Brexit – what happens next?

Parliament is in a tizzy over the draft ‘Withdrawal Agreement’ and latest version of the ‘Political Declaration’ that mark the end results of Brexit negotiations between UK and EU.

The documents are important in providing working arrangements and a starting point for the next step.  But this unique event - which truly is sending ripples around the World – has multiple threads that have to be woven together before moving to the next step – and there are many steps in the sequence before the end-game and long-term stability is reached.

For the UK to Brexit with a ‘deal’

In the remaining weeks until UK leaves the EU at 23:00 GMT on 29 March 2019, if a Brexit deal is to be agreed and ratified – the threads ultimately include: UK and 27 other EU National Parliaments; the European Parliament; European Commission (EU civil service); and European Council – comprised of the 28 Prime Ministers and Presidents of the bloc.

The Draft ‘Withdrawal Agreement’, published 14 November, lays down the rules for two steps beyond Brexit: the UK’s actual withdrawal from the EU on 29 March 2019; and a transition period until the end of 2020 – with one possible extension – during which time negotiations of the future relationship between EU and UK can take place.

After that, future trade relationship between the EU and the UK comes into effect.  The outline for this was published in an accompanying 6-page ‘Political Declaration’.  Subsequently this Political Declaration – which is not legally binding and will be the subject of a second agreement and will require its own (and different) ratification process – has been further fleshed out.  A future insight will do a detailed analysis and forecast of impacts for business and citizens.

Establishing the process, timing and conditions for the divorce and subsequent settlement

UK Parliament must approve both the Withdrawal Agreements and Political Declaration allowing time for proscribed constitutional process to complete before 29 March 2019.

In the UK, Treaties must be laid before Parliament under the so-called Ponsonby rule before the Government ratifies them.  This process was codified in law in 2010 and means Parliament can object to a treaty within 21 parliamentary sitting days and delay its ratification indefinitely.

On this occasion, however - for both the Withdrawal Agreement and the framework for the Political Declaration - Parliament’s role has been enhanced, and MPs will have a “meaningful vote” on the content of both documents.  This came into law as Section 13(1) of the European Union (Withdrawal) Act 2018, which requires the draft agreements to be put to both Houses of Parliament.  MPs must approve it and at the same time pass legislation to implement Brexit.

The role of the European Parliament - and the Parliaments of each of the 27 member states – has different ratification rules for the Withdrawal Agreement and the future trade agreement (Political Declaration).

The Withdrawal Agreement is an ‘international agreement’ better known as a ‘Treaty’.  Treaties are typically negotiated by the government or executive branch - in this case the UK government on the one side and the EU’s chief Brexit negotiator, Michel Barnier, acting on behalf of the Council of the European Union.  

The European Parliament - including the MEPs from the UK - must consent by simple majority to the Withdrawal Agreement – but does not have the power to amend it.

The European Council (Heads of States) have to adopt the work of their Commission negotiators by ‘super-qualified majority’.  This means it needs to get support of 72% of the 27 participating member states (or 20 of the 27 member states); and the support must also represent over 65% of the population of the 27 member states.  

Although the UK will still a full member of the EU with full rights in the Council of the EU at the time of this vote, it is excluded from participating in the European Council’s decisions concerning Brexit.

There is no role for national parliaments of the 27 remaining member states regarding the Withdrawal Agreement.

In summary

For there to be a ‘deal’: both UK Houses of Parliament must vote in favour both the Withdrawal Agreement and the Political Declaration before mid-January 2019; the European Parliament (including UK MEPs) must vote in favour of the Withdrawal Agreement by simple majority; and the European Council of Ministers must vote in favour of the Withdrawal Agreement by super-qualified majority.

https://www.brexit-partners.com/blog/2018/11/15/summary-of-the-draft-withdrawal-agreement-released-by-eu-and-uk

Brexit occurs on 29 March 2019, and the Withdrawal Agreement sets the terms under which the UK and EU operate for a temporary, transition, period during which negotiations begin for the long-term future trade agreement.

https://www.brexit-partners.com/blog/2018/11/15/summary-of-the-draft-withdrawal-agreement-released-by-eu-and-uk

If any of these threads break or unravel, Brexit occurs on 29 March under ‘no-deal’ conditions – described by the EU as falling of a ‘cliff-edge’ – immediately subject to the dozens of no-deal Technical Notices that we have been covering in detail in previous insights.  There will be no transition period.   

https://www.brexit-partners.com/blog/2018/11/11/government-updates-advice-on-doing-business-with-eu-in-a-no-deal-brexit

Trading between the UK and Europe will operate under the basic conditions set by the World Trade Organisation.

https://www.brexit-partners.com/blog/2018/11/19/the-great-wto-fallacy-behind-a-no-deal-brexit

Long Term Agreement

In the event of Brexit under the terms of the Withdrawal Agreement - the full agreement governing the future relationship between the UK and the EU needs to be concluded to come into effect at the end of the transition period.  The opening positions for the negotiation are set out in the ‘Political Declaration’.  The end point of those negotiations is at least 2 years away, and it could be indefinitely postponed with the agreement of all the parties some years beyond that.  Why wait until 30 March 2019 to even begin talks about this framework?  Constitutionally, the EU can only negotiate with non-EU members – known as ‘third countries’ – and the UK does not become a third country until after it has left the EU next year.

It is open to the UK to begin bi-lateral negotiations with other third countries from the moment of Brexit, however, the early feedback from WTO and countries that the UK has canvassed, is that they are likely to wait until a long-term deal – or no-deal – with the EU is concluded before entering discussions about international, regional or global trade agreements and trading status.

It is unclear whether the UK parliament will get the enhanced involvement future trade agreements in the way that it has with ratifying the Withdrawal Agreement - or whether the established rules relating to Treaties apply, as the Government has implied.  The House of Commons Committee on Exiting the European Union has been critical of this, calling the established process “inadequate” - as it does not guarantee “a debate or vote on a Treaty before it is ratified.”

The situation on the EU side is constitutionally even more complex than it was for the divorce part of the Brexit process.  In addition to the EU parliament - which must consent to the future trade agreement - each and every one of the 27 remaining member states will need to ratify it according to their own individual national constitutional provisions.

This is because the future trade agreement between the UK and the EU would be a ‘mixed’ agreement, dealing with some matters for which the EU is responsible and with some matters which fall into what’s called “shared competence” between the member states and the EU.  For example, the Court of Justice of the EU (CJEU) ruled in 2017 that provisions relating to investor-state dispute settlement procedures and non-direct foreign investments fall into areas of shared competence.

As comprehensive free trade agreements have to be approved by all national parliaments, there is a risk that a single member state may not ratify the deal and so block the agreement from coming into effect.  This risk became reality in the case of the Canada-EU Trade Agreement (CETA), when one of the regional parliaments of Belgium, the parliament of Wallonia, rejected the deal in 2016.  Italy also threatened not to ratify CETA, while Austria and Germany delayed ratification pending the outcome of judicial proceedings.  CETA’s full ratification is still pending.

And even before the UK has left the EU, countries with vested interests in piling on the negotiating pressure – such as Spain over Gibraltar, and France over fishing rights – are making their positions known.

All this means that while the biggest hurdle for the Withdrawal Agreement remains getting it agreed by the UK parliament, ratifying the future trade agreement is a much more complex process that will be fraught, will take years – and might in the end result in a no-deal outcome.

References

https://www.consilium.europa.eu/en/council-eu/voting-system/qualified-majority/

When the Council votes on a proposal by the Commission or the High Representative of the Union for Foreign Affairs and Security Policy, a ‘super-qualified majority’ is reached if two conditions are met.  This procedure includes what is known as the 'double majority' rule.  It will apply to the Withdrawal Agreement.

  • at least 72% of Council members vote in favour (meaning at least 20 countries)

  • together those countries represent at least 65% of the EU population

Four EU institutions will play a significant role in the Brexit negotiations:

  • The European Council defines the general political direction and priorities of the EU.  It consists of the heads of state or government of the member states, together with its President and the President of the European Commission.  It does not negotiate or adopt EU laws.

  • The Council of the EU represents member states' governments.  It is where ministers below the head of state from each EU country meet to adopt laws and co-ordinate policies.  Along with the European Parliament, the Council plays a key role in negotiating and approving EU legislation and international agreements.

  • The European Commission is the EU’s executive body (civil service).  It is the only institution with the authority to initiate legislation in most areas, though it draws on input from a variety of other bodies.

  • The European Parliament is a directly elected legislature, presently comprising 751 Members of the European Parliament (MEP) elected by citizens of the 28 member states.  Its role in the legislative process is to scrutinise, amend and vote on legislation.

Who decides the EU’s negotiating position?

Two articles in EU treaties will govern how the Brexit negotiations are run:

Article 50 of the Lisbon Treaty describes the process for triggering a withdrawal from the EU

Article 218 of the Treaty on the Functioning of the European Union sets out the arrangements for negotiations with third countries.

According to EU treaties, the European Council, Council of the EU and the European Commission will all have a role in informing and agreeing the EU’s negotiating position.  The European Council will agree the high-level guidelines for the negotiations; the Council of the EU will approve a more detailed, technical mandate; and the Commission will carry out the bulk of the negotiations.

Brexit shifts the balance of power in EU and new definition of QMV may be needed

The Treaty of Lisbon introduced a new system of weighting votes in the Council, which radically departs from the principles based on which the distribution of votes between the Member States of the EU was made for more than half a century.  One of the main arguments for the introduction under the Lisbon Treaty of the so-called double majority system of weighting votes in the Council was the relative ease of its adaptation in the event of accession of new Member States.

It is likely that a new process will be needed after Brexit to avoid countries with bigger populations exerting undue influence over the bloc.

 
John ShuttleworthComment