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The path to agreement

On 15 December 2017 the European Council endorsed the European Commission’s assessment that “sufficient progress” had been made in the Brexit negotiations for the EU and the UK to move on to phase two of the Brexit negotiations. This came after a series of stops and starts, as the two sides grappled with the three priority issues in phase one: citizens’ rights, the financial settlement and the Irish border question.

The November negotiations had not produced much movement on any of the three areas. The EU Chief Negotiator, Michel Barnier, issued an ultimatum, giving the UK two weeks to come up with proposals which would satisfy the EU – and in the case of the Irish border issue, the Government of Ireland in particular.

On 8 December, after intensive discussions, the EU and UK announced that a joint report had been agreed which satisfied the “sufficient progress” criterion, and that therefore the negotiations could move on to phase two in January 2018.

But phase two will not include the detail of future trade relations. The joint report calls for “an agreement as early as possible in 2018 on transitional arrangements”. There will be another separate mandate for negotiations on a future trade framework in late March 2018.

The European Parliament adopted a resolution on 13 December also recommending that the EU27 agree to move to phase two.

The Commission’s assessment that sufficient progress had been made, as set out in the Joint Report and Commission Communication of 8 December, was endorsed by the EU27 at the European Council meeting on 14-15 December.

The joint report

The joint report has been described as “a summary of the negotiations toward the legally binding withdrawal agreement, rather than any sort of legally binding text of its own. It focuses on achievements in the three priority areas for phase one and notes progress on other separation issues that have not yet been settled.

Citizens’ rights

The negotiators reached a “common understanding” on how to provide reciprocal protection for EU and UK citizens exercising “rights derived from Union law and based on past life choices”.

The CJEU will have indirect influence in that UK courts will take CJEU case law into account. For eight years after Brexit UK courts will be able, if they want, to approach the CJEU for an interpretation of citizens’ rights.

The European Commission and an independent national authority in the UK will monitor the implementation of citizens’ rights.

EU citizens and their family members will have a “short, simple, user friendly” application form to register for status in the UK and will be given two years to register at a low cost. The grounds for eligibility for post-Brexit national status will largely follow current EU law on eligibility for rights of residence.

Future family reunion rights (for family members not living with the EU/UK citizen on the cut-off date) will depend on the family’s circumstances at that time: pre-existing spouses will be able to join their partner after Brexit under the same conditions as current EU law, but future partners or spouses would be subject to national immigration law. 

Social security coordination rules will continue to apply to EU citizens who, on the cut-off date, are or have been covered by the UK social security system, and UK nationals who are or have been covered by the system of an EU27 state. 

EU or UK citizens who are away from the host country for more than five years will lose residency rights.

There is no guarantee that UK citizens who move from one EU State to another will maintain all the rights after Brexit.

The financial settlement

The underlying principles of the methodology agreed in the Joint Report are that:

  • no EU Member State should pay more or receive less because of the UK’s withdrawal from the EU;
  • the UK should pay its share of the commitments taken during its membership; and
  • the UK should neither pay more nor earlier than if it had remained a Member State. This implies in particular that the UK should pay based on the actual outcome of the budget

In accordance with these principles, the UK will pay its share of the current EU Budget, which runs to 2020, and some payments will be made after 2020, based on the average of UK contributions between 2014 and 2020. The UK will pay as payments become due and will be reimbursed for what it has paid to the European Investment Bank and the European Central Bank.

The UK will not pay for the relocation of the two London-based EU agencies.

The Irish border

The peace process established by the Good Friday Agreement will be upheld and a hard border between Ireland and Northern Ireland will be avoided.

If the withdrawal agreement cannot avoid a hard border between Ireland and Northern Ireland, the UK will propose “specific solutions to address the unique circumstances of the island of Ireland”.

If there is no agreed solution, the UK will maintain “full alignment” with the rules of the Single Market and customs union which support North – South cooperation and the Good Friday Agreement.

While the joint report sets out the objectives in relation to the Irish border, there is little detail about how they might be achieved. There has been significant focus on what the phrase “full alignment” means in the event of no agreed solution.

Other separation issues

The Joint Report and Commission Communication outline areas where there has been limited agreement (e.g. Euratom-related nuclear specific issues) or no discussion yet (e.g. intellectual property rights).

New EU negotiating guidelines on transition

The European Council adopted new guidelines for phase two of the negotiations on 15 December 2017. These insist that “negotiations in the second phase can only progress as long as all commitments undertaken during the first phase are respected in full”.

The new guidelines allow the EU to start negotiating a ‘standstill’ transition period, when the UK would be outside the EU but bound by the whole of the EU acquis. They also envisage ‘preliminary and preparatory discussions’ on the framework for the future UK-EU relationship, once additional guidelines have been adopted.

Other developments

Brexit in Parliament

The main recent Brexit developments in Parliament are:

  • a Commons debate on a second referendum with three options;
  • agreement on a new ‘Brexit sifting committee’ to examine statutory instruments made under the EU (Withdrawal) Bill;
  • a Government defeat on Parliament having a ‘meaningful vote’ on the withdrawal agreement; and
  • Government amendments to fix ‘exit day’ for the purposes of the EU (Withdrawal) Bill as 11pm on 29 March 2019.

Parliamentary committees have also continued to publish a large number of reports and other documents on Brexit.

UK remains outside EU defence initiative

The UK Government did not sign a Joint Notification by 23 EU Member States setting out their intention to utilise the Permanent Structure Cooperation (PESCO) mechanism to further European Scrutiny and Defence. The UK will therefore have no decision-making rights over its governance or veto over its future strategic direction.

Emissions Trading Scheme: first Brexit-related regulatory change agreed

On 30 November the EU Climate Change Committee agreed to implement safeguard measures for the EU Emissions Trading Scheme to protect it in the event of a hard Brexit.

On 11 November the Environment Secretary announced that there would be a new independent UK environment watchdog to protect UK wildlife, land, water and air after Brexit.

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