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A fresh look at the EEA

Friday, 20 July 2018
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Tuesday, 11 July 2017

The general election in June 2017 has left the government without a majority and arguably did not provide a clear endorsement of its proposals for the UK's post-Brexit relationship with the EU. Some commentators have interpreted the vote as favouring a "softer" Brexit which could, potentially, involve membership of the Single Market based on the EEA model (examined in more detail in our latest Q&A). But how realistic is this prospect?

A template for transition?

The UK government's stated position remains that it intends to leave the Single Market. On the face of it, this would suggest that the EEA model should be dismissed as irrelevant. However, even if the UK's ultimate goal remains unchanged, there appears to be increasing acceptance that reaching a comprehensive free trade agreement with the EU is not achievable by March 2019 and that transitional arrangements will be needed. Adoption of the EEA model as a template for the transition would enable the government to soften the short to medium term impact of leaving whilst also partly addressing some of the key concerns of Leave voters. For example:

  • Sovereignty: First and foremost, the UK would no longer be part of the EU and would not be subject to EU Treaty obligations associated with an "ever closer" union and monetary union. It would also regain sovereignty in relation to key areas such as trade agreements, agriculture, fisheries and VAT.  See Q4 of our Q&A.
  • Immigration: Although the EEA model involves acceptance of the principle of free movement of people, it provides stronger safeguards than EU membership; these could provide the basis for the EU and UK to agree temporary restrictions on immigration, potentially lasting for the duration of the transitional arrangements. See Q9 of our Q&A
  • EFTA Court, not CJEU: references from the UK courts on the interpretation of Single Market legislation would be made to the EFTA Court, not the Court of Justice of the European Union (CJEU). See Qs 12-14 of our Q&A.

As an "off the shelf solution" which has already been agreed by the EU with several other Member States, the EEA model should also be easier to negotiate than a genuinely "bespoke" EU-UK relationship, allowing more time to be spent on particularly difficult or contentious issues such as Northern Ireland.

Problems with the EEA model

That said, use of the EEA model as a template for transitional arrangements is not without its problems, mainly:

  • Customs arrangements: the EEA model does not include continued participation in the EU Customs Union. An abrupt departure from the Customs Union would be highly problematic from a practical perspective, because the UK is very unlikely to be ready for the introduction of full customs controls by 2019. As a result, our view is that the UK would need to negotiate transitional arrangements relating to customs which would sit alongside any agreement with the EU based on the EEA model.
  • Consent of EFTA States: for reasons explained at Q16 of our Q&A, it may be challenging within the time available for the UK to make a "seamless" transition from EU membership to becoming a fully fledged EEA-EFTA State, alongside Iceland, Liechtenstein and Norway (whose consent, along with that of Switzerland, would be needed). However, a potential solution to this problem would be for the UK to ask the EU for a "mirror" EEA Agreement i.e. a separate agreement on broadly the same terms as the EEA Agreement (see Q17 of our Q&A). It seems to us, therefore, that the EEA model should not be ruled out as "too difficult" – although clearly, there will need to be political willingness from all relevant parties to make this work.
  • Fear that "temporary" becomes "permanent": even as an interim option, the EEA model may face political opposition from Leavers who fear that a temporary arrangement could become permanent. This could, however, be addressed by the adoption of a clear "end date" for the transition.
  • Financial contributions: Leavers may well also object to the fact that EEA-EFTA States are still required to make contributions towards the EU/EEA budget. Whilst some estimates suggest that the UK could expect to pay about 25% less per head, others have suggested that if the UK were to lose its rebate, it could end up paying almost as much as it does now. On the other hand, the higher the UK's contribution, the less money the EU will need to seek from remaining Member States after Brexit to balance its budget; consequently, a higher level of contribution could make the EU more willing to make concessions to the UK on certain other aspects of the Brexit negotiations (such as the size of the "divorce bill").

That said, even if the EEA model is not adopted "wholesale" as a basis for the UK's transitional arrangements, elements of it could still provide a useful template for certain aspects of the UK's post-Brexit relationship for the EU. For example, it has been suggested that the institutions of the EEA Agreement could be used by Switzerland as a mechanism to supervise and enforce its complex relationship with the EU; such an arrangement might provide a compromise in areas where the EU is insistent that market access can only continue if the UK remains subject to the CJEU.

What of the longer term?

The EEA model is often dismissed as a basis for the UK's longer term relationship with the EU because, compared with EU membership, it is said that it would lead to an unacceptable loss of influence (see Q6 of our Q&A), making the UK a rule-taker rather than a rule-maker. On the face of it, this makes the EEA model hard to reconcile with the emphasis placed by Leavers on return of sovereignty.

However, we live in unpredictable political times and a number of respected continental think tanks have suggested that, in the long term, reforms allowing EEA-EFTA States a greater say in decision-making on Single Market legislation may be achievable: see Q2 of our Q&A. Part of the thinking behind this is that the EU's current policy towards neighbouring countries such as Turkey and Ukraine is unsustainable, because it consists of offering them a path to membership whilst being unwilling to let them join. As such, some restructuring of current arrangements is likely to be needed, based around a relationship which does not involve full EU membership. This could present an opportunity for the UK to adopt a leadership role in building on the EEA model to establish a more coherent framework, capable of accommodating countries which either do not wish to be part of the EU (e.g. the UK and the EFTA States) or which the EU itself is reluctant to accept (e.g. Turkey).

For more detail on the EEA, see our Q&A.


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