Negotiations of the UK's withdrawal agreement and future relationship agreement with the EU

20 June 2017

Richard Eccles

The UK government gave two years' notice of withdrawal from the EU on 29 March 2017, under Article 50 of the Treaty on European Union ("TEU"). The European Council adopted a decision, on 22 May 2017, authorising the European Commission to open negotiations for a withdrawal agreement, nominating the Commission as the EU negotiator, and adopting negotiating directives to the Commission. The Commission's appointed lead negotiator is Michel Barnier, and the formal negotiations between the EU and the UK commenced on 19 June 2017.

The UK will cease to be a member state of the EU as from 30 March 2019, or sooner in the event that the withdrawal agreement is concluded at an earlier date, or later if the European Council, in agreement with the UK, unanimously decides to extend the period.

The legal basis of the planned withdrawal agreement and, in due course, any future relationship agreement, between the UK and the EU, is Article 218 of the Treaty on the Functioning of the European Union ("TFEU"). In accordance with Article 218(2)-(4), the Council has established that the negotiations must be conducted in the light of its high-level negotiating guidelines which were adopted on 29 April 2017, and in line with the Council's negotiating directives of 22 May 2017. The content of these directives show, by their nature, only the EU's position, but the EU's approach will be influential (to say the least) on the structure of the negotiations.

The Council's negotiating guidelines:

The Council's guidelines provide for a two-stage negotiation process involving, first, negotiation of the terms of withdrawal under Article 50 TEU, and during a second phase, negotiation of an overall understanding on the framework for the future relationship. The Council stated that Article 50 TEU requires account to be taken of the framework for the UK's future relationship with the union in the withdrawal negotiations, but also that preliminary and preparatory discussions on this would only commence when the Council decides that sufficient progress has been made in the first place towards a satisfactory withdrawal agreement.

The Council's guidelines laid down the core principle that "nothing is agreed until everything is agreed", and that individual items cannot be settled separately. 

The Council's negotiating directives:

The Council's negotiating directives of 22 May 2017 confirm the two-phased approach to negotiations, but the directives apply only to the first phase of the negotiations, meaning that they only apply to the negotiation of the withdrawal agreement but not the future relationship agreement. The directives provide for the following main priorities in the withdrawal agreement.

Safeguarding the status and rights of the EU 27 member state citizens in the UK and of UK citizens in the EU 27 member states:  The stated first priority is to provide enforceable and comprehensive guarantees for the rights of these citizens and their families. These include the right to acquire permanent residence after a continuous period of five years legal residence, freedom from discrimination on grounds of nationality, the free movement of workers, and rights in relation to the co-ordination of social security systems. They also include the right to take up and to pursue self-employment (which is part of the right of establishment in other member states). These objectives also include the protection (in effect continued mutual recognition), in the UK and the EU 27, of recognised professional qualifications obtained in any of the EU member states before the withdrawal date.

Settlement of the UK's financial obligations to the EU: The basic principle is that the UK should honour its share of the financing of obligations undertaken while it was an EU member state. This should include settlements relating to the UK's participation in specific EU funds and policies, for example the European Development Fund, and the termination of the UK's membership of all EU bodies and institution.

Goods placed on the market under EU law prior to withdrawal must circulate freely:  Goods lawfully placed on the single market under EU law before the withdrawal date must be permitted to be made available on the market both in the UK and in the EU 27 under the same conditions after the withdrawal date as before.  Services will be governed by subsequent negotiating directives.

A hard border on the island of Ireland should be avoided: The aim is to avoid such a hard border, while respecting EU law. Account is to be taken of the fact that Irish citizens residing in Northern Ireland will continue to enjoy rights as EU citizens. Existing bilateral agreements between Ireland and the UK, such as the Common Travel Area, which are in conformity with EU law, should be recognised.

Arrangements regarding the UK's Sovereign Based Areas in Cyprus should be recognised: The EU should recognise bilateral agreements between Cyprus and the UK which are compatible with EU law.

The European Court of Justice should retain jurisdiction in respect of matters arising before the withdrawal date: The Court of Justice should remain competent to adjudicate in proceedings pending before the Court of Justice involving the UK, and its rulings in such cases should be binding on the UK.  Further, it should be possible to commence administrative procedures before EU institutions and judicial proceedings before the Court of Justice concerning the UK after the withdrawal date regarding facts that have occurred before the withdrawal date. EU acts that impose pecuniary obligations and Court of Justice judgments adopted before the withdrawal date should continue to be enforceable.

The European Court of Justice should be the forum for settling disputes under the withdrawal agreement: This jurisdiction should apply to all matters concerning the application of EU law, citizens' rights and the application of other provisions of the withdrawal agreement including the financial settlement. In relation to the other provisions of the agreement, an alternative dispute settlement should only be envisaged if it offers equivalent guarantees of independence and impartiality to the Court of Justice. 

The UK's withdrawal agreement will require approval of a qualified majority in the European Council, of at least 72% of the Council members, amounting to 20 of the 27 member states excluding the UK, comprising at least 65% of the population of those member states (Article 50(4) TEU and Article 238(3)(b) TFEU). It will also require the consent of the European Parliament (Article 50(2) TEU).

The future EU-UK relationship agreement:

Whilst the negotiating directives apply only to the withdrawal agreement, the Council's guidelines (of 29 April 2017) set out a political framework for negotiation of the anticipated future relationship agreement between the UK and the EU. The Council stated that such an agreement can be finalised and concluded only once the UK is no longer an EU member state. 

The Council stated that any free trade agreement should be "balanced, ambitious and wide-ranging" but cannot amount to participation in the Single Market.  This is because of the stated core principle that a non-member of the EU cannot have the same rights and enjoy the same benefits as a member state. The Council welcomed the UK government's acknowledgement that the four freedoms of the Single Market are indivisible. 

The Council stated that any free trade agreement must ensure a level playing field, notably in terms of competition and state aid, and in this regard include safeguards against unfair competitive advantages through, inter alia, tax, social, environmental and regulatory measures and practices.

The Council further stated that the EU stands ready to establish partnerships in other areas, in particular the fight against terrorism and international crime, and security, defence and foreign policies. The guidelines also stated that no agreement between the EU and the UK may apply to the territory of Gibraltar without agreement between Spain and the UK. 

The Council's guidelines also allow for the possibility of transitional arrangements, to provide a bridge towards the future relationship in the light of the progress made. The Council stated that any such transitional arrangements must be "clearly defined, limited in time, and subject to effective enforcement mechanisms". 

The relationship agreement is likely to require the approval of the European Parliament and unanimity in the European Council, in particular if it takes the form of an association agreement (Article 218 (6) and (8) TFEU).

Conclusion:

It is uncertain when a withdrawal agreement or a future relationship agreement will be concluded. It is possible that a withdrawal agreement will not be finalised within the period of the two years' notice under Article 50 TEU. Even if this proves possible, it is even less likely that the government's previously stated objective of concluding a relationship agreement within the same timescale will be achieved. The House of Commons Exiting the European Union Committee has stated that a comprehensive UK-EU free trade agreement will not be possible within two years. On this basis the UK government may consider it necessary to seek transitional arrangements with the EU, in particular for participation in the EU customs union and if possible in the Single Market. However, this is likely to depend on satisfactory progress having been made towards conclusion of the UK's withdrawal agreement. 

This article is part of our Brexit series

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