Brexit talks move to Phase Two as outlook looks more uncertain

Phase Two negotiations on a Transition Deal officially kicked off, with the UK’s position remaining as elusive as ever.

Phase Two was originally set to focus on two things simultaneously: a transition period and the future relationship i.e. a deal on a wide range of sectors including free trade, aviation, financial services, and agriculture. The adopted guidelines in December slightly changed things, however, and Phase Two has now been split into two distinct stages.

Negotiations on a transition deal will start this month and are due to be completed by April. This would then coincide with the start of separate discussions on a framework of the future relationship, which will require the adoption of another set of guidelines and directives at the end of March.

It is worth noting that this second stage will be discussions on a future relationship, a preparatory period, and therefore we expect that negotiations on a future relationship deal will only actually begin in March 2019, after the UK leaves.

The conclusion of this stage will take the form of a separate political statement which will accompany the withdrawal agreement.

Michel Barnier has suggested that this document, whilst relatively detailed in terms of the aspirations and dimensions of a future relationship, would be solely a political statement and should not be confused with a treaty or legally binding agreement.

Barnier has again reiterated that Phase One and Two must be concluded by October 2018 to leave time for ratification on the withdrawal deal by the EU27, the European Parliament and the UK Parliament.

 



 

The Transition Period

The final Brexit negotiating directives were approved by Council Ministers with little substantial change from their draft which was published in December. Between the negotiating directives and political guidelines, there are a number of key points:

  • The transition period should apply as from the date of entry to the enforcement of the Withdrawal Agreement and should not last beyond 31 December 2020.

 

  • The UK will be classed as a third country from the beginning of the transition period on March 29, 2019, irrespective of how hard or soft a Withdrawal Agreement is, as well as the contents of the transition deal.

 

  • Despite this, UK will continue to apply the full ‘acquis’ but will lose its voting rights. This means existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will apply, including the competence of the EU’s Court of Justice.

 

  • The UK will no longer have members of the Union institutions, nor participate in the decision-making or the governance of the Union bodies, offices and agencies. In meetings where Member States are to be represented, the UK will not attend. However, it could be invited on a case-by-case basis without voting rights so that it may be consulted on provisions that may have an exceptional impact on the UK during the transition.

 

  • During the transition period, the UK may not become bound by international agreements entered into in its own capacity in the fields of competence of Union law, unless authorised to do so by the Union.

 

Michel Barnier additionally crucially confirmed last month that the UK would be expected to comply with obligations set out by existing international agreements, specifically citing both trade and aviation agreements as examples. He also mentioned that consent from those third-party countries would be required to make this work.

This week Barnier’s negotiating team Taskforce 50 also published their draft position paper on “Transitional Arrangements in the Withdrawal Agreement”. The position paper, which translates the principles laid down in the Political Guidelines and Negotiating Directives into legal terms, will serve as the EU27’s opening position and will form the basis of fierce negotiations with the UK in the coming weeks. Both parties are aiming to have a final agreed text by the end of March, however it is widely acknowledged that the UK has little room for bargaining.

 

Remaining questions

Questions remain as to how the transition arrangements will be given effect, bridging the constitutional dichotomy between the UK’s new legal status as a third country following its departure in March 2019 and the continued binding nature of the EU acquis.

There are areas of EU law, such as those governing relations with a third country, that will need to be addressed, either through a blanket statement or specific exemptions, to ensure legal clarity during the transition arrangements.

It very much remains to be seen whether the continuation of the EU acquis will either twist the UK to not being a third country as specified by such legislation, or if some other mechanism will be applied.

Furthermore, it mustn’t be forgotten that only ‘sufficient progress’ has been made on the three fundamental issues of Phase One: citizens’ rights, the divorce bill and Northern Ireland.

As for the latter, it remains extremely unclear as to how the EU and UK will reach a final agreement.