Theresa May's Brexit deal: Chequers plan

The UK and the EU would maintain a common rulebook for all goods including agri-food, with the UK making an upfront choice to commit by treaty to ongoing harmonisation with EU rules, covering only those necessary to provide for frictionless trade at the border.

The white paper underlines the UK’s commitment to maintain a “common rulebook” with the EU.

It commits to making an “upfront choice” to “harmonisation” with a subset of EU rules needed to provide frictionless trade. That means the UK would update the rules in line with the EU. The UK is yet to clarify which rules would be outside the scope.

Accepting regulatory harmonisation would apply to agri-food – essential to solving the Irish border question – and makes a deep trade deal with the US much less likely.

The UK would seek participation in the relevant EU agencies and technical committees, taking a role in designing and implementing rules – even without formal voting rights.

This would need the EU to accept the divisibility of the Single Market and its underpinning four freedoms as the UK is proposing to end freedom of movement. It also assumes that goods and services can be divided – though increasingly they are bound up together and EU businesses may think less restrictive UK obligations on services could give UK firms a competitive advantage. The EU has, however, conceded variants of partial alignment/ access in its agreements with Turkey, Switzerland and Ukraine in return for mandatory alignment.

The EU itself proposed that Northern Ireland should stay aligned with a subset of EU rules through a common regulatory area as part of its proposed backstop, but it has stressed that this could not apply for a country the size of the UK.

We would strike different arrangements for services, where it is in our interests to have regulatory flexibility, recognising the UK and the EU will not have current levels of access to each other’s markets.

There is no commitment to align on services and the UK would retain the ability to diverge. The white paper accepts this would mean the UK’s ability to provide services would face greater restrictions in the EU and vice versa as a result.

The UK puts forward a new ‘economic and regulatory arrangement for financial services’, which would expand the EU’s existing provisions for ‘equivalence’. It proposes principles and mechanisms for co-operation and ways to increase stability of the agreement – for example, a structured withdrawal process to provide safeguards should either side revoke its equivalence decision. 

The UK would seek a ‘system’ for mutual recognition of professional qualifications that tries to replicate the current arrangements.

The document suggests this would give scope for trade deals on services – though there is little evidence to date of deep trade deals on services. The EU’s Single Market has the most liberalised trans-national services regime.

The EU would argue that goods and services are increasingly integrated and the Single Market institutions and infrastructure cannot be split to apply just to goods. The UK could gain an unfair advantage if it did not have to align on services that are embedded in goods, which are often the profitable component of a goods export.

The UK’s proposal on financial services and professional qualifications would require the EU to show a lot of flexibility.

The UK and the EU would work together on the phased introduction of a new Facilitated Customs Arrangement that would remove the need for customs checks and controls between the UK and the EU as if a combined customs territory.

The UK would apply the UK’s tariffs and trade policy for goods intended for the UK, and the EU’s tariffs and trade policy for goods intended for the EU – becoming operational in stages as both sides complete the necessary preparations.

This is a variation on the original New Customs Partnership (NCP) idea which also proposed that the UK would administer the EU’s external border. The big change is that the majority of importers would pay either the UK or the EU tariff at the border. Those who are not trusted traders and cannot prove where their goods will end up will pay the higher of the two tariffs, like in the NCP proposal, and could apply for a rebate. It would avoid the need for customs declarations at the Irish land border.

The fact that it would be “phased” suggests that initially it would work as a customs union with no divergence, while the technology is developed.

The EU has expressed its reservations about allowing allow a third country, unsupervised by the Commission and not subject to the European Court of Justice (ECJ), the ability to control its borders and about the potential loss of revenue. The EU would potentially also be worried about the costs the technology may impose on member states or business.

There are also questions about the ability for the UK and EU to co-ordinate on quotas or operate trade defence measures.

The UK would commit to a common rulebook on state aid and establish co-operative arrangements between regulators.

The UK and the EU could also agree to maintain high regulatory standards for the environment, climate change, social and employment and consumer protection – meaning we would not let standards fall below current levels.

The Prime Minister offered “binding commitments” on state aid and competition at Mansion House. The UK is offering a “no-regression” clause on some other level playing field issues the EU identified.

The EU has made it clear in its guidelines that, even with a Canada-style free trade agreement (FTA), it is concerned that the UK does not undercut its protections or ability to compete. This will go some way to meeting its concerns – but it is likely to look for firmer and more enforceable guarantees.

The EU has also identified corporate tax as an area of concern which the UK does not mention.

End free movement.

Include a mobility framework so that UK and EU citizens can continue to travel to each other’s territories to visit, study and work – similar to what the UK may offer other close trading partners in the future.

The UK Government is proposing that EU citizens will be able to visit visa free, with similar rules to now on business visits and intra-company transfers. There will also be a focus on allowing young people to move to work or study for a period as it currently does with Australia and Canada.

The proposal does not cover permanent hires or family, it is focused only on the elements that are usually covered in an FTA.

The UK suggests that the sort of scheme it negotiates with the EU might be offered to other close trading partners.

The EU has always insisted that future migration, including onward movement for UK citizens living in other EU members states should be discussed in the future partnership. But the key part for Single Market access is the reiterated commitment to end free movement.

Taken alone, it should not be difficult to agree to this kind of mobility framework. But the EU may demand greater scope and freedom in exchange for market access.

The UK will leave the Common Agricultural Policy (CAP) and Common Fisheries Policy (CFP).

The UK will design its own agricultural support policies and, as an independent coastal state, will conduct annual negotiations with the EU on access to its fisheries. There is an acknowledgement that multiannual negotiations may be appropriate for some stocks.

The UK has accepted a common rulebook on all areas of agriculture which would require border checks – including the EU’s sanitary and phytosanitary regulatory regime. This is to avoid border checks on the island of Ireland.

However, there are some rules, such as labelling and marketing, that are not necessary for the border that the UK is proposing to sit outside of the common rulebook.

Leaving CAP would allow the UK to run its own farm support scheme, and leaving the CFP would allow the UK to "take back control" of access to its waters. The UK is proposing annual negotiations over access to waters.

The EU may be worried about levels of agriculture subsidy (especially as this will be devolved) and the risk that reduced bureaucracy allows UK farmers a competitive advantage.

The EU guidelines explicitly link a trade deal to maintaining “existing reciprocal access” on fish.

"Such a partnership [i.e. the common regulatory rulebook and the facilitated customs arrangement] would see the UK and the EU meet their commitments to Northern Ireland and Ireland through the overall future relationship: preserving the constitutional and economic integrity of the UK; honouring the letter and the spirit of the Belfast (‘Good Friday’) Agreement; and ensuring that the operational legal text the UK will agree with the EU on the ‘backstop’ solution as part of the Withdrawal Agreement will not have to be used."

The UK and the EU have already agreed that the Withdrawal Agreement, a legally binding treaty that is expected to be signed and ratified by March 2019, must contain a backstop protocol which, if applied, would be guaranteed to keep the border between Northern Ireland and the Republic open. It would only come into force, however, if it proved impossible to achieve the same outcome through negotiations on the future economic relationship between the UK and the EU.

The white paper only refers to the backstop once, saying that the Government’s proposal for the future relationship means that the backstop will not need to come in to force. It does not, however, advance any more proposals for the legal text that will need to be contained within the Withdrawal Agreement. It is not clear whether the UK is thereby accepting the backstop text proposed by the EU earlier this year.

The EU has consistently said that there will be no Withdrawal Agreement, and hence no transition period, unless there is an agreement on the backstop.

The EU will press for clarity on what kind of backstop the UK is seeking to negotiate. Guy Verhofstadt, the European Parliament lead on Brexit, tweeted shortly after the white paper’s publication that "an operational backstop" is one of the European Parliament’s priorities

The UK wants to maintain existing co-operation on the approximately 40 EU tools on police and judicial co-operation that it currently participates in, to allow:

• rapid and secure data exchange
• cross-border operational co-operation
• continued UK co-operation with EU law enforcement and justice agencies.

The UK currently has a privileged arrangement on law enforcement co-operation with the EU, which allows it to choose those tools it wants to use. The white paper makes the case for this special arrangement to continue effectively unchanged, although it recognises that "the relationship has changed."

The UK recognises that its proposal would be unprecedented for a non-EU, non-Schengen country. However, it argues that this is in the EU’s interest as well as the UK's.

It also commits to certain safeguards in order to achieve this relationship. Most significant is the commitment to maintain membership of the European Convention on Human Rights (ECHR), something the EU had explicitly singled out as a precondition for ongoing policing co-operation and that the Prime Minister had previously said she wants to leave. The UK has also committed to "comprehensive data protection arrangements and robust, appropriate governance arrangements".

The EU has already ruled out a special arrangement for the UK that goes beyond third country arrangements. The UK’s concession on the ECHR may mean it gets a bit more, but it is unlikely to secure everything it wants in this area.

The UK wants to be able to "combine efforts around the world" with the EU and the member states in order to achieve common objectives.

The white paper proposes that the UK and EU would continue to consult across all foreign policy areas, share intelligence, exchange expertise and personnel and co-operate in international for a, such as the UN, G20 and IMF. The UK also wants to continue to co-operate with the EU on international development and space technology, most notably the EU’s Galileo programme.

Some of this can be done within existing third country arrangements; in other areas, the UK suggests going beyond these.

Foreign policy is not currently an EU competence – it is still the preserve of member states’ governments. So the UK’s proposal of close collaboration between the UK and EU27 may not face the same legal challenges as their request for close co-operation with other areas of the EU.

By signalling its hope to maintain a close arrangement with the EU’s defence programmes, the UK will be hoping to maintain market access for its defence sector.

On development, the UK wants to be able to continue to contribute to EU programmes, subject to value for money assessments.

The UK argues that it is in both parties’ interests for co-operation to continue in these areas. As a significant player in both defence and development, the UK may be able to secure a close relationship with the EU. But it is unlikely that the EU will go far beyond existing precedents, an approach they have taken across the board.

The Government wants data flows between the UK and the EU to continue after Brexit.

It proposes an agreement that goes beyond the standard ‘adequacy’ assessment, in which the European Commission decides whether or not a third country’s data protection standards meet the EU’s. This agreement would include a ‘framework’ on data protection to increase "stability and transparency" and a "ongoing co-operation" between the Information Commissioner’s Office and other EU data protection authorities.

This would mean that personal data could continue to flow freely between the UK and the EU, that the UK would have influence over the future of the EU’s data protection rules and that UK citizens could enforce their data protection rights across the EU.

It would also mean that the EU could not unilaterally decide to end data sharing with the UK, which is a possibility under the current adequacy regime.

The UK’s proposal for an agreement on data protection that goes beyond adequacy will be difficult to negotiate – the EU has already pointed to the adequacy regime as the one that will govern the future data sharing relationship with the UK.

The UK acknowledges that adequacy must be the starting point, saying that it hopes to have an adequacy judgement in place for the end of the transition period. Whether it can get anything more than that remains to be seen.

The white paper identifies a number of areas where the UK wants to negotiate 'co-operative accords', including on science and innovation, culture and education, international development, defence research and space.

These accords would allow the UK to take part in various EU schemes and programmes, and their successors in the future. These cover, inter alia, scientific research, educational and cultural exchanges, research and development in defence and space technologies, and assistance for developing countries.

This would require a financial contribution from the UK and the white paper signals the Government’s willingness to pay for participation.

Space has proved particularly difficult, with the EU saying the UK will not have access to the secure code of its Galileo satellite project, despite the significant UK contribution to date. The white paper makes another request for the UK to maintain this, but also reiterates the UK’s openness to investigating other alternatives. 

Non-EU countries have arrangements with the bloc in many of these areas. Replicating these for the UK should not be a challenge, particularly given the UK’s willingness to pay.

As with other areas in the UK’s proposals, going beyond third country arrangements, particularly on sensitive areas like defence and space, may be more difficult.

The two sides will agree a clear process to manage the regulatory and legislative changes. This would differ between rule changes that relate to different elements of co-operation, but would follow the same sequence of steps.

A joint committee, a body made up of officials and diplomats from both sides, would assess whether new rules or changes are in scope of the "common rulebook" and if the agreement should be updated. If the committee disagrees, consequences could include independent arbitration, financial compensation or part of the future relationship being suspended.

Parliament must consent to new rules as domestic legislation will be needed to give them effect in the UK. However, if the agreement is updated based on a decision by the joint committee, and Parliament decides against incorporating this into domestic law, then it would breach the UK’s international obligations. 

The Government is talking about two different kinds of incorporation here. First, it discusses the process for incorporating a new EU rule into the UK-EU agreement, meaning that the rule would bind both parties to that agreement. If the UK did not want to incorporate such a rule into the agreement, the UK could insist in the joint committee that the new EU rule was not inside the scope of the “common rulebook” set out in the agreement. This is similar to the process for the European Economic Area agreement, although in practice the EFTA-EEA states very rarely make such arguments.

If the UK did claim a rule was outside the scope of the agreement but the EU argued otherwise, then the question could be referred for arbitration. The UK seems to be offering to buy the EU off in these circumstances, suggesting that the UK Government could pay “financial compensation”. However, the Government also acknowledges that part of the agreement could be suspended, as is the case in like circumstances with the EEA agreement.

The Government suggests that once a rule is incorporated into the agreement, a second kind of incorporation would still need to take place: incorporation by Parliament into the UK legal order. The Government suggests that Parliament could refuse to incorporate a rule, but unlike at joint committee, this would render the UK in breach of its international  obligations, and so would amount to the UK acting illegally.

This will be one of the most controversial issues, as far as the EU is concerned. The Single Market is constructed to ensure that national parliaments do not have a lock on incorporating new EU rules into their domestic legal orders. If they fail to do so, they can be hauled before the ECJ and made to comply.

The Government has therefore chosen to follow the precedent set by the EEA agreement, which also provides that if the parties disagree as to whether new EU rules should be incorporated into the agreement, part of the agreement can be suspended. However, this has never happened in the EEA and how it would work remains murky. It is not clear from the Government’s proposals whether a small part of the agreement, or an entire chapter, or the entire agreement would be suspended, and what the decision-making process leading up to that suspension would be. This could be a sticking point in negotiations.

The UK proposes an association agreement overseen by a joint institutional framework.

The institutional framework would have a 'governing body’ (a political forum) to set the direction for the future relationship, and a joint committee to manage the technical aspects of implementation, including taking into account changes in EU and UK legislation.

The Government is proposing political governance that mirrors that of EU association agreements, and of the EEA: a political-level council to shape the overall direction of the relationship and agreement, and a joint committee, with technical sub-committees, to monitor the application of the agreement in more detail. 

The Government’s proposal for an association agreement has already been welcomed by the Brexit steering group of the European Parliament, who mooted the idea in their own resolution.

The creation of an official-level joint committee and a political joint council is unlikely to be controversial. This is standard for deep EU economic agreements.

The role and powers of the joint committee and its technical sub-committees, however, could be more contentious. The UK is suggesting that that the UK and EU could use the joint committee to notify each other of proposed legislative measures, giving each other the opportunity to comment on changes. This could raise concerns about the EU’s “legal autonomy”.

Consistent interpretation and application of the UK-EU agreements would be done in the UK by UK courts, and in the EU by EU courts – with due regard paid to EU case law in areas where the UK would continue to apply a "common rulebook".

This proposal is not unprecedented. The Government is suggesting that the interpretation and application of the UK-EU agreement should work in a similar way to the EEA agreement.

In that agreement, those three states have their own top court, the EFTA court, which adjudicates on the application of the agreement in those countries, while the ECJ adjudicates on the application of the agreement in the EU. The EEA agreement also provides that the EFTA court should “pay due account” to the case law of the ECJ.

Michel Barnier has hinted in the past that the EFTA model could work for the UK. A major benefit of a “two-pillar” structure, in which different institutions interpret and apply the agreement for each side, is that this approach ensures that only the EU’s own institutions bind the EU to a particular interpretation of EU law. In the past, the ECJ has rejected proposals for agreements that would bind the EU to another court’s interpretations of those rules.

However, making this model work for the UK is slightly more difficult than making it work for the EFTA-EEA states. This is because the UK is only one country. The application of the EEA Agreement in Norway is reviewed by Icelandic and Lichtensteinian judges, whereas the application of the UK-EU agreement in the UK would be reviewed only by UK judges, and so not subject to the same kind of “external review”. The EU might therefore worry that the proposal amounts to the UK “marking its own homework”.

This framework would also include robust and appropriate means for resolving disputes. This would take place through the joint committee and, if necessary, through an independent arbitration panel.

Where both sides would have agreed a common rulebook and a dispute relates to interpretation, there would be an option of referral to the Court of Justice of the European Union (CJEU) as the sole interpreter of EU rules – either with ‘mutual consent’ of the joint committee or from the arbitration panel. This would respect the principle that the court of one party cannot resolve disputes between the two.

Arbitration is a standard means of dispute resolution for trade agreements. When the parties disagree about the application or interpretation of some aspect of the agreement, they agree on the appointment of three expert lawyers to decide the case. However, under EU law, only the ECJ can bind the EU to a particular interpretation of EU law. In the past, therefore, the EU has required that where arbitral tribunals play a role in dispute resolution between the EU and its partners, they refer EU law-related issues to the ECJ. This is the case, for instance, with the EU-Ukraine Association Agreement. The Government appears to be drawing on that model.