Long march to Brexit passes a milestone, but faces many more

18 December 2017 4:16pm
EU and UK Flags Against Metal Building

15 December 2017. By Matthew Holehouse and Simon Taylor*.

European leaders issued a sigh of relief as they signed off a resolution that the UK had made “sufficient progress” on divorce talks, opening the road to discussions on a transitional period.

Leaders needed just 10 minutes to debate the resolution. But it’s still too soon for businesses, which hope for a time-limited extension of the UK’s terms of membership, to be celebrating.

There’s a big hurdle to be cleared in the new year: the process of translating a loosely-worded political agreement, secured by Prime Minister Theresa May last Friday, into a legally-binding international treaty that settles the Irish border issue and other tough questions.

That process will expose starkly different understandings of how closely the UK must hew to EU regulations to keep the Irish border open. Negotiators must also clean up a significant list of leftover questions, which include the role of the EU courts and ongoing administrative procedures.

Negotiators are also eyeing a “precisely time-limited” transition period that will govern relations for about two years after the UK exits the block on March 2019. The EU guidelines adopted by leaders today say the whole body of EU law will continue to apply for that period, and the UK will no longer participate in the EU institutions or its decision-making.

Both sides hope to agree transition terms by March 2018, and the UK wants to see progress as soon as possible to deter banks and other institutions activating costly exit plans after Christmas.

But today’s EU paper confirms the process of drafting and then scrubbing the text — known in EU lingo as toilettage — risks holding everything up. And last week’s deal is no guarantee against future arguments.

“The passage from the joint report to a withdrawal agreement is not automatic. It needs to be worked on,” said an official.

Irish row

The Irish border question is far from settled. After last week’s progress, the EU has designed a rigid procedure to push the UK toward an agreement. An initial draft of the legal agreement running to around 65 pages has been drawn up by European Commission officials, MLex understands. This will be shared first with EU governments, and then with the UK.

The row will likely come over the precise meaning of a UK commitment to maintain “regulatory alignment” with the Republic of Ireland, to prevent a hard border with UK-governed Northern Ireland.

The dispute is likely to be over how tightly that commitment binds the UK to EU law, and how much of the economy is covered. The tighter the rules, the less room the UK will have to deregulate and strike trade agreements with other states.

Irish premier Leo Varadkar said yesterday the meaning of the text was clear: “Maintain means, 'keep as it is,' of course. Full means 'full,' not 'partial,' and alignment means 'keep in line.'”

"In terms of European law, the whole concept of alignment exists in the accession treaties so when a country wants to join the EU it's required to align its rules and regulations with the European Union before it joins,” Varadkar said.

The UK, however, claims this refers to a broad outcome of equivalence rather than a close copy of EU legislation.

“What is necessary is that we have the same objectives. We may reach those objectives in different ways,” May told the House of Commons, Parliament's lower chamber on Monday.

EU officials have been angered by claims from UK Brexit Secretary David Davis that last Friday’s political agreement isn't binding, and say that any disputes will jeopardize the March landing zone for agreeing a transition.

The leaders “underline that negotiations in the second phase can only progress as long as all commitments undertaken during the first phase are respected in full and translated faithfully into legal terms as quickly as possible,” the document says.

Gibraltar

The summit also exposed another territorial dispute that will need addressing over the next three months: Gibraltar, one of the UK’s overseas territories.

A post-Brexit trade deal between the UK and the EU requires agreement on how to handle Gibraltar. But today Mariano Rajoy, Spain’s prime minister, stressed that the issue also needed inclusion in the interim transition arrangements. This means Spain will have to give its explicit consent to the transition deal.

"We agreed that any future deal between the UK and the EU needs a prior agreement between Spain and the UK to be applied in Gibraltar,” Rajoy said.

“We demanded that this principle has to be applied also for the transition period. We have put this very clearly in today's conclusions as an inspiring principle."

Future relationship

Leaders agreed that formal UK-EU discussions on the terms of a future relationship will open in March, giving a window of six months to build a framework for a future relationship. That will form the basis of a trade negotiation, once the UK has left the bloc.

Between now and March, the EU’s Brexit negotiators will hold five or six seminars with national governments to garner views on the UK’s future relationship, commission President Jean-Claude Juncker said at a press conference.

At the same time, EU officials said the UK would be able to take part in informal scoping talks on how their future trade relationship may look.

This is highly important for the UK side. Their nightmare scenario is being locked out the room until EU chief negotiator Michel Barnier’s mandate has been published in March, which could frame the outcome before talks even commence.

May’s hopes of securing a substantial framework agreement before exit day is shared by other leaders, however.

“There’s a view around the table that we shouldn’t be spending the transition phase negotiating the new EU-UK relationship,” Varadkar said. “We should try to have that done, or as much as possible, before the UK leaves the EU in 2019.”

Leaders are understood to have spent one hour discussing the future of Brexit talks, with questions over the procedure for transition and trade talks.

There were also discussions over whether the UK's desire to replicate Canada-style trade terms will permit a satisfactory solution for Ireland's internal border, it is understood.

*Additional reporting by Alberto Fernandez, Joanna Sopinksa and Poppy Carnell.

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