Brexit: Update

Brexit negotiations have recently entered a new phase, crucial for defining the future relationship between the European Union (“EU”) and the United Kingdom (“UK”).

On 8 December 2017, a Joint report from the EU and UK negotiators and a Communication from the European Commission to the European Council detailed the state of progress made during the first phase of the Brexit negotiations. An agreement in principle was reached on three key areas: reciprocal protection for EU and UK citizens having exercised free movement rights by the time of the UK’s withdrawal, practical aspects of the future cooperation between Ireland and Northern Ireland, and a financial settlement. The details of this agreement need to be included in the Withdrawal Agreement, which in turn needs to be coherent with the agreement on the transition period.

On 15 December 2017, the European Council adopted Guidelines for the future conduct of the negotiations, noting, in particular, that sufficient progress had been made to move to the second phase of the negotiations on transition and the framework for the future relationship. The European Council called on the EU negotiator and the UK to complete the work on all withdrawal issues in accordance with its Guidelines of 29 April 2017 (see our Newsletter July 2017). With regard to the transition period, the EU noted in particular:

• the fact that transitional arrangements must be in the interest of the Union, clearly defined and limited in time;
• the application of the whole of the EU acquis during that period, with changes applying to both the UK and the EU and the UK continuing to participate in the Customs Union and the Internal Market (with all four freedoms) and complying with EU trade policy;
• the fact that the UK, as a third country, would no longer participate in or nominate or elect members of EU institutions, nor participate in the decision-making of other EU bodies;
•  the need for full applicability of the EU regulatory and enforcement instruments during that period, including the competence of the Court of Justice of the European Union;
• the UK’s intention no longer to participate in the Customs Union and the Internal Market after the end of the transition period.

Our assessment is that it is unlikely that all of these demands of the European Council will be accepted as such by the UK.

On 29 January 2018, the Council of the European Union adopted Supplementary directives for the negotiation of the Withdrawal Agreement supplementing initial directives adopted on 22 May 2017 (see our Newsletter July 2017). These new directives further detail the principles for the transition period set out by the European Council. They specify that it should run from the date of entry into force of the Withdrawal Agreement and should not last beyond 31 December 2020.

It is expected that the European Council will decide on key principles of the transition period in March 2018.