“IN LIGHT OF THE GUIDELINES”: BREXIT AND THE EUROPEAN COUNCIL REVISITED

ORIGINAL PUBLISHED ON EUROPEAN LAW BLOG ON APRIL 4, 2017
By Darren Harvey

 

Introduction

Following the delivery by Sir Tim Barrow of a letter to European Council President Donald Tusk notifying the European Council of the United Kingdom’s intention to withdraw from the EU, the two-year time period within which the UK and EU shall negotiate and conclude a withdrawal agreement has commenced.

According to Article 50(2) TEU, the first step in this process is for the European Council to agree upon a set of guidelines defining the framework for the EU side of the negotiations. A first draft of these guidelines was circulated by European Council President Donald Tusk on Friday 31st March 2017.

The purpose of this post is to follow up from a post written last October on the role of the European Council and the Brexit process.

Amending the Guidelines

As was noted in the previous post, Article 50(2) TEU clearly stipulates that in the absence of guidelines from the European Council, the negotiations between the UK and the EU cannot proceed. It is worth emphasizing from the outset that the draft guidelines shall not be formally adopted by the European Council until it meets on 29th April 2017. One must bear in mind the possibility, therefore, that yesterday’s document may be subject to amendment prior to the adoption of a final version later this month.

What is more, according to the introductory remarks, the European Council may update or amend the guidelines as it sees fit throughout the course of the negotiations. It is unclear whether Article 50(2) TEU gives the power to the European Council to unilaterally amend the guidelines as and when it wishes.

On one interpretation, “in light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement” could allow for a continuous process of revision throughout the process of negotiation and conclusion of the withdrawal agreement. This still leaves open the question of whether the European Council is free to alter the guidelines unilaterally or may only do so upon request from another interested party e.g. the Commission.

The next step in the Article 50 TEU process may be instructive here. Following adoption of guidelines in the European Council, the Commission will then issue a series of recommendations to the Council concerning the finer details of its negotiating mandate and further institutional arrangements. We will therefore have guidelines from the European Council and we will have a more detailed negotiating mandate suggested by the Commission and adopted by the Council. As Dr Camilla Macdonald has recently pointed out, the Commission, in issuing its recommendations to the Council, will be utilizing its technical, legal and policy expertise to fill in all the missing details from the European Council’s guidelines, including firm recommendations on each area under negotiation.

An example of how these Council guidelines may be amended throughout the negotiation process is provided by the EU-Canada Comprehensive and Economic Trade Agreement (CETA), in which the original 2009 guidelines were amended in 2011 by the Council following a recommendation to modify the negotiating directives from the Commission.  It remains to be seen, therefore, whether the European Council will be free to unilaterally update its guidelines throughout the negotiations, particularly when one considers that the Council’s negotiating directives are likely to flesh out the details of those guidelines. Based solely upon the wording of the European Council’s draft last week, it certainly seems to be the case that the heads of state and government of the 27 Member States reserve the right to alter their guidelines as and when they deem it appropriate to do so.

The Scope and Content of the Guidelines

Turning to the guidelines themselves, they address in general terms the basic principles underlying the EU’s negotiating position such as acting with one voice, mitigating uncertainty for citizens and businesses, adhering to the principle of sincere cooperation and ensuring the integrity of the internal market.

In addition, they also address, with varying degrees of detail, all of the following issues: the order in which negotiations on withdrawal and any agreement detailing future UK-EU relations will be negotiated; transitional arrangements; reciprocal guarantees for UK and EU citizens; preventing a legal vacuum liable to disrupt business upon withdrawal; a single financial settlement for legal and budgetary commitments as well as liabilities; the aim of avoiding a hard border on the island of Ireland; the status of the UK’s Sovereign Base Areas in Cyprus; international agreements concluded by the EU during the UK’s membership; the transfer of the seats of EU agencies; cases pending before the Court of Justice and administrative proceedings before the European Commission and EU agencies on the date of withdrawal EU; dispute settlement mechanisms for both the interpretation and application of the withdrawal agreement and any future agreement; institutional arrangements allowing for the adoption of measures to deal with situations arising under the withdrawal agreement; the need to prevent a race to the bottom on fiscal, environmental and employment regulation; Gibraltar and the keeping of ordinary EU business separate from the withdrawal negotiations over the coming two years.

Constraints of space preclude an examination of all these issues in the current post, which is intended only as a first reaction to what I consider to be some of the more intriguing or controversial points raised by the guidelines. The following shall therefore discuss some of the more procedural and institutional aspects of the guidelines, whilst leaving much of the points relating to the substance of any future agreement(s) such as safeguards against fiscal, social and environmental dumping for another time.

How many agreements?

There has been much discussion in recent months on whether the UK’s withdrawal from the EU will require the negotiation and conclusion of one, two or three separate agreements. The uncertainty here stems in large part from the wording of Article 50(2) TEU, which provides that the EU shall negotiate and conclude an agreement with a withdrawing state “setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.”  The general consensus seemed to be that that there would need to be at least two separate agreements: one to deal with the UK’s withdrawal and another providing for any future trading relationship between the two parties. It was also generally accepted that it would be possible to have some form of transitional agreement so as to prevent all of the UK’s rights and obligations coming to an abrupt end before any agreement covering future UK-EU relations could be agreed.

The draft guidelines have clarified matters to a certain extent here. As they make clear at point 3 under the heading “A Phased Approach to Negotiations”, the negotiations are envisaged as proceeding in two phases.

The first phase shall involve the disentanglement of the UK from the EU and from all the rights and obligations that the United Kingdom derives from commitments undertaken as Member State. In particular, it shall aim at providing clarity and legal certainty to citizens, businesses, stakeholders and international partners on the immediate effects of the UK’s withdrawal.

With regards to the second phase of the negotiations, the guidelines state that it will not be possible to conclude an agreement setting out any future relationship between the UK and the EU until the UK formally leaves the EU and becomes a third country.

However, in light of the abovementioned requirement in Article 50(2) TEU that the parties take account of the framework for their future relations within the withdrawal negotiations, the EU and the remaining 27 Member States have indicated that they are willing to engage in “preliminary and preparatory discussions” with a view to establishing an overall understanding on the framework for future UK-EU relations. These preparatory discussions are subject to the significant caveat at point 4 that they will only commence “As soon as sufficient progress has been made in the first phase towards reaching a satisfactory agreement on the arrangements for an orderly withdrawal.”  Contrary to the views of some members of the British government, therefore, it does not appear possible to begin negotiating a future trade agreement alongside the withdrawal agreement immediately – a point which was re-emphasised by President Tusk in his remarks on Friday: “Once, and only once we have achieved sufficient progress on the withdrawal, can we discuss the framework for our future relationship. Starting parallel talks on all issues at the same time, as suggested by some in the UK, will not happen.”

Consequently, the guidelines have clarified that it will not be possible to set out all of the details governing both the UK’s withdrawal and any future UK-EU relations within a single Article 50 TEU agreement. What is more, whilst it may be possible to discuss future relations, the EU will not be in a position to conclude any agreement to this effect until the UK has formally withdrawn and become a third state. What remains to be seen, however, is whether the scope and content of any agreement governing future UK-EU relations could be agreed upon in principle prior to “Brexit day” on 29th March 2019 and then concluded quickly thereafter.  Whilst the complexities of international trade negotiations dictate that the prospects of getting all this done in less than two years are rather slim, there is nothing in the guidelines which explicitly rule this out. That said, as the guidelines now make clear, the UK is to be treated as a third state for the purposes of any agreement setting out future UK-EU relations. This raises the prospect of such an agreement being a so called “mixed agreement” requiring ratification from  national parliaments.

Finally, with regards to any transitional arrangements, point 5 of the guidelines states that “To the extent necessary and legally possible, the negotiations may also seek to determine transitional arrangements which are in the interest of the Union and, as appropriate, to provide for bridges towards the foreseeable framework for the future relationship.”  The use of the phrase “to the extent legally possible” thus leaves open the question of whether these may be included within the Article 50 TEU withdrawal agreement itself or rather must be situated in a separate agreement?

Depending upon one’s interpretation, there is arguably a nod in the direction of three separate agreements being required (or at least being possible) in point 7 of the guidelines, which states that: “The core principles set out above should apply equally to the negotiations on an orderly withdrawal, to any preliminary and preparatory discussions on the framework for a future relationship, and to any form of transitional arrangements.”

Enforcement and Dispute Settlement

The guidelines insist at several points that some form of mechanism for enforcement and dispute settlement will be required not only for the withdrawal agreement, but also for any transitional arrangement and agreement governing future UK-EU relations. Concerning the withdrawal agreement, point 8 stresses the importance of ensuring that reciprocal guarantees made to UK and EU citizens and their respective family members (for example, the right of EU citizens to remain in the UK) must be enforceable and non-discriminatory.

Moreover, point 16 states that: “The withdrawal agreement should include appropriate dispute settlement mechanisms regarding the application and interpretation of the withdrawal agreement, as well as duly circumscribed institutional arrangements allowing for the adoption of measures necessary to deal with situations not foreseen in the withdrawal agreement. This should be done bearing in mind the Union’s interest to effectively protect its autonomy and its legal order, including the role of the Court of Justice of the European Union.”

This envisages the likelihood of disputes arising in the future from and in relation to the withdrawal agreement itself. For example, should the withdrawal agreement enable EU citizens currently living and working in the UK to continue to do so on the same conditions as UK citizens, will those citizens who feel that their rights as enshrined in that agreement are not being respected be entitled to some form of redress?

Absent any concrete proposals in the guidelines as to how such dispute settlement mechanisms may operate, a number of possibilities present themselves.

One option would be to entrust an existing judicial body such as the CJEU with the task of interpreting the withdrawal agreement and settling disputes. Alternatively, one could envisage the establishment of a new court or tribunal for this specific purpose. A further possibility would be some form of ad hoc arbitral tribunal to hear disputes as and when they arise. From a different perspective, it may be possible for both the UK and EU to agree on a mechanism whereby disputes arising may be settled via diplomatic means and thus not involve any court-type entity.

In addition to the withdrawal agreement, one finds similar references to enforcement and dispute settlement in point 5 with regards to transitional measures, namely “Any such transitional arrangements must be clearly defined, limited in time, and subject to effective enforcement mechanisms. Should a time-limited prolongation of Union acquis be considered, this would require existing Union regulatory, budgetary, supervisory and enforcement instruments and structures to apply.”

The crucial point to note here is that, according to point 5, any transitional arrangement in which a time-limited prolongation of the Union acquis is envisaged would necessarily result in the continued payment by the UK into the EU budget for the duration of that arrangement, along with the continued applicability of EU law in the UK and with it the continued jurisdiction of the Court of Justice.  Whilst this makes sense from the perspective of ensuring a smooth transition from EU membership to a future trading relationship, much of the leave campaign during the referendum was based upon putting an end to much of these budgetary and institutional arrangements.

Finally, point 21 states that any future partnership between the EU and UK must include appropriate enforcement and dispute settlement mechanisms that do not affect the Union’s autonomy, in particular its decision-making procedures.

Irrespective of how these issues are ultimately resolved, it is clear that the negotiations over the withdrawal agreement (and potentially any transitional measures and future trade deal) are now likely to require substantial work on institutional arrangements to account for the settlement of potential disputes arising after the UK has formally left the EU, in addition to the more mainstream issues of assets, liabilities, citizens’ rights, pensions etc.

Gibraltar

As was noted in my previous post, “will the Spanish government seek to place the status of Gibraltar and its future EU membership explicitly on the table at the outset by pushing for its inclusion in the guidelines which shall guide the EU’s side of the negotiations?” The reason why it was foreseeable that issues relating to Gibraltar would be placed on the table at the outset is because once the guidelines have been negotiated and concluded by consensus in the European Council, there exists no means for an individual Member State to veto the withdrawal agreement, with a Qualified Majority in the Council and the consent of the European Parliament sufficient to conclude the deal.

Attention was therefore drawn to the prospect of those Member States with particularly pressing matters of national interest trying to have them included in the negotiation agenda from the beginning by including them in the European Council guidelines. And so it has come to pass, with the guidelines stating in no uncertain terms at point 22 that “After the United Kingdom leaves the Union, no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom.”

This is to be read alongside point 3, which stipulates that on the date of withdrawal, the Treaties will cease to apply to the United Kingdom, to those of its overseas countries and territories currently associated to the Union, and to territories for whose external relations the United Kingdom is responsible.

Interestingly, point 22 does not address the Article 50 TEU withdrawal agreement. Instead, it addresses only any future UK-EU agreement which, depending on its contents, may require a unanimous vote in the Council to conclude, which would give Spain a veto at the end of the process anyway. Nonetheless, inclusion of Gibraltar in the guidelines seems to have caught the UK government off-guard and has been met with consternation in some sections of the UK media, with accusations that Spain is using the pretext of Brexit to take back Gibraltar.

The first point to keep in mind here is that the guidelines are still in draft format. It would therefore be possible for the UK and Spanish governments to try and come to some form of understanding over the coming month and have point 22 removed from the final version of the guidelines. But should this provision make it into the formally adopted guidelines, what would this mean for the UK, EU and Gibraltar moving forward?

It is important to consider the default position here before moving to examine the possible impacts of point 22 of the guidelines.

The default position in public international law is set down in Article 29 of the Vienna Convention on the Law of Treaties (VCLT) which stipulates that unless a different intention appears from the Treaty or is otherwise established, a Treaty is binding upon each party in respect of its entire territory.

In terms of what constitutes the territory of a state, the CJEU has held that, “In the absence, in the Treaty, of a more precise definition of the territory falling within the sovereignty of each Member State, it is for each of the Member States to determine the extent and limits of that territory, in accordance with the rules of international public law.” (C‑111/05, Aktiebolaget NN v Skatteverket, paragraph 54)

In this regard, as the UK Foreign Office’s guidelines on the extension of treaties to overseas territories makes clear, overseas territories such as Gibraltar are not constitutionally part of the United Kingdom. The default position is therefore that, absent any provision dealing with the matter, any Treaty entered into by the UK does not automatically cover the territory of Gibraltar. An example of such a provision in a Treaty is provided in the EU Treaties themselves, with Article 355(3) TFEU providing that the EU Treaties shall apply to the European territories for whose external relations a Member State is responsible. This provision has been held by the CJEU to include Gibraltar (Case C-145/04, Spain v UK, paragraph 19).

Absent such a provision in the Treaty, it nevertheless remains possible for the UK to extend the territorial scope of treaties that it ratifies to include overseas territories, either at the time of ratification or at some later date. When doing so, the UK must consult the government of Gibraltar at the earliest stage possible and allow them a proper length of time to consider the implications of having any treaty extended to them.

Thus, in an “ordinary” state of affairs, any agreement between the UK and EU governing future relations could cover Gibraltar either by an explicit provision in the agreement itself or by a decision of the UK government, having consulted the government of Gibraltar, to extend the Treaty to the territory of Gibraltar.

The problem posed by point 22 of the guidelines from the UK’s perspective, however, is that the EU’s default position seems to be that any future agreement will include an explicit clause excluding its application to the territory of Gibraltar. Alternatively, point 22 could be interpreted as meaning that a provision in the agreement stating that it applies to Gibraltar will only be inserted following agreement between the UK and Spain. If correct, the question then becomes what it is that Spain would seek in return for dropping the prohibition on applicability to Gibraltar or including a provision stipulating that Gibraltar is covered by the agreement.

It is important to keep in mind that the sovereignty of Gibraltar or its coming under Spanish control are not discussed in the guidelines. They only address the applicability of any future UK-EU agreement to the territory of Gibraltar.

Thus, as things currently stand, the UK faces the prospect of having to choose between signing a comprehensive free trade agreement with the EU which will explicitly exclude the territory of Gibraltar from its scope of application, on the one hand, and leaving the EU without any agreement at all governing future relations, on the other.

In order to prevent ever having to make such a choice, UK officials could seek to negotiate with their Spanish counterparts between now and the end of April in a bid to have point 22 dropped from the final version of the negotiating guidelines.

Conclusion

As mandated by Article 50(2) TEU, the European Council has provided a draft set of guidelines which shall direct the EU side of the negotiations with the UK regarding its withdrawal from the EU. Whereas one might have expected the guidelines to be rather abstract in nature and simply set out a list of general principles, the present draft is rather detailed in terms of both its scope and content. This blog post has provided a first reaction to merely a few of the many considerable points set down by the European Council guidelines, which shall undoubtedly be the subject of much discussion and analysis in the coming days and weeks. Turning to the immediate future, the draft guidelines will need to be formally adopted by the European Council at the end of April 2017 and it remains to be seen whether any amendments shall be made to the guidelines between now and then.

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