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The Brexit negotiations: Nirvana or “Nowhere Land”?, by Christopher Muttukumaru (Update 14/11/18)

Brexit Update


Even if a transition period is agreed, the negotiations in the following 21 month period will involve massive challenges, will require imagination and flexibility of approach.




March in London on 20 October 2018 in support of a second Brexit referendum in the UK: photograph Christopher Muttukumaru. “Nowhere land” is part of the lyrics of the Beatles’ song “Nowhere Man”.
March in London on 20 October 2018 in support of a second Brexit referendum in the UK: photograph Christopher Muttukumaru. “Nowhere land” is part of the lyrics of the Beatles’ song “Nowhere Man”.
  1. As the Brexit negotiations reach a crucial staging point, this brief update is intended to guide readers through the maze of issues that have been raised. The update covers (a) the major outstanding obstacle to the conclusion of a draft Withdrawal Agreement, namely how to preserve an open Ireland/Northern Ireland border and (b) such  progress as is discernible on a political declaration on the framework for a future EU/UK relationship . Both issues are soluble at the EU/UK level within the next few weeks if the political will to compromise exists. If the outstanding issues are resolved, both sides will understandably want to claim victory. But the inescapable truth is that there will be no winners.
  2. As soon as the EU/UK negotiated outcome is agreed by negotiators, the Member States will have to consider the texts. The UK Parliament will also have to decide whether to support the deal. The outcome is uncertain. Subject to what happens in the UK Parliament,  the negotiation of a future economic and socio-economic relationship will then take centre stage. Those negotiations will be lengthy and complex. As a result, there will continue to be a state of legal and economic uncertainty for at least the next two years, probably longer.
  3. This update should be read with earlier FIDE Fundacion articles, namely: (a) the draft UK/EU Withdrawal Agreement [1]; (b) the UK policy White Paper on the future relationship between the EU and the UK [2]; and (c) an update following the Salzburg summit [3].
  4. There is much speculation, information and disinformation about what lies ahead in the EU/UK negotiations. This article concentrates on the known facts as at today’s date. There are two new statements of intent  for consideration: a speech by Michel Barnier on 10 October 2018  at the closing session of Eurochambre’s European Parliament of Enterprises 2018 [4] and Theresa May’s House of Commons statement on the European Council on 22 October 2018 [5].
  5. The negotiators are handling two texts. First the Withdrawal Agreement itself and, secondly, the framework for a future EU/UK relationship. If agreed, the first would be a binding agreement under Article 50. It would contain provisions covering a transitional period from 29 March 2019 until 31 December 2020. On the EU side, the agreement would be concluded by the Council on behalf of the Union. The Council would act by qualified majority in accordance with  Article 218(3) [6] after obtaining the consent of the European Parliament. On the UK side, before ratifying the agreement in line with UK legal requirements for ratification, inter alia the UK House of Commons would need to approve a parliamentary resolution.[7] The resolution would, in a form yet to be articulated by the UK Government, seek approval for the EU/UK negotiated outcome. Secondly there would be a political declaration which would provide a framework for a future trade,  socio-economic and social (including migration) relationship.
  6. Draft Withdrawal Agreement (“WA”). Both sides say that most of the draft Withdrawal Agreement has been agreed. In parenthesis , the WA will only deal with matters that are consequential upon the UK’s exit. According to Mrs May on 22 October, 95% of the Withdrawal Agreement had been settled, including the governance provisions and dispute resolution arrangements for the Agreement. More particularly, Mrs May  said that , following discussions with Spain, “and  in close cooperation with the Government of Gibraltar – we have also developed a Protocol and a set of underlying memoranda relating to Gibraltar…”
  7. Governance and dispute resolution in the WA  Apart from the Northern Ireland/Ireland border questions, the detail of the consensus on  the outstanding points on governance and dispute resolution will be under close scrutiny. For example, other than in respect of rights under draft Part Two on Citizens’ rights and under draft Part Four (transition period), a crucial question will concern the future role of the Court of Justice in relation to which both sides had previously drawn their own red lines. The UK Government regards the ending of CJEU jurisdiction as symbolic since it concerns the question of taking back control of laws from the EU. The EU27 have said that the deal must protect the integrity and consistent application of those parts of EU law to which the UK agrees to adhere. A possibility is that, as with the continuing role of the CJEU in citizenship cases for eight years after exit, a similar deal will be struck for the rest of the rights conferred by the WA , namely, a time-limited deal on CJEU jurisdiction.
  8. Northern Ireland border – the backstop in the WA. The backstop will only crystallise  if the future EU/UK trade partnership fails to provide a long term answer to the conundrum arising in respect of the Ireland/Northern Ireland border. But the proposal has raised intractable diplomatic, political and constitutional problems.
  9.  The EU and the UK are committed to the protection of the Good Friday Agreement, concluded in 1998. A key aspect is the preservation of an open border on the island of Ireland. On the one hand, the UK believes that a backstop will never be necessary and argues that technological solutions can be developed  to avoid controls at the border. On the other hand, since the UK wishes to leave the Single Market and the Customs Union, the EU takes the view that there must inevitably be customs checks and regulatory checks. But the EU proposes a system of regulatory and customs checks away from the border.
  10. The EU’s back stop proposal in the draft WA would provide for a “common regulatory area comprising the United Kingdom in respect of Northern Ireland …an area without internal borders in which the free movement of goods is ensured….”[8] The UK is unable to accept the backstop as drafted since it would create a border down the Irish Sea which would create customs and regulatory separation between Great Britain and Northern Ireland. While there is undoubtedly a political objection to this approach, there has been much debate about whether there is also a UK constitutional bar . In fact, it is questionable whether there is. The UK Parliament is sovereign. It has, for example, already treated the four territories of the UK differently in the legislation enacted to create the three different devolved models of government for Scotland, Wales and Northern Ireland.
  11. As a first alternative, it has therefore been proposed[9] that the backstop might involve a commitment to a temporary UK/EU joint customs territory in order to avoid treating Northern Ireland differently to Great Britain. But the UK argues that that should be incorporated in the WA as a legally binding commitment. The EU says that “we are open to the idea of having a customs union with the UK.”[10] There has, however, been disagreement about whether a binding commitment  can be achieved through the WA since such a customs territory  anticipates matters that are properly the subject of a permanent trade agreement. To avoid the impasse, it might be  proposed that the WA should simply contain a minimalist provision that commits both sides to a temporary EU/UK customs territory as a backstop, while leaving the detail of what a permanent customs union would  encompass to a subsequent treaty. If so,  the cold truth is that this will simply delay the inevitable problems. The problems would include what rules the UK would adhere to and whether  future EU27 amendments to the rules would be followed in the UK.
  12. A second alternative backstop proposal would be to create an option to extend the transitional period beyond 31 December 2020. This is politically sensitive in the UK since it ties the UK into the full range of EU legal obligations for a further period. But an extension would have the undoubted advantage of providing an extended period in which to negotiate the permanent trading and other agreements. At present, it is a heroic assumption that the future EU/UK long term relationship would be  capable of being negotiated before the end of 2020.
  13. Under either alternative, from 29 March 2019, the UK would no longer have any meaningful role in the EU’s legislative machinery.  Moreover, the UK argues that the backstop cannot last indefinitely. Politically in the UK, if there were no end point, direct or indirect, Brexit supporting politicians would reject the deal. The EU, however,  argues that it is in the nature of a fall back such as the backstop that it cannot be time limited. There are two observations  to make. First, it would be unusual for a contingent obligation such as the backstop  to have no mechanism to bring it to an end.  Secondly, a review mechanism for the backstop may be proposed to review  the operation of the backstop, including whether to terminate it. If so, could the ending of the backstop be in the hands of one party acting unilaterally or would it need to be a joint decision?    
  14. The framework for a future trade deal . It is envisaged that a political declaration on a framework for a future trading partnership would be published alongside the draft Withdrawal Agreement. This too will have to be approved by the UK House of Commons. There is a serious risk that members of the UK parliament will be faced either with a “take it or leave it” resolution to approve the deal, however damaging to UK interests, or with a “no deal” alternative.
  15. The UK articulated its preferred policy in its Brexit White Paper in July 2018 (also known colloquially as the Chequers White Paper). In the earlier analysis[11] of the Brexit White Paper, a number of difficult questions were highlighted in respect of the proposed common rulebook on goods. The questions included[12]:
(a) whether the proposed pick and mix approach by the UK to adherence to the rules on regulation of goods that would apply under the common rulebook would be acceptable to the EU;
(b) whether the UK’s stated desire to be able to diverge from EU rules in the future would be deliverable in negotiations with the EU;
(c) whether the UK’s proposed approach to a future role for the CJEU would satisfy both sets of red lines and, more importantly, result in consistency of future interpretation;and
(d) whether the UK’s proposed future approach to setting environmental and consumer protection standards , which contained no commitment to alignment with EU rules but rather a commitment to reciprocity of high levels of protection, would be acceptable to the EU since it could result in competitive distortion where a deregulating UK Government set lower (even if “high”) standards. By contrast, in respect of state aid, the UK pledged to maintain a common rulebook. Why the difference?
  1. It is not clear what the political declaration as to a future trading framework will conclude. In the Brexit White Paper, the UK is determined to leave the Single Market and “the” Customs Union . In turn, it accepts that it is bound to lose the level of favoured access that it presently enjoys, with obvious consequential downsides.
  2. Against that background, M Barnier’s speech was sobering . His points included:
  1. Once the UK has left the EU, there will be several negotiations (ten parallel negotiations) until the end of 2020. It is doubtful whether that would leave enough time for agreement on each dossier. That will result in more legal and economic uncertainty.
  2. The UK White Paper was, in his view, “useful , as it allows us to benchmark our proposals against the UK proposals and identify points of convergence.” In  areas such as financial services and data protection, the EU is willing “to look at recourse to unilateral equivalence or adequacy decisions”. He also refers to points of convergence in thinking in respect of numerous areas of sectoral cooperation such as aviation and transport . The approach sounds benign . But to take as an example the aviation sector, is it likely that the EU will allow UK registered air carriers the same level of unfettered access to the Aviation Single Market as UK carriers presently enjoy?
  3. M Barnier agrees that the future relationship should be based on a free trade area without tariffs or quotas. Rather more ominously, M Barnier points to two significant points of divergence with the UK. Each is fundamental to the EU stance that the integrity of the Single Market should not be undermined;
  4. First , he rejects the UK proposition that there could be a common customs rulebook , while simultaneously operating an autonomous trade policy and the freedom to pursue agreements with third countries. That would leave it open to the UK lower tariffs for its external trade, undermining the position of its EU competitors ;
  5. Secondly, he notes (see the observation above) that the UK is prepared to align itself with many, but not all, standards for goods so that it can participate in the internal market for those goods alone. Simultaneously, the UK would be free to diverge from those regulatory requirements which govern production of these goods, “whether it be services, labour, capital or social or environmental rules”.
  6. This would amount to membership of the Single Market, a la carte, and confer a major competitive advantage on UK entities.
  1. Conclusion As events unfold at the EU/UK level and at the national level over the next three months, it will be obvious to every informed commentator that the impacts of Brexit will never result in a state of Nirvana. Even with a transition period under the WA, legal certainty will be undermined both in the short term and long term. Whether in the context of the interests of citizens, businesses or lawyers, any planning horizon which extends beyond 29 March 2019 will involve consideration of unanswered and unanswerable questions. Even if a transition period is agreed, the negotiations in the following 21 month period will involve massive challenges, will require imagination and flexibility of approach. The deadline of 31 December 2020 seems undeliverable with up to ten workstreams in negotiation.  The result will be yet another maze for navigation by businesses, lawyers and citizens. It may yet lead to Nowhere land.
 

[1] Presentation at FIDE on the draft EU/UK Withdrawal Agreement on 5 June 2018 and the full text of that presentation published by FIDE Fundacion on 19 June [link here]
[2] See FIDE article of 27 July 2018: Is the Brexit endgame clearer in the light of the UK White Paper? Goods and services in a post-transition EU/UK future? [link here]
[3] See FIDE article of 25 September 2018 : The Salzburg EU summit: an update . Transition period or no deal? [link here]
[4] European Commission Task Force on Article 50 website [link here]
[5] Gov.UK website : transcript of speech as delivered on 22 October to the UK House of Commons [link here]
[6] 72% of the members of the Council , representing 65 % of the population of the EU27 (that is, excluding the UK)
[7] The detailed requirements of section 13 (ibid) are beyond the scope of this article. A key issue is whether the UK Government will accept that the parliamentary resolution will be meaningful or whether the resolution will amount to “take it [the deal with the EU] or leave it” .
[8] Article 3 of the draft Withdrawal Agreement – TF50 (2018) 35 – Commission to EU27
[9] Speech of Theresa May on 22 October 2018 (ibid)
[10] Speech of Michel Barnier on 10 October 2018 (ibid)
[11] Is the Brexit endgame clearer in the light of the UK Brexit White Paper? (ibid)(link here)
[12] Paragraphs 20-25 (ibid)

Christopher Muttukumaru

CB, DL, barrister , consultant to Eversheds Sutherland (International) LLP and a member of FIDE’s Academic Council

The maze on San Giorgio di Maggiori, Venice, reflects the complexity of the Brexit negotiations.
The maze on San Giorgio di Maggiori, Venice, reflects the complexity of the Brexit negotiations.