieve its “do or die”[11] ambition of exit on 31 October, its further plans are likely to be in disarray within a short time;
  2. In the UK, the EU rules on imports from other Member States would be preserved in UK domestic law. But it is not clear what barriers the EU will decide to establish in respect of UK exports to the EU27.
  3. There has been a considerable emphasis on the risks to trade in goods and on the need to avoid delays at the bottlenecks at the Port of Dover and at ports in France (Calais) , the Netherlands (Rotterdam) and Belgium  (Antwerp). On both sides of the English Channel, plans, including the establishment of a spare lorry holding capacity and deployment of significant numbers of additional border staff, are well-advanced.    Damaging impacts on trade are unquantifiable but, on an incremental bases, significant[12]. Most seriously, in areas such as imports of fresh produce and medicines, the harmful impacts might be serious in the short term.
  4. In the EU, its contingency plans are designed to mitigate against unacceptable shocks to the economies of the EU’s Member States. They are expressly designed [13] not to replicate the benefits of membership of the EU, will generally be temporary in nature and have been adopted unilaterally.
  5. The EU’s contingency action plan will indirectly help the UK in the short term.  For example, UK citizens would still be permitted to enjoy visa-free travel although that would not obviate the need for border checks; UK-registered aircraft would still be able to fly to and from EU27 destinations.
  6.  That said the Northern Ireland border conundrum would remain. There would be a stark choice between (on the one hand) an open border, considered to be essential to future peace and to ensure compliance with the Good Friday Agreement and (on the other) the preservation of the integrity of the Single Market.
  7. The UK as a whole will need to negotiate a future trade deal with the EU27. The negotiating environment will have been badly scarred by no deal, especially if the UK were to claim that it had no debts to settle and that the divorce bill (or a substantial part of it) would, therefore, remain unpaid.
  8. The UK as a whole will need to negotiate future trade deals with third countries, including permanent deals with those countries whose agreements with the EU have been temporarily continued. According to a published UK Government report of 13 September 2019, the trade arising from these agreements amounted to £138.7 billion (or 10.7% of UK trade) and agreements had been rolled over with countries whose trade represented 64.7% of the total[14].
  9. While the Political Declaration with the EU27 might be capable of being revived in some form, the EU has given no commitment to that effect and, indeed, its stance has hitherto been heavily influenced by the expectation that the Withdrawal Agreement would first have been ratified.
  10. The terms of future EU/UK engagement would probably not be as favourable as the Political Declaration had anticipated.   For example, in the negotiations hitherto, UK ministers have (apparently and surprisingly ) placed little emphasis on the services sectors, including financial services. For its part, the Commission has made clear that the withdrawal of the UK would result in the loss of the rights of financial operators in the UK to provide services in the EU under the EU passport regime[15]. The Political Declaration signalled the EU’s readiness to use existing equivalence frameworks instead[16]. Will that readiness survive a messy Brexit without a deal and without settlement by the UK of the divorce bill?
  11. If, post-exit, consensus on aspects of the withdrawal agreement were a pre-condition of negotiation of a permanent trade deal, that would probably mean that the EU27 would need to act inter governmentally in respect of some areas covered by the Withdrawal Agreement.
  12. Any future trade agreement with the EU27 would be made under a different treaty basis  (Article 218 of the TFEU) to Article 50.  Any new agreement(s) would need to comply with the constitutional requirements of each of the EU27 Member States[17]. That could be a long haul.
  13. The UK Government would be faced with a hostile House of Commons. A Johnson-led government is likely to be a deregulating government[18]. Yet the provisions of the EUWA will (see above) mean that EU law is frozen in UK domestic law. Why? While, after a no-deal exit, the Government could   introduce new parliamentary bills seeking amendments to the EU acquis (by then part of UK national law by virtue of the concepts of retained or converted EU law) amendments would involve a parliamentary process and it seems clear that MPs who are opposed to a no-deal exit would be in no mood to compromise. But a General Election, if called after exit,  might result in different parliamentary arithmetic.
  14. While businesses and citizens are desperate for certainty, they may well find that a post-no-deal future is even more complicated and time-consuming than the purported simplicity of a no-deal exit. On any view, that uncertainty is going to last for a number of years.
 

[1] See footnote to the first indent under Section C (below)
[2] A “non-paper is frequently used by the UK authorities to articulate ideas for possible negotiation with another state or an international institution such as the European Commission. A non-paper is not necessarily a statement of UK Government policy but is rarely put forward by officials without express or implied ministerial authority. 
[3] 2019 chapter 26
[4] Section 1(3) and (4) of the European Union (Withdrawal)(No 2) Act
[5] Section 1(1) (ibid)
[6] Section 1(2)(ibid)
[7]Section 1(3) and (4)(ibid)
[8] Section 3(1) and (2) (ibid)
[9] On 8 September, the French Foreign Minister expressed grave reservations about another extension; but Irish Government has said that they would agree to an extension.
[10] Report entitled “Operation Yellowhammer: HMG Reasonable Worst Case Planning Assumptions as of 2 August 2019” .
[11] Boris Johnson, UK Prime Minister. The phrase was used in Lord Tennyson’s poem, the Charge of the Light Brigade,  a heroic failure. “Forward the Light Brigade!” / Was there a man dismay’d? / Not though the soldier knew/Someone had blundered/Theirs not to make reply, /Theirs not to reason why, Theirs but to do or die./Into the valley of Death/Rode the six hundred”.
[[12]]url:#_ftnref12 Operation Yellowhammer report (ibid): as at 2 August, the UK Government’s conclusion was that “the lack of trader awareness combined with limited space in French ports to hold “unready” HGVs, could reduce the flow rate to 40-60% of current levels within one day…”
[13] Commission Communication of 13 November 2018 (COM(2018)880 final): “Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan”; and Commission Communication of 12 June 2019 (COM (2019) 276 final: “State of play of preparations of contingency measures for the withdrawal of the United Kingdom from the European Union”.
[14] UK trade with Trade Agreement Continuity (TAC) Countries: statistical ad hoc release: 13 September 2019.
[15] Commission Communication of 13 November 2018 (ibid)
[16] EU/UK Political Declaration of November 2018: paragraphs 37-39.
[17] In the case of mixed agreements where competence is shared, ratification might require approval by national parliaments or a referendum
[18] See, for example, the report in the Financial Times of 6 September 2019

Christopher Muttukumaru

Photograph taken during the presentation at Jesus College.
Photograph taken during the presentation at Jesus College.
CB, DL, barrister , consultant to Eversheds Sutherland (International) LLP and a member of FIDE’s Academic Council.

Emeritus Professor Derrick Wyatt

Photograph taken during the presentation at Jesus College.
Photograph taken during the presentation at Jesus College.
Emeritus Professor of Law, Oxford University ; Emeritus Fellow of St Edmund Hall, Oxford 




L M M J V S D
            1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31          











Semblanzas Fide

Síguenos en redes sociales
Facebook
Twitter
LinkedIn
YouTube Channel
Rss