Brussels and Brexit: the end of the beginning

Despite frequent flurries of media coverage over the summer months, as well as the trading of thinly-veiled insults between politicians on both sides of the Channel, little of substance has changed in the Brexit negotiations since May of this year.

The main reason that talks have not yet progressed is because the two sides have been haggling over the finer details of the Withdrawal Agreement, which governs the terms of the UK’s planned departure from the EU at the end of the article 50 TEU negotiating process. The EU’s position has been that talks may only proceed to the next stage once the Withdrawal Agreement is in place. The UK Government has instead tried to move discussions on to the future relationship with its Chequers proposals, which it sees as a means of solving the problems Brexit poses to the issue of the Irish border.

Concluding the Withdrawal Agreement

In late October, Prime Minister May stated that the UK and EU had agreed 95% of the text of the draft Withdrawal Agreement, and Michel Barnier has since confirmed that in his view around 90% has now been agreed.

The provisions of the Agreement cover all technical areas affected by the UK’s departure from the EU, including the UK’s financial liabilities, the rights of citizens on either side, and the terms of the transition period designed to bridge the gap between the UK’s departure and the entry into force of a new agreement governing the future relationship.

Crucially, the Agreement will also contain provisions governing the much-discussed backstop for the Irish border. The success of the entire negotiating process now hinges on the outcome of talks in this area, where, even at this late stage, reports suggest that the UK and EU remain far from agreement.

The essential problem here lies in both sides’ interpretation of the Joint Report agreed in December 2017, where the UK and EU committed to avoiding a hard border on the island of Ireland. The EU side see this agreement as a UK guarantee that Northern Ireland will remain aligned in terms of customs and regulation into the future, even if the rest of the UK does not. The EU’s proposed language was rejected out of hand by the UK Government, who argue that agreeing to the EU’s terms would damage the union between Great Britain and Northern Ireland.

The conclusion of the Withdrawal Agreement, thus guaranteeing the transition period that is so crucial for business on both sides, now depends on that circle being squared before the end of the two-year period mandated by article 50 TEU.

Deal or no deal

If there is no agreement by the end of that period, the UK will leave the EU in a cliff-edge Brexit on 29 March next year, an outcome which will undoubtedly damage both the UK and EU economies. It is also difficult to imagine such a scenario improving relationships between the EU27 and the UK Government.

In its current draft form, the Withdrawal Agreement contains provisions on a transition or implementation period, which are planned to take effect from 30 March 2019. During this period, which is to last until the end of 2020, a legal and regulatory status quo will apply. Citizens will retain their free movement rights and businesses will be able to continue trading under the same terms as they do at present.

The only immediate change will be an institutional one – UK judges will no longer sit at the European Courts, UK MEPs will no longer attend the European Parliament and the UK Government will no longer vote on EU legislation. However, the European Courts will retain their jurisdiction over the UK and the UK will continue to implement newly-adopted EU rules.

Fifth round of negotiations and December European Council

The fifth round of negotiations leading up to the October European Council summit yielded little progress, with Michel Barnier describing the discussions as having taken place in a “state of deadlock”.

At that October meeting, EU27 heads of state agreed to continue negotiations with a view towards reaching a final agreement with the UK at December’s European Council.

According to reports, the UK recently submitted new proposals to solve the Irish border issue, and the EU Commission in turn has agreed to “dedramatise” its proposals by altering its draft language on the backstop and engaging with the UK on the possibility of agreeing a set of UK-wide temporary customs arrangements. This proposal would, according to the UK, negate the need for the backstop entirely. The success of the Government’s argument now hinges on whether the EU is willing to agree to a proposition that would see some elements of the future UK-EU relationship being included in the withdrawal process.

Negotiations between the two sides are currently taking place “in a tunnel”, which means that they are being conducted continuously, without either side divulging the contents of meetings and without press engagements.

Next steps

It is worth noting that the EU has signalled that it will be able to agree and ratify the Withdrawal Agreement, once concluded, in the first few months of the new year. Some Brussels-based commentators have also suggested that it may be possible for the EU to slightly extend the article 50 time limit in order to finalise the ratification of the deal.

On the UK side, the relevant bills ratifying both the exit and the new agreement will also need to be adopted. This means that enough time is needed for both Houses of Parliament to consider the new framework and to ratify it.

In Brussels, the draft Agreement will be voted on by MEPs in the European Parliament, which is to give its consent by simple majority. The final act of ratification is to be adopted by the Council by qualified majority.

There are concerns in the EU that the ratification of any Agreement may fail in London. As a result, the EU may withhold its ratification until the UK Parliament has approved the Agreement and provides more detail on the implementing legislation. The EU will be keen to assess the way the UK legislates for any of the rights set out in the Agreement.

Importantly, the EU maintains that time remains to conclude and ratify the Agreement, as its ratification process is relatively straightforward. For example, both the European Parliament and the Council cannot propose any changes to the text at the stage of ratification.

Additionally, and as is mentioned above, article 50 can be extended for a prescribed period in order to complete the ratification process. The decision to extend can be taken by the unanimity of the EU member states, although the UK Government would still need to request such an extension.

Both parties are now under pressure to create enough momentum in talks to reach an Agreement. In particular, many businesses have triggered their no deal plans and have been more vocal in urging both sides to avoid a no deal scenario under all circumstances. With pressure on the negotiating teams mounting, November may prove to be a decisive month in the Brexit process.