Brexit Negotiations Phase One: Winter Is Coming

The past three months have proven an interesting, albeit predictable, beginning to the two-year period of Brexit negotiations between the United Kingdom and the European Union. After almost a year of preparation, amply recorded in prior Brexecution columns, U.K. and EU negotiators began the real “work” of Brexit on June 19. Representatives agreed to meet in Brussels for four days of negotiations per month during the first phase of talks. Preliminary meetings in July and August addressed the rights of EU citizens in the U.K. and vice versa; the border between Northern Ireland and the Republic of Ireland; and the U.K.’s debt to the EU, which the EU estimates is around 100 billion euros (the U.K. has not published its own appraisal). The EU has refused to discuss any further issues, including trade relations, until these topics are resolved. A delay in trade negotiations is worrisome; the sheer volume of trade issues already makes the two-year negotiating horizon a tall order, as I discussed here.

This is the predictable part: According to the House of Commons, perspectives on the status of negotiations vary. David Davis, the U.K. secretary of state for exiting the European Union, believes that both sides have made “concrete progress on many important issues.” But the EU negotiator, Michel Barnier, says that no progress has been made on the headliner issues and that this inefficiency portends insufficient time for an orderly Brexit. The next round of Brexit negotiations will begin on Sept. 25. The European Parliament has promised to draft a resolution on its negotiating positions by the end of September. The following round is scheduled to begin on Oct. 9 and soon after, on Oct. 19 and 20, EU leaders will host their post-summer European Council Summit, during which they are expected to assess the progress of negotiations.

While Davis and his team brave the cold negotiating tables of Brussels, U.K. Prime Minister Theresa May and her government are working to clean house. The government is making progress with what many call the Great Repeal Bill (the formal name is the “European Union (Withdrawal) Bill”), which repeals the European Communities Act of 1972.

To help contextualize the September negotiations, I will briefly summarize the status of each discussion point. Additionally, I will walk through the government’s Sept. 18 “Future Partnership Paper” on U.K.-EU security, law enforcement and criminal justice cooperation.

As mentioned above, the EU refuses to introduce new issues for negotiation until resolution has been reached on EU and U.K. citizens’ rights, the border between the Republic of Ireland and Northern Ireland, and the settlement of U.K. debt.

First, let’s look at citizens’ rights, an anticipated point of contention since the Brexit referendum results were tallied. More than 3 million EU citizens live in the United Kingdom, and almost 1.2 million U.K. citizens reside in the 27 other EU countries. Absent specific terms protecting the rights of these people, Brexit day stands to leave both EU and U.K. citizens stranded outside their home countries and without rights in foreign territory. After the August round of negotiations, the EU and the U.K. released a joint technical note describing areas of agreement and disagreement. About a third of the citizens’ rights issues—22 of 69 points—are still in contention. For example, the EU argues that U.K. citizens who are currently in the EU will retain rights only within the states in which they reside on Brexit day. The U.K.’s position is that its citizens residing in the EU should retain all of their existing rights, including those that enable cross-border activity. Considering the number of unresolved issues, negotiators are unlikely to reach agreement soon.

Second, the Irish border is also a thorny topic in light of the long history of violence between the Republic of Ireland and Northern Ireland. EU and U.K. negotiators are mindful of the potential to destabilize the peace established by the Good Friday agreement nearly 18 years ago. Both the U.K. and the EU are opposed to introducing a physical border and want continued recognition of the Common Travel Area, or free movement, between Ireland and the U.K. The source of friction is the anticipated difficulty of implementing EU customs regulations without a physical border infrastructure. The EU wants the United Kingdom to stay within the customs union to solve this problem. The U.K. prefers that the EU suspend its customs laws at the future Irish border. The negotiating parties’ impasse has not gone unnoticed. One member of the European Parliament, Guy Verhofstadt, has summed it up as: “We are nowhere on border issues.”

Last, there is still disagreement about the size of the U.K.’s debt to the EU; both sides are reluctant to budge on their appraisals of the U.K.’s financial obligations. During August negotiations, the United Kingdom spent significant time criticizing the EU’s estimates without publishing its own. It is unlikely that the parties will reach a financial settlement during the coming negotiation period.

Meanwhile, the U.K. government continues to prepare for Brexit day by articulating negotiating positions. This week it published a “Future Partnership Paper” on security, law enforcement and criminal justice cooperation between the EU and the U.K. Given the recent terrorist attacks in the U.K., the government argues that it is “in the clear interest of all citizens that the UK and the EU sustain the closest possible cooperation in tackling terrorism, organized crime and other threats….” But the terms of cooperation will be the product of painstaking negotiations. Conservative peer Lord Timothy Kirkhope, a former member of the European Parliament, expressed concerns that Britain would lose access to “critical data” if it rejects European Court of Justice (ECJ) jurisdiction in its withdrawal agreement. U.K. officials have been forthright about wanting to get out from under the thumb of the ECJ, but a former head of Europol, Max-Peter Ratzel, has warned that the EU is unlikely to allow British participation in its security infrastructure if the U.K. doesn’t accept ECJ jurisdiction. In addition to negotiating the details of security cooperation, both parties have to agree to a means of dispute resolution: the ECJ or some new mechanism.

This summer, the House of Lords published a study of yet another anticipated obstacle: the potential disconnect between future U.K. data policy and EU General Data Protection Regulation (GDPR), a set of more comprehensive EU-wide data regulations set to take effect in May 2018. Once the U.K. exits the European Union, it will no longer be privileged to free data flows within the EU regulatory regime. Instead, it will have to seek approval for data exchanges from the European Council. Without a bespoke agreement baked into the withdrawal agreement, the U.K. will have to seek approval in the form of an "adequacy decision." In other words, the U.K.’s domestic data protection policy must adequately meet the European Council’s standards. The U.K. has consistently said it will implement the data regulations by next May, and the paper published this week confirms that commitment: “When the UK leaves the EU it will therefore be operating at the same standards as EU Member States, with safeguards clearly set out in domestic law.” Still, the process of obtaining an adequacy decision may take longer or introduce more uncertainty than the U.K. security infrastructure would like, especially in the face of recent terror attacks. In addition to the initial approvals, the U.K. is likely to struggle to stay abreast of EU data policy changes unless it negotiates a better cooperation and coordination mechanism before Brexit.

The U.K.’s Future Partnership Paper also acknowledges the importance of the legal instruments that have been developed to undergird the European security and law enforcement infrastructure. This legal toolkit “facilitates a level of operational cooperation...that can be more comprehensive and sophisticated than other multilateral cooperation.” The U.K. names a few of the key components: the EU Directive on Passenger Name Records, the Schengen Information System II, Prüm, Eurodac, the European Arrest Warrant, the Europol Internet Referral Unit, the Europol Serious and Organized Crime Threat Assessment, and the Europol Joint Cybercrime Action Taskforce. While the paper emphasizes the importance of maintaining close cooperation in these institutions and others, the U.K. government assumes that the European Court of Justice will be excluded from future dispute-resolution mechanisms.

The government recognizes the difficulties to which I allude above; early on, the Future Partnership Paper specifies that a new regime “need[s] to be supported both by a means of resolving any disputes between the UK and the EU, and by arrangements that allow for the free flow of personal data.” The paper rejects existing third-country partnership models with the EU and instead proposes a “more ambitious model for cooperation” that, like some trade agreements with third countries and the Schengen association agreements, will exclude the ECJ and create a separate overarching legal framework. The paper reserves much of the substantive discussion for negotiation, but the mandate set out by the government is clear: to maintain, and in some cases intensify, existing security and law-enforcement cooperation under a different legal framework such that the U.K. may continue to depend on EU institutions without being subject to the ECJ.

The government is also forging ahead with necessary changes to domestic legislation. On Sept. 11 the Great Repeal Bill passed its first vote in the House of Commons. The bill repeals the European Communities Act of 1972, which legislated the incorporation of EU law and ECJ jurisdiction into U.K. domestic law. The Great Repeal Bill returns all legislative competence to the U.K. Parliament, authorizes the creation of secondary legislation so that regulatory agencies may create legally enforceable regulations regarding vestigial EU law, and copies all of EU law into U.K. statute to avoid vacuums of law where EU law used to apply. This bill suggests a new legal construct in the United Kingdom: retained EU law. This new body of law will require judicial interpretation and is sure to generate its own disputes; much of the retained law stands to be amended, replaced or repealed by Parliament. The next step for the Great Repeal Bill involves detailed examination of the bill at the committee stage.

If the pace of this summer’s negotiations suggests anything, it is that trade negotiations are unlikely to start in October. This is particularly worrisome because of the negotiating window mandated by Article 50 of the Treaty on the European Union. If a deal hasn’t been reached within two years, and the European Council doesn’t unanimously approve an extension, the U.K. will be immediately expelled from the European Union with or without a deal. As I discussed last year, the sheer volume of necessary trade negotiations is so large that experts were skeptical of the original negotiating horizon. The clock began ticking in the spring and as winter approaches the goal of finalizing Brexit negotiations by March 29, 2019 seems even more farfetched.