The state of play of the Brexit negotiations: The clock is ticking!

By David Meier

 

 

 

The Brexit talks have missed their first big deadline as the 27 Heads of State or Government of the remaining member states of the European Union (EU) have adopted the conclusion that the divorce negotiations have made insufficient progress for starting to negotiate on the future relationship between the EU and the UK. In view of the already tight timetable for the negotiations the spectre of a Brexit without an exit agreement is looming.

On 19 and 20 October 2017, a two-day‘s summit of the European Council, which consists of the 28 Heads of State or Government (in other words, the Governments of the member states of the EU), took place. In the realm of this meeting, Brexit was at the core of the discussions. Originally, the summit was meant to enable the start of the second phase of Brexit negotiations. However, the prerequisite for that to happen was the agreement of the members of the European Council that there has been enough progress in the first phase of the negotiations.

 

The decision that there shall be two negotiation phases had been taken by the European Council on 29 April, when the Heads of State and Government of the 27 remaining member states enshrined it in their guidelines for the Brexit negotiations.  According to those guidelines, the talks should focus on an orderly withdrawal of the UK from the EU during the first phase, while the focus should be on the future relationship between the UK and the EU in the second phase.     

Actually, the European Council`s judgment was no surprise to the majority of experts and observers, as Michel Barnier, the EU´s chief negotiator, had regularly complained about the slow pace of the talks with his British counterpart David Davis the Secretary of State for Exiting the EU. He warned against the threat of stalling negotiations resulting in a loss of dearly needed time.

Article 50 of the Treaty on European Union (TEU), which regulates the exit of a member state, limits the negotiation period to two years. This already very tight timetable has been exacerbated by Theresa May`s (the British Prime Minister`s) decision to hold early elections. So although Theresa May had already triggered article 50 TEU on 29 March, the negotiations could only start on 19 June. Furthermore, any agreement between the EU and the UK can only enter into force if the UK, the European Parliament and all remaining member states ratify it according to their constitutional orders. In the end, several parliaments will have to discuss and adopt it, some referenda on the agreement could take place and it could even be challenged before the constitutional courts of some member states. Consequently, the ratification process within the EU will at least take 6 months, which means the negotiations should be finalised until October 2018 if both parties want to avoid an exit of the UK without any agreement (hard Brexit).

This option of a hard Brexit is associated with political, economic and social chaos as the remaining member states and the UK are highly intertwined. The membership in the EU is tantamount to the membership in its Customs Union and in the European Single Market.

Thanks to the Customs Union, all goods can be bought and sold duty-free within the EU; and, all 28 member states levy common customs duties on all goods entering the EU. Moreover, only the EU is entitled to conclude trade agreements with foreign trade partners for its member states.

The European Single Market guarantees the 4 freedoms for all EU citizens and businesses alike all over the territory of the EU and without any discrimination. Those freedoms cover the opportunity to sell goods (free movement of goods), the freedom to invest (free movement of capital), the right to establish a business and to provide services (Freedom to establish and provide services) and the right to migrate to other member states in order to work there (free movement of workers).      

Due to the Customs Union and the European Single Market many British companies have established affiliated companies or plants in other member states, or they have integrated suppliers from there within their production chains and vice versa. A hard Brexit would destroy those production chaines and cause economic turmoil. Consequently, a lot of jobs are at stake.  

Besides, because of the 4 freedoms 3.6 million citizens of the remaining 27 member states live in the UK and 1.2 million British citizens live in another member state.  A hard Brexit scenario would leave them in total legal uncertainty about their permission of residence, work, national insurance and social benefits etc.

Thus, the European Council has identified three priority areas for the first phase of the negotiations. The first priority area focuses on the rights (after Brexit) of EU citizens living in the UK and British citizens living in the EU. The focus of the second priority area is on the financial settlement of the committments of the UK towards the EU as Brexit will cause a lot of costs. Last but not least, the third priority area concerns the status of the border between the Republic of Ireland and Northern Ireland which is part of the UK. 

In general, the UK and the EU agree that the rights of EU citizens already living in the UK and British citizens living in the EU must be preserved. Still, the EU insists that those rights have to be a part of a Brexit agreement and that citizens must be enabled to enforce their rights before the European Court of Justice (ECJ), the court of the EU. Meanwhile, the UK government prefers to guarantee those rights through domestic laws that can be enforced before British courts.   

The most complicated bone of contention between both parties is priority area two – financial settlment, as the EU wants the UK to pay an amount ranging from 60 bn euro to 100 bn euro, while Theresa May has only offered 20 bn euro by now. On 20 October, the French President Emmanuel Macron`s response to this offer was “I would say we are far from having reached the necessary financial commitments before we can open phase two. We are not halfway there.” Other Heads of State or Government such as the Maltese prime minister Joseph Muscat, the Austrian chancellor Christian Kern and the Lithuanian president Dalia Gribauskaite urged Theresa May to tackle the issue of the financial settlement as well.  The UK Prime Minister explained that her 20 bn euro offer was “not the final word” and she did not even rule out that the Brexit bill could amount to 60 bn euro.

As to the border between Ireland and Northern Ireland, both parties agree that there must not be a physical border - e.g. with border control (hard border) - as the openness of this border is primordial for the peace process in the conflict-stricken Northern Ireland. Nevertheless, currently there is no agreement on how to avoid a hard border. As the UK wants to leave the Customs Union as well as the Single Market border control between Ireland and Northern Ireland is necessary to protect the integrity of the Customs Union and the Single Market. A possible solution is that Northern Ireland remains a part of the Customs Union but this is strongly rejected by the Democratic Union Party (DUP), a right-wing protestant pro British party from Northern Ireland that is part of the ruling coalition in the UK. The DUP is anxious about preventing Northern Ireland from being isolated from the other parts of the UK.   

Theresa May and the German chancellor Angela Merkel both expressed their optimism that those differences can be overcome, but Merkel added that phase two “ is undeniably going to be more complicated than the first stage”. At least the 27 Heads of State or Government have decided to start internal talks (without the UK) on the second phase of negotiations. The next opportunity for a green light for phase two will be during the European Council summit on 14-15 December. After all, the clock is ticking!