While much attention has been given to the final state of the EU-UK relationship, much less has gone towards the arrangements for any transitional period between leaving the EU and the start of the new relationship.
At present, the only model on the table is that contained within the draft Commission mandate for Phase 2 of the Article 50 negotiations, and shortly to be approved by the EU27. In the apposite words of Jean-Claude Piris, former Director General of the Council’s Legal Service, the model is a ‘full monty’ one: taking the UK out of the decision-making system in March 2019 – including MEPs, Commissioner and representation in Council meetings – but otherwise maintaining current involvement in the EU’s activity through to the end of 2020.
Thus it would continue to contribute to the budget, abide by all treaty commitments – including freedom of movement – and implement EU legislation, as well as having access to the ECJ, whose rulings would continue to have the same force as at present.
Such an approach would avoid a double transition for the UK, i.e. from membership to interim arrangements and then again to the new relationship. For economic operators and citizens alike, this would provide a degree of certainty and an extended period which to adjust to withdrawal.
It would also be relatively simple to negotiate the arrangements. For a time-crunched Article 50 negotiation, being able to side-step lengthy discussion of exceptions could prove very useful when trying to work through the rest of the agenda.
As such the ‘full monty’ model is considerably less problematic than any alternative approach, and moreover is the only one that has been mapped out in any detail. But this is not to say it is without various problems.
The core of the Commission’s suggestion is a trade-off between length and content of the transition arrangements: the UK gets the brief transition it say it wants, but has to take a very overt position as a rule-taker.
Clearly, public perception in the UK is likely to be negative: despite a vote to leave, and despite actually leaving, the UK would still be bound by all the rules and commitments of membership, only now without any institutional voice. Even if that were time-bounded, that will be a tough sell, especially if sections of the government’s backbenches decide it is beyond the pale.
But there is a more abstract problem of equity in the arrangement. It contains an implicit assumption that the EU will act in good faith, recognising that the UK is bound to its rules, but without a say in them. But as set out, there is nothing to stop the EU making decisions from April 2019 that run deeply against UK preferences (or even capacity). Would the UK then have some legal redress in such circumstances?
For example, would the UK be able to challenge the legal basis of a piece of EU legislation, which might impact the form of implementation? And if the EU starts to act in new areas of public policy, then would the UK have an opt-out arrangement?
Those problems become much more pertinent in a situation where a ‘full monty’ model is extended – as might happen if the new relationship negotiations dragged on. Short-run issues could be fudged or deferred, but should the period turn into several years then such matters would become unavoidable, even as public concern about the equity of legislation without representation grew.
A key part of the logic for running transition through to the end of 2020 is to fit with the EU’s multiannual financial framework, which establishes annual envelopes for broad headings over a seven year period. That framework sits on top of the usual annual budget negotiations, rather than replacing them.
The UK is involved as usual in the 2019 budget talks, since it’ll be a member in that year, but it is excluded from the framework from 2021 (which have already begun).
The first question is what happens to the 2020 budget, if the UK is excluded from decision-making, but still fully integrated into the budget structure for both income and expenditure? Would an exception be made to the decision-making rule, or would a change be made to the budget structure?
It is clear that the UK will have to continue to make payments to the EU in return for long-term access to specific parts of EU activity, but this might go to a separate pot (as is the case for Norway), rather than the general budget. However, in the transition the UK would be fully involved, so it makes little sense to separate it out.
But the 2020 budget would pale into insignificance compared to an extended transition that – by definition – would run into 2021. With a new multiannual framework in place, and one that the UK had not been involved in negotiating, how much would change? The end of the British rebate mechanism that the Commission is currently seeking might result in sharp changes in net contributions by the UK.
Any transition arrangement will come with significant implications, for both the UK and the EU. As a short-run proposition, the ‘full monty’ comes with various advantages, both pragmatic and economic, and it is currently the only offer on the table.
But it still comes with a number of immediate and not-insignificant issues, which would get even worse if transition were to be extended.
Thus the paradox of a ‘full monty’ is that while it represents the most viable way of covering the gap from March 2019, it also contains potentially more political, legal and financial problems that harder (i.e. less EU-aligned) models if transition takes longer than planned. Whether an alternative can be designed by either side in the coming months remains to be seen.