Professor Steve Peers

The UK formally initiated the Brexit process by sending the Article 50 withdrawal letter to the EU on March 29th. The EU responded with its draft Brexit negotiating guidelines.

This post offers a thorough analysis of the EU’s draft guidelines, comparing them to the UK’s stance as articulated in Theresa May’s Chatham House speech last January. Although subject to potential modifications before their final adoption on April 29th, significant alterations to the draft guidelines are improbable. My assessment relies on the current text and will be revised if substantial amendments occur.

The European Parliament’s (EP) draft position is also considered, recognizing that while the EP isn’t directly involved in negotiations, its veto power over the final Article 50 agreement holds sway and could influence the negotiators. This analysis encompasses both legal and political aspects, acknowledging the speculative nature of legal interpretations of Article 50 without established European Court of Justice (ECJ) case law.

Initial UK attention wrongly centered on the draft EU guidelines’ stance on Gibraltar. The critical point is the convergence of numerous negotiating goals between the EU and the UK. Notably, the EU has embraced the UK’s pursuit of a comprehensive EU/UK free trade agreement (FTA) devoid of provisions concerning the free movement of people or EU budget contributions.

The complexities lie in the finer points. For instance, the EU and UK remain divided on the Brexit talks’ timeline, potentially the ECJ’s role, financial settlements (the ‘divorce bill’), the Gibraltar issue (a matter for bilateral talks with Spain), the UK’s adherence to environmental and related standards within a deal, and the feasibility of ‘sectoral’ agreements. Additional disagreements will undoubtedly arise as negotiations progress.

Whether an EU/UK relationship grounded in an FTA is the optimal course is debatable; in my view, it isn’t. Nevertheless, it significantly surpasses reverting to a ‘WTO-only’ trade basis with the EU, as some suggest. This would bring about substantial tariff and non-tariff barriers on many traded goods and services, negatively impacting both sides.

There’s a democratic facet too. A considerable portion of ‘Leave’ voters harbored concerns about EU budget contributions and the free movement of people, concerns that an EU/UK FTA would address. However, the ‘Leave’ campaign repeatedly downplayed anxieties about a decline in UK-EU trade, claiming the UK and EU would effortlessly establish an FTA without commitments on these issues.

Their assertion, as the EU’s draft negotiating guidelines confirm, was demonstrably false. Instead of dwelling on this misrepresentation, the focus should be on moving forward. The government must progress with negotiations, acknowledging that reverting to WTO-only trade with the UK’s primary trading partner contradicts a ‘Global Britain’ pursuing free trade and lacks democratic legitimacy. Moreover, it would harm both parties, jeopardizing jobs in the UK. These negotiations, though challenging, are essential. The time for illusions, empty gestures, and procrastination is over.

Annex I

Upon receiving the UK’s notification of its intent to withdraw from the European Union and Euratom on March 29, 2017, the European Council initiated the negotiation process stipulated in the Treaty.

It’s important to note that the guidelines consistently reference ’negotiations’, refuting the erroneous claims that the EU will present the UK with a non-negotiable agreement. Article 50(2) TEU repeatedly cites ’negotiations’, a point reflected in the draft guidelines.

Although the EP resolution (point L) presumes the possibility of withdrawing the notification with consent, the guidelines remain silent on this. Arguments exist for indefinitely extending the Article 50 withdrawal period, but that’s a topic for another discussion.

Speculation about the EP demanding a UK referendum on the negotiation outcome as a condition for its consent is likely unfounded and counterproductive. The draft EP resolution avoids this topic.

European integration has brought peace and prosperity to Europe, fostering unparalleled cooperation on shared interests in a dynamic world. Therefore, the Union’s overarching objective in these negotiations is to protect its interests, those of its Member States, its citizens, and its businesses.

The UK’s decision to leave creates considerable uncertainties, potentially causing disruptions primarily within the UK but also affecting other Member States. Citizens whose lives are structured around rights stemming from British EU membership face the possibility of losing these rights. Businesses and stakeholders risk losing the predictability and certainty provided by EU law. Therefore, a phased approach prioritizing an orderly withdrawal is essential.

Here, the EU explicitly emphasizes its aim for an ‘orderly withdrawal’. Article 50(2) mandates good faith negotiations with the withdrawing Member State, implicitly aiming for an orderly withdrawal—an interpretation the ECJ is likely to support. Consequently, the EU can’t simply abandon negotiations. However, it’s improbable that the ECJ would, in a legal challenge, dictate specific negotiation objectives for the EU, considering its prior case law emphasizing political discretion in the EU’s international relations.

Politically, this paragraph underscores the EU’s intention to secure an agreement with the UK, refuting any assertion to the contrary.

The Union will approach these negotiations with unity and a constructive spirit, striving towards a mutually beneficial agreement. However, the Union will also prepare for the possibility of unsuccessful negotiations.

Reaffirmed here is the EU’s intention to negotiate as a unified entity, as stipulated in Article 50 (“the Union shall negotiate and conclude an agreement with that State”). This doesn’t preclude informal bilateral dialogues between the UK and key Member State governments, a common practice during EU trade negotiations with non-EU states.

Although the overall tone emphasizes diplomacy and a desire for an agreement, the final sentence reveals the EU’s readiness for a ’no deal’ outcome. This likely involves prepping draft EU laws for approval and readying national customs administrations for a UK departure, potentially under two scenarios: a) on the date established according to Article 50; b) if the UK breaches Article 50 by exiting prematurely. In the latter case, EU Member States might declare the UK in material breach of the EU Treaties under Article 60 of the Vienna Convention on the Law of Treaties, potentially suspending the UK from the Treaties before the Article 50 period concludes.

The guidelines omit any mention of amending the Treaties to remove references to the UK, which is understandable as this isn’t a negotiation point with the UK. Whether the EU will pursue this course remains unclear; legally, it’s arguable that Article 50 is ‘self-executing’, rendering references to the UK automatically irrelevant post-Brexit. One challenge could be enacting other Treaty amendments concurrently, making negotiations difficult. Even a purely technical amendment requires time for ratification. Work on this would logically commence soon if pursued, although the UK’s required participation in Treaty amendments as a member state presents a legal hurdle. A possible solution is to draft the treaty after Brexit Day and retroactively apply it.

While paras 30 and 32 of the draft EP resolution address potential EU law changes due to the UK’s exit as an issue for the EU-27, they avoid explicit mention of Treaty amendments.

These guidelines, serving as the framework for negotiations under Article 50 TEU, outline the overarching positions and principles guiding the Union. The European Council will closely monitor progress, adapting these guidelines as necessary.

The legal effect of Article 50(2)’s stipulation that negotiations be conducted “in light of” these guidelines remains unclear. Could a dissenting Member State, for instance, challenge the Article 50 agreement based on guideline violations? An ongoing ECJ case concerning the legal effect of European Council guidelines in asylum cases, discussed elsewhere, might offer clarity.

The guidelines’ primary influence will be political. The European Council’s willingness to ‘update’ them (amend or elaborate) highlights this. A significantly longer treaty text will detail these guidelines, based on drafts negotiated by both sides.

I. Core principles

1. The European Council reaffirms its commitment to the principles outlined in the June 29, 2016, statement by Heads of State or Government and the Presidents of the European Council and the European Commission, reiterating its desire for a close future partnership with the UK. It emphasizes that any agreement with the UK must be based on a balance of rights and obligations, ensuring a level playing field. Maintaining the integrity of the Single Market precludes participation based on a sector-by-sector approach. Non-members cannot enjoy the same rights and benefits as members without upholding the same obligations. The European Council acknowledges the UK government’s recognition of the four freedoms of the Single Market as indivisible, rejecting any “cherry picking.”

The June 2016 statement is referenced here. The second sentence aligns with the UK’s goal of a close future partnership. However, the exclusion of any ‘sectoral’ deals contradicts the UK’s objective. Sectoral deals, in any case, would likely be challenged under WTO rules requiring FTAs to encompass ‘substantially’ all trade in goods (Article XXIV GATT) or services (Article V GATS). Mutual recognition agreements covering specific trade sectors could be an option. The guidelines are silent on the UK’s aim for a special customs agreement, except implicitly regarding Northern Ireland.

2. Negotiations under Article 50 TEU will be conducted as a single package, adhering to the principle that nothing is agreed until everything is agreed. Individual items cannot be settled separately. The Union will present unified positions, engaging with the UK solely through the channels outlined in these guidelines and the negotiating directives. To maintain a united front, individual Member States will not engage in separate negotiations with the UK concerning its withdrawal.

Whether this ‘single package’ narrowly refers to the EU’s priority negotiation points or encompasses the broader post-Brexit relationship remains unclear. This distinction is crucial, as a strong case exists for separating the initial treaty addressing withdrawal issues, particularly the status of UK and EU citizens who’ve moved between Member States, from subsequent treaties.

The ’no separate negotiations’ point, mentioned earlier, is reiterated here. As previously stated, this doesn’t preclude informal bilateral discussions on specific issues. UK/Ireland discussions on border issues and UK/Spain talks on Gibraltar (mandated by the guidelines) are examples. The guidelines also mention bilateral UK/Cyprus issues.

The common assumption that unanimous national parliament ratification is required for any Article 50 deal is incorrect. Article 50 stipulates a qualified majority vote (excluding the UK) for EU decisions. However, aspects of the broader Brexit deal (e.g., future relationship) might necessitate unanimous voting and national ratification; the EU might hesitate to proceed with the Article 50 agreement against the wishes of one or more Member States.

II. A phased approach to negotiations

3. Upon the UK’s withdrawal, the Treaties cease to apply to the UK, its associated overseas countries and territories, and territories for which the UK manages external relations. The primary objective of these negotiations is to ensure a smooth UK withdrawal, minimizing uncertainties and disruptions caused by this sudden change.

This point covers entities mentioned in Article 353 TFEU: Gibraltar, the Channel Islands, the Isle of Man, and remaining semi-colonies. The House of Lords report provides further discussion on their status. The emphasis on minimizing disruption, although qualified by “to the extent possible,” is notable.

The first phase of negotiations will focus on:

• Settling the UK’s disentanglement from the Union and all rights and obligations arising from its commitments as a Member State.
• Providing maximum clarity and legal certainty to citizens, businesses, stakeholders, and international partners regarding the immediate impact of the UK’s withdrawal.

The European Council will monitor progress closely to determine when sufficient progress allows for transitioning to the next negotiation phase.

The EU’s prioritization of withdrawal issues over trade issues is evident here, contrasting with the UK’s preference for simultaneous discussions. However, the guidelines don’t necessitate complete resolution of withdrawal issues before addressing post-Brexit matters. The ‘sufficient progress’ benchmark offers flexibility; a general agreement on key issues, even with some details pending, might suffice. Para 14 of the EP draft resolution aligns with this, although the EP’s formal role in assessing ‘substantial progress’ (their slightly stricter criteria) is absent.

4. While a formal agreement on the future EU/UK relationship can only be reached after the UK becomes a third country, Article 50 TEU mandates considering the framework for this future relationship in the withdrawal arrangements. Therefore, a mutual understanding of this framework could be established during the second phase of negotiations under Article 50. Once sufficient progress is made in the first phase toward a satisfactory agreement on an orderly withdrawal, the Union and its Member States are prepared for preliminary discussions towards this framework within the Article 50 TEU negotiations.

The EP draft resolution (point 15) echoes the prohibition on establishing a ‘future relationship’ treaty pre-Brexit.

The ‘future relationship’ discussion, addressing trade and related issues, is distinct from the potential ’transitional arrangement’ mentioned subsequently (‘may also’). When a transitional deal can be established remains unclear, as this paragraph, unlike the previous, doesn’t explicitly restrict talks or agreements before Brexit Day.

Arguably, a long-term deal could be established (or at least signed and provisionally applied) on, or retroactively to, the withdrawal date. This aligns with the EU’s objectives of an orderly withdrawal and minimizing disruptions. However, the language surrounding ‘preliminary and preparatory’ discussions and ‘overall understanding’ seemingly excludes this possibility.

Practically, negotiating the long-term framework within the timeframe, even with Theresa May’s aspirations, is challenging. This is further complicated by the time allocated to withdrawal issues before addressing the ‘future relationship’.

5. If necessary and legally permissible, negotiations may explore transitional arrangements beneficial to the Union, potentially bridging the gap to the anticipated future relationship framework. These transitional arrangements must be clearly defined, time-limited, and subject to effective enforcement mechanisms. If a time-limited extension of the Union acquis is considered, existing Union regulatory, budgetary, supervisory, and enforcement instruments and structures would apply.

Maintaining trade flows and relationships with the UK is undoubtedly in the EU’s interest. As noted earlier, this aligns with their objectives of an orderly withdrawal and minimizing disruption. Such arrangements are ’necessary’ to avoid reverting to a WTO-only framework for UK-EU trade. The timing of a transitional deal remains unclear, although this paragraph, unlike the previous, doesn’t explicitly preclude concluding talks or agreements before Brexit Day. The legal basis is also unclear: whether it falls under Article 50 (qualified majority vote) or other Treaty provisions (potentially requiring unanimity and national ratification). The exact scope of Article 50 is legally ambiguous; the phrasing here suggests uncertainty about what’s ’legally possible,’ potentially warranting ECJ clarification (see Annex II).

While time-limited, it’s unclear if the transitional deal would encompass all aspects of EU membership, or if the EU would only consider continuing the EU acquis. This distinction is crucial: a) flexibility here could mean ending the free movement of people, or continuing with an ’emergency brake,’ post-Brexit; b) an ’enforcement mechanism’ might not equate to continuing existing EU regulatory, budgetary, supervisory, and enforcement measures. The latter implies retaining the ECJ’s current jurisdiction, while ’enforcement mechanisms’ could mean a limited ECJ role (no references from UK courts, no direct impact on UK law) or a different dispute resolution system, potentially utilizing the existing EFTA Court, which already rules on certain EU law issues for Norway, Iceland, and Liechtenstein. However, deviating significantly from current EU membership through the transitional system lengthens negotiation time and increases the risk of delays.

The UK government seems to envision an interim transitional period without explicitly naming it. The Chatham House speech refers to ‘phased implementation,’ where elements of EU law persist. Despite the difference in terminology, the UK and EU positions share fundamental similarities.

The EP draft resolution (para 28) takes a similar stance, setting a three-year maximum for the transitional deal while remaining vague about the specifics, mirroring the European Council’s draft guidelines.

6. The core principles outlined above should uniformly apply to negotiations on an orderly withdrawal, preliminary discussions on the future relationship framework, and any transitional arrangements.

7. The two-year timeframe stipulated in Article 50 TEU concludes on March 29, 2019.

Note that Article 50(3) allows the withdrawal agreement to set a different date (potentially earlier or later), and the UK and remaining EU, through a unanimous vote, can extend the deadline.

III. Agreement on arrangements for an orderly withdrawal

8. The right of every EU citizen and their families to live, work, or study in any EU Member State is a cornerstone of the European Union. This right, along with others granted under EU law, has shaped countless lives and decisions. Negotiations will prioritize agreeing on reciprocal guarantees to safeguard the status and situations of EU and UK citizens, and their families, impacted by the UK’s withdrawal on the withdrawal date. These guarantees must be enforceable and non-discriminatory.

Both the EU and the UK prioritize an early agreement on citizens’ rights. The EU clearly intends to address this in the Article 50 talks, contrary to some claims. The ’non-discriminatory’ principle confirms that bilateral talks on this issue, as some anticipated, won’t occur. While some argue the EU lacks legal authority to regulate non-EU citizens, Articles 77-79 TFEU grant such powers, and the EU has enacted relevant legislation. Furthermore, it’s arguable that Article 50 empowers the EU to negotiate any issue stemming from the withdrawing Member State’s EU membership—the status of UK and EU citizens being a prime example.

An ’enforceable’ guarantee doesn’t necessarily imply ECJ involvement. Alternatives include other forms of dispute resolution or a commitment to national law implementation with provisions for dialogue to address arising issues.

Notably, the guidelines omit any reference to the EP-promoted idea of an optional right for UK citizens to retain EU citizenship. The EP draft resolution addresses this but insists on reciprocity (para 27), a condition unlikely to be accepted by the UK government.

9. The UK’s exit will impact EU businesses operating in the UK and vice versa. It may also affect those engaged in contracts, business arrangements, or EU-funded programs based on the presumption of continued UK membership. Negotiations should aim to prevent a legal vacuum once the Treaties cease to apply to the UK and, as far as possible, address uncertainties.

This signals an intent to uphold contracts and legal arrangements established before Brexit Day, which could be relevant for research funding, regional development funds, or agricultural subsidies. It could also support the argument that UK banks with existing licenses to provide financial services within the EU market can retain them.

10. A single financial settlement should ensure both the Union and the UK fulfill their obligations undertaken before the withdrawal date. This settlement should cover all legal and budgetary commitments, including contingent liabilities.

Negotiating this point will likely be challenging. While the draft guidelines avoid specifying the ‘bill’ amount, press reports mention figures around €50 billion. The settlement doesn’t necessitate an upfront payment, as some liabilities pertain to funding commitments over the coming years and long-term pension obligations. The House of Lords report and a Brueghel report provide detailed discussions on this issue.

11. The Union, a staunch supporter of the Good Friday Agreement’s peace and reconciliation goals, maintains its commitment to the Peace Process’s achievements, benefits, and commitments. Given the unique circumstances on the island of Ireland, flexible and imaginative solutions are required, including preventing a hard border while respecting the Union’s legal order. The Union should also acknowledge existing bilateral agreements and arrangements between the UK and Ireland that are compatible with EU law.

Both the EU and the UK prioritize addressing the Ireland-Northern Ireland border issue. (The EU guidelines make no specific mention of Scotland; the EP resolution merely notes Scotland’s Remain vote). A strong willingness to compromise is evident (“flexible and imaginative solutions”). Importantly, Treaty Protocols oblige the EU to facilitate the Common Travel Area between the UK and Ireland (“should also recognise” understates this legal obligation). However, the Protocols don’t detail the implications of UK withdrawal, making it a negotiation point. Historical arguments concerning the UK and Ireland are irrelevant, as there’s no precedent for one country being in the EEC/EC/EU while the other is not.

12. The Union and the UK should establish arrangements concerning the UK’s Sovereign Base Areas in Cyprus, recognizing bilateral agreements and arrangements between the Republic of Cyprus and the UK that align with EU law. This particularly concerns the status of EU citizens residing or working within the Sovereign Base Areas.

A specific Protocol to the 2003 Accession Treaty addresses the UK sovereign base in Cyprus. This will likely require amendments to reflect any new agreement. Despite the overarching EU-wide approach, a bilateral agreement between the UK and Cyprus alongside an EU-UK agreement is acknowledged.

13. Following the withdrawal, the Union, with its 27 Member States, will retain the rights and obligations of the 28-member Union concerning international agreements. Agreements concluded by the Union, Member States acting on its behalf, or jointly will no longer cover the UK. The European Council expects the UK to honor its share of international commitments made as an EU member. A constructive dialogue with the UK on a possible common approach with affected third-country partners and international organizations should be pursued in such cases.

The EU’s stance is clear: upon Brexit, the UK ceases to be party to any treaty with non-EU countries within the scope of EU law, regardless of whether the agreement was concluded by the EU alone, Member States alone (affecting EU law), or jointly. This particularly impacts trade agreements (discussed by Markus Gehring) but extends to other agreements (e.g., environmental agreements).

The UK will likely seek replacement agreements with the relevant countries, a move encouraged by the EU’s call for a ‘constructive dialogue’. The ‘international organizations’ reference points primarily to the WTO.

Practically, the ’tariff rate quotas’ pose a challenge: allowing a specific quantity of products at a reduced tariff. If the EU allows 100,000 tons of olives from Morocco at a low tariff, a logical solution is to divide that quota between the UK and the remaining EU based on recent trade flows (e.g., the proportion of olives imported by the UK versus the rest of the EU in the past three years).

Non-EU countries must consent to this process. The UK might prioritize replicating agreements with a significant impact on its exports, such as EU agreements protecting the ‘Scotch Whisky’ designation.

14. While the relocation of EU agencies and facilities currently in the UK is a decision for the 27 Member States, arrangements should facilitate their transfer.

The intention is to relocate these entities as soon as possible after Brexit Day, if not before. While excluded from the decision-making process regarding relocation destinations, the UK will be involved in the logistical aspects of the move.

15. Arrangements should be in place to ensure legal certainty and equal treatment for all court proceedings involving the UK or its natural or legal persons pending before the ECJ on the withdrawal date. The ECJ should retain its jurisdiction in these cases. Similar arrangements should apply to administrative procedures before the European Commission and Union agencies on the withdrawal date involving the UK or its natural or legal persons. Provisions should also be made for potential administrative or court proceedings initiated post-exit for events occurring before the withdrawal date.

The EU assumes that the ECJ should retain jurisdiction over EU court cases pending on Brexit Day, a logical stance considering these cases involve the pre-Brexit legal framework (comparable to the proposed Great Repeal Bill, which maintains the binding nature of pre-Brexit ECJ case law). The situation is less clear for pending administrative procedures, such as those concerning competition law and state aid (“arrangements should be found”). This ambiguity also applies to cases involving EU law issues pending in UK courts on Brexit Day or initiated afterward concerning pre-Brexit events (e.g., a 2018 tax bill).

This paragraph is insufficiently comprehensive. The transitional deal needs to explicitly address all legal proceedings under EU law pending on Brexit Day, not just those involving EU institutions. Examples include a pending claim for recognizing a German court judgment in the UK, or the French authorities’ obligation to execute a pre-Brexit European Arrest Warrant issued by the UK. The majority of EU law implementation occurs at the national level, handled by national courts and administrations, an aspect the transitional rules must consider.

16. The withdrawal agreement should include appropriate dispute resolution mechanisms concerning the agreement’s application and interpretation. It should also establish clearly defined institutional arrangements enabling the adoption of measures for unforeseen situations, always bearing in mind the Union’s interest in safeguarding its autonomy and legal order, including the ECJ’s role.

The institutional arrangements likely refer to an EU/UK Joint Committee with decision-making power based on mutual agreement, similar to bodies in other EU treaties with non-EU states. While acknowledging the need for dispute resolution mechanisms, the text, particularly the first and third sentences, doesn’t explicitly mandate ECJ jurisdiction over the withdrawal agreement (although the ECJ will inevitably hold jurisdiction over the EU side). The focus on ensuring EU autonomy reflects ECJ case law stipulating that treaties with non-EU countries cannot impede the independent development of EU law or infringe upon the Court’s essential powers: see Opinion 1/91 and Opinion 1/00. This contrasts with point 17 of the EP resolution, which explicitly calls for ECJ jurisdiction over the withdrawal agreement.

IV. Preliminary and preparatory discussions on a framework for the Union - United Kingdom future relationship

17. The European Council welcomes and reciprocates the UK’s desire for a close partnership post-Brexit. While acknowledging that a relationship between the Union and a non-Member State differs from full membership, both sides have a vested interest in strong, constructive ties extending beyond trade.

The EU generally agrees with the UK’s vision of a close partnership encompassing but not limited to trade. The specific form of this relationship, however, remains undefined. This is relevant as it could influence whether the EU must vote unanimously and seek national parliament ratification for any treaty (EU treaties with non-EU states can be partially applied provisionally pending ratification). Point 22 of the EP draft resolution suggests a potential association agreement, which typically requires unanimous voting and national ratification.

18. The European Council acknowledges the UK government’s indication that it won’t seek to remain in the Single Market but desires an ambitious free trade agreement with the EU. Aligned with its interests, the European Council is prepared to begin working towards such an agreement, to be finalized and concluded after the UK ceases to be a Member State.

The EU accepts the UK’s preference for a comprehensive FTA over continued Single Market participation. Notably, the EU doesn’t mention the free movement of people or financial contributions - two key objectives for the UK. The timing, as mentioned earlier, is crucial; finalizing the agreement post-Brexit necessitates a transitional deal in the interim. While theoretically achievable on or shortly after Brexit Day, it’s unlikely given the limited timeframe.

19. Any free trade agreement, while balanced, ambitious, and wide-ranging, cannot equate to Single Market participation or partial participation, as this would undermine the Single Market’s integrity and functionality. It must ensure a level playing field concerning competition and state aid, including safeguards against unfair competitive advantages resulting from practices like fiscal, social, and environmental dumping.

EU trade agreements often include provisions regarding state aid and competition law, although only some require non-EU states to directly implement EU law in these areas. The guidelines remain open-ended about the EU’s specific objectives. WTO rules also impose some restrictions on subsidies, allowing trading partners to retaliate if subsidies are deemed unfair, although these rules are less comprehensive and enforceable than those binding EU Member States. (Note that the EU permits state aid under specific circumstances).

The EU’s desire for ‘safeguards against unfair competitive advantages’ encompasses ‘fiscal, social, and environmental dumping.’ While this doesn’t explicitly demand UK adoption of EU law, and there’s no existing EU law on minimum corporate tax rates (compare to para 24 of the EP resolution, which explicitly mentions EU laws concerning ’tax evasion and avoidance,’ separate from tax rates), the UK might argue that remaining party to international treaties on environmental law and social protection (through the ILO, the Council of Europe, and the UN Covenant on Economic, Social and Cultural Rights) and engaging in regular dialogues on corporate tax rates would suffice. However, many in the UK would welcome safeguards against weakened environmental and social standards and would be concerned about funding public services if corporate taxes were significantly reduced. This is a double-edged sword.

The specific safeguards the EU would deem acceptable remain unclear. However, the EU’s position should be considered within the broader context: the EU isn’t demanding free movement of people or financial contributions. The lack of explicit mention of services, an area where the UK enjoys a trade surplus, is noteworthy. This suggests the EU’s condition for the UK maintaining its strong surplus through an advanced trade relationship with more liberalized services trade (while still falling short of Single Market participation).

20. The EU is open to exploring a partnership extending beyond trade, particularly in areas like combating terrorism, international crime, security, and defense.

This aligns with the UK’s stance, although neither side provides concrete details.

21. The future partnership must include robust enforcement and dispute settlement mechanisms that respect the Union’s autonomy, particularly its decision-making procedures.

The ECJ isn’t specifically mentioned here, and the autonomy issue was addressed earlier. ECJ jurisdiction over disputes with non-EU states is uncommon, with exceptions like the European Aviation Area treaty facilitating aviation between EU and other European countries. However, the EU often incorporates dispute settlement systems similar to the WTO’s in agreements with non-EU countries. Interestingly, the EU seldom utilizes such systems in its trade agreements, often relying on the WTO instead.

In essence, the WTO system employs expert panels to determine WTO law violations, with appeals possible through an Appellate Body. If a WTO member found in breach doesn’t comply with the rulings, the complainant can be authorized to impose proportionate trade sanctions. Dispute settlement bodies aren’t exclusive to the EU and WTO; the NAFTA agreement between the US, Canada, and Mexico is an example. While these systems lack the legal force of EU law within national legal frameworks, they impose constraints on parties to trade treaties.

22. Post-Brexit, any agreement between the EU and the UK cannot apply to Gibraltar without a separate agreement between the Kingdom of Spain and the UK.

This clause has been met with disproportionate reactions. It doesn’t assert territorial claims or joint sovereignty over Gibraltar, making discussions of military action unnecessary. It merely clarifies that the EU won’t apply post-Brexit treaties to the UK unless the UK and Spain reach a separate agreement. The onus is on the UK and Spain to find common ground for each treaty or accept that the treaty either won’t be concluded or won’t apply to Gibraltar.

V. Principle of sincere cooperation

23. Until its departure, the UK remains a full member of the European Union, subject to all rights and obligations under the Treaties and EU law, including the principle of sincere cooperation.

This reflects the UK’s stated commitment to upholding EU law until Brexit Day. Point 5 of the EP draft resolution echoes this sentiment.

24. The European Council recognizes the need to consider the UK’s unique circumstances as a withdrawing Member State within the international context, provided it remains committed to the Union’s interests during its remaining membership. Similarly, the Union expects the UK to acknowledge the 27 Member States’ need to convene and address matters related to the post-Brexit landscape.

The first sentence is ambiguous regarding the UK’s ability to engage in trade talks with non-EU countries. While concluding such agreements before Brexit would violate EU law (para 23), it’s unclear if this sentence permits discussions about post-Brexit deals due to the UK’s status as a withdrawing member. The second sentence asserts the remaining EU’s right to convene without the UK, potentially going beyond the Brexit-related discussions without the UK’s presence as outlined in Article 50. However, as the next paragraph confirms, such meetings must remain informal.

This contrasts with point 6 of the draft EP resolution, which explicitly prohibits the UK from engaging in negotiations with non-EU countries before Brexit and advocates excluding the UK from EU trade talks with non-EU countries if it violates this. Such an exclusion wouldn’t be legally sound; in cases of alleged EU law violations, the appropriate action is for the Commission or another Member State to bring the UK before the ECJ.

25. The EU’s business must continue as smoothly as possible with 28 members while the UK remains a member. The European Council remains committed to pursuing the Union’s established priorities. Negotiations with the UK will be handled separately from ongoing Union business and should not impede its progress.

While retaining its formal status as a Member State until Brexit Day, the UK’s influence will inevitably wane. Addressing its concerns will be a low priority, and other Member States can simply wait out any UK veto attempts or participation in blocking minority votes.

VI. Procedural arrangements for negotiations under Article 50

The European Council endorses the arrangements outlined in the December 15, 2016, statement by 27 Heads of State or Government.

These procedural arrangements are discussed further in the next annex.

Annex II – Procedural rules

What follows are the December 2016 procedural rules with annotations.

1. Following the UK’s notification, the first step involves the European Council adopting guidelines defining the negotiation framework under Article 50 TEU. These guidelines will outline the overarching positions and principles guiding the EU. The European Council will closely monitor and update these guidelines as needed throughout the negotiations.

This refers to the European Council guidelines (Heads of State and Government), the draft of which is now public and discussed above. Article 50 mandates the adoption of these guidelines at the start of the process.

2. After adopting the guidelines, the European Council will request the General Affairs Council to swiftly adopt the decision authorizing the start of negotiations, based on a European Commission recommendation. The General Affairs Council will also handle subsequent steps in the process and adopt negotiating directives outlining substantive issues and detailed arrangements governing the relationship between the Council, its preparatory bodies, and the Union negotiator. These directives may be amended or supplemented during negotiations to reflect the evolving European Council guidelines.

This follows the standard procedure for EU treaty negotiations with non-EU countries as defined in Article 218 TFEU: a Commission recommendation to initiate talks, followed by a Council mandate with detailed and potentially amendable negotiation objectives. This mandate is expected to be more comprehensive than the current guidelines. The General Affairs Council comprises foreign or Europe ministers from Member States and convenes monthly. The Council’s ‘preparatory bodies’ consist of working groups and Member States’ permanent representatives (meeting weekly, also known as ‘Coreper’).

3. The Council will be asked to appoint the European Commission as the Union negotiator. Michel Barnier’s nomination as chief negotiator has been well-received. To ensure transparency and build trust, the Union negotiator’s team will include a representative from the rotating Council Presidency. Representatives of the European Council President will be present and participate in a supporting role alongside the European Commission representatives during negotiation sessions. The Union negotiator will provide regular reports to the European Council, the Council, and its preparatory bodies.

Article 50 doesn’t specify negotiators, leading some to believe it would be the Council. Choosing the Commission aligns with the standard approach under Article 218 TFEU. However, including representatives from the rotating Council Presidency and the European Council President (Donald Tusk) is a novel approach, highlighting the significance of these negotiations. The reporting obligation to EU bodies reflects Article 218 TFEU.

4. Between European Council meetings, the Council and Coreper, aided by a dedicated Working Party with a permanent chair, will ensure the negotiations adhere to the European Council guidelines and the Council negotiating directives, providing guidance to the Union negotiator.

Council working parties overseeing Commission negotiators are standard practice under Article 218 TFEU (and Article 207 TFEU regarding trade). The Commission refers to this supervisory committee as the ‘mothers-in-law’ (don’t shoot the messenger!).

5. Representatives from the UK within the European Council, the Council, and its preparatory bodies will not participate