Background Briefing: The European Commission’s Draft Negotiating Directives

Introduction

Today, the European Commission published its recommendation on directives for the next phase of the Brexit negotiations. These documents can be found here and here. As a next step, the aim is for the remaining EU 27 member states to approve these guidelines on 29 January 2018. The negotiating directives are in line with the European Council’s Brexit recommendations from Friday of last week, which can be found here and for which Open Britain produced a briefing which can be found here.

Crucially, today’s recommendations by the European Commission spell out their view that:

  • A transition period should not last beyond 31 December 2020 – this is less than the 2 years which Theresa May had envisaged in her Florence speech.
  • During transition all existing as well as new EU rules proposed during this period will apply to the UK, including all Single Market (as well as the four freedoms) and Customs Union rules, where the UK will have to apply existing EU customs’ policies.
  • The transition period will see the UK continue to have abide by rulings of the European Court of Justice and also accept the jurisdiction of the ECJ as a final arbiter.
  • The recommendation recalls that negotiations on the second phase can only commence when what has been agreed in the first phase are respected in full and translated in legal terms as quickly as possible.
  • The Commission’s recommendation acts as a reminder that the talks on the future relationship cannot be negotiated under Article 50 but will be negotiated under Article 218 of the Treaty of the Functioning of the European Union and according to last week’s European Council guidelines, these talks are not expected to be started until March. This would provide a period of 6 months only to discuss the future relationship, prior to the start of the ratification process. 
  • Already from the date of the withdrawal, the UK will no longer benefit from the EU’s trade and other international agreements, throwing into serious question the UK’s ability to roll over existing trade agreements which it benefits from as an EU member state. 

Today’s text underscores yet again the difficult nature of the Brexit negotiations and poses serious questions for British businesses about the length of the transition period, with 31st December 2020 being just over 3 years away. The clock is very much ticking and the Government’s Brexit rhetoric is already crashing head-first into reality, serving, once again, as a reminder that everybody has the right to change their mind on Brexit, if they so choose.  

The following pages provide further examples from today’s recommendations, nixing the Government’s rhetoric so far on the Brexit negotiations.

The length of the transition period 

Theresa May had alleged that a transition period would be around 2 years in length but today’s document by the European Commission shows that it will be at best 21 months, further putting business concerns at the fore-front of these negotiations. To counter these concerns, the Government should look to keep the UK in the Single market and the Customs Union for the long-term.   

What Ministers said then: “As of today, these considerations point to an implementation period of around two years.”[1]

European Commission recommendations: “The transitional arrangements should apply as from the date of entry into force of the Withdrawal Agreement and should not last beyond 31 December 2020.”

On the European Court of Justice

The Government have stated in the past that the UK would no longer need to abide by the jurisdiction of the ECJ, including during a transition period. Today’s recommendations by the Commission contradicts this ambition.

What Ministers said then: “So we will take back control of our laws and bring an end to the jurisdiction of the European Court of Justice in Britain. Leaving the European Union will mean that our laws will be made in Westminster, Edinburgh, Cardiff and Belfast. And those laws will be interpreted by judges not in Luxembourg but in courts across this country.”[2] (Theresa May Lancaster House speech, 17 January 2017)

“The UK must refuse to accept new EU or ECJ rulings during transition…UK must not agree to shadow EU rules to gain access to market.”[3](Boris Johnson, 29 September 2017)

European Commission recommendations: “In line with the European Council guidelines of 29 April 2017 and the first set of negotiating directives of 22 May 2017, any time-limited prolongation of the Union acquis requires existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply, including the competence of the Court of Justice of the European Union.”

“In relation to the application of the Union acquis to the United Kingdom, the Withdrawal Agreement should therefore, during the transitional period, preserve the competences of the Union institutions (in particular the full jurisdiction of the Court of Justice of the European Union), bodies, offices and agencies in relation to the United Kingdom and to United Kingdom natural or legal persons.”

On the Single Market

Theresa May only yesterday stated that the UK would be outside of the Single Market during a transition period. Today’s recommendations clearly show that the contrary is most likely to be the case.

What Ministers said then: “As I proposed in Florence, during this strictly time-limited implementation period which we will now begin to negotiate, we would not be in the Single Market or the Customs Union, as we will have left the European Union. But we would propose that our access to one another’s markets would continue as now, while we prepare and implement the new processes and new systems that will underpin our future partnership.”[4] (Theresa May statement to the House of Commons, 19 December 2017)

European Commission recommendations: “In line with the European Council guidelines of 15 December 2017, any transitional arrangements require the United Kingdom's continued participation in the Customs Union and the Single Market (with all four freedoms) during the transition.”

On the Customs Union

Only yesterday, Theresa May reiterated the Government’s red line of leaving the Customs Union in order to try to strike new free trade deals with other countries outside the EU. Today’s language by the European Commission clearly spells out that the UK will be abiding by EU trade policy until 31st December 2020 and will be very much in the Customs Union in this period. 

What Ministers said then: “As I proposed in Florence, during this strictly time-limited implementation period which we will now begin to negotiate, we would not be in the Single Market or the Customs Union, as we will have left the European Union. But we would propose that our access to one another’s markets would continue as now, while we prepare and implement the new processes and new systems that will underpin our future partnership.”[5] (Theresa May statement to the House of Commons, 19 December 2017)

“We respect the will of the British people – in March 2019 the United Kingdom will leave the European Union. We will leave the Customs Union and be free to negotiate the best trade deals around the world as an independent, open, trading nation...When we’ve left the Customs Union, we will build up on [relationships with other countries] by negotiating as an independent nation with the freedom to sign bilateral free trade agreements.”[6] (Liam Fox and Philip Hammond, 13 August 2017)

European Commission recommendations: “In line with the European Council guidelines of 15 December 2017, any transitional arrangements require the United Kingdom's continued participation in the Customs Union and the Single Market (with all four freedoms) during the transition. The United Kingdom should take all necessary measures to preserve the integrity of the Single Market and of the Customs Union.The United Kingdom should continue to comply with the Union trade policy. It should also in particular ensure that its customs authorities continue to act in accordance with the mission of EU customs authorities including by collecting Common Customs Tariff duties and by performing all checks required under Union law at the border vis-à-vis other third countries.”

On the legally binding nature of the agreement 

Following the agreement on 8 December between the EU and the UK on the terms of the UK’s withdrawal, comments by David Davis on the Andrew Marr Show on 10 December led both the European Parliament (here) earlier this week as well as the European Council (here)  to spell out the importance of last week’s agreement being binding. This was further underlined by today’s language by the European Commission.

What Ministers said then: “It [the terms of ‘sufficient progress’] was much more a statement of intent than it was a legally enforceable thing.”[7] (David Davis, Andrew Marr Show, 10 December 2017)

European Commission recommendations: “Negotiations in the second phase should furthermore translate into legal terms the results of the negotiations, including those obtained during the first phase”

On regulatory alignment

The Government has previously spoken about the desire to see regulatory divergence between the UK and the EU, including during the transition period. Today’s document fully spells out that the UK will have to be in full regulatory alignment with the EU during a transition period. 

What Ministers said then: “That is why we believe a time-limited interim period will be important to further our national interest and give business greater certainty - but it cannot be indefinite; it cannot be a back door to staying in the EU. We are both clear that during this period the UK will be outside the single market and outside the customs union and will be a 'third-country' not party to EU treaties.”[8] (Philip Hammond and Liam Fox, 13 August 2017)

“We start at the same position, but we will manage the divergence…of course we will diverge, we will do things our own way.”[9] (David Davis, 24 September 2017) 

European Commission recommendations: “In line with the European Council guidelines of 29 April 2017 and the first set of negotiating directives of 22 May 2017, any time-limited prolongation of the Union acquis requires existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply, including the competence of the Court of Justice of the European Union.”

On timings for the negotiations on the future relationship 

The Government used to argue that the negotiations on the future relationship could be concluded prior to the UK leaving the EU. This has run into the reality that the UK will not be able to conclude any agreement until after it has left the EU and – in line with last week’s European Council guidelines – and will not be able to start negotiating the future relationship until March 2018 at the earliest. Todays’ text only talks about an “overall understanding on the framework for the future relationship” and does not go into further detail about this.  

What Ministers said then: "What we are intending to do is to get the form of the implementation period agreed quickly -- December or thereafter -- but we want to conclude the overall negotiation by the end of March 2019."[10] (David Davis, 25 October 2017 

European Commission recommendations: “During the second phase of the negotiations, an overall understanding on the framework for the future relationship of the Union with the United Kingdom should also be reached. This will require additional European Council guidelines.”

Rolling over international agreements

In the past the Government have claimed that the UK will be able to roll-over the existing trade agreements which we enjoy through our membership of the EU. Today’s recommendations by the European Commission make clear that this will not be the case, and that unless renegotiated, the UK will lose access to the deals with more than 65 countries around the world.

What ministers said then: “The EU currently has 36 free trade agreements covering more than 50 countries. It is entirely possible for us to be able to transition those into UK agreements."[11] (Liam Fox 3 November 2017)

“There are a number of countries who said they would like to move directly to a new free-trade agreement but we have said we are simply unable to do that at the moment…It requires the willingness of the country involved to want to move the process further on and it’s dependent on our own capacity in our own department.”[12] (Liam Fox, 4 September 2017)

European Commission recommendations: “In line with the European Council guidelines of 29 April 2017, it is also recalled that as from the date of its withdrawal from the Union the United Kingdom will no longer benefit from the agreements concluded by the Union, or by Member States acting on its behalf, or by the Union and its Member States acting jointly.”

[1] https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-and-partnership-between-the-uk-and-the-eu

[2] https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech

[3] https://www.thesun.co.uk/news/4580334/boris-johnson-pm-brexit-red-lines/

[4] https://www.gov.uk/government/speeches/pm-commons-statement-on-european-council-18-december-2017

[5] https://www.gov.uk/government/speeches/pm-commons-statement-on-european-council-18-december-2017

[6] https://www.theguardian.com/politics/2017/aug/13/hammond-and-fox-brexit-transition-would-not-be-way-to-remain

[7] http://news.bbc.co.uk/1/shared/bsp/hi/pdfs/10121703.pdf

[8] https://news.sky.com/story/brexit-hammond-and-fox-pledge-fixed-transition-to-avoid-cliff-edge-10986546

[9] https://www.politico.eu/article/david-davis-uk-will-diverge-from-eu-regulations/  

[10] https://www.irishtimes.com/news/world/uk/brexit-parliament-may-vote-on-deal-after-britain-leaves-1.3268289

[11] http://parliamentlive.tv/event/index/916c39e8-6824-4066-9b10-6a09d18d45a5?in=10:19:00 (10:19:05 – 10:19:20)

[12] https://www.politico.eu/article/brexit-trade-negotiations-liam-fox-britain-does-not-have-capacity-to-strike-deals-now/