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3 April 2017

Leave.EU has deconstructed the European Council’s draft Article 50 negotiating lines. Here are our six big observations. 

1. Structure

Article 50’s weak wording has given rise to much speculation on how the negotiations should proceed and whether the participants should aim to come to a unviersal agreement on both withdrawal and a replacement trade deal within the two-year time frame as expressed by the Prime Minister. The guidelines virtually abandon the only strictures imposed by the Article 50, while insisting that the “divorce” is settled upon before ploughing ahead with a trade deal.

The timetable is made up of three phases with limited scope for overlap. Negotiations will kick off discussions over withdrawal only. This phase will fix onto the niggling questions of how much the UK should pay to leave – even though its EU assets total more than £23bn – the rights of EU citizens living in the UK and their counterparts in the European Union and Northern Ireland.

During the second phase, which cannot get underway until it is clear that both sides are coming to an agreement over withdrawal, the EU will not seek to complete a trade agreement but “identify” an “overall understanding on the framework” towards one. The third phase, which is low on detail, seeks to determine transitional arrangements, partly in response to Theresa May’s request to avoid a “cliff-edge”.

2. Transition

Unlike the Prime Minister, the EU is sceptical of the possibility of concluding negotiations towards a comprehensive trade deal in under two years, hence the limited scope of the second phase, a framework towards a trade deal rather than a fully-fledged agreement as well as the designation of a third phase for a transitional period. In other words, whatever cannot be concluded between the two parties before April 2019 will have to be hammered out afterwards.

The guidelines state that a transitional period “may” occur, but it is clear that the EU is looking to the period succeeding Article 50 for the real trade negotiations to get underway. One line in particular points to such low expectations:

The European Council welcomes and shares the United Kingdom’s desire to establish a close partnership between the Union and the United Kingdom after its departure.

In not insisting on unanimous agreement among the remaining Member States Article 50 precludes the possibility of a comprehensive trade agreement – articles pertaining to trade agreements in the Treaty on European require unanimous approval. This, taken alongside the EU’s persistent reference to “frameworks” towards future agreements under Article 50 rather than actual agreements under the articles with the power to forge trade agreements, namely 218 and 207 which the guidelines do not name, suggest the EU plans to agree on as much possible under Article 50 powers before embarking on the real deal during the transition period. Dispiritingly, that means the transition period could last a considerable amount of time, the EU has a terrible track record in striking trade deals, The EU-Canada FTA is still awaiting implementation even though negotiations began in 2009.

Britain may cease to be an EU Member State from 30 March 2019, unfortunately, independence will have to wait until many years after that.

3. Legal powers

The withdrawal agreement should include appropriate dispute settlement mechanisms regarding the application and interpretation of the withdrawal agreement…

Given the EU’s huge appetite for power, bureaucracy, and legal faff it is no surprise to see calls for a UK-EU judicial system put in place for dubious reasons, more specifically, “to deal with situations not foreseen in the withdrawal agreement.”

The EU clearly intends to hold onto its current judicial authority over the UK under the pretext of any loose ends emanating from withdrawal agreement following its conclusion. Furthermore, the transition agreement will give plenty of time for an overly ambitious trade agreement, again giving the EU reason to argue for a court to preside over regulatory differences as it does now. We should therefore be wary of negotiations towards a deal becoming too comprehensive, leading to the same level of sovereignty remaining in Brussels.

4. Gibraltar

After the United Kingdom leaves the Union, no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom.

Inserted a couple of paragraphs above the infamous Spanish veto on Gibraltar is a commitment to reaching a “wide-ranging” and “ambitious free trade agreement”. An obvious move to support the Spanish in their longstanding objective of acquiring sovereignty over the Rock makes a mockery of such diplomatic language. Various figures in the EU, along with the Spanish foreign minister, had said Britain’s exit would not be used as an opportunity to make a grab.

Spain is the only EU Member State mentioned in these adversarial terms. It is not at all in keeping with the rest of the document to not only call into question the sovereignty of land in the context of Brexit, land that is unquestionably British, but also to frame that scrutiny within a bilateral dispute within a document focused on reaching a multilateral agreement. Gibraltar is a dispute between the UK and Spain, the EU need not, and indeed should not be involved.

Cyprus, where the Ministry of Defence owns one percent of the land, known as the Sovereign Base Area, features under the withdrawal section of the guidelines alongside Northern Ireland, but the similar case of Gibraltar features only in section two on building a framework towards a trade partnership, which in the UK’s eyes is far more important than withdrawal, a fact the EU abundantly aware of. The only major difference between the Sovereign Base Area and Gibraltar is that Spain wants what it sees as its own territory and Cyprus does not want is its own land back, a political as well as a legal distinction. In including this veto in the wrong section, where it carries more significance, and busting in on a bilateral dispute the EU is clearly using all the weapons at its disposal and not playing by the rules. We should not expect an easy fight.

5. Nothing is agreed until everything is agreed, or is it?

The Gibraltar veto also adds an unnecessary layer of bilateral complexity to multilateral negotiations. Surprisingly, Spain has distinguished itself among the EU27 for taking a soft line on Brexit, although it is not without its incentives, the 300,000 Brits living there are doing far more for the Spanish economy than just covering their costs. At the other end of the spectrum are the hardliners, France and Germany. Forging an agreement to everyone’s approval will not be straightforward.

The guidelines maintain that “nothing will be agreed until everything is agreed”. This seems thoroughly incorrect when everything can be agreed with the exception of the minor issue of Gibraltar, only for Spain to put a spanner in the works by exercising its unique veto.

6. Single Market Vs. Customs

The guidelines mention the Single Market on four separate occasions. Due to Theresa May’s strong stance on migration, the United Kingdom’s future economic partnership, “cannot amount to participation in the Single Market or parts thereof”. The message is clear. But nowhere is the Customs Union mentioned, and whether or not Britain or “parts thereof” can remain in it. Membership of the CU for key industries like car manufacturing remains a tempting option.