Brexit – Negotiating a transition

Both the EU and the UK agree that a transitional phase governing the EU-UK relationship is needed to govern the time between the UK leaving the EU and the new relationship being agreed. The Article 50 withdrawal negotiations are now focussing on the terms of any transitional agreement.

From the UK Government’s perspective, a transitional phase (though it calls it an implementation period) is seen as the bridge to the new relationship with the European Union after Brexit. It will provide certainty for business in the short term, allow the EU and UK to set up the necessary infrastructure (customs checks etc.) and ensure the future relationship is in keeping with both sides’ legal commitments as neither side is able to conclude an agreement on the future relationship until the UK has formally left the EU.

The EU’s proposals for transition

On 29 January, the EU27 adopted a new set of negotiating directives relating to the transitional period between the UK leaving the EU and the future relationship coming into force.  The negotiating directives set out a number of key principles:

  • The transition period will cover the whole of the EU acquis[1], and any changes to the acquis during the transition period will apply to the UK.
  • The UK will no longer participate in the institutions and the decision-making of the EU, though, exceptionally on a case-by-case basis, the UK could be invited to attend appropriate meetings, but without voting rights.
  • The UK will continue to participate in the customs union and the single market (with all four freedoms) during the transition.
  • All existing EU regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will also apply, including the competence of the Court of Justice of the European Union.
  • The proposed end date for the transition period in the negotiating directives is 31 December 2020.

The EU27’s proposals also appear to indicate that the UK will continue to participate in the Common Agricultural Policy and the Common Fisheries Policy and also EU funding programmes during the transitional period.

The proposals from the EU27 could be described as a ‘status quo transition’ where the UK leaves the EU but where most people will notice little change on the day after exit.

The UK Government’s view on transition

On 26 January, the Secretary of State for Exiting the EU, David Davis, made a speech in Teesport in which he set out the UK Government’s proposed approach to an “implementation period” following the UK’s departure from the EU.

The Secretary of State’s speech suggested the UK Government was willing to agree a transitional deal which would see the UK continue to abide by the EU’s rules and regulations during the transitional period with continued access to each other’s markets on current terms. However, a potential sticking point in the negotiations on transition might be the Secretary of State’s suggestion that, whilst the UK will no longer be part of the EU’s institutional and decision making infrastructure, it would still like a measure of influence during the transitional period:

“…we will have to agree a way of resolving concerns if laws are deemed to run contrary to our interests and we have not had our say and we will agree an appropriate process for this temporary period.

So that we have the means to remedy any issues, through dialogue, as soon as possible. It’s very, very important. If there are new laws that affect us, we have the means to resolve any issues during that period.”

As the UK leaves the EU, three key red lines for supporters of a hard Brexit have been to end observance of free movement rules, end the jurisdiction of the European Court of Justice and end financial contributions to the EU. In his speech, David Davis committed to a continuation of these policies during the transitional period.  On free movement rules, the Secretary of State suggested that the UK Government will seek to have a registration system in place for EU nationals.

The EU27’s indication that the UK will no longer be a participant in the institutions and decision making of the EU would effectively leave the UK as a rule taker during the transitional period. Jacob Rees-Mogg MP has suggested the likely transitional deal would leave the UK as a “vassal state”, in response David Davis said this would perhaps be true if it was a long term arrangement rather than a short term one.

What happens to the international agreements the EU has signed?

During the implementation period, it is unlikely that only the UK’s relationship with the EU will be addressed, but also the UK’s relationship with other countries whose relationship was previously managed within the UK’s membership of the EU.

The UK Government has proposed that the existing international agreements the UK is party to as a result of its EU membership should continue to apply during the transitional period. These agreements would include all the EU’s current trade agreements with other countries. This approach will require the agreement not just of the EU27 but also the third countries involved.

Crucially on trade, according to David Davis, the UK Government also envisages that during the transitional period it will be able to negotiate new trade agreements to come on stream once the transitional period is over.

“But participating in a customs union should not and will not preclude us from formally negotiating — and indeed signing — independent trade agreements.

Although, of course, they would not enter into force until the implementation period has ended.”

Whether the EU would see the UK’s desire to negotiate new trade agreements during the transition period as a breach of Article 4(3) of the Treaty on European Union[2] may be a subject of the negotiations.

How long will transition last?

The UK has committed to a time-limited transition, though David Davis did not make any mention of this in last week’s speech; previously Theresa May suggested the transition period should last around two years.  The EU27’s guidelines propose that the transition period should run until the end of 2020.  This timeframe would allow the UK to continue to participate in and contribute to the current Multiannual Financial Framework and funding programmes which are due to end in December 2020.

Most experts agree that a two year transition period would not be enough for the UK and EU to negotiate a future trade agreement, so it is possible that, unless any transition period is further extended, the UK would simply be delaying the impact of Brexit until the beginning of 2021.

The Daily Telegraph reported last week that UK officials in Brussels had enquired about the possibility of extending the transition period to three years.  Conversely, supporters of a hard Brexit are likely to want to ensure the UK has broken all of its links with the EU before the next general election is due to take place in 2022.

Protracted negotiations over the terms of the transitional deal will only lead to delays in beginning discussions about the broad framework for the future relationship which should come into force at the end of transition. In addition, any difficulties in negotiating a transitional arrangement are likely to be a small indicator of the likely challenges ahead in negotiating the future relationship.

Why not just extend Article 50?

An alternative option to a transitional period between EU membership and the future relationship coming into force would potentially be to seek an extension of the Article 50 withdrawal period. Under Article 50 of the Treaty on European Union, the Treaties shall cease to apply to the UK two years after the Article 50 notification period has been triggered.  However, if the EU27 and the UK unanimously agree, the two year period can be extended.

In his speech, David Davis suggested that seeking to extend the notification period would not be appropriate because it would not address the legal obstacles to negotiating the future arrangement, and perhaps crucially:

“…it would create a new uncertainty about whether and when we would actually leave the Union.”

From an EU perspective, an extension of UK membership under the Article 50 procedure could be seen as a distraction from the EU getting on with its other business and would potentially complicate institutional matters such as the European Parliament elections which are due to be held in 2019.

Iain McIver, Senior Researcher (European Union and International Affairs)

 

[1] The EU’s ‘acquis’ is the body of common rights and obligations that are binding on all EU countries, as EU Members.

[2] Article 4(3) addresses the principle of sincere cooperation and prohibits Member States from “any measure which could jeopardise the attainment of the Union’s objectives”