Professor Steve Peers, University of Essex

Introduction

The recent joint report on the progress of Brexit negotiations, along with a related paper from the Commission, represents an informal agreement to move to the next stage of negotiations. Based on this report, the EU27 have agreed that “sufficient progress” has been made to move forward. This next phase will focus on a transition period and, potentially starting in March 2018, the framework for the post-Brexit relationship between the UK and the EU.

This post will focus on the parts of the joint report concerning the Irish border, financial settlement, and concluding issues. While not legally binding, the joint report outlines political commitments crucial to finalizing the withdrawal agreement and shaping future EU-UK relations. These points will be further elaborated upon when drafting the formal withdrawal agreement, a process set to begin shortly. Some points remain under negotiation or require further development, and any agreement regarding the transition period will need to be incorporated into the withdrawal agreement. Nevertheless, this recent deal marks a significant step forward, making a final, comprehensive withdrawal agreement more likely.

Regarding citizens’ rights, the UK has committed to introducing a bill for an Act of Parliament that would give domestic legal effect to the withdrawal agreement. This Act would explicitly reference the agreement and integrate the citizens’ rights provisions into UK law. However, the UK has not explicitly committed to integrating the agreement’s other provisions into UK law.

Irish Border Issues

Given the differing viewpoints of Ireland (supported by the EU27), the Democratic Unionist Party (DUP), and factions within the Conservative government, reaching an agreement on the Irish border proved to be the most challenging aspect of the joint report.

Both sides remain committed to the Good Friday Agreement, which effectively ended the protracted period of violence surrounding Northern Ireland’s status. The joint report also highlights the UK government’s goal of preventing a “hard border” between Northern Ireland and Ireland, characterized by the absence of physical infrastructure, checks, or controls at the border. To reassure the DUP, both sides concur on upholding the “principle of consent” outlined in the Good Friday Agreement (meaning Northern Ireland would need to vote in favor of unification with Ireland), and the UK supports Northern Ireland remaining part of the UK absent such consent. The UK acknowledges both Ireland’s desire to remain within the EU internal market and customs union and Northern Ireland’s desire to remain within the UK internal market as the UK exits the EU’s. Reconciling these stances with the aim of avoiding a hard border presents a challenge.

The joint report refrains from making any premature decisions regarding the broader EU-UK relationship, which may need to be tailored to the unique circumstances of the island of Ireland. The commitments are intended to be upheld under all circumstances, regardless of the nature of any future UK-EU agreement. However, it is difficult to envision how this could translate into a legally binding obligation applicable even if a withdrawal agreement is not reached.

Furthermore, the joint report stresses the importance of preserving North-South cooperation on the island of Ireland, which is intertwined with cooperation within the EU framework across various sectors. Then comes the crucial paragraph 49, where the UK reiterates its commitment to North-South cooperation and its pledge to avoid a hard border:

“Any future arrangements must be compatible with these overarching requirements. The United Kingdom’s intention is to achieve these objectives through the overall EU-UK relationship. Should this not be possible, the United Kingdom will propose specific solutions to address the unique circumstances of the island of Ireland. In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market or the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement.”

This reassurance to Ireland is immediately followed by a reassurance to the DUP: the UK will not establish new regulatory barriers between Northern Ireland and the rest of the UK unless Northern Ireland consents.

The joint report proceeds to address related matters. It recognizes that, as a result of Irish citizenship law, many in Northern Ireland will retain Irish citizenship and, consequently, EU citizenship. Human rights and equality law will continue to be safeguarded, including non-diminishment of equality rights protected under EU anti-discrimination law. The Common Travel Area for individuals will remain in effect. In fact, the UK’s position paper on Northern Ireland states its intent not to implement checks on individuals crossing the land border with Ireland, but instead to manage migration control through in-country checks at workplaces, banks, universities, and landlords (among others), as is currently the case for non-EU citizens. Lastly, funding programs related to the peace process will persist, and their future implementation will be “examined favorably.” The Commission paper, in fact, commits to proposing the continuation of these programs in the next EU multi-annual funding cycle, with a proposal expected in May 2018.

The critical question in this section of the joint report is how to prevent a hard border and maintain broader North-South cooperation. Some interpretations of paragraph 49 suggest the UK is implicitly committing to remain part of the EU’s internal market and customs union; however, this interpretation clashes with the paragraph explicitly stating the UK is leaving both. (The EU27 guidelines on the transitional period reiterate this point.)

Upon closer examination, the obligation for “full alignment” only applies if the commitments to “no hard border” and North-South cooperation cannot be achieved through the overall EU-UK agreement or by a specific solution. Even then, it is a commitment to align with “those rules” within the internal market or customs union that support North-South cooperation, etc. If the intent were to commit to remaining in the entire customs union and internal market, why single out only some rules in this context?

The reality is that this phrasing is a calculated ambiguity, intended as a vague compromise sufficient to secure a nod for “sufficient progress” and advance to the next phase of negotiations. The “Irish border” section of the joint report lacks the concrete detail present in the sections on citizens’ rights and the financial settlement. Whether the two sides are content to leave this point open-ended for the time being remains to be seen, particularly as talks regarding the future trade relationship have yet to commence, and a “status quo” transitional period would delay the need for a definitive decision.

Should they choose to address this issue in greater detail at an earlier stage (as implied by the wording in the joint report), it will be necessary to clarify the extent to which paragraph 49 pertains solely to border controls versus its application to broader issues of North-South cooperation and the all-island economy. Border controls do not encompass every aspect of the internal market, considering that checks on individuals are addressed separately in the joint report, and issues related to the regulation of services or establishment have little to no bearing on checks at land borders. (It’s worth noting that the issues on which Jeremy Corbyn’s Labour leadership would most prefer to deviate from single market rules — competition, state aid, regulation of public services — have minimal connection to land border checks.)

Concerning land border checks specifically, the UK’s Northern Ireland paper posited that trade and regulatory rules could differ to some extent while still avoiding a hard border through the implementation of new high-tech systems for remote trade tracking. Two such methods were proposed (a “highly streamlined customs arrangement” and a “new customs partnership”), but neither was elaborated upon in detail. (See the discussion paper on the proposed Customs Bill.)

On the other hand, ensuring regulatory alignment for North-South cooperation and the all-island economy would involve a broader swathe of the internal market, though not necessarily in its entirety. Regardless of the interpretation, this raises the question of whether the EU27 would accept a solution involving adherence to only some EU rules, rather than all. While the EU27 has stated it would not accept “cherry-picking” of internal market rules by the UK, it has also expressed a willingness to consider a “unique” solution for Ireland in light of its particular circumstances. This contradiction mirrors the tension within the UK’s own stance: simultaneously aiming to avoid a hard border, keep Northern Ireland within the UK internal market, and diverge from EU regulations. While the UK has frequently and justifiably faced criticism for its “have your cake and eat it” approach to Brexit, the EU27 seems to be engaging in some magical munching of its own.

Financial Settlement

EU budgetary law is notoriously complex. However, examining the specifics of the agreement on this matter is crucial, as the principle of paying anything to the EU after Brexit is deeply unpopular among some. It is important to note that the EU27 was not simply seeking a lump sum (as some have claimed), but rather a detailed list of commitments related to specific amounts it believed were owed due to the UK’s membership leading up to Brexit day. Additionally, it is essential to understand that the financial settlement represents money the UK would have paid anyway had it remained an EU member state. Suggesting it is an additional fee incurred because of Brexit is misleading. However, the magnitude of the financial settlement further undermines earlier misleading claims about how much the UK stood to save by leaving the EU.

Rather than a precise figure, the two sides have agreed on a “methodology” for the financial settlement. This methodology comprises four elements: a list of components outlining what is owed; principles for calculating the value of the settlement; provisions for the UK to remain part of the current EU budget until its conclusion in 2020; and arrangements for the UK’s involvement in other EU spending. Some points are deferred to the second phase of talks (paragraphs 60, 67c, 70, 72, 80, and 85) or, effectively, to the future relationship negotiations (paragraphs 66 and 73).

Components of the Settlement

The UK has agreed to continue participating in the current EU budget until the end of 2020, despite leaving the EU in March 2019. The EU27 views this as an outstanding obligation, while the UK sees it as an aspect of the post-Brexit transition period, as proposed in the Prime Minister’s Florence speech. In principle, the UK’s legal argument holds; in practice, it is a distinction without a difference.

Notably, the joint report states that any changes to the EU’s foundational spending or revenue laws enacted after Brexit day that impact the UK will not apply. This protects the UK from having its budget rebate abolished or reduced, or from being obligated to contribute to any (hypothetical) increases in EU spending, without its veto. It stands as a clear “derogation” from the rule (later proposed in the EU27 guidelines) stating that the UK would be bound by new EU laws adopted during the transition period. Conversely, it implicitly follows that the UK would be bound by the annual EU budgets for the entirety of 2019 and 2020 (excluding any portions of those budgets impacted by changes to the fundamental budget laws) and any amendments to the EU’s Financial Regulations (which detail the technical aspects of the EU spending process without determining actual spending amounts).

The UK has also agreed to contribute its share of funding commitments pledged by the EU before the conclusion of the 2020 budget cycle but not actually disbursed until a later date. Known by the rather clunky French acronym “RAL,” this constitutes likely the largest portion of the financial settlement. A detailed agreement outlines the calculation of the UK’s share of EU liabilities generally.

Principles for Calculating the Value of the Settlement

This section of the joint report details the calculation of the UK’s share of EU spending, including a requirement that UK contributions be made in euros. This means the UK will pay a premium due to the decline in the value of the pound following the Brexit vote and the decision to leave the single market.

Current EU Budget

The joint report clearly states that the UK will fully benefit from EU spending until the end of the 2020 budget cycle. This means, for example, that EU regional funds, agricultural subsidies, and research funding will continue to be allocated to the UK until the end of 2020. While the UK has expressed a desire to continue participating in certain EU programs post-Brexit, this issue will be addressed in negotiations regarding the future relationship.

Other EU Spending

The UK has agreed to guarantee its “callable capital” in the European Investment Bank. A schedule is in place for the return of the UK’s capital in the Bank over twelve years (at a rate of €300 million per year). Once again, while the UK desires a continuing relationship, this remains a topic for future negotiations. The UK’s capital in the European Central Bank will also be returned, with details to be determined by the Bank.

The UK will maintain its participation in off-budget EU spending related to Turkey and Africa (concerning migration and refugees) and in the European Development Fund, the aid program for African, Caribbean, and Pacific countries. This spending, for its duration, will presumably still count towards the UK’s commitment to spend 0.7% of its GDP on international aid. This does not represent a direct financial saving, though it would have provided the UK with the option to allocate this aid money differently had these commitments not been in place. The joint report includes an agreement to discuss “governance arrangements” to account for the off-budget nature of this fund, presumably to preserve the UK’s decision-making role in this area despite its loss of representation within EU institutions.

Finally, the report acknowledges the UK’s intent to discuss reducing the withdrawal costs for EU agencies relocating from London. It seems peculiar that these agencies would not be able to mitigate these costs by subletting their office spaces to other tenants.

‘Winding Up’ Rules

These are the least prominent issues covered in the joint report, but they are nonetheless important for the practicalities of the UK-EU relationship. Any agreements reached on this matter may prove irrelevant, at least temporarily, if the substance of UK-EU relations remains unchanged during the transition period (as proposed by the EU27). They may even become permanently irrelevant to the extent that the UK and EU agree to continue applying existing rules even after the transition period concludes. However, it is probable that a substantial portion of the current rules will eventually change.

On these matters, the joint report (paragraphs 87-95) indicates that “further discussion” is needed on certain issues during the second phase. The Commission paper notes that discussions have not yet begun regarding EU27 papers on issues related to intellectual property law, customs, public procurement, and data protection. However, some principles have been agreed upon concerning the UK’s participation in Euratom, the atomic energy body. However, the Commission paper points out that some issues remain unresolved. Several points have been agreed upon regarding goods placed on the market before Brexit day, although the Commission paper notes that no agreement has been reached on the definition of “placing on the market” or on regulatory competence.

Concerning civil law cooperation, the two sides have agreed to continue applying existing conflict of laws rules where the contract was signed or the damage occurred before Brexit day. Current rules on court jurisdiction will apply to proceedings initiated before Brexit day. However, a complete agreement regarding the mutual recognition of civil judgments or decisions is still pending: while a judgment issued before Brexit day will be recognized, the two sides have not yet agreed on the status of a case pending on Brexit day but decided afterward. Disagreement persists on the implications of a “choice of court” rule being triggered after Brexit day, but civil cooperation proceedings ongoing on Brexit day (e.g., the service of documents or a request for evidence) will be completed.

On criminal law, both sides have agreed that pending procedures will be finalized, but a cut-off date has yet to be established. Procedural rights for suspects, with respect to legislation the UK has opted into, will be guaranteed.

Regarding issues specific to EU institutions, the UK has accepted the EU27’s position that the ECJ will retain jurisdiction to deliver a judgment in cases involving the UK that were brought before it before Brexit day, even if the judgment is issued after Brexit day. (Presumably, it will be clarified that such a judgment would still be binding on the UK, given the ECJ’s insistence on the binding nature of its judgments.) However, as noted in the Commission report, the two sides have yet to agree on the handling of EU law cases pending in UK courts on Brexit day (i.e., could they still be referred to the ECJ for a ruling?).

Moreover, no agreement has been reached on the management of administrative proceedings in progress before EU institutions on Brexit day, such as competition and state aid cases. However, agreement has been reached on matters related to immunities, professional secrecy, and classified information.

Notably, there is also no agreement on “governance issues,” particularly the role of a Joint Committee and the dispute settlement process, including the role of the ECJ (note this is separate from the agreed-upon role of the ECJ regarding citizens’ rights).

Conclusions

Hardline Brexiteers once claimed that the UK could swiftly secure a straightforward trade agreement from a capitulating EU, with the UK’s demands met immediately. The protracted and complex Brexit negotiations to date — even before trade talks have begun — demonstrate the fallacy of these assertions.

The specifics of the agreements reached so far further underscore this point. If the UK truly “holds all the cards” in these negotiations, why agree to a financial settlement worth tens of billions? If the UK-Ireland border could truly remain unaffected by Brexit, why the need for such convoluted language and numerous details still to be ironed out? If citizens’ rights issues could be resolved through a simple exchange of letters, why has the UK agreed to the continued application of key aspects of EU law to EU27 citizens residing in the UK?

The UK-Ireland relationship will undoubtedly remain central not only to the withdrawal agreement but also to the future UK-EU relationship. The irony of the situation is manifold. Firstly, while the UK government attempted to leverage discussions concerning the Irish border to expedite talks on the future EU-UK trade relationship, the EU27’s willingness to do just that exposed the lack of consensus within the UK government (and between the government and the DUP) on what the UK actually desires from that future relationship.

Secondly, the joint report treats Northern Ireland as a quantum entity: simultaneously reaffirming its identity as an integral part of the UK and its distinct status as a part of the UK closely tied to the Republic of Ireland. Perhaps this is to be expected given the influence of the Democratic Unionist Party, which sees no contradiction in concurrently emphasizing Northern Ireland’s uniformity with the rest of the UK and advocating for lower taxes, increased spending, and different laws on same-sex marriage and abortion there compared to the rest of the UK.

Thirdly, the significant overlap between hardline Brexiteers and staunch unionists inherently contradicts itself. The Good Friday Agreement dictates that maintaining close ties between Northern Ireland and the rest of the UK inherently necessitates a close relationship between the entire UK and Ireland — and, by extension, the rest of the EU. Brexiteers are eager to strengthen ties with the USA and the Commonwealth, but Ireland was not the former colony they had in mind.

In conclusion, reaching an agreement on the first phase of Brexit talks makes a “no deal” outcome somewhat less likely — although this may be paralleled by a reduced likelihood of the “Remain” option prevailing, assuming leaving the EU results in a gradual economic impact rather than a sudden shock. Combined with plans for a transition period that largely or entirely preserves the substance of EU membership, the joint report suggests a process in which the UK gradually shifts from being a semi-detached member of the EU to a semi-detached *non-*member.

While the UK government has not yet abandoned all the magical thinking in which Brexiteers have indulged, its willingness to compromise on some contentious issues suggests an acknowledgment that “no deal” is undesirable. The government has also acknowledged the necessity of a transition period, the inevitability of a financial settlement, and (tentatively) the reality that Irish border issues will not be magically resolved. While the move to the next phase of Brexit talks was a setback for proponents of disaster capitalism and fantasy, and while the skies may be clearer without flying pigs and unicorns, it seems everyone will now be subjected to the same incessant complaining from hardline Brexiteers that they have long accused “Remainers” of engaging in.

Barnard & Peers: chapter 27

Art credit: Steve Cutts