There are several factors that can help understand the dynamics of the EU-UK negotiations and where the key problems may arise.
First of all, the mechanics of negotiating international agreements by the EU involves a complex and time-consuming exercise of arriving at a common position between (now) 27 member states. Once agreed, although not set in stone, it is not that easy to change it or at least it takes time to ensure that all agree .
Importantly, there are currently several important stumbling blocks that currently determine the pace and the future of the agreement. Despite five negotiating rounds, they persist and will be tackled as priority over the summer.
Architecture of the agreement and governance
As already mentioned above, the publication of each sides’ draft legal texts has also highlighted how the EU and UK have taken a very different approach to how the agreement should both be structured and overseen. The UK has offered one main FTA, supported by a range of ancillary agreements, whereas the EU favours one all-encompassing framework.
The UK is also adamant that the negotiations on an FTA must be kept separate from technical assessments, including on Data Adequacy and the EU response to the UK application to remain a member of the Lugano Convention. It does not appear the EU is playing ball in this regard.
This also has an impact on the progress of the negotiations. While the UK would seem more flexible in terms of the progress of each of its separate agreements, the EU insists on all issues progressing together at the same time.
Level Playing Field
Having emerged as one of the major stumbling blocks in the EU-UK negotiations, it may be a surprise for readers to note that a chapter on Level Playing Field is fairly standard within an FTA. It is though the case that the provisions rarely go beyond minimal commitments over non-discriminatory treatment on supply of services and goods, coupled with an obligation to openly, fairly and transparently operate the national competition regime.
Neither side is barred from supporting businesses or enterprises, but there is typically an agreement to report to the other side every two years which businesses and enterprises have received support, and there is the option to discuss mitigating measures if it is felt that the support has had a detrimental impact on the economic interests of the other side.
The UK has largely stuck to these standard FTA provisions in its position on Level Playing Field, though it has also been prepared to commit to certain international taxation standards, including base erosion and profit shifting (BEPS), whereas taxation would usually not be incorporated.
The EU proposal for dynamic alignment on State Aid rules and Non-Regression Clauses in a wide range of related fields, such as employment, taxation, and environmental standards, supported by rights of enforcement before UK courts is clearly at the other end of the spectrum.
The UK government wants ‘annual negotiations’ on access to UK waters. However, EU fishermen, who rely on being able to fish in UK waters, have said they do not want discussions on quotas and access every year. They are concerned they will have limited, if any, access to the UK waters.
The EU proposal on fisheries has been widely commentated to reflect largely the status quo of EU membership, which is not seen as acceptable to the UK Government. There are suggestions the EU may be willing to reduce its ambitions in this field.
Cooperation in the field of criminal justice
To date, there has been no EU FTA that has included cooperation in the field of criminal justice. In fact, the EU FTAs do not even include judicial cooperation in civil and commercial matters. It is true that there are past agreements that mention these areas of cooperation: the Association Agreements with Georgia (Article 20) and Moldova (Article 21) mention judicial cooperation. Association Agreement with Ukraine (Article 24) also mentions cooperation in criminal justice. However, none of these indicate a specific form this cooperation should take.
For the EU, cooperation in the field of criminal justice forms part of the overal agreement that was published in March 2020. The text also includes indications of the necessary pre-requisites and an overarching governance system and dispute settlement mechanism. One of such pre-requisites is UK’s adherence to the European Convention on Human Rights (ECHR) and therefore submission to the judgments of the European Court of Human Rights. This particular pre-requisite is hard to swallow for the UK. Another pre-requisite set by the EU one is the adequacy decision on transfer of data. As this is still being negotiated, it is uncertain what the final outcome will be.
The UK on the other hand, and as mentioned above, presented a separate agreement on cooperation in the field of criminal justice.
Beating the clock while on lockdown
And now set all of the above against a very tight deadline and a global pandemic. The UK insisted on completing the negotiations until the end of 2020 and both sides, UK and EU, agreed on a tight negotiating deadline. Soon after that, a majority of the world economies was shut down as a result of the Covid-19 pandemic thus bringing most economic and social activities to a halt and forcing many to work from home including the EU and UK negotiating teams.
Despite these major challenges, on 15 June the UK has reiterated that it would not ask for an extension to the transition period (which was possible under the Withdrawal Agreement). This has made an already ambitious negotiating timetable even more difficult and put the final shape of the agreement into doubt or at least uncertainty.
Some fear that in an event of a lack of agreement on the stumbling blocks, there will be no agreement at all. Some fear that there may only be a restricted ‘mini deal.’ In practice, it may mean focusing on goods since services are perceived as already being regulated (albeit at a basic level) by the General Agreement on Trade in Services (GATS) under the WTO framework.
Many also fear that there are important areas of cooperation that would suffer in case there is no agreement. One such area is cooperation on law enforcement not least because of its political sensitivity and public concern. Notwithstanding the content of the UK and EU proposals, which are not fundamentally too different, it appears that for the EU reaching a comprehensive agreement on the economic relationship, and on governance of that agreement, is a condition sine qua non to any cooperation in criminal and security matters.
Given the ambitious exercise ahead, both negotiating teams braced themselves for the intense period of negotiations, bulk of which will fall in the summer months. Coming weeks will show where the ‘cracks’ in the red lines and negotiating strategies may appear. The first signals already appeared with Michel Barnier hinting (FT, £) that the EU would be ready to accept UK’s rejection of the Court of Justice of the EU (CJEU) from the negotiations.