As discussed in a previous blog, the impact of coronavirus (COVID-19) has meant the UK and EU face a challenge in reaching an agreement on the future relationship before the end of 2020. As a result, it has been speculated that the UK government will seek an extension to the transition period before the deadline of 30 June 2019.
However, the UK government has consistently said it will not request an extension to the transition period. This was reaffirmed most recently by the UK government’s Chief Negotiator, David Frost in a series of tweets. As a result, under EU law, the UK will leave the transition period on 31 December 2020. When this happens, it is likely to lead to one of three outcomes, each of which are explored below.
A future relationship agreement is reached
Although the clock is ticking, both the UK and the EU are working to reach an agreement on the future relationship and have it in place to begin on 1 January 2021. Both sides have now exchanged legal texts outlining how their negotiating mandates could be turned into an agreement. According to the readout from the meeting (by videoconference) between the UK’s Chief Negotiator David Frost and the EU’s Chief Negotiator Michel Barnier on 15 April 2020, this work has been useful in identifying all major areas of divergence and convergence between the two sides.
However, given the limited time left for negotiations, any agreement may be relatively basic and may require a continuing series of amendments, and further deals and subsidiary deals in additional areas well after 2020. In addition, even with a deal it’s almost certain that from January 2021, border checks for customs and regulatory compliance will still be required on goods travelling between the EU and the UK.
No agreement is reached
At the start of the future relationship negotiations, it was generally accepted that time to negotiate and ratify an agreement was very short. As a result of the impact of COVID-19 in curtailing the negotiations up to now and into the immediate future (see for example the limited number of negotiating rounds scheduled for between now and the end of June), it may prove impossible for negotiators to reach agreement. If no agreement is reached before the end of the year, the UK will leave the transition period in an effective no-deal situation (although the measures set out in the Withdrawal Agreement in relation to citizens’ rights, finance and the Ireland and Northern Ireland border would continue to apply).
In the event the UK leaves the transition period without a future relationship agreement in place, most attention would be focussed on new trade barriers in place as a result of trade being conducted under World Trade Organisations (WTO) rules. However, there would also be the potential for new barriers hindering EU-UK cooperation in a number of other areas including financial services, aviation, police and judicial cooperation and security.
In preparing for the possibility of a no-deal Brexit during 2019, the EU adopted a number of pieces of no-deal related legislation to help reduce the impact of a no-deal Brexit on EU citizens and businesses. The EU was however clear that the contingency measures are temporary, unilateral and cannot mitigate fully a no-deal Brexit. It’s probable the EU would seek to re-institute these measures in the event no future relationship is agreed before the end of the transition period.
In the event that the UK leaves transition without a new relationship, both the EU and UK are likely to wish to seek agreements in a number of areas as quickly as possible to minimise the possible disruption. However, if both sides retain their red lines it may prohibit a quick resolution.
Short extension
It is possible that the EU and UK might be able to reach an agreement on a future relationship but given it’s likely to be a mixed agreement of member state and EU level competences it will require ratification at both EU and member state (and where appropriate sub-national) level. Ratification could prove a barrier to getting the deal in place and operational from 1 January 2021. In this situation the EU may seek to bring into effect the EU elements of the deal whilst member states ratify areas within their competence.
If a deal is reached that only requires ratification, it is possible that the EU and UK might investigate ways in which the terms of transition can remain in place (even beyond the end of the legal transition period) for a short period of time to allow the future relationship to replace it when fully ratified. At this stage, it is not clear what legal basis the EU would have for making such a move.
Conclusion
The UK government has indicated it will not seek an extension to the transition period. If no request is made, the EU and UK are likely to face one of three scenarios at the end of 2020.
Given the timescales and the ongoing COVID-19 pandemic, it is possible that the UK and EU will not reach a deal by the end of 2020. In these circumstances, a no-deal Brexit seems the most likely outcome. But if a deal is close both sides could look to see what was legally possible to in effect slightly extend the effects of the transition period whilst a new deal is ratified.
Iain McIver, SPICe Research