In the week since the Article 50 notification, we have learned a considerable amount from the tone and content of the Article 50 letter itself, the draft negotiating guidelines published by the EU, the UK Government's Great Repeal Bill White Paper and the latest resolution of the European Parliament on the EU’s negotiating mandate.
The key takeaways are summarised below.
The EU's draft negotiating guidelines (the "Draft Guidelines") confirm that:
- Brexit Day will be Friday 29 March 2019
- as expected, the EU will adopt a phased approach, insisting that a new EU/UK Free Trade Agreement ("FTA") cannot be finalised until the UK has exited, which the UK government now appears to be acknowledging
- but "preparatory discussions" on the framework for a future FTA can commence as soon as "sufficient progress" has been made in negotiations on the withdrawal treaty. There have been suggestions that such preliminary discussions could start in the autumn.
For more on what the EU/UK FTA might look like, see our paper here.
The Draft Guidelines expressly refer to the possibility of a transitional period (which Theresa May prefers to call an “implementation phase”), to provide for a "bridge" towards the future EU/UK relationship, but the European Parliament resolution (the "Resolution") suggests it would be limited to three years from Brexit day, and on that basis would end in March 2022. The Resolution is not binding on the EU negotiators, although it provides a useful indication of the likely approach to transitional arrangements on the EU side of the table. and the The European Parliament views the Resolution as setting out its "red lines" for the negotiations, and it does have a veto right over the final agreement.
For more on transitional arrangements, see our guide here.
Scope of the UK's withdrawal treaty
The purpose of the UK's withdrawal treaty, which will be the focus of the first phase of negotiations, will be to deliver the smooth and orderly exit which both sides are aiming to achieve. The Draft Guidelines suggest that the withdrawal treaty may make provision for:
- Right to remain: reciprocal guarantees on preserving the right to remain of UK citizens resident in EU states and EU citizens resident in the UK;
- Existing EU/UK commerce: achieving continuity and legal certainty for existing trade arrangements between EU and UK businesses (for more on this, see below);
- Financial settlement: a settlement of the UK's financial obligations to the EU;
- Irish border: the protection of the Northern Ireland peace process, the avoidance of a hard border with the Republic of Ireland, and recognition of existing bilateral agreements between the UK and Ireland;
- Cyprus: the future of sovereign military bases in Cyprus;
- Relations with third countries: the status of the UK's rights and obligations under international agreements between the EU and third countries;
- EU agencies in UK: the future of EU agencies currently based in the UK, such as the European Banking Authority and the European Medicines Agency; and
- Ongoing/pending legal proceedings: legal certainty for pending cases before the European Court of Justice or administrative proceedings pending before the European Commission or other EU agencies.
Legal certainty – law and regulation
The Government's recent White Paper confirms that the Great Repeal Bill is designed to convert applicable EU law into domestic law to avoid a legal vacuum arising as a result of EU law falling away on Brexit. Controversially, the Bill will give the Government time-limited delegated powers to make such amendments to this body of law, and to existing UK law, as are necessary to make it work sensibly following Brexit. For example, amendments will be needed to replace references to EU law, EU obligations or the involvement of an EU institution. The White Paper describes this as a "mechanical" process, although the volume and complexity of secondary legislation required under the Great Repeal Bill will be considerable and full Parliamentary scrutiny of all such secondary legislation would render the task impossible in the required timescale.
Despite the somewhat misleading working title of the Great Repeal Bill, substantive changes or repeals will be achieved through normal parliamentary procedures over the longer term, mostly after Brexit, rather than under the Bill. Also, some amendments may depend on nature and extent of the future relationship between the UK and EU, for example where legislation requires mutuality of rights and obligations to achieve continued access to EU markets. See our paper on the technical difficulties of transposing EU environmental law, for example.
So, whilst in some areas, the Great Repeal Bill approach should help to avoid an immediate change in the legal and regulatory landscape applicable to businesses following Brexit, it is not a panacea and the final shape of legislation may depend on difficult policy decisions in the UK as well as the outcome of the Brexit negotiations.
Legal certainty – contracts and business arrangements
The Draft Guidelines suggest that the UK/EU withdrawal treaty, which must be agreed before Brexit, will seek to prevent a legal vacuum arising in relation to contracts or business arrangements between UK and EU businesses, or participation in EU-funded programmes. It remains to be seen how that will be achieved. We will keep you posted.
Revocation of Article 50 notification
The Article 50 notification has led to discussion as to whether it is capable of revocation. A decision to withdraw the Article 50 notice is not inconceivable if the eventual deal with the EU is unacceptable or non-existent. Article 50 is a mechanism for the voluntary withdrawal, not the forced expulsion, of an EU member, but commentators disagree on what would happen if the UK unilaterally decided to try to revoke the notice, against the will of the remaining EU territories. Some argue that if, in accordance with its constitutional arrangements, the UK decided to withdraw the Article 50 notice, it should be allowed to do so. Others argue that Article 50 is designed to promote certainty and a departing member should not be allowed to create uncertainty and increase its negotiating power by revoking the notice.
The European Parliament Resolution also acknowledges the ability of the UK to revoke the Article 50 notice, provided it is not used as a means of improving the UK's terms of membership of the EU.
Meanwhile, the question of revocation could come before the European Court of Justice via a case launched in Ireland last week. That case argues that Article 50 notification is revocable, if revocation is approved by the UK Parliament in accordance with its constitutional requirements. Those bringing the case (lead by Jolyon Maugham QC) are hoping for an early reference from the Irish courts to the European Court of Justice for a declaration on the matter of revocation, the preservation of EU citizenship rights following Brexit and various other matters.
Overall, not a bad start to the Brexit process, but the timetable remains extremely ambitious and it could still be some time before sufficient certainty on key issues such as the shape of the future UK/EU trade relationship emerges, so our position remains that businesses should continue to hope for the best and prepare for the worst, as outlined in our Brexit Contingency Planning Checklist.
Watch this space for further updates.