In any negotiation, it is necessary not only to seek the best terms for oneself but also to ensure that the terms can be accepted by the other side – otherwise the negotiations will have failed. Of course, this is not easy when the other side has no coherent position on what it can accept – or wants from the negotiation. This is the problem now facing the EU and the UK. The negotiations have not led to an agreement that both sides can accept.
However it has also become clear that the consequences of a no-deal Brexit would be extremely disruptive and both sides appear agreed that they must avoid them. That is why the European Council, having previously extended the period provided for in Article 50(3) of the Treaty on European Union ("TEU") subject to strict conditions that were not met has, on 10 April 2019, agreed to extend it again until 31 October 2019 subject to new conditions – and has not ruled out further extensions. In this View from Brussels we examine some of the legal issues arising out of these extensions.
The conditions for the extension
The first extension decision of the European Council provided for an extension of the period provided for in Article 50(3) until 22 May 2019 conditional on the Withdrawal Agreement being approved by the UK House of Commons by 29 March 2019, failing which the period would be extended until 12 April only. Because this condition was not satisfied, the European Council took a second extension decision on 10 April extending the period to 31 October 2019 subject to a double condition expressed as a cessation of application:
This decision shall cease to apply on 31 May 2019 in the event that the United Kingdom has not held elections to the European Parliament in accordance with applicable Union law and has not ratified the Withdrawal Agreement by 22 May 2019.
Brexit will therefore take place on 31 May 2019 if two cumulative conditions are met – elections are not held and the Withdrawal Agreement is not ratified by 22 May 2019.
One can only be amazed at the legal uncertainty created as to the occurrence of such a momentous legal event as the cessation of the application of EU law in the UK without any agreement. Fortunately, however, it seems clear on the basis of the evidence so far that a no-deal Brexit will not be allowed to happen. For example, if elections are not held and the Withdrawal Agreement is approved but not ratified by 22 May, the European Council would be able to again extend the period.
The legal basis for the withdrawal agreement
The Withdrawal Agreement has been negotiated under a power granted to the EU under Article 50(2) TEU which provides that:
In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.
At the commencement of the negotiations, the EU took the position that a withdrawal agreement under this power could only set out arrangements for withdrawal and that it could not negotiate – and still less conclude – agreements defining the future relationship between the EU and the UK while the UK remains a Member State. The most that could be done, it argued, would be to include some transitional provisions to facilitate the transition to a future relationship, the framework for which could be laid down in a political declaration.
The experience of the negotiations with the UK has shown that withdrawal terms are inevitably and intrinsically linked to the future relationship. Indeed, the Protocol on Northern Ireland (the "Protocol"), designed to remedy the consequences of withdrawal for Ireland, which is part of the Withdrawal Agreement and sets out a future trade relationship not only for the Island of Ireland but also between the whole of the UK and the EU which will enter into force and endure indefinitely "unless and until" an alternative agreement is concluded. This comprises not only a customs union and an obligation of close alignment with a list of EU regulations but also provisions considered necessary to ensure a level playing field in future trade relations and covering taxation, environmental protection, labour and social standards and state aid.
As we have pointed out in a previous View from Brussels, this protocol is illegal as a matter of EU law if one accepts the original view of the EU that Article 50 TEU provides no power to negotiate and conclude a future relationship. However, the EU has presumably changed, or at least nuanced, its original view and since it has now negotiated and is willing to conclude an indefinite customs union, close alignment with the EU regulatory acquis and provisions to ensure a level playing field in trade relations.
The Entry into Force of the Withdrawal Agreement
Article 185 of the Withdrawal Agreement provides that it will enter into force on 30 March 2019 and that it will not enter into force if it has not been ratified by both the Union and the United Kingdom prior to that date.
While the Council has signed the Withdrawal Agreement, the European Parliament has not ratified it. It has been waiting for the UK House of Commons to approve it by means of a "meaningful vote". To date, the UK House of Commons has rejected the Withdrawal Agreement three times.
The negotiators have therefore agreed a modification to the Withdrawal Agreement to provide for its entry into force on the earliest of the extended Article 50(3) date or the first day of the month following receipt of the notifications of ratification by both parties. Although described as a "limited technical change", this modification is substantive at least insofar as it introduces options and therefore discretion into the date of entry into force. In addition, it shortens the transition period. The transition period ends on 31 December 2020 unless extended by a decision to be adopted before 1 July 2020. The modification of these dates could equally be termed a "limited technical change".
If the Withdrawal Agreement is not ratified by the current European Parliament before the elections in May 2019, it will have to be ratified by the new European Parliament, which only holds its first session in July 2019 at which it will need to concentrate on reconstituting its political groups and committees. In September, Parliamentary time is normally taken up with the appointment of the new Commission. Accordingly, the European Parliament may only finally ratify the Withdrawal Agreement in October 2019.
There is therefore time for the Withdrawal Agreement to be further amended.
Possible Further Amendments to the Withdrawal Agreement
The EU has always insisted that the negotiated withdrawal agreement was the best and the only agreement possible and has refused to reopen it. The European Council has reiterated this refusal in recital 12 of the second Article 50(2) extension decision – adding for good measure that the extension cannot be used to start negotiations on the future relationship.
The EU has however agreed in its conclusions of 21 March 2019 to an "instrument" with legal consequences relating to the Withdrawal Agreement (as well as a Joint Statement relating to the Political Declaration) in an unsuccessful attempt to secure acceptance by the UK House of Commons. It has also announced that it is open to the negotiation of a customs union with the UK and to the reinforcement of labour protection provisions in the future relationship. These are two demands of the UK Labour Party that could guarantee a majority in the UK House of Commons for the approval of the Withdrawal Agreement. Indeed, the UK Labour Party is insisting that these demands be anchored in some way in an international commitment so as to prevent a future UK government from reneging on them.
Accordingly, the EU would presumably be open to the negotiation of further "instruments" with legal consequences in connection with the Withdrawal Agreement that could render it acceptable to the UK House of Commons. Indeed, since the Withdrawal Agreement needs to be reopened in any event (at least to amend its Article 185), why should these commitments not be inserted into the Withdrawal Agreement itself, or at least into the Protocol?
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2020