UK Cabinet agrees Brexit deal – what was agreed and what next?

Following a UK Cabinet meeting yesterday afternoon the UK Government has announced support for the text of a draft Withdrawal Agreement and an outline of the Political Declaration on the Future Relationship agreed with EU negotiators. The Withdrawal Agreement sets out the arrangements for the UK's withdrawal from the EU on 29 March 2019 and includes a transition period following the date of the UK's EU exit through to 31 December 2020, during which EU law will continue to apply in and to the UK.

What next?

A special European Council, due to be held on 25 November 2018, will be asked to finalise and approve the text of the Withdrawal Agreement and the full text of the political declaration. This will be on the basis of a qualified majority vote. The deal will also have to pass through the European Parliament. 

However, the main challenge for achieving a binding deal is anticipated to be the requirement for approval by the UK Parliament. The first vote by the UK Parliament is expected within two weeks of the European Council.

Our analysis so far

The Withdrawal Agreement is 586 pages long, has 185 articles, 3 protocols and several annexes, whilst on the other hand the Political Declaration on the Future Relationship in its current summary form contains little detail. Nonetheless during today we have published the following blog posts on our Brexit notes blog providing Herbert Smith Freehills' initial analysis on certain key aspects of these documents:

• The Protocol on Ireland/Northern Ireland (the Backstop)
• Brexit Withdrawal Agreement: Impact for data protection
• Brexit outline Political Declaration: Initial indicators for the Financial Services Industry
• Brexit deal – what does it mean for insurers and insurance intermediaries?
• Brexit Withdrawal Agreement: – IP and Marketing Authorisation Provisions Summarised

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High level summary of the Withdrawal Agreement

The Withdrawal Agreement consists of six parts, three protocols and a number of annexes (which provide additional information necessary to support the technical interpretation and application of the agreement).

Part One - Common provisions: this section sets out relevant definitions and territorial scope of the Agreement. It provides for the provisions of the Agreement to be interpreted under the general principles of EU law, including those of the EU Charter of Fundamental Rights. UK courts will be bound by relevant CJEU case law handed down before the end of the transition period and must pay due regard to relevant case law handed down after the transition period. The provisions of the Withdrawal Agreement produce the same legal effects in the UK as they do in the EU and the Member States, including the ability of the courts to disapply incompatible legislation, direct effect and the availability of remedies. The UK and the EU are bound by a duty of good faith under which they should not act in any way to undermine the Agreement and should support each other in carrying out tasks which flow from the Agreement.

Part Two - Citizens' rights: this section deals with the rights of EU citizens in the UK and UK citizens in the EU who are exercising their free movement rights before the end of the transition period ('the specified date').

Qualifying EU citizens will be able to continue to exercise their right of free movement under EU law and live, work and study in the UK as they are currently able to do. UK citizens exercising their rights in the EU will be able to continue to do this in their host state. The right of UK nationals living in the EU27 to live and work in a different Member State after Brexit is not provided for in the Agreement, but as part of the future relationship with the EU, the UK will also seek to secure onward movement opportunities for UK nationals in the EU. The same rights will apply to their family members who are legally resident in the host State before the end of the specified date.

Spouses, registered partners, dependent parents and children related to the EU/UK right holder who are not residing in the host Member State on the specified date will keep their entitlement to join an EU/UK family member at a later date, for the lifetime of the EU/UK national right holder, irrespective of their nationality.

The UK and the EU27 are entitled to require citizens concerned to apply to obtain a status which gives them the necessary rights of residence, but such administrative procedures must be transparent, smooth and streamlined.

Part Three - Separation provisions: this covers a range of events in a variety of areas that may be ongoing by the end of the transition period and sets out how these will be resolved. It deals with the following:

• Goods placed on the market before the end of the transition
• Ongoing customs procedures, ongoing value added tax and excise duty matters
• Continued protection in the UK of intellectual property rights
• Ongoing police and judicial cooperation in criminal matters
• Ongoing judicial cooperation in civil and commercial matters
• Data and information processed or obtained before the end of the transition period or on the basis of the Withdrawal Agreement
• Ongoing public procurement and similar procedures
• Euratom related issues
• EU judicial and administrative procedures
• Administrative cooperation procedures between Member States and the UK
• Privileges and immunities - status of UK nationals working in EU institution and EU staff working in EU bodies in the UK
• Other issues relating to the functioning of the institutions, bodies, offices and agencies of the EU

Part Four - Transition period: a transition or implementation period, starting on the date of entry into force of the Withdrawal Agreement and ending on 31 December 2020 has been agreed. During this transition period the UK will no longer be an EU Member State, as it will have left the EU on 29 March 2019, but, unless otherwise provided in the Withdrawal Agreement, EU law will be applicable to and in the UK, so as to produce the same legal effect as it does prior to exit.

The provisions also state that any references to Member States in EU law, including EU law as implemented by Member States, is to be understood as including the UK during the transition period.

EU law will therefore continue to have direct effect in the UK and the principle of supremacy of EU law will apply during the transition period. The UK will no longer be represented and participate as a matter of course in the EU institutions, thereby losing its right to influence and vote on new legislation. In exceptional circumstances representatives or experts from the UK may, upon invitation, attend meetings of certain committees but without having any voting rights.

During the transition period the UK will be free to negotiate, sign and ratify international agreements entered into in its own capacity, provided these agreements do not come into force or apply until after the transition period.

The Withdrawal Agreement (Article 132) provides for the possibility of an extension of the transition period, decided by the UK-EU Joint Committee.

Part Five - Financial provisions: both sides have agreed a methodology for calculating the financial settlement without agreeing a specific amount. The UK agrees to contribute and participate in the EU budget until the end of the current budget cycle (2020) as if it had remained in the EU. The UK will also contribute its share of the financing of the budgetary commitments entered into before the end of the current budget cycle but not yet disbursed at the end of 2020 (the so called 'reste à liquider').

Payments arising from the financial settlement will become due as if the UK had remained a Member State, so the UK will not be required to make payments earlier than would be the case had it remained in the EU. The UK will continue to benefit from EU spending under programmes financed by the current budget until their closure. UK beneficiaries will be required to respect all relevant EU provisions governing these programmes, including co-financing.

Any participation of the UK in EU programmes after Brexit, as a non-Member State, will have to be discussed and agreed as part of the UK's future relationship with the EU.

Part Six – Institutional and final provisions: in order to ensure consistent interpretation of the citizens' rights provisions of the Agreement, UK courts will be able to make preliminary references to the CJEU for up to eight years from the end of the transition period. A Joint Committee consisting of representatives of the EU and the UK will be responsible for the implementation and application of the Withdrawal Agreement. Disputes arising under the Withdrawal Agreement can be referred to the Joint Committee with the aim of reaching a mutually agreed solution. If no agreed solution is reached within three months, there is a mechanism to establish an independent arbitration panel (composed of two members proposed by the EU and the UK each, and a chairperson agreed by both parties) to rule on the dispute. Where the dispute involves a question on the interpretation of EU law, the panel will request the CJEU to rule on it but it will still be for the panel to rule on the dispute as a whole. The arbitration panel's ruling on a dispute will be binding and the parties will need to comply within a reasonable period.

Protocol on Ireland/Northern Ireland: this Protocol aims at avoiding a hard border on the island of Ireland. This includes protections of the rights of individuals, security co-operation and the continuation of the common travel area between Ireland and the UK. Most significantly the Protocol lays out “backstop” arrangements for the Irish border designed to ensure the free circulation of goods across the island of Ireland. In order to prevent the creation of a border in the Irish Sea, it has been necessary to envisage a customs union between the whole of the UK and the EU. The Protocol would remain in place unless and until a separate EU-UK agreement replaces them.

The provisions create further obligations binding Northern Ireland to the EU’s customs code and single market rules, with checks on some trade with the UK mainland both at ports and in the marketplace. See our blog post here for our initial analysis of the backstop arrangements.

Protocol relating to the Sovereign Base Areas in Cyprus: the Protocol is intended to preserve the existing unique arrangements which reflect the UK's international commitments and ensure the continued effective operation of the Sovereign Base Areas for military purposes.

Protocol on Gibraltar: the Protocol provides for close cooperation between the UK and Spain in Gibraltar in relation to the implementation of part two of the Agreement on citizens' rights. The Protocol or any other arrangements between the UK and Spain do not in any way affect the UK's sovereignty over Gibraltar.

Invitation to our webinar

We are hosting a webinar on Monday 19 November 2018, 12.30 - 1.20pm GMT to discuss:

• key aspects of the Withdrawal Agreement, including in relation to the UK-wide backstop to deal with the Irish border issues;
• what the summary of the political declaration tells us about prospects for future UK/EU free trade arrangements;
• the political obstacles to a deal.

Our Brexit Director, Paul Butcher, will be joined by:

• Oliver Lewis, Director, Hanbury Strategy. Oliver is one of the leaders of Hanbury's Brexit team. He has previously worked with the then Education Secretary Michael Gove as well as advised Cabinet Ministers on a range of policy issues.
• Eric White, Consultant, Herbert Smith Freehills. Prior to joining Herbert Smith Freehills Eric was a member of the European Commission's Legal Service between 1985 and 2016, where he led the Trade Policy and WTO team.
• Katherine Dillon, Of Counsel, Herbert Smith Freehills. Katherine is a specialist in UK and EU financial services law and regulation with extensive experience of advising financial sector clients on the implications of Brexit.

Please click here to register.