Following PM May’s triggering of Article 50, Donald Tusk has published for the European Council the draft guidelines for the negotiations. This means that the UK and EU are entering the withdrawal negotiation process. While it is impossible to predict the outcome at this stage – there are simply too many unknowns – it is possible to say what will take place next: how the negotiations will be started and what will be on the menu at each stage. 

Orderly withdrawal

The first principle is that the EU will aim to reach an agreement on an orderly withdrawal. Article 50 includes a danger that the UK will simply fall out of EU membership: If the withdrawing state and the remaining EU member states do not reach an agreement within 2 years from triggering Article 50, and they do not agree unanimously to extend the time period for the negotiations, the EU treaties shall cease to apply to the withdrawing state.

This is the cliff-edge scenario, where the UK simply ceases to be an EU member state, without a separate formal exit agreement, transitional provisions or new trading relationship having been agreed.

The problem with this disorderly withdrawal is that it will hit hardest those people and businesses who have been able to benefit from free movement, and who have forged cross-border lives or trading relationships. These are those EU citizens living in the UK, UK citizens living in the EU – including those who work at the EU institutions – or those businesses who are engaged in cross-border trade. Including them and their family members, a disorderly withdrawal impacts the lives of tens of millions of people. 

Negotiations: phased approach

The second principle is that the negotiations will be conducted with a phased approach. This means that there will be no negotiations in parallel about the exit and the possible new relationship, at least until the main issues for the exit have been agreed. The purpose for the EU is to first set an orderly exit, and after that establish a new framework.

This corresponds to what Article 50 TEU provides. It establishes a process for an exit agreement and simply mentions that those arrangements may take account of the new relationship, which is to be negotiated under Article 218 TFEU process. This means that there will be at least two treaties with the EU: one on exit, another on the new relationship.

Exit agreement ending the UK membership

The exit agreement will be about institutional issues surrounding the finalising of the UK’s EU membership. The crucial issue here is to settle the final budgetary contributions and financial responsibilities. These are those contributions that the UK has agreed to make as an EU state.

Further issues in this category will be setting dates for ending the various posts that the UK holds in the EU institutions: the Commissioner, Judges at the Court of Justice, and what will happen to the UK citizens employed by the UK institutions, their rights to employment and pensions.

The draft guidelines see that the exit agreement will also contain provisions on the rights of the EU and UK citizens and businesses. Furthermore, the agreement will aim to ensure that the businesses or individuals are not left in a legal vacuum once the UK’s membership ends.

These parts of the agreement are likely set out cut off dates, e.g. who gets to benefit from the EU citizenship laws and who does not anymore. This would also include cut off dates for the cases pending before the Court of Justice and national courts with UK and EU parties, or for the Commission investigations.

Finally, it is possible that parts of the agreement aim to settle also more permanently some aspects for the future. The draft guidelines recognise the special circumstances surrounding the Northern Irish border and provide that the EU and UK should seek for flexible and creative solutions in order to avoid hard border between the Northern Ireland and the Republic of Ireland.

Agreement on the new relationship

A separate agreement on the new relationship will be needed in order to determine the new legal framework between the UK and EU. This may take the form of a free trade agreement or something more ambitious, including areas beyond just trade in goods.

Both the UK and EU are going to be seeking a special relationship or partnership. The UK government is seeking an agreement on trade, but also on issues such as security and fight against crime or terrorism.

The EU draft guidelines remind us simply that the new deal cannot be expected to provide the same benefits as the Union membership and must not undermine the proper functioning of the internal market. It furthermore needs to set a level playing field and include competition and state aid and include safeguards against fiscal, social or environmental dumping.

Transitional agreement

The likelihood of an agreement on the new relationship being agreed within the two-year period prescribed for the exit is small, in particular if the parties are looking to include areas not normally covered by the FTAs, e.g. criminal justice or access to intelligence sharing in the fight against terrorism and crime, while seriously limiting the present framework in relation to trade in services or free movement of persons.

This means in turn that there may be a need for a third agreement, a transitional agreement, which allows a continued legal framework to be applied between the UK and EU, without the UK being formally a member of the EU any longer.

The draft guidelines suggest that this is likely to take the form of preserving the status quo on the legal framework that is applied to individuals or businesses. This makes sense in that if there were to be major amendments to the present framework, it would be a new agreement, which needs to be negotiated and agreed by the parties.

What’s next?

At the next stage the Commission is aiming to submit its draft mandate for the negotiations in early April. This Commission mandate will in turn be adopted by the Council and it will bind the EU both as to the scope of the negotiations and the team that the UK government will be negotiating with.

The draft mandate is likely to follow closely the guidelines set by the European Council – in particular, as the draft guidelines repeat quite faithfully what the Commission lead negotiator, Michel Barnier, has already proposed. He has asked for a staged approach, whether he will ask for the starting only of exit negotiations in the mandate, at this stage, will be one of the issues to watch for. After the mandate is adopted and the team appointed, the EU side will be ready to start.

The rest, time will tell, how these negotiations will go, how long will they take and how many stages will we see.

This article has been written the Law Society of Scotland’s Journal, and it will appear on 17 April edition.