The triggering of Article 50 of the TFEU meant the UK could begin to negotiate an exit deal but it does not cover the negotiations required to set up a new future trading relationship. So, once the deal has been finalised the Brexit negotiations will move to another part of the Treaty on the Functioning of the European Union – Article 218. This Article sets out the EU’s rules for conducting negotiations with third parties. For example, it defined the way negotiations happened between the EU and Canada over the Comprehensive Economic and Trade Agreement (CETA) and between the EU and Singapore on the EU-Singapore Free Trade Agreement. Of course, the UK is not a third country yet but a trade deal can only be negotiated under this Article and any agreement must be ratified by all 27 EU countries and their national parliaments. (Belgium alone has seven of them.) The majority of the negotiations covered by Article 218 are focused on trade and investment, but it can also apply to other areas such as negotiations over economic cooperation and development, and participation in EU programmes such as research funding.
What is the timeline for negotiation?
There is no formal rule-book for these negotiations and few informative precedents but Article 218 does detail how negotiations are opened and concluded so we can begin to set out a potential timeline.
It is clear that the negotiations have been difficult and were very slow to get started but we have an agreed “Divorce Settlement” (subject to final ratification) and a draft Transitional Arrangement that will keep the UK within the EU Customs Union and Single Market until 31st December 2020. The EU is pushing the UK to come up with the next steps and outline what type of trading relationship we want with the EU but this is proving problematic, despite the so called Chequers’ White Paper outlining the UK Government’s preferred arrangement as a Facilitative Customs Partnership. More people are coming forward to say that a no-deal exit seems likely as we need to conclude the exit negotiations and outline a credible new arrangement by October 2018 to give any chance of a deal being in place before the time limit of Article 50 comes into play (11pm GMT 29th March 2019).
What is in Article 218?
The whole of Article 218 is relevant to negotiations on the future UK-EU deal, but the key sections are:
- Article 218 (3) sets out how negotiations will begin, with the Commission submitting a recommendation to the Council and the Council adopting that decision and appointing a negotiator.
- Article 218 (4) provides that the Council may address directives to its negotiator to guide the negotiations, and may also appoint a special committee to oversee the negotiations.
- Article 218 (6) sets out how negotiations are concluded – by a vote of the Council, following a recommendation from the negotiator.
- Article 218 (10) states that the European Parliament must be ‘immediately and fully informed at all stages of the procedure’.
Under the terms of Article 218 (8) the final deal must be agreed by a qualified majority vote of the European Council. That means that 72% of the 27 member states (representing at least 65% of the total population of the 27 member states) need to vote in favour of the agreement. However, if the agreement covers certain areas – including EU accession, EU finances, or common foreign and security policy – then the Council must agree to the deal by a unanimous vote. Whether or not the final Brexit deal will require a unanimous vote therefore depends on the scope of the agreement.
What happens next?
The Heads of State/ Governments of the EU27 invited the Council to nominate the European Commission as the Union negotiator and Michel Barnier was appointed chief negotiator. Michel Barnier will keep the European Parliament closely and regularly informed throughout the negotiations which will take place in Brussels.
It is clear that Member States will be closely involved in preparing negotiations, giving guidance to the Union negotiator, and assessing progress. For this purpose, a dedicated Working Party will be created in the Council, with a permanent chair, to ensure that negotiations are conducted in line with the European Council guidelines (anonymously agreed by the Council on the 29th April 2017) and the Council’s negotiating directives.
It could be argued that to negotiate a trade agreement with a country with which you already have a trade agreement should be easy. This is not going to be the case as the two parties have clearly started from opposite positions. PM Theresa May said in the Article 50 letter that the UK will leave the single market and the Customs Union but the EU are still talking about a relationship model based on the UK remaining in the Customs Union, being part of the Single Market like Norway or negotiating a deep and comprehensive economic partnership arrangement along the lines of the Canada and, more recent, Japanese trade agreements. The guidelines laid down by the Council will define the overall principles that the EU will pursue during the negotiations and, it must be remembered, be based on the common interest of the European Union and of its (remaining) 27 Member States. These trade negotiations will not be about liberalizing trade; which is the usual reason for trade deals. Unique these negotiations will be to establish how far trade restrictions and controls will impact on the EU27 and the UK relationship.
Article written by Sandra Strong Managing Partner of Strong & Herd LLP