Brexit Business Brief | "So let’s get on with it"

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What’s happening?

In a busy few days for Brexit, the Prime Minister set out the UK’s desired position on its future economic partnership with the European Union, the European Commission published the first draft of the full legal text of the Withdrawal Agreement, and Jeremy Corbyn confirmed that a Labour government would seek to negotiate a new customs union with the EU.

The Prime Minister’s Mansion House speech on Friday was the third of her big Brexit speeches, following the bullish “red lines” set out at Lancaster House in January 2017 and the request for a transition period made at Florence in September 2017.

This most recent speech is much more detailed than previous efforts, and is the UK’s opening gambit in the upcoming negotiations on what the future relationship between the EU and the UK could look like. The EU will adopt its own future relationship guidelines at the European Council meeting on 22 and 23 March 2018.

This new detail was accompanied by a – perhaps belated – acknowledgement of the nature of the road ahead. The Prime Minister said:

“I want to be straight with people – because the reality is that we all need to face up to some hard facts. We are leaving the single market. Life is going to be different. In certain ways, our access to each other’s markets will be less than it is now.”

The speech concluded with the line “So let’s get on with it”.

The three baskets of Brexit

The Prime Minister’s approach is built on the “three baskets” approach to Brexit that was hinted at in her Florence speech, with the UK advocating a policy of managed sectoral divergence after the end of the proposed transition period. In essence:

• Basket 1: The UK remains fully aligned with EU rules in some sectors, with no divergence.
• Basket 2: The UK diverges to its own regulatory regime in some sectors, but one that achieves the same ends as the analogous EU regime.
• Basket 3: The UK develops its own regulatory regime in some sectors, and fully diverges from the EU regime.

The question now is to what extent this approach will appeal to a European Commission and wider EU27, who appear united on a “no cherry picking” approach to the Single Market.

Rather than going through the PM’s speech in any more detail, here is a table reproducing short sections that will be of particular interest to business and to lawyers.

One subject that the Prime Minister did not touch on in her speech was the transition period that is expected to follow the UK’s departure from the EU on 29 March 2019. That transition period is of overriding concern to business, so let’s turn to that now.

General developments

The expected transition period

The EU27 and UK appear pretty close to agreement that after Brexit there will be a “status quo” transition during which, in practical terms, current rules for business would remain the same. The only change would be that the UK would have no representation at EU institutions, bodies or agencies.

The two sides differ on how long the transition would last. In the draft legal text of the Withdrawal Agreement published on 28 February 2018, the Commission repeated its stance that it should end on 31 December 2020 (driven by EU budgetary periods).

The UK’s position is that it should last as long as needed to “to prepare and implement the new processes and new systems that will underpin the future partnership”, which gives a bit of wriggle room (though the UK currently thinks this will be “around two years”).

What could stop this transition period from happening? Well, under Article 50 the transition appears dependent on the UK and EU27 settling the UK’s withdrawal arrangements. The reality is that there is almost certainly no transition period without agreement on the terms of the UK’s withdrawal.

The withdrawal “heads of terms” were agreed in December 2017, and it is those heads of terms which the draft text published on 28 February 2018 seeks to translate into a binding legal agreement. The major outstanding issue on the withdrawal is what happens to the border between Northern Ireland and the Republic of Ireland. Failure to agree that issue could jeopardise a transition period happening, and at worst could mean a “cliff edge” Brexit.

So we are left still waiting for some greater measure of certainty that the transition period will happen. All attention will be on the March European Council meeting.

The transition: rights of EU citizens

An outstanding area of disagreement with regard to the terms of the transition appeared to drop away this week, when the UK published a policy paper on “EU citizens arriving in the UK during the implementation period” (which is how the UK government refers to the transition).

The UK’s stance had been that EU citizens arriving in the transition could not expect to have the same right to remain as citizens arriving before Brexit. The policy paper largely reverses that position (the UK still proposes some differences around family rights of reunion) and is much closer to the EU27’s wish for rights to be the same irrespective of when the citizen arrived. This removes a potential roadblock to agreeing the terms of the transition.

Sector developments

The spate of papers from lobby groups and others has abated, now that attention has turned to the more detailed official positions being published by the Commission and the UK government.

The Commission continues to publish its “Brexit preparedness” notices. The latest are on consumer protection and passenger rights, and on rail and maritime transport. The complete collection is here.

Also from the Commission are various slide decks from the EU27 “internal preparatory” discussions. These are rather hard going, but are a detailed guide to EU27 thinking about what the “future relationship” in various sectors might look like – always, in the context and tramlines of existing Union law and policy. There are decks on transport, movement of people, services, aviation, and trade policy, amongst other topics. The master deck is this very informative and detailed one on “Regulatory issues”.

Legal developments

The European Union (Withdrawal) Bill remains in the House of Lords. The dates for the next Parliamentary stages of the Customs Bill and the Trade Bill have yet to be announced, despite the importance of getting these Bills into law so that the UK’s post-Brexit legislative framework and infrastructure in these areas is in place.

The Haulage Permits and Trailer Registration Bill continues to move through the House of Lords, as does the Sanctions Bill through the Commons.

We discuss what the draft Withdrawal Agreement says about IP post-Brexit in this Insight.