Article 50 of the Treaty on European Union (TEU) provides for an EU Member State to leave the EU with or without a withdrawal agreement – or ‘deal’ – within a two-year timeframe starting from the formal notification of withdrawal by the leaving State. The two-year negotiating period can be extended if the other EU Member States agree to a UK request for an extension.

1.1 Timing is crucial

The UK Government delivered a letter notifying the European Council of its intention to leave the EU on 29 March 2017, which started the clock ticking under the Article 50 process. The EU and the UK aimed to complete negotiations on the UK’s ‘orderly’ withdrawal from the EU by October 2018. Theresa May told the Liaison Committee on 18 July that the aim was still to have “sufficient detail of this agreed by October”.

The then Secretary of State for Exiting the EU, Dominic Raab, told the Lords EU Committee on 29 August he was “confident” a deal was “within our sights”, that he was still aiming for the October deadline but there was a measure of leeway. He confirmed that the 20% of matters not agreed included data transfers, police and judicial cooperation and collaboration, and governance issues; the contours and principles were agreed but not the technical details. A solution to the Irish border was the main outstanding issue. The UK and EU agreed to “continuous” negotiations on Brexit “to energise the final phase of the diplomacy and to reach a deal that is in both sides’ interests”.1

Agreement in November 2018 allowed just enough time for the UK and European Parliaments (the EP said it needed three months) to consider and vote on a withdrawal agreement, and for the 27 other EU Member States (EU27) to ‘ratify’ it in the Council of the European Union before exit day on 29 March 2019 (may also apply to new exit date on 31 December 2020) (11 pm UK time).

1.2 Scenarios for a no-deal Brexit

Leaving the EU without a withdrawal agreement – ‘no deal’ – cannot be ruled out. Terms used to describe a ‘no deal’ outcome to the negotiations include ‘cliff edge’ Brexit,2 ‘hard Brexit’3 and the UK ‘crashing out’ of the EU.

No deal could be the result of various scenarios:

– The EU and UK do not agree on the terms of a withdrawal agreement (WA) and/or a framework for future relations because of lack of time and/or because there are intractable disagreements

1 Dominic Raab, speech 23 August 2018

2 Described in the Lords EU Committee report Brexit: deal or no deal, 7 December 2017, “as overnight between 29 and 30 March 2019 they would have to adjust to radically different terms of trade, while citizens would face profound uncertainty over issues such as residence, property and other rights, child custody decisions, or health insurance”.

3 Although ‘hard Brexit’ now seems to mean something short of no deal.

 

and no willingness to compromise – the talks break down. A negotiated text of a withdrawal agreement and political declaration on the framework for future relations was agreed in mid-November 2018 and endorsed by EU Member States on 25 November with one significant amendment (Article 132 – setting a maximum extension of the transition period “for up to one or two years”). This fulfilled part of the Article 50 requirement,4 but the UK Parliament’s rejection of the WA to date means it might not be ‘concluded’.

– There is agreement in principle on the substance of a withdrawal agreement but more time is needed and the other EU Member States refuse to extend negotiations. The EU has said it is not prepared to renegotiate the agreement on offer. Commission President Jean Claude Juncker has said “it is the best deal possible and the only deal possible”.5 The December European Council (Article 50) Conclusions stated: “The Union stands by this agreement and intends to proceed with its ratification. It is not open for renegotiation”. The EU was willing to offer reassurances on the backstop,6 saying initially said it “stood ready to examine whether any further assurance can be provided” on the backstop, but this assurance was later removed. The Conclusions do note, however: “The European Council also underlines that, if the backstop were nevertheless to be triggered, it would apply temporarily, unless and until it is superseded by a subsequent agreement that ensures that a hard border is avoided”.

– There is agreement in principle on the substance of a withdrawal agreement but more time is needed for certain details. The Prime Minister has said she does not intend to ask for an extension7 and the EU has said it will not renegotiate the November 2018 agreement – although it has indicated that a short extension might be possible if needed to secure UK agreement for the WA. The Prime Minister has continued to seek EU confirmation that the backstop cannot become permanent, but this has not been forthcoming.

– The UK Parliament rejects the negotiated withdrawal agreement and framework for future relations in the vote under Section 13 of

4 Article 50: “the Union shall negotiate and conclude an agreement” with the leaving State. The agreement has been negotiated but not concluded.

5 EurActiv, Juncker warns May: ‘No room’ to renegotiate Brexit deal, 11 December 2018

6 The Select Committee on Exiting the EU recommended in its Third Report of March 2018 that the Government should be prepared to seek a limited extension to the two-year article 50 period if substantive aspects of the future relationship are not agreed, or if Parliament votes against the withdrawal agreement, or if there is no deal, but acknowledged that the EU might not grant such a request.

7 Trade Secretary Liam Fox said that asking for an extension would be a “complete betrayal” of Brexit voters (Politico, 27 July 2018). However, in October 2018 he suggested an extension of the transition period to secure a better future relations agreement would be acceptable.

 

the EU (Withdrawal) Act. The unlikelihood of the WA being passed by Parliament prompted the Prime Minister to postpone the December 2018 vote until January 2019.

8 In the vote held on 15 January the Government was defeated by a majority of 230 (MPs voted 432 to 202 against the WA). The Prime Minister intends to renegotiate the backstop provisions and return to the Commons for another vote. She said that if the Government had not brought a revised deal back to the Commons by 13 February, there would be a statement and another amendable motion would be tabled for debate the next day.

– The European Parliament rejects the negotiated withdrawal agreement and framework for future relations. The EP is continuing with the ratification process under Article 50 and is in the process of examining the text. It aims to vote on the WA in plenary in March 2019.

– The Council does not endorse the WA by an enhanced qualified majority (20 of the 27 Member States, representing 65% of the EU population).

– A withdrawal agreement is concluded and enters into force, but at the end of the implementation/transition period there is no agreement on future EU-UK relations; or there is an agreement, but it has not been implemented in the UK because the bill to implement it has not been passed, or it has not been ratified in the EU Member States and has not entered into force provisionally.

1.3 Are any scenarios more or less likely than others?

It would appear less likely that the EU27 Member State governments or the European Parliament (EP) would unexpectedly vote against an agreement drawn up by the EU and UK negotiators. The EP, which has a power of veto over the final deal, has been kept fully informed of developments in the negotiations and its resolutions on Brexit have been taken into account so as not to jeopardise final agreement. The EU27 governments have maintained solidarity in their position on the negotiations, so surprises, either in the adoption of a final text or in allowing an extension of negotiations, are unlikely. Less clear, however, is whether the EP would approve any amendments to the WA that the EU might be persuaded to endorse to ‘help’ the UK Parliament approve it, such as changes to the backstop provisions.

Earlier reports that Spain could veto a withdrawal agreement because of its sovereignty claim on Gibraltar are unfounded, since no EU Member State

8 Opposition leader Jeremy Corbyn said the postponement of the vote was “a completely cynical manoeuvre to run down the clock and offer MPs the choice of the devil or the deep blue sea”: i news, Jeremy Corbyn demands Theresa May recalls parliament to give MPs Brexit ‘meaningful vote’, 28 December 2018.

 

has a veto power, although Spain could, of course, contribute to a blocking minority against an agreement (and could veto a future relations agreement if unanimity is required for its approval).

Some scenarios might provide a more or a less favourable environment for a no-deal departure than others (i.e. a ‘smooth’ no deal scenario or a ‘disruptive’ no deal), depending on the good will of the parties and the political mood. But the consensus among the negotiators and most stake-holders continues to be that any no-deal outcome should be avoided.

In early August 2018 the Governor of the Bank of England, Mark Carney, described the possibility of no deal as “uncomfortably high”.10 The Government insisted no deal was “unlikely”11 but also said it was taking a “responsible” approach12 and making “sensible preparations”, so that even a no-deal scenario could be managed in an “orderly” fashion.13 After postponing the ‘meaningful vote’ and trying unsuccessfully to get legal assurances from the EU that the Irish ‘backstop’ could not become permanent, the Government stepped up its ‘no deal’ contingency planning. Its ‘no deal’ guidance, which had referred to the “unlikely event” of a no-deal Brexit, has been edited, according to reports,14 to remove the word “unlikely”. The government is engaged in ongoing negotiations regarding the Irish ‘backstop’.

1.4 ‘Bare bones’, side- and mini-deals?

‘No deal’ would mean no withdrawal agreement, and this would mean no transition (implementation) period in which to adapt to being outside the EU and to finalise and ratify a future relationship agreement.

Professor Derek Wyatt and Hugo Leith of Brick Court Chambers told the Foreign Affairs Committee in March 2017 that a ‘no deal’ outcome next March did not necessarily mean the end of negotiations, suggesting that a negotiation outside the Article 50 process could take place:

The economic and political shock for the UK and the EU could lead to renewed attempts to deal with outstanding issues. The position might be recovered, and a belated withdrawal agreement which included transitional arrangements might be put in place.15

9 The EU27 ‘ratification’ of the withdrawal agreement and declaration on a framework for future relations will be by an enhanced qualified majority vote: 20 of the EU27 States representing 65% of the EU27 population.

10 BBC Today Programme, 3 August 2018.

11 See Theresa May, the Chequers statement, 6 July 2018, and Dominic Raab, UK government’s preparations for a ‘no deal’ scenario, updated 24 August 2018

12 Ibid

13 See, e.g. BBC News, No 10 deny plan for Army role in ‘no deal’ Brexit, 30 July 2018.

14 See, e.g., The Guardian, Government drops claims that no-deal Brexit ‘unlikely’ – as it happened, 20 December 2018.

15 FCA, Ninth Report of Session 2016–17, Article 50 negotiations: Implications of ‘no deal’, 12 March 2017

It might be possible to agree a “bare-bones” deal covering key issues of mutual concern, as David Davis suggested to the Lords EU Committee in October 2017:

in the event that we did not get a full deal, the interest of both sides on, say, counterterrorism co-operation, justice co-operation or data exchange co-operation is so great that I find it hard to believe that we will not get some fundamental deal there.16

Or there might be an assortment of last-minute unilateral (EU) and/or bilateral (UK-EU27) ‘parachute’ agreements or side-deals to minimise disruption in certain areas. Philip Rycroft (DExEU) suggested the European Commission would want to avoid “unnecessary disruption” to business between the EU and UK and would therefore want to be pragmatic even in the event of ‘no deal’. This assumption was part of the Government’s thinking but could not be guaranteed. Dominic Raab told the Exiting the EU Committee on 5 September 2018 that there could be “no deal deals” in some areas if negotiations break down: the UK and EU could coordinate what they do without a legally binding agreement; sign Memorandums of Understanding (MoUs); or there could be more formal agreements.17

House of Commons Leader Andrea Leadsom told the BBC’s Today Programme on 20 December that if Parliament rejected the negotiated deal, “then we have to look at what the alternatives are — and a managed no-deal, where we collaborate with the EU27, friends and neighbours — would be an alternative solution that the European Union might well find is also in their interests”. Her managed ‘no deal’ would be “a more minimalist approach that enables us to leave with some kind of deal and implementation period that avoids the cliff edge and uncertainty for businesses and travellers and so on”.18

It is unclear whether the EU side would agree to this kind of arrangement if crisis point were reached, but the EU’s current position is that there would be no side-deals. Michel Barnier said on 3 September that the EU would not engage in any kind of “managed no-deal Brexit” if negotiations break down. He told the Exiting the EU Committee there would be no further discussions or negotiations, no “side-deals”, no “mini-deals”, the discussions would stop.19

Anand Menon of ‘UK in a Changing Europe’ was pessimistic about any such no-deal mitigation scenarios:

Given the political capital expended by both the UK and the EU on reaching an agreement within the Article 50 timeframe, a no deal outcome of any kind is likely to generate considerable acrimony. In particular, there will be a lot of finger-pointing about who is to blame.

16 House of Lords European Union Committee, Oral evidence, 31 October 2017; 7th Report of Session 2017–19, Brexit: deal or no deal, 7 December 2017.

17 Reported in The Guardian, 5 September 2018.

18 BBC News, Andrea Leadsom and Amber Rudd suggest rival Brexit ‘Plan Bs’, 20 December 2018

19 House of Commons Exiting the EU Committee, Oral evidence, 4 September 2018.

This matters on a number of levels. Most immediately, it will complicate any moves to secure emergency deals on critical systems such as air travel, medicines or fissile materials, especially if politicians on either side seek to use such issues to teach the other a lesson or force compromises elsewhere. Mitigations in the form of agreements with the EU would be particular to each sector, meaning the impact of no deal could vary considerably, with certain sectors more vulnerable than others. The difficulty is that we cannot know at this point just how many of these emergency agreements it would be possible to reach in a relatively short period of time and in a confrontational political atmosphere.

Moreover, a breakdown of the negotiations would colour the pursuit of any wider efforts to restart the UK-EU relationship, in terms of the attitudes of both sides and the lack of a clear basis upon which to work. No withdrawal agreement means no political declaration on the future relationship, and it would be wise to assume that the general level of trust and willingness to compromise would be small.20

In a speech on 13 December 2018 the UK’s former Permanent Representative to the EU, Sir Ivan Rogers, also sought to dispel the idea that the EU would happily agree to mini-deals with the UK to mitigate the effects of a no-deal Brexit:

The reality is that if the deal on the table falls apart because we have said “no”, there will not be some smooth rapid suite of mini side deals – from aviation to fisheries, from road haulage to data, from derivatives to customs and veterinary checks, from medicines to financial services, as the EU affably sits down with this Prime Minister or another one.

The 27 will legislate and institute unilaterally temporary arrangements which assure continuity where they need it, and cause us asymmetric difficulties where they can. And a UK Government, which knows the efficacy of most of its contingency planning depends, to a greater or lesser degree on others’ actions out of its control, will then have to react – no doubt with a mixture of inevitable compliance and bellicose retaliation.

There is no EU offer of side or mini-deals and the European Commission has called for continued solidarity among the EU27, but it has proposed some EU regulations that will facilitate, on a temporary basis, EU-UK flights if there is no deal. Reports in January suggest some EU27 States might be willing to agree to more such temporary measures. Michel Barnier has also suggested that if there is flexibility on the UK side, there could be some on the EU side too, especially with regard to the future relationship agreement. He told the EU’s Economic and Social Committee on 23 January:

Given the red lines set out by the British government, the political declaration currently envisages a free trade agreement with ambitious customs cooperation. If the UK’s red lines were to change in the days or weeks to come, the Union would immediately be prepared to look at other – more ambitious – models for the relationship, each of them based on a balance between rights and obligations. We are therefore prepared to rework the content and the level of ambition of the political declaration if the UK shifts its red

20 UK in a changing Europe, Cost of no deal revisited, 3 September 2018

20 What if there’s no Brexit deal?

lines. My feeling today is that we need to leave the British Parliament the time – which is short – to have this debate and take its decision. We must remain calm, resolute, open and always respectful of the debate in the British Parliament.

So there could still be a period of undeterminable length in which the UK and the EU are without any agreements on withdrawal (or post-transition relations), and possibly little good will among the EU27 towards the UK.

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