Brexit Briefing No.59: Still in the Brexit Waiting Room

This week has been dominated by anticipation of an announcement that a deal, or at least an agreement between the British and European negotiators, had been found. 

Preparations were made for EU Ambassadors to be briefed and for a potential summit to be announced for later this month. Whilst in the UK, the Cabinet was also being prepped to approve a deal.

Yet the deal, which if often reported to be tantalisingly close, never came. At the time of writing it has still not been confirmed. It is unclear how close to a deal the negotiators really are, with multiple mixed signals leaking from Brussels and London, but very few genuine leaks from the heart of the negotiating teams. British Prime Minister Theresa May announced this week that the deal was 95% done. However the mantra of the Article 50 process has always been “nothing is agreed until everything is agreed” and the remaining 5% continues to be the issue of the Irish border, and specifically whether a new “backstop,” (the mechanism to avoid a hard border in Ireland) which would include all of the UK, can be unilaterally ended by the UK or not. This difference in opinion cannot be easily solved and an agreement, if found, will be delicate and difficult to sell to both sides, both of whom will have to compromise. 

Olly Robbins, the Prime Minister’s Europe adviser, was spotted sprinting through the EU district in Brussels early on Tuesday evening, suggesting that some intense talks had taken place. 

swimming pool

The backstop is designed to be in place until the UK and the EU strike an agreement on their future economic relationship. And can only be lifted if the EU is content that the future relationship can ensure that a hard border can be avoided in Ireland. 

Herein lies the problem. For the EU any ability for the UK to unilaterally leave the backstop renders the previous two-year negotiations on the Irish border irrelevant, as they would have no legal guarantee that a hard border would not be introduced by the UK. 

But for the UK any agreement which denies the UK the right to unilaterally leave the backstop means a future UK government cannot avoid the choice between two unpalatable outcomes. 

The EU would only agree a future trade deal which addresses the Irish border and a deal which does that will need the UK to align to EU standards, thus denying the UK the ability to do comprehensive trade deals with other countries. The UK could therefore only sign a trade deal with the EU which allowed the UK to diverge from EU rules and do more comprehensive trade deal with other countries in the future if that deal excluded Northern Ireland, any other option would ensure the backstop kicks in which effectively separates Northern Ireland from British rules. The UK could not leave that backstop without agreement from either the EU or Ireland, which would not be forthcoming. 

That would therefore leave the UK in the UK wide backstop, effectively remaining in the customs union with no way to exit it, as it could not leave unilaterally. 

This is where the negotiations are still stalled. Bridging this gap remains hugely difficult but is possible. But there are still some options. 

This week much of the discussion has been about how to include a possible “review mechanism” of the backstop to try to address this issue. The UK will want to know there is a possible exit ramp from what is after all only supposed to be an insurance policy if a trade deal can’t be agreed. 

The UK has, therefore, suggested that an independent, third-party arbitration panel could be the way forward to unlock the backstop conundrum. 

ukraine

While no drafts have emerged from the secret technical talks being held in Brussels - known as the ‘tunnel’ - there is already a similar precedent in the EU’s Association Agreement with Ukraine. Trade disputes in that pact are resolved using a model based on the World Trade Organisation system. Discussions between officials are the first step to finding an agreement. If that fails, the dispute is then referred to an independent arbitration panel.  In the Ukraine deal, there is a panel of three arbitrators: one representing Ukraine, another the EU and the third from another country as chairperson. If the outcome of that dispute hinges on regulatory issues or an interpretation of EU law, it can be referred to the ECJ, although it does not have direct jurisdiction over Ukraine. Negotiators will have to be careful yet creative in drafting wording that will not cross the UK’s and the EU’s red lines. It is yet unclear who would have the final decision on whether the UK can quit the backstop. Any outcome that includes the European Court of Justice (ECJ) will be difficult to sell in London.

However any agreement along these lines will ultimately be a convoluted way of trying to avoid addressing the major issue - how to square the circle of the UK wanting an independent trading policy, freedom from EU rules and the avoidance of a hard border in Ireland or a border between Northern Ireland and the UK? 

An agreement may delay that reckoning, and allow Brexit to get over the finishing line next March. But it won’t solve the problem, which is probably unsolvable and will mean that even if the UK manages to leave the EU, it won’t be able to have the independence Brexit promises until some way is found to square those circles. Of course, the debate on the legal texts does sometimes obscure the fact that no parliament in Westminster can be bound by its predecessors, the UK could in theory unilaterally withdraw from the backstop whatever is agreed with the EU, but there would obviously be consequences for such action.

So another week ticks by, and 29th March 2019 is looming closer and closer. A deal needs to be done soon if it is to get through the UK and EU parliaments in time. Talks are continuing at pace and a deal is, despite all written above, imminent. We all await to see what is in it.