Withdrawal Agreement Matters

Brexit negotiations related to two agreements or sets of agreements, broadly a Withdrawal Agreement and later, a new trade agreement(s) between the EU and the United Kingdom.

The Withdrawal Agreement dealt with financial issues arises from existing UK obligations. The financial settlement required to be negotiated under Article 50 took effect in the context of UK and EU’s ongoing financial relationship. The UK (with all other states) made commitments to the EU multiannual financial framework 2014 to 2020.

Another second key issue for the Withdrawal Agreement was the protection of the rights of EU and UK citizens and their families who resided in the territory of the other.

The negotiating guidelines pointed out that the EU had consistently supported the goal of peace and reconciliation in Northern Ireland enshrined in the Good Friday Agreement in all its parts and that continuing to support and protect the achievements, benefits, and commitments of the Peace Process would remain of paramount importance.

They continued that “in view of the unique circumstances on the island of Ireland, flexible and imaginative solutions will be required, including with the aim of avoiding a hard border, while respecting the integrity of the Union legal order. In this context, the Union should also recognise existing bilateral agreements and arrangements between the United Kingdom and Ireland, which are compatible with EU law”.

‘In view of the unique circumstances on the island of Ireland, flexible and imaginative solutions [would] be required, including with the aim of avoiding a hard border.

Future Trade Relationship and Transition

The UK was keen to initiate discussions on the future trade relationship. The European Union was keen to ensure that the divorce issues of finance, citizens’ rights and Northern Ireland could not be used as leverage in those discussions and maintained its negotiation position that it would not consider those issues until the withdrawal issues had been settled.

The Article 50 procedure provided for a two-year period to the exit day scheduled to take place on 29th of March 2019. This narrowing timeframe placed pressure on the UK government to settle the withdrawal issues at an early date.

It quickly became apparent that the timeframe for ratification of the Withdrawal Agreement and the negotiation of a future relationship agreement would take much more than the two years provided for by the Article 50 procedure. The EU proposed a transitional period during which the UK would cease to be a member of the EU in the sense of participating in EU decision-making institutions but would remain subject to all EU rules and laws.

A transitional period would have to be ‘clearly defined, limited in time and subject to effective enforcement mechanisms if the UK wishes to remain in the customs union and single market in this period. This would require that existing EU law, regulatory, budgetary, supervisory judiciary and enforcement instruments and structures would apply.

The EU made known at an early stage that the four freedoms of the single market, free movement of goods, of people, of capital and of services were indivisible. There could be no cherry-picking. There could be no sector-specific deals.

Infamously in November 2016, an aide to the Conservative Party had been photographed leaving Downing Street with handwritten notes which included the words ‘What’s the model? Have cake and eat.” “Cakeism” entered many dictionaries, being defined in one as ‘the belief that you can have all the benefits of a particular thing and none its disadvantages especially in relation to the United Kingdom’s negotiation on leaving the European Union”. It was defined in another as ‘to expect to achieve something that is beyond the realm of reality, simply because you think you should have it. A pro-remain podcast took the title “Cakewatch”.

The decision as to whether sufficient progress had been made on the issues was to be made unanimously effectively requiring the consent of the Irish government to the arrangements in respect of the fallback arrangements for Northern Ireland.

Citizens’ Rights

Citizens’ rights were identified by the European Council as the first priority. The negotiations related to the rights of the more than 3 million EU citizens living in the UK and the more than 1 million British citizens living in the European Union. They were entitled as EU citizens to move and establish themselves, moving their family and establishing themselves there for life. After five years’ lawful residence, they have rights of permanent residence and entitlement to be treated equally to citizens of the host state.

Because the EU treaty rights and the citizens directive and the corresponding domestic legislation had removed formalities and barriers to free movement, most citizens did not have any documentary proof of their entitlement. The EU took the view that the right should be the subject of direct legal protection enforceable by the citizens themselves in the same way as EU citizenship rights, ultimately by reference to the European Court of Justice. If such rights were enforceable merely by UK law, this law could be amended, and the protections might be enforceable only at a government to government level in the diplomatic or international law arena

Theresa May in her Florence speech on 22 September 2017 effectively accepted the EU’s requirements agreeing that EU citizens’ rights would be enforceable in UK law in the same way as existing EU rights. The agreement ultimately provided that EU citizens would have such rights which would be enforceable directly in UK courts and that the matter could be referred to the European Court of Justice are necessary to clarify the law.

The rights would accrue to those present on the date of Brexit, the date of formal withdrawal from membership. However, subsequently, the issue of EU citizens’ rights first accruing during the transition period (arriving after the technical Brexit date but before the end of the transition period were to be discussed in the second phase of negotiations. Ultimately it was agreed that the rights of future spouses to join partners would be determined by national law.

The Money

The EU was determined to secure that the UK would not use its position as a net contributor to the EU budget and in particular, its accrued obligations under existing commitments as a bargaining chip in negotiation, that these obligations already existed and were not something to be bargained in return for new concessions.

This contention was strongly rejected by many in the United Kingdom. Brexit years had highlighted the prospective savings to the UK in being quit of its approximately €10 billion net contributions and the hole that would be left in EU funding by its withdrawal. They pointed out that the obligations were not due in the same way as private debt is binding on the UK government.

EU budgets are set in a seven-year cycle. The 2014 to 2020 budget had been set and agreed by member states and included provisions for contributions by all member states to the EU budget and for EU expenditure. For historical reasons related to some extent to the relatively small agriculture sector in the UK, the UK had consistently been a net contributor for many years notwithstanding the rebate and reductions negotiated by Mrs Thatcher in the 1980s. Current budgetary liabilities appeared to be approximately £20 million.

In addition to current budgetary commitments, the UK in common with other states indirectly carried a proportion of all EU liabilities under treaty commitment, for example in relation to pensions of EU civil servants. On the other hand, the UK was also entitled to a share of EU assets which should be taken into account in calculating its net obligations.

There were wildly different estimations of the net liabilities of the UK, given the that many of the key assumptions and variables were highly debatable, hypothetical and could not be ascertained in an accurate way without a complete winding up of the EU. It was widely discussed that the figure might be as high as €100 billion. The UK government indicated that the figure would be at most €40 billion.

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