Brexit: A Relatively Neutral Response.

The EU’s draft Brexit guidelines look anything but punitive by Vincenzo Scarpetta   31 March 2017

European Council President Donald Tusk is a man of his word. He promised he would have a first draft of the Brexit negotiating guidelines for the 27 remaining EU member states ready within 48 hours from the moment the UK triggered the Article 50 exit mechanism – and he delivered. Overall, the document reads as anything but punitive. Below are my initial thoughts. The door is wide open for parallel negotiations, albeit not from the very beginning Over the past couple of days, the media have been (arguably too) quick to jump on carefully worded statements by a number of EU leaders – notably including German Chancellor Angela Merkel, on whose remarks my colleague Henry Newman blogged here – and conclude that the 27 were going to flat out reject Theresa May’s request to run ‘parallel negotiations’ on the terms of the divorce and the future UK-EU relationship. However, the draft guidelines make it clear that parallel negotiations will be fully possible during the two-year timeframe stipulated by Article 50 – provided that “sufficient progress” on the terms of the withdrawal is achieved. In other words, the door is wide open for parallel negotiations – albeit not from the very beginning. This is the exact wording, “An overall understanding on the framework for the future [UK-EU] relationship could be identified during a second phase of the negotiations under Article 50. The [European] Union and its member states stand ready to engage in preliminary and preparatory discussions […] as soon as sufficient progress has been made in the first phase towards reaching a satisfactory agreement on the arrangements for an orderly withdrawal.” Crucially, Tusk himself told reporters in Brussels this morning, “It must be clear that the EU, as 27, decides if sufficient progress has been achieved, probably in the autumn, at least I hope so.” If his prediction is accurate, there would be about one year to discuss the future UK-EU relationship – although, of course, any successor agreement would need to be concluded after the UK formally leaves the EU and becomes a third country. It was always going to be the case that the EU27 would seek to discuss process and principles first – a point Open Europe has repeatedly made. Non-members can’t enjoy same benefits as members – what else could EU27 say? The draft guidelines stress that, “A non-member of the Union, that does not live up to the same obligations as a member, cannot have the same rights and enjoy the same benefits as a member.” This is clearly an important statement, but possibly the most unsurprising of the entire document. The EU27 have always been adamant that any future settlement with the UK has to be “inferior” to membership of the bloc. From the EU’s point of view, stating the opposite would just not make sense. Furthermore, Theresa May has repeatedly said – including in her letter triggering Article 50 – that the UK accepts the indivisibility of the ‘four freedoms’ (free movement of goods, services, capitals and workers) and will therefore not seek continued membership of the EU’s single market. Expats and the principle that ‘nothing is agreed until everything is agreed’ Another point that drew my attention concerns the rights of expats – both nationals of EU member states living in the UK and UK nationals living across the EU. The draft guidelines say, “Agreeing reciprocal guarantees […] will be a matter of priority for the negotiations.” However, in an earlier paragraph, the document also stresses, “In accordance with the principle that nothing is agreed until everything is agreed, individual items cannot be settled separately.” In other words, while an agreement on the rights of expats remains, in my view, relatively easy to wrap up and announce, the draft guidelines appear to suggest it would somewhat be tied to the overall success (or failure) of the withdrawal negotiations. Indeed, this cuts both ways and the EU27 will no doubt be determined to get this point settled. A few potential sticking points To be sure, the draft guidelines do include a few potential sticking points. Firstly, what has become known as the ‘Brexit bill.’ The document says, “A single financial settlement should ensure that the Union and the UK both respect the obligations undertaken before the date of withdrawal. The settlement should cover all legal and budgetary commitments as well as liabilities, including contingent liabilities.” Importantly, though, the draft guidelines do not mention any specific figure – suggesting the exact amount is up for discussion – and do not say anything about when the bill would be due. Maltese Prime Minister Joseph Muscat, whose country holds the rotating presidency of the EU’s Council of Ministers, provided further clarity in his joint press conference with Tusk this morning, by saying, “The idea is that we have to come up with a methodology that shows and calculates those commitments, and also what Britain needs to take from European assets, as in a clear balance sheet.” Secondly, the draft guidelines imply that the EU27 might want the European Court of Justice (ECJ) to play a role as the dispute settlement mechanism “regarding the application and interpretation of the withdrawal agreement.” As I previously noted, this would be rather unpalatable for the UK government. Thirdly, somewhat unsurprisingly, the document stresses the UK “will no longer be covered” by the trade deals the EU has concluded with third countries. We recommended on several occasions that the UK should look to ‘grandfather’ those trade deals after Brexit, in order to safeguard existing global supply chains and support growth in global trade. Encouragingly, the draft guidelines also say, “A constructive dialogue with the UK on a possible common approach towards third country partners and international organisations concerned should be engaged.” Finally, the draft guidelines mention the possibility of transitional arrangements “to provide for bridges towards the foreseeable framework for the future relationship”, and emphasise, “Should a time-limited prolongation of the Union acquis [the body of EU law] be considered, this would require existing Union regulatory, budgetary, supervisory, and enforcement instruments and structures to apply.” In plain English, this suggests the EU27’s preference for a transition period would essentially be a continuation of the status quo – whereby the UK would be expected to keep contributing to the EU budget and be subject to ECJ jurisdiction. Indeed, we have heard this before (see what Maltese Prime Minister Muscat said back in January). However, the UK is keen on a ‘phasing-in’ period – which involves gradual steps towards a new relationship with the EU. This divergence of views will need to be ironed out. These draft guidelines will now be discussed among the ‘sherpas’ of the 27 remaining EU member states, with a view to EU27 leaders formally adopting them at their extraordinary summit on April 29. They are therefore subject to change, but after reading them I am more optimistic about the prospect of a good deal – for the UK and the rest of the EU. Further reading Open Europe responds to the Great Repeal Bill White Paper (by Henry Newman): http://openeurope.org.uk/today/blog/open-europe-responds-great-repeal-bill-white-paper/