The authoritative source for independent research on UK-EU relations

09 Nov 2017

Relationship with the EU

Reaping what you sow

Looking back over the past four years, it is possible to see how the poor quality of the political debate about ‘Europe’ in the UK has left the country with a serious problem. Neither in David Cameron’s 2013 Bloomberg speech nor his 2015 announcement that there would be a referendum, the electoral campaigns of 2015 or 2017, nor Theresa May’s declaration that ‘Brexit means Brexit’, her announcement of her intention to trigger the Article 50 process, nor her decision to start the clock on 29 March 2017, was UK public opinion properly informed about the UK’s options or the consequences of the UK’s departure from the EU. This failing has left public opinion unprepared for the effects of Brexit, and hampered the ability of the UK government to negotiate quickly and credibly.

The most important practical effect is that the UK has lost precious time. The two-year period for completing the Article 50 negotiations does not come to an end until 29 March 2019. However, once the time that an agreement takes to ratify is taken into account, the UK has in effect about twelve months. Given that elections to the European Parliament are scheduled for spring 2019, it will not be possible to extend the negotiating period for more than a few weeks for political reasons.

Until now, the first phase of negotiations on the UK’s withdrawal has produced insufficient results. Following the European Council’s negative decision on 20 October, discussions on future relations will wait until December for a further evaluation of progress. Nonetheless, with the limited time available, perhaps it’s time we started thinking about the shape these future relations might take.

Future relations

Prime Minister Theresa May has declared that she wants neither the European Economic Area (EEA) nor the EU-Canada (CETA) model, but a tailored made agreement somewhere in between. This is an illusion: there are no intermediate points between these two agreements, so far as the single market is concerned. The single market covers four freedoms (goods, services, capital and persons), and picking and choosing among them, or their scope, is not permitted. The UK may aspire to full single market access for some goods, and especially in regard to some services (particularly financial services), but no third country has ever been given such privileges.

This is because it is unacceptable to the EU. The adoption and the evolution of EU legislation and regulation, their interpretation, surveillance and control of their implementation are constitutive of the single market. The EU will not allow full single market access to the UK just as it has not granted access to any other third country. This is not due to any ill-will on the EU side; rather, the EU vitally needs to protect the credibility and legal security of its single market.

What the UK’s position perhaps reveals is that the single market – what it means, and what it consists of – is not well or widely understood. The EU internal market is not only an area where all customs tariffs have been abolished; it aims to remove all regulatory obstacles to trade. It is a quite a revolutionary concept in international public law, because it combines the following features:

– the same rules, norms and standards on goods or products are applied by all participating states to firms (under EU law on internal market), along with the same rules on fair competition and the interdictions against state aid.
– these rules are adopted by one decision-making authority, the EU legislative institutions.
– these rules require that the interpretation can only come one authority, namely the Court of Justice of the European Union.
– these rules and interpretation have legal supremacy over national law, and are applied as such by national administrations and national courts.
– their implementation is controlled by the European Commission, but also by individuals and firms through national courts.
– states not correctly applying the rules may be required by the Court of Justice of the European Union to pay lump sums and penalties, while individuals may be compensated for damages.

This is the sine qua non set of conditions for the single market to be legally credible for all firms and investors in EU member states, and for third countries. They are also why no third state has ever obtained free full access to EU single market, with the exception of the three EEA/EFTA states. They have been granted access because they have undertaken commitments to implement relevant EU law, and to be bound by judgments of the EFTA court. Importantly, the two Courts cannot differ on their interpretation of single market law. Should an ambiguity arise, either the Court of Justice of the European Union decides, or the EU acts to redress the situation (Article 105 and 111 and Protocol 48 EEA).

Even though the EEA would probably be the best option for the UK economy, it is highly unlikely that the UK will become an EEA member for two reasons. First, the procedure would be difficult. After Brexit, the UK would have to negotiate both an EFTA and an EEA accession treaty, the second of which would involve the 31 members of the EEA.

Second, the UK could not accept becoming a member of the EEA for political reasons, because it would have to accept conditions that are too many and too tough. It would have to reproduce and comply with EU law on the single market without participating in its decision making, accept the homogeneity of the internal market, the four freedoms (including that of persons), the EEA Authority’s surveillance role, and judicial control by the EFTA Court; and it would have contribute to the EU budget. For these reasons, an EEA option is not politically realistic, even for an interim period of two to three years. In short, the only real option seems to be a free trade agreement (FTA) – and the fullest such agreement that the EU has ever signed is that with Canada (CETA), which famously took nearly seven years to complete.

Final evaluation

This entire discussion is predicated on the assumption that this whole process is an exercise in damage limitation, since Brexit will not be to the advantage of either the EU or the UK. At this point, two scenarios can be envisaged.

The first is pessimistic. This is where the amount that the UK owes the EU cannot be agreed or no solution can be found on the role of the Court of Justice of the European Union, which would lead to no Article 50 Agreement, no agreement on a framework for future relations between the EU and the UK, and no period of transition. This would be a bad outcome for EU, but catastrophic for the UK – the cliff edge.

The second is a moderately optimistic view. If an Article 50 agreement is ratified before Brexit, it would refer to a framework for the future relationship. The framework would be elaborated in another agreement, signed preferably before or at the end of the transition period, which could provisionally quickly enter into force. The agreement is likely to take the form of an FTA, similar to CETA. The UK would no longer be bound by EU laws and institutions. It would be outside the EU customs union and free to sign trade agreements with other countries. The FTA would allow a market free from customs tariffs for most (or all?) UK goods and products. The UK would not be bound by free movement of persons. On financial services, UK would not get more substantive provisions than Canada.

As for EU norms and standards on social rules, protection of consumers or of the environment, the UK would not be obliged to follow them. However, its firms would have to follow them, in conformity with WTO’s principles, to be able to export their products to the EU. The UK would thus probably continue to adapt its national law to pertinent EU law but its exports would have, in any case, to comply with EU controls at EU borders (maintaining conformity with norms as well as with rules of origin).

Finally, due to the special relations between the UK and the EU, any FTA would certainly have to be accompanied by a number of important additional agreements, which would cover cooperation on external and internal security (with only the institutional limits which are unavoidable), participation in EU programmes, in Euratom and some EU agencies, UK acceptance of the jurisdiction of the Court of Justice of the European Union where necessary, and contributing to the EU budget, as other third countries do.

Jean-Claude Piris is a former director-general of the Council of the European Union’s Legal Service


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