Brexit Briefing No.18

Finally the magic words "Sufficient Progress" were uttered by European Commission President Jean Claude Juncker before dawn in Brussels on Friday morning, after the Prime Minister's middle of the night flight to Belgium following an evening of phone calls between London, Brussels, Dublin and Belfast.

At times since June there have been doubts that this stage would ever be reached, let alone in time for the December Council Summit, but in the last week both sides demonstrated real willingness to reach a stage where talks could move on to trade and the future relationship. That political will is going to be needed even more in stage two, there will be more bumps in the road ahead, as last night's commons defeat showed.

European Council

So what does the deal on stage one mean?

It covers a number of areas, but particularly the three areas the EU had identified as a priority, Citizens' Rights, Northern Ireland / Ireland relationship and the financial settlement, the so-called divorce bill.

On Citizens’ Rights the UK and the EU agreed largely reciprocal protection of UK and EU citizens’ rights when those citizens reside legally in either the UK or the EU27 before the 29th March 2019. Family reunification rights after the UK departs were also agreed in principle in accordance with national law. There was also agreement that either side could require the affected citizens to apply for settled status, as the UK has indicated it will wish to do after the 29th March, and states the principle that this application process will be simple and the burden of proof for residence will not be set too high, an important ask from the EU side.

On the role of the European Court of Justice, it will maintain a voluntary role for a time limited period. UK courts will, for 8 years, have the option to refer to the ECJ for a legal view on those citizens’ rights in specific cases before them. It has been estimated that the type of cases that could be referred to the court for an opinion number no more than 2 to 3 a year. UK courts remain the final decision maker and the ECJ’s compulsory jurisdiction will end, important from the UK side, and an agreement that importantly does not set a precedent that could see ECJ competence creeping into other areas of the future UK-EU relationship when those are agreed.

On Northern Ireland both sides agreed to uphold the Good Friday Agreement and the maintenance of the Common Travel Area, and both sides committed to no hard border between Northern Ireland and the Republic. The UK has pledged to achieve this smooth border through the agreement on the future EU-UK trade relationship, which has always been its position, but if that is not possible has pledged to maintain “full alignment”. I.e. the same policy goals, on those rules which specifically support North-South cooperation under the Good Friday Agreement, not the same regulations, notably the word “regulatory” was dropped from alignment in the final text.

This alignment would be done at either a UK wide level, unless with cross-community consent there were some particular arrangements for Northern Ireland, like the all-Ireland energy market in existence today. The alignment issue does raise questions for the future on trade and agriculture in particularly. The UK government has made it explicitly clear that all parts of the United Kingdom will be leaving the single market and the customs union.

On Northern Ireland then, as the UK government always insisted, the phasing makes little sense and everything is wrapped up in the future UK-EU trade relationship. The broad principles agreed to in the phase one text can be seen as an EU acknowledgment that that is the case.

On the Financial Settlement, the so-called divorce bill, both sides agreed on a number of key areas where the UK would meet its obligations, without a final calculation on the percentage obligations of the United Kingdom for money owed after 2020. It was agreed, as already announced, that the UK would continue to pay into the EU as if it were a member for the years 2019 and 2020, minus future financial commitments made in those two years.

EU programmes financed during this multi-annual financial framework will see UK continued participation until their closure, good news for UK researchers, scientists and businesses who have been worried about disruption to agreed programmes. The UK has also indicated an interest in remaining part of some programmes, as a number of non-EU member states, including Israel, are currently.

Crucially, there is no lump sum divorce bill, commitments will be met over time as and when they arise. This has two positive effects for the UK, firstly ensuring a continued EU interest in a good relationship with the UK in the decades to come, and secondly, it reduces the liabilities, perhaps by as much as half. One example of this is the EU pensions fund, which has a large deficit, the current abnormally low interest rates are widely expected to return to normal levels in the years and decades to come, significantly reducing the fund’s deficit.

What happens next?

This agreement on sufficient progress was already approved in a non-binding vote in the European Parliament and will go to the European Council Summit on Friday this week for approval, where it is also expected to pass. Then the formal commencement of phase two talks on the future relationship, covering transition arrangements, trade, security and many others areas can begin.

It is those talks which really matter to both sides, and everything agreed in Phase One also depends on the outcome of those negotiations, as the first remarks of this joint EU-UK paper make clear, nothing is agreed until everything is agreed. Although when David Davis reminded people of that this week he ruffled some feathers in the European Parliament, even as the Commission confirmed his comments, it was a reminder of how sensitive the situation is.

What the last two weeks have demonstrated is that both sides really do want a deal, it is in our mutual interest, and that underlying fact will be important when difficulties are reached in the next stage of the negotiations.