07 November 2016

A future deal with the EU could take far longer to agree than the two years allowed under Article 50. Robyn Munro argues that there are clear benefits to pursuing an interim deal to bridge the gap between negotiations and a future deal, but getting one won’t be straightforward.

The benefits of an interim deal

An interim deal would bridge the gap between the two-year period which the UK will have to agree withdrawal from the EU (stipulated under Article 50) and the time it takes to agree a future deal.

Given the complexity of trade deal negotiations, it is unlikely we will agree our future relationship with the EU in two years. Conservative estimates say it could take 5-7 years to agree (including ratification by all 27 member states and 11 regional assemblies). Less conservative estimates put it at more than 10 years (based on Canada and the Comprehensive Economic and Trade Agreement (CETA)).

If these negotiations are not completed at the end of the two-year negotiating window, then the European treaties would simply cease to apply to the UK overnight. UK trade with Europe would revert to a World Trade Organization-based relationship with substantial tariff and non-tariff barriers, and limited access to the EU market in services.

Our access to European institutions such as the European Single Aviation Market (which allows UK airlines to fly over Europe) and the European Medicines Agency (which license pharmaceuticals) would be unclear. These issues could be resolved in the fullness of time, but without an interim deal there is a risk that we face a legally uncertain ‘hard Brexit sandwich’ between full EU membership and some looser form of co-operation.

The risk to UK businesses and economy of entering such a period of uncertainty could put pressure on the Government to accept a deal with the EU before the two-year window expires. Putting in place an interim deal would provide a safety net – the promise of legal and economic continuity, as the future relationship is thrashed out.

What would an interim deal look like?

An interim deal would need to cover:

  • the UK’s relationship to the Single Market
  • a position on the extent to which free movement still applies to the UK
  • clarity on the role of the European Court of Justice
  • the rights of UK businesses to access EU institutions like the European Single Aviation Market (for airlines) and the European Medicines Agency (for pharmaceutical companies).

But an interim deal could be difficult to agree

While there are clear benefits to securing an interim deal, it is by no means a given that one will be agreed. There are three major challenges:

1. It isn’t clear what kind of agreement process an interim deal would require.

The key benefit of an interim deal is that it could be agreed within the two-year Article 50 window, because it would only require a Qualified Majority in the European Council and the approval of the European Parliament. However, if the interim agreement is a ‘mixed agreement’ – i.e. it affects national competences (which includes some Single Market regulations) as well as EU competences (such as the Customs Union) – then it would require ratification by all 27 national parliaments and 11 regional assemblies, taking far longer.

2. The EU doesn’t want this to drag on. 

An interim deal would extend the period that the EU must spend negotiating with the UK, presenting a distraction from other pressing issues such as the migrant crisis and Eurozone challenge. And the content of an interim deal would not be agreed lightly – both sides would be conscious of the possibility that the interim deal will end up solidifying into the new status quo if no other relationship could be agreed. Neither the UK Government nor the EU institutions will want to admit early in the negotiation process that an interim deal is needed, as doing so would suggest that the Brexit process could drag on indefinitely.

3. ‘Brexit means Brexit’.

An interim deal – even in the short term – could be politically controversial and a hard-sell to the UK electorate – particularly if the interim deal was still in place at the time of the next election. But this political risk needs to be weighed against the consequences of failing to agree a deal within the two-year window.

Is there an alternative to an interim deal?

The other option, if negotiations are not completed at the end of the two-year negotiating window, is that all 27 member states and the UK – if they were unanimous – could decide to extend the negotiating window. If agreed, this would buy the UK and EU more time to agree a deal that covers all the necessary issues.

Sir Simon Fraser, former head of the Foreign Office, said that the UK Government should seek some ‘sort of interim relationship between leaving and establishing the long-term, permanent relationship’, to prevent uncertainty at the point when the UK exits. Many others agree with him.

But while there would be many benefits to securing such an interim deal, there will also be big legal and political barriers to be overcome.

Ultimately, it is for the UK Government and the EU to decide how to balance the benefits and risks of pursuing an interim deal. But without the safety net of an interim deal, the prospect of a ‘hard Brexit sandwich’ will hang over the Brexit negotiations, creating uncertainty and putting pressure on the UK Government to accept a deal.

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Comments

You are certainly right that a proper comprehensive exit agreement is unlikely to be achieved within two years, and that an interim agreement (or series of agreements) will almost certainly be required to cover many day-to-day issues, and others of considerable importance that will stretch far beyond the narrow confines of trade and migration rights. There is no direct provision in TEU for such agreements, which would therefore fall under either the 'make it up as we go along' provisions, or the mostly more onerous provisions for agreements with foreign powers within the TEU – which also specify a completely different cast of negotiators and supervisors of negotiation, not merely different approval hurdles. That is a complication too far (and takes the power to set terms away from the EU Council), which is why it will most likely be a variant of the Article 50 process that is driven by the EU Council.

You do have a misunderstanding about the implications of Article 50 itself. The topic of negotiations is covered by 50 (2), which requires the Union to negotiate and conclude an exit agreement. There is no deadline on that process until the agreement is concluded (which requires the approval of the UK, a Europarl majority and QMV in Council – which then makes the agreement final regardless of anything else, with no further contingent approvals from memebr parliaments). The fudge will be to claim that this can be achieved in stages (including interim stages), much as EU accession is approved in chapters of the acquis. No deadline means that Article 50 negotiations must carry on even if the UK has already left the EU: the obligation on the EU to negotiate the exit agreement is only extinguished when the agreement is complete.

The timing of the end of membership is dealt with by 50 (3), which offers three options: a date agreed under an exit agreement (which might be sooner or later than the two year guillotine provided it is agreed during a period of continuous membership); the guillotine period expiring two years after notice to leave is given; and an extension of FULL MEMBERSHIP subject to unanimous approval (which might be anything from a day to eternity). There is no cross linkage to exit negotiations at all.

The effect of ending membership is to end all treaty obligations on the UK (but obviously not on those who remain in the EU! – including their obligation to negotiate the exit agreement) – unless otherwise agreed (including budget contributions, requirement to defer to the EEAS on foreign policy and the EU Commission on trade, environmental obligations, energy obligations not covered by other treaties, no state subsidy rules for business, etc.). If the UK exits via the guillotine, the option to extend the period of membership under 50 (3) expires at the same time, and the UK would then have to reapply to the EU for membership under article 49. In practice that means that Remainers and the EU itself have a short period in which to propose terms for the UK to stay a member beyond the guillotine: short because it requires unanimous agreement, which would almost certainly entail a further referendum in the UK at least. The unanimity hurdle is hard: to get the UK to say Yes to staying permanently, they would likely need to improve substantially on the offer made under Cameron’s renegotiation, and yet securing the UK’s ongoing contributions to the EU budget could come at a price that may be less attractive to EU members than exit. Unanimity also makes it impractical to use as a way to have an interim agreement – it too easily taken hostage by “Wallonia”, and it would cause conniptions in the UK because it would subvert the two year guillotine guarantee.

Wise negotiators will spend time drafting the essentials for an interim agreement negotiation as soon as there is any sign of lack of progress, or stonewalling (technically illegal both in international law and the terms of 50 (2)). The side that has its act together will get to choose most of the terms if it has to be agreed late in the day, and will also benefit from having thought about fallbacks. I do not agree that the pressure to agree an interim deal will be mainly on the UK. The pressure will be on whichever side is least prepared for it. That could easily be the EU if they misjudge their hardline stance.