Brexit Withdrawal Agreement Questions and Answers

23 Nov 2018

Policy area: Brexit

With the Withdrawal Agreement now set, Patrick Brown, our Head of Insights and EU Engagement, provides us with the latest blog on Brexit.

What’s happened?

The European Commission and the United Kingdom's negotiators have reached an agreement on the entirety of the Withdrawal Agreement of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, as provided for under Article 50 of the Treaty on European Union.

The Withdrawal Agreement establishes the terms of the UK's withdrawal from the EU. It ensures that the withdrawal will happen in an orderly manner, and offers legal certainty once the Treaties and EU law will cease to apply to the UK.

The Withdrawal Agreement covers the following areas: 

  • Common provisions, setting out standard clauses for the proper understanding and operation of the Withdrawal Agreement.
     
  • Citizens' rights, protecting the life choices of over 3 million EU citizens in the UK, and over 1 million UK nationals in EU countries, safeguarding their right to stay and ensuring that they can continue to contribute to their communities.
     
  • Separation issues, ensuring a smooth winding-down of current arrangements and providing for an orderly withdrawal (for example, to allow for goods placed on the market before the end of the transition to continue to their destination, for the protection of existing intellectual property rights including geographical indications, the winding down of ongoing police and judicial cooperation in criminal matters and other administrative and judicial procedures, the use of data and information exchanged before the end of the transition period, issues related to Euratom, and other matters).
     
  • transition period, during which the EU will treat the UK as if it were a Member State, with the exception of participation in the EU institutions and governance structures. The transition period will help in particular administrations, businesses and citizens to adapt to the withdrawal of the United Kingdom.
     
  • The financial settlement, ensuring that the UK and the EU will honour all financial obligations undertaken while the UK was a member of the Union.
     
  • The overall governance structure of the Withdrawal Agreement,ensuring the effective management, implementation and enforcement of the agreement, including appropriate dispute settlement mechanisms.
     
  • The terms of a legally operational backstop to ensure that there will be no hard border between Ireland and Northern Ireland. The protocol on Ireland/Northern Ireland also contains UK commitments not to diminish rights set out in the Good Friday (Belfast) Agreement 1998, and to protect North-South cooperation. It provides for the possibility to continue the Common Travel Area arrangements between Ireland and the UK, and preserves the Single Electricity Market on the island of Ireland.
     
  • A protocol on the Sovereign Base Areas (SBA) in Cyprus, protecting the interests of Cypriots who live and work in the Sovereign Base Areas following the UK's withdrawal from the Union.
     
  • A Protocol on Gibraltar, which provides for close cooperation between Spain and the UK in respect of Gibraltar on the implementation of citizens' rights provisions of the Withdrawal Agreement, and concerns administrative cooperation between competent authorities in a number of policy areas.

Is there a transition period?

Yes. Until the end of 2020, the EU will treat the UK as if it were a member state, with the exception of participation in the EU institutions and governance structures.  The transition period will help in particular administrations, businesses and citizens to prepare for the UK’s eventual withdrawal, and whatever new relationship manifests.

This means that not only will existing legislation that has EU derivation continue to apply during the transition period (and presumably thereafter until Parliament and the Executive choose to amend it such as they are able), there will be a continuing obligation to transpose, apply and enforce legislation that is hatched during the transition period.

One flashpoint is that the withdrawal agreement allows the UK and EU to extend the transition period after it expires in December 2020.  No deadline is given for the one off extension provision, but that it could be extended to ‘20XX’.  It’s presumed that a more concrete deadline will be filled in by negotiators before the Treaty is ratified.  The EU is understood to prefer an extension to no later than 2022, whereas the UK has yet to confirm its preference to the EU.

Who likes the Deal?

‘Like’ is probably too strong a word.  BPF favours this deal as a preferable alternative to the negative effects that would accompany No Deal for businesses.  The Labour Party does not favour the deal, and 20 or so rebels that were expected to defy the Party Whip and vote with the Government appear to be wavering. 

Various DUP MPs, including Nigel Dodds, have described the backstop, which entails Northern Ireland being held to different rules if another solution cannot be found, as a ‘betrayal’. This puts the DUPs 10 critical votes for May’s working majority in jeopardy and places heavier emphasis on the need to persuade Labour rebels to join her.

Remain MPs in some cases see the deal as being worse than status quo.  Brexiteers see the deal as tying the UK to something akin to the status quo for much longer than necessary.

This poses a problem for the Parliamentary arithmetic.  The PM needs 320 supporting MPs, but at present, there are a large number to win over in the next few months.

Shailesh Vara, Dominic Raab, Suella Braverman, Anne-Marie Trevelyan, Esther McVey have all resigned as ministers/PPS shortly following the unveiling of the Withdrawal Agreement, although Cabinet backed the deal as a collective.

There is a sense the EU institutions are not as pleased with the outcome either.  Donald Tusk, European Council President, called Brexit ‘lose-lose’ and an exercise in ‘damage control’.

With Raab gone, who is Brexit Secretary?

The machinery of Government documents indicate that the role of negotiations on Brexit is technically in the control of the PM, with delegated responsibilities to the Brexit Secretary.  This has been made more explicit with the appointment of Stephen Barclay as the new Brexit Secretary following the resignation of Dominic Raab, with the former’s role now explicitly focused on domestic preparations rather than negotiations.

Michael Gove was reportedly offered the job, but on being told that there would be no scope to renegotiate the existing package deal, Gove opted to remain as Environment Secretary.

Is the PM in Danger?

Probably more than usual.  A number of high profile resignations followed the publication of the draft Withdrawal Agreement.  May has two main problems.  First, she requires 320 votes in the Commons to carry the ‘meaningful vote’ on the Deal.  The problem at present is that the Deal has unpalatable elements for many, including the DUP (who provide a working majority to the Conservatives via the Confidence and Supply Agreement), Remainer MPs who consider the deal to be a worse offer than currently enjoyed via full EU membership, and Brexiteers who consider the Deal to tie the UK to the EU for longer.

A second issue for the PM concerns the machinery of leadership of the Conservative Party.  The 1922 Committee of backbench MPs has the power to trigger a no confidence vote in the party leadership in the event that it receives letters to that effect from 15% of MPs (meaning 48 at present).  One safeguard in the PM’s favour is that the process is via blind ballot, so only the Chairman of the 1922 Committee (Graham Brady MP) knows how many have been submitted at any one time.  The letter remains on file until the member requests that it should be withdrawn.  Needless to say, we have no idea at this point if, and indeed how many if so, letters have been submitted.  It is often a fond topic of speculation in Whitehall and Westminster at any one time whether a Conservative Leader is in imminent risk of being deposed via this mechanic.  In this case, the executive of the 1922 Committee is composed of brexiteers and so it does not help the PM’s chances.

The European Research Group, an informal caucus of 60 MPs with an interest in the European Union has sabre rattled over the past months with regard to organised disobedience around the Deal. Jacob Rees-Mogg, who leads the group, announced his intention to submit a no confidence letter to the 1922 Committee on 15 November.  While the ballot is secret, this could be seen as a signal of intent to encourage other Eurosceptics to do the same. Yet on 20 November 2018, there were admissions that the plot to oust May had not attained momentum and that perhaps it would not reach the point of a formal no confidence motion after all.

What’s been agreed on Northern Ireland and Ireland?

The EU and UK have agreed in full the terms of the Protocol on Ireland and Northern Ireland.

A single EU-UK customs territory will be established from the end of the transition period until the future relationship becomes applicable.  Northern Ireland will therefore remain part of the same customs territory as the rest of the UK with no tariffs, quotas or checks on rules of origin between Northern Ireland and the rest of the UK.  The Protocol also sets out the UK’s commitment to no diminution of rights as set out in the Good Friday Agreement, preserving north-south cooperation.

In effect, this acts as an insurance policy that guarantees that, whatever the circumstances no hard border between Ireland and Northern Ireland is established owing to Brexit.

What this does mean is that the transition period in effect sets the clock for finding an alternative solution that both Brexiteers and Remainers will find more palatable than the ‘Diet EU’ membership that this approach constitutes, offering few of the benefits of membership and few of the benefits of non-membership of the EU.  Yet, as offered, the proposal does offer an alternative to the anticipated challenges (as well as those that are unanticipated) of No Deal.

Won’t it make us some kind of ‘Vassal State’?

That appears to be what some believe.  However, it’s been pretty clear for a while now that applying EU rules during the transition period was going to be a standard feature of any deal.  If a ‘future relationship’ can be hatched beyond the political declaration on the future relationship (e.g. Canada+) then the EU-UK customs union + related rules will not come into play. 

It’s therefore a matter of confidence in the ability of the UK and EU to strike an FTA that perhaps is stopping some from supporting the deal.

That said, as long as transition continues, the UK must continue to make contributions to the EU Budget.  If the transition is extended, the size of these contributions will have to be agreed at that point in time, and perhaps without full visibility of what the future trading relationship will look like.  This year, the UK’s contributions to the EU Budget is to be a net £10.8bn.

Why can’t we decide the future trading relationship now?

Things get murky here.  Article 50 is the Lisbon Treaty provision that allows an applicant state to leave the EU, and which has never been used before.  The provisions allow for two things: a legal withdrawal agreement covering the terms of divorce and a political framework for a future relationship. 

May at an earlier stage sought concessions from the EU via the Chequers Deal, which sought for the UK to stay in the Customs Union and Single Market for goods only (because they require checks at borders and something was required to satisfy the concerns around the border between Ireland and Northern Ireland).  Subsequently, the EU cried foul because the proposals trod too closely to the bounds of the future relationship for which there was no legal basis to negotiate via Article 50.  Moreover, separate treatment of free movement of goods and services (and most likely capital and people), the ‘Four Freedoms’ often held as constitutionally elevated principles in the Treaty, was something that the EU negotiators have been at pains to highlight as being unacceptable.  Yet the Chequers backstop was in effect seeking to do just that.

More recently, the EU has granted some quite significant concessions: first, that the backstop can now include the whole of the UK and second, it permitted separate treatment of goods and services but only for Northern Ireland.

What about the Political Declaration on the future relationship? What’s in that?

The initially released 7 page document was more spartan.  Yet, as the history of the Article 50 process should tell all by now, having heads of terms agreed at the outset is helpful. 

On 22 November, a longer document was issued that delivered more detail on the anticipated framework for the future relationship:

  • A commitment on trade in goods for the EU and UK to negotiate a ‘free trade area, combining deep regulatory and customs cooperation, underpinned by provisions ensuring a level playing field for open and fair competition’. This appears to be striking for the ‘frictionless’ trade mentioned in the Chequers Agreement, but not to the point of attaining the common rulebook that would mean the UK remaining in the Single Market for goods;
     
  • The document also makes an explicit reference to the backstop being a fallback position, and a commitment to finding alternative proposals that avoid a hard border between Northern Ireland and the Republic of Ireland.  The document also recognises (but couched in political terms) the potential of technological solutions to obviate the need for hard borders;
     
  • A pledge to seek cooperation between UK authorities and EU Agencies, which if true is a significant concession by the EU which has been cold to the idea of the UK as an associate member of European regulatory regimes and their agencies;
     
  • On financial services, both the UK and EU agree to begin to assess the ‘equivalence’ of each others’ rules after Brexit day, although it is unclear what will happen as a result;
     
  • A commitment to a deal on data by 2020, given the EU’s data protection rules enable it to provide a framework allowing the European Commission to recognise a third country’s data protection standards as providing an adequate level of data protection, enabling transfers of personal data to that country;
     
  • On free movement, there is explicit recognition of the need to allow visa-free travel and short-term visits and agreement ‘to consider conditions for entry and stay for purposes such as research, study, training and youth exchanges’ but it does seem that longer term travel may be subject to further restrictions.  From the perspective of access to talent and skills, both at C-Suite level and at the level of skilled and semi-skilled construction workers, this is concerning.
     
  • The EU and UK agree to explore options for a future relationship with the European Investment Bank (EIB).
     

What happens next?

EU Special Summit

There is a special summit being arranged for 25 November among EU leaders to sign off the proposed deal.  Donald Tusk said on Thursday 15th November that the meeting would be to ‘finalise and formalise’ the withdrawal agreement unless something ‘extraordinary’ happened in the meantime. 

UK Parliament Approval

The PM has probably about a month to rally support for the deal at home before a vote on the deal.  The Government’s position is that any Commons vote on the agreement will be held on a binary deal/no deal basis.  Parliament cannot control how the Government would react to a rejection of the deal – the Government could seek an extension to the Article 50 process, or it could seek one and be refused, and in both cases the default position is that a ‘no deal’ exit would result.  It is lamentable that Parliament will not be given more time to scrutinise the deal; the Committee structures of the Houses of Parliament could provide helpful direction and analysis to backbenchers but it seems improbable that any Committee will have sufficient time to do so.

One point of detail that may be significant is whether the Government will opt to seek the UK Parliament’s approval for the Withdrawal Agreement and the Political Declaration on the Future Relationship as a package.  There are suggestions that this might well be the case, given the linkages between the Withdrawal Agreement’s provisions relating to the transition period, and the backstop.  Further, a Government with a weak(ening) majority may be seeking a mandate to negotiate the flesh on the bones of the Political Declaration.

A second point of detail is that the motion under Section 13 of the EU (Withdrawal) Act 2018 is not specified in precise form, merely that the Government must pass a motion which states:

  • ‘This House approves the exit agreements negotiated by her Majesty’s Government with the European Union under Article 50’

It is therefore possible that the motion could be amended in form, with additional conditions attached.  In such circumstances, the Government and Parliament will need to exercise caution that the motion in fact does approve the agreements.  For example, inserting words to the effect that approval of Parliament is subject to a ‘People’s Vote’ at some point in the future, then that could be interpreted as either passing the motion or rejecting it. 

European Parliament Approval

If the UK Parliament approves the deal (which is a big ‘if’ given that the confidence and supply deal with the DUP appears to be in trouble based on rebellions on the Finance Bill on 19th November in Parliament by said DUP), the European Parliament votes by simple majority on the Deal.  The Constitutional Affairs Committee of the European Parliament will provide MEPs with a recommendation and a report as to whether the institution should approve the withdrawal agreement.  The European Parliament is also expected to give a non-binding opinion on the Political Declaration on the future relationship.

European Council Approval

If the Parliament passes the deal, the European Council must approve the Deal by a majority comprising 20+ countries, representing 65%+ of the population.  However, that’s formally speaking.  Informally, even in matters where qualified majority voting is the rule, the European Council operates by consensus. Often decisions are taken in the ‘shadow of the vote’, where preparatory work is undertaken beforehand in order to try to secure support for a motion.  On many occasions, proven by studies of voting in Council, countries that are isolated and know that they are not part of a larger blocking minority of Member States will avoid appearing on the losing side and therefore ‘isolated’.  Therefore we expect much effort to go into framing the motion and the context for it in advance of the special summit and Council vote (later), but given that the Negotiator for the EU (Michel Barnier) has stayed close to his brief, and the intense work by EU Sherpas, it does not seem likely that the Summit or the Council will reject the deal, save if something truly extraordinary happens.  That does not mean that there will not be deft politicking and spinning taking place in advance of and after, however, cf. Merkel’s comments regarding the UK not being in a position to renegotiate terms of the Withdrawal Agreement. 

What alternatives are there to this Deal right now?

The PM has confirmed that the only options open are ‘No Deal’ or a u-turn on Brexit. 

Despite a modest groundswell of support for a second referendum there is not really time to organise and hold such a referendum under current timescales for Article 50 because:

  • You need about 6 months to hold a referendum according to the UCL Constitution Unit
     
  • Earliest we might know if a referendum is needed is December when MPs vote on proposals, which means referendum in June or July 2019, beyond the unamended time horizon for Article 50
     
  • Other EU capitals plus EU institutions are likely to want the matter settled by European Parliament elections 23 – 26 May
     
  • If UK given extra time, probably would have to elect MEPs from the UK again
     
  • Where there is a will there is a way, but EU leaders would need to see the good points about such a proposal in order to be able to ‘fudge’ the European Parliament problem

Substance of the Withdrawal Agreement

Dispute Resolution

The Withdrawal Agreement includes ‘incomplete contracting’ mechanisms to resolve unforeseen issues and to have a standing brief to ensure the ‘effective management, implementation and enforcement of the Agreement’.

Both the UK and the EU have agreed to a dispute-resolution mechanism that places the withdrawal agreement under the same conditions as those applicable in EU law, with the Court of Justice the ultimate arbiter for matters related to EU law or concepts.

Any dispute on the interpretation of the withdrawal agreement will be subject to initial consultation via a joint UK-EU Committee.  If no acceptable solution can be found, either [1] the UK or the EU can refer the matter to a new arbitration panel, whose decision will be binding on both parties.  The agreement also permits the suspension of the application of the Withdrawal Agreement, save in relation to citizens rights (see below) or parts of other agreements between the UK and EU, but the arbitration panel must approve this step.

Goods Placed on the Market

Goods lawfully placed on the market in the EU or the UK before the end of the Transition Period may continue to circulate freely in and between the two markets until they reach their end users without the need for product modifications or relabelling.

The exceptions to this are live animals and animal products, which will be subject to checks from the end of the Transition Period at borders, regardless of whether they were put on the market before the end of the Transition Period.  This is due to the sanitary and health risks associated with live animals and animal products.

Protection of Intellectual Property Rights

Under the Withdrawal Agreement, protections offered by current EU intellectual property rights, such as trademarks, registered design rights on the territory of the UK will be preserved as national intellectual property rights.  This will be an automatic process and free of cost.

Existing Geographical Indications will also be preserved by the Withdrawal Agreement. The UK Government will have to implement legislation to guarantee non-UK EU Geographical Indications in UK territory.

EU-approved geographical indications bearing the names of UK origin (e.g. Welsh Lamb) remain unaffected within the EU and therefore continue to be protected in the EU.

Citizens rights

As set out in the March draft of the Withdrawal Agreement, non-UK EU citizens resident in the UK and UK citizens resident in other member states will retain their residency and social security rights post-Brexit.  Those who take up residence during the transition period will be permitted to remain in that country after Brexit. However, working across borders and recognition of professional qualifications remain unresolved issues.

Applicable procedures

The Withdrawal Agreement leaves the choice up to the host state whether to require or not a mandatory application as a condition for enjoyment of rights under the Withdrawal Agreement.  The UK has already expressed its intention to introduce such a system, with those fulfilling the conditions being issued a residence document.  Other member states have said that they will reciprocate.  The EU has been keen to stress that onerous or disproportionate measures must be avoided.

The implementation of citizens’ rights in the EU will be monitored by the Commission acting in conformity with the Treaties.  In the UK, an independent authority will perform this role.  The Commission and the Authority will communicate with one another via the Joint Committee what they have done in each year to enforce the citizens’ rights under the Agreement, including the number of complaints investigated and any follow-up legal action.

Jurisprudence

During the transition, the UK will have to abide by decisions taken by the European Court of Justice (ECJ).  To aid in interpretation, a joint UK-EU Committee will be established that will seek to resolve any differences in opinion on rulings.  Should the backstop come into play, the ECJ will not be able to resolve disputes between the UK and EU in direct fashion.  Instead arbitration panel will rule instead, but if the dispute is based on any interpretation of EU law, the arbitration panel will recognise the authority of the ECJ to make a binding decision instead.  In effect, the ECJ will continue to have influence during transition and even after.

State Aid

The United Kingdom has committed to apply EU state aid rules in a way that is dynamically aligned to the development of those rules in the EU. 

In the event of the backstop applying, the UK will continue to enforce state aid rules directly as part of the backstop solution for matters pertaining to trade between Northern Ireland and the EU, and the ECJ would retain authority.

In respect of state aid that affects trade flows between the rest of the UK and the EU, the UK will inaugurate an independent enforcement authority which will work with the Commission and with the UK courts.  The Commission will have legal standing before the UK courts and the right to intervene in cases.

A joint committee willl permit the Commission and the independent authority to consult on matters of common interest, and to allow a first means of dispute resolution.

Competition

The EU and the UK have both agreed to avoid the abuse of dominance by undertakings and certain concentrations of undertakings so far as they affect trade between the UK and EU.

The UK has agreed to ensure that administrative and judicial proceedings are available in order to allow interventions in the case of violations of competition rules and to provide effective remedies.  Where the UK is not thought to be complying with its commitments, dispute settlement through arbitration will be available.

Environment

The UK and EU have agreed not to lower the EU’s existing environmental standards in key areas such as industrial emissions, air quality, nature and biodiversity protection and environmental impact assessments.  Norms such as ‘polluter pays’ and the precautionary principle will also continue to be adopted in UK legislation and policy.  The Joint Committee will - based on EU standards - also lay down specific minimum commitments on matters such as pollution.

The UK and EU have also agreed their continuing commitment to international agreements on climate change, which will include the adoption of a carbon pricing scheme in the UK that is at least as effective as the EU Emissions Trading System.

The UK will set up an independent body responsible for oversight, reporting and enforcing its commitments in respect of environmental protection.  Critically the new body will have the ability to act on own initiative as well as complaints from individuals and companies, and to bring cases before UK courts for remedial action.  The Government has committed to finding remedies and sanctions that are effective, proportionate and deterrent.

Labour and Social Protection

 As with environmental policy, a non-regression arrangement applies in social and labour protection.  The EU and UK have committed not to reduce their common level of protection in areas such as equal treatment, equal pay, health and safety and working time.

The UK will ensure enforcement through existing domestic authorities and labour inspections, legal and administrative procedures.

Taxation

The UK will continue to implement the principles of good governance in tax.   These include global standards on transparency and exchange of information, fair taxation and OECD-BEPs standards. 

The UK will continue to apply its domestic law which transposes EU Directives on the exchange of information, anti-tax avoidance rules and country-by-country reporting by credit institutions and investment firms.

The UK will also curb harmful tax measures under the EU Code of Conduct, and this will be overseen by the Joint-Committee.

 

 

[1] European Commission (14 November 2018), Brexit Negotiations: What is in the Withdrawal Agreement: http://europa.eu/rapid/press-release_MEMO-18-6422_en.ht