Brexit Negotiations Edging Closer: Theresa May's Article 50 letter and Donald Tusk's draft negotiation guidance

Government Affairs Alert

által:

On March 29, the UK Prime Minister Theresa May sent the European Council formal notification of the United Kingdom’s intention to withdraw from the EU and the European Atomic Energy Community (EURATOM).

In return, on March 31 European Council President Donald Tusk issued draft guidelines for the withdrawal negotiations. These will be discussed and adopted by the 27 remaining Member States at an ad hoc European Council meeting scheduled for April 29. Both documents set out each party’s expectations for the process and outcome of the negotiations.

While the UK’s and the EU’s view are in line on certain issues, such as their willingness to remain close partners in the future and to conclude a comprehensive agreement, there are a number of points of divergence:

The approach to negotiations

In her letter, Prime Minister May called for parallel negotiations of the withdrawal agreement and the future EU-UK partnership agreement, on the grounds that it is in both sides’ interests to avoid disruption and that, thanks to the UK’s unique position of former EU Member State, negotiations on the future relationship should be smooth and swift.

However, President Tusk made it very clear that this approach cannot be endorsed by the EU. He stated that the EU and the UK “must proceed according to a phased approach giving priority to an orderly withdrawal”.

President Tusk’s statement aligns with the Treaty provisions. Article 50 TEU and Article 218 TFEU clearly set out the process and timing to be respected. Pursuant to Article 50 TEU, the EU shall first negotiate and conclude the agreement on the withdrawal. That withdrawal agreement should “tak[e] into account the framework of [the] future relationship with the Union” but not settle such future relationship. Article 50 TEU then provides that “the agreement [on the future relationship] shall be negotiated in accordance with Article 218 (3) of the Treaty on the Functioning of the European Union". Article 218(3) lays down the process and rules for the negotiations of agreement with third countries.

Put simply, this means that the legal basis, the legal mandate, the voting rules, and processes for a withdrawal agreement are not the same as for an agreement with a third country - which is what the UK will become post-Brexit. Consequently, it is not possible legally to conclude these two agreements in parallel as PM May would like.

President Tusk agreed with PM May’s request for transitional arrangements to provide a bridge towards the framework for the future relationship. Nevertheless, he stressed that such transitional arrangements should be limited in time and be compatible with EU law.

In other words, this means that the EU would be keen to lay down transitional agreements but only on condition that the UK remains de facto bound to EU law during the transitional period, despite its withdrawal from the EU. This is likely to be a point of major divergence between the EU and the UK.

Behaviour during the negotiations

In her Lancaster House speech on 17 January 2017, PM May stated that “no deal would be better for the UK than a bad deal". In her Article 50 letter, she threatened the EU with the negative effects of a no-deal outcome by declaring that it would weaken European security.

In response, President Tusk warned the UK that the EU would not conclude an agreement that would not be in accordance with its best interests. He asserted that the EU “will prepare itself to be able to handle the situation also if the negotiations were to fail” and that “the negotiations with the United Kingdom will be kept separate from ongoing Union business, and shall not interfere with its progress”. In other words, either the UK plays fair game or there will be no game.

President Tusk also clearly defined the different phases to be followed in the negotiations. He also explained that, if there is insufficient progress in one phase of the negotiations, there can be no progress to the next phase. This statement is of particular importance as it warns the UK that if it does not cooperate in the negotiations, in particular as regard to the matter of the financial exit settlement and the rights of the citizens (both of which are priorities for the EU), the European Council will not allow the negotiations to go further.

This respect for the principle of sincere cooperation is also required from the UK with regard to the bilateral negotiations it will have to conduct with Ireland, Spain, and Cyprus on their cross-border issues.

Furthermore, President Tusk stressed the importance of the EU’s unity, in particular by reminding the UK that it will not be able to conduct bilateral talks with any EU Member States, because the EU enjoys exclusive competence in trade policy.

Nevertheless, while President Tusk reminded the UK that it would remain subject to all rights and obligations under EU law until the withdrawal agreement takes effect, he seemed to concede that the UK had a right to start preparing future trade relationship with third countries.

The potential future agreement between the EU and the UK

Both parties have agreed to remain close partners in the future. The future agreement should be broader than a trade agreement and should encompass security cooperation. They also both acknowledge that the four freedoms of the single market are indivisible and there can be no “cherry picking”. Both also recognise that the UK will lose its influence on the EU’s decision-making process, but will also have to comply with EU rules when trading with the EU.

On this last point, President Tusk emphasised that the UK cannot expect to obtain through a Free Trade Agreement the same benefits as a Member State, only with lighter obligations. He stated that an agreement should be “balanced, ambitious and wide-ranging” and “ensure a level playing field in terms of competition and state aid, and must encompass safeguards against unfair competitive advantages”. This is again a clear “fair game or no game” warning for the UK.

The future dispute settlement mechanism for post-Brexit disputes is also likely to be a major point of contention between the UK and the EU. While the UK Government has clearly expressed a desire to end the ECJ’s jurisdiction in the UK, President Tusk stated that any future dispute settlement mechanism would have to respect the EU’s legal order and the role of the ECJ.

Conclusion

After waiting nine months for the Article 50 trigger, the EU is adopting a firm starting position in the negotiations and stressing its clear intention to preserve its best interests.