As British Brexit negotiators are hoping to secure an agreement on the transition period at the European Council on 22-24 March, Sionaidh Douglas-Scott explores what they should keep in mind, and discusses sticking points to prepare for.
Both the EU and UK appear to accept that a transition period (or as the UK Government prefers it – ‘implementation period’) will be necessary to effect Brexit, as it is unlikely that agreement on the UK’s future relationship with the EU will be reached and implemented before 29 March 2019.
The EU has set out its view on transition in some detail in the draft Withdrawal Agreement published last week by the European Commission in which it stated that, ‘unless otherwise provided Union law shall be applicable to and in the [UK] during the transition period.’ The UK has yet to produce anything of similar detail, although it seems to have accepted that some transition is necessary and that, during transition, although the UK will no longer be an EU member state, most current EU rules will continue to apply to it.
Indeed, provision for a transition agreement is perhaps the most important part of the Brexit process right now given that, without it, on 29 March 2019 the UK will exit the EU over the fabled ‘cliff edge’ into 3rd country land, involving an immediate change of status and uncertainties dreaded by business, EU citizens, and many others. Yet there has been very little discussion about a transition agreement and the issues it raises.
The form of a transition agreement
An immediate question is whether and how a transition period relates to the Withdrawal Agreement, which is being negotiated under Article 50 TEU. In fact, Article 50 does not mention any transition, which might make this legal basis for a transition seem questionable. However, both the EU Commission (in its draft Withdrawal Agreement) and the EU Council (in its negotiating guidelines) appear to assume that transition is part of any exit deal under Article 50.
Yet it might be argued that, given that transition seems to replicate EU membership, with some adjustments, it is not really ‘withdrawal’ as such, and it should not be negotiated under Article 50. The alternative would be its conclusion as a separate deal (a ‘mixed agreement’ involving all EU states as negotiators) under Article 218 TFEU, which would require unanimity of member states and ratification in all their parliaments (unlike the Article 50 deal), and so is impossible to conclude before Britain exits (according to Article 50) on 29 March 2019.
On the other hand, given the desire to give businesses and others time to prepare for Brexit, and avoid a ‘cliff edge’, it would not seem to be in Britain’s interests to argue that a transition agreement is outside Article 50 competence (unless some Brexiteers wished for a total break from the EU in 2019). However, a dissatisfied party might question the legal basis of the transition agreement, perhaps by referring the matter to the European Court of Justice. This could be a lengthy process (with consequential uncertainty for Britain – would it remain in the EU during that period, if so, under what terms, or could uncontested parts of an Article 50 agreement apply?) If the European Court did have to decide the issue, then, roughly, the test to be applied is whether the ‘essential object’ of a withdrawal agreement could be covered by Article 50, which could indeed be dependent on the type of deal struck.
Transition in substance
Nonetheless, in the absence of a UK ‘draft Withdrawal Agreement’, or indeed any document that spells out the UK’s view on transition in anything like the detail so far expressed by the EU, questions do arise about what the UK’s approach to transition might be.
First, there are questions as to what might be included in an agreement on a transition period. Generally, will the UK be content to agree an extension of the EU acquis that requires the existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply? More specifically, the following issues are contentious. First, the continued jurisdiction of the European Court of Justice, supposedly a ‘red line’ for Theresa May, but now apparently conceded by the UK. But would the existing system of preliminary references, a key EU law mechanism whereby UK courts may refer a British case to the ECJ for clarity on the validity and interpretation of EU law, continue to apply if the UK is no longer a member state and no longer appoints a judge to the ECJ? Secondly, during the transition, because it will have left the EU, the UK will no longer take part in the decision making of EU bodies, offices or agencies. Does this mean it will have no say in the making of new EU laws that could affect the UK and even run contrary to its interests? The UK would like some sort of participation or control in EU lawmaking, but the EU looks unlikely to allow this to a state that is no longer an EU member. Third, we should also note that the Charter of Fundamental Rights, specifically excluded by the EU Withdrawal Bill from continued application in the UK post Brexit, will apply during the transition period. Fourth, EU citizens’ rights during the transition period look set to continue pretty much as at present. The UK’s position had been that all EU citizens arriving after March 2019 will need to register and will be subject to the new migration regime, thus taking ‘Brexit day’ as a cutoff point. However, the EU position is that, in effect, the end of the transition period becomes the cutoff, with no new UK migration regime before then, and the UK appears to have conceded this. Fifth, will the UK be able to conclude its own trade policies during the transition? Part of the rationale for Brexit appears to be that the UK should be able to form its own trade policy with third countries. However, the Commission draft states that the UK must ‘not become bound in areas of exclusive EU competence’ (which include external trade). There seems to be broad agreement that the UK could negotiate new trade agreements during a transition, but no agreement on if they can be signed before the transition ends. And what is the position with the existing free trade agreements (FTAs) that the EU has already concluded with third countries? The UK is likely to ask the EU for support in rolling over these deals, so that it can keep their benefits without having to sign fresh agreements (which would be complex and time consuming). However, this is also a matter for the other signatories (such as Korea), and the EU and the UK cannot bind third countries in the Brexit negotiations.
Finally, the Commission draft clause 126 states that ‘If during the transition period the Union considers that the United Kingdom has not fulfilled … an obligation under Union law as found in a judgment rendered pursuant to Article 126 of this Agreement … the Union may suspend certain benefits deriving for the United Kingdom from participation in the internal market’ – this provides an accelerated mechanism for punishment — namely, the suspension of certain benefits the UK receives from participating in the EU’s single market.
This short discussion has only briefly noted the sticky, contentious issues likely to arise a matter of substance in any transition agreement – there are, and will be, many others, due to the scope of the transition agreement, which will comprise most aspects of EU law, and thus a huge field.
Must transition be time-limited?
Another contentious issue that sits somewhere between process and substance is the question of whether any transition agreement must be for a limited period only. Article 121 of the Commission’s draft states that transition shall ‘end on 31 December 2020’. Within the UK, there seems to be division between those who wish transition to be short to non-existent (including some Brexiteers, in the hope of reducing further ‘bondage’ to Brussels), and those who would like transition to last as long as it takes to conclude a comprehensive treaty on the UK’s future relationship with the EU.
However, as noted, Article 50 does not mention transition, and the longer any transition arrangement might last and look like a semi-permanent arrangement, the less it would seem to fit within Article 50 – so, by this thinking, transition should be expressly limited in the agreement itself. How such a limited period might be extended is another matter, and not necessarily simple. Without any express provision for extension in the Withdrawal Agreement itself, the UK would be in the position of having to negotiate any further extension as a third country, and thus probably as a mixed agreement, necessitating unanimity of all EU member states and ratification by their parliaments. So, if the UK thinks that 31 December 2020 is too soon for a transition period to expire, it should be pressing that point now.
UK domestic law, transition and the withdrawal agreement
It is difficult to see how various Brexit legal preparations can work together without undermining each other or providing inconsistencies. At present the EU Withdrawal Bill (EUWB) is being debated in the UK Parliament. Section 14 of this Bill expressly sets an exit date of 29 March 2019 for the UK to exit the EU, and it also provides for the repeal of the European Communities Act (ECA) on exit day. The EUWB also provides for the conversion of much of EU law into domestic law, although it specifically excludes certain elements, such as continued supremacy of EU law. How will the EUWB function alongside the Withdrawal Agreement with its intended transition period?
The problem is that the EUWB does not appear to have been conceived with a transitional period in mind, because its focus appears to be on actual Brexit, rather than taking the intermediate approach that involves a transitional period.
On the other hand, how will domestic law regulate for a transitional period? Article 122 Commission draft Agreement states that ‘Unless otherwise provided in this Agreement, Union law shall be applicable to and in the United Kingdom during the transition period.’ Article 122(3) continues, ‘During the transition period, the Union law applicable pursuant to paragraph 1 shall produce in respect of and in the United Kingdom the same legal effects as those which it produces within the Union and its Member States and shall be interpreted and applied in accordance with the same methods and general principles as those applicable within the Union.’ There will thus need to be continued direct effect and supremacy of EU law and observance of the binding jurisdiction of the ECJ.
The question is how will this be possible if, according to the terms of the EUWB, the ECA is repealed on exit day, much EU law is converted into domestic law, ministers are given powers to amend ‘retained EU law’, and the Charter of Fundamental Rights excluded from application in the UK? These moves are incompatible with a transition period as currently foreseen. So it looks as if the EUWB will not be able to come into force in accordance with its own provisions. However, if the ECA, the gateway whereby EU law penetrates UK law, were not repealed on exit day, this would provoke some, who might maintain that Britain had not really left the EU.
Perhaps the whole EUWB (and other associated primary legislation, such as Trade Bills, and Immigration and Customs Bills) might be deferred in application until any transition period ends. But this still leaves the question of what to do with the ECA, and how to give effect to the Article 50 Withdrawal Agreement to ensure that EU law can continue to apply in transition. The Article 50 Withdrawal Agreement will need to be implemented into national law, as the UK is a dualist state and international agreements do not have domestic effect without some domestic legislation. If the ECA is not maintained, there will need to be alternative legislation to do this, and when will such legislation be introduced by the Government? If this stage of the withdrawal negotiations with the EU were concluded by March (and this is still hypothetical, given that the UK has not yet produced its own draft terms), then possibly such legislation could be introduced into Westminster, given that Parliament will sit in one continuous session until 2019. But even if such an agreement is concluded, this leaves little time for debate in the Commons and Lords, and the obtaining of devolved consent. There has, in any case, been no public discussion of any such development.
This seems a cavalier approach, given that it is the Article 50 Withdrawal Agreement, and its transitional provisions, that will govern Britain’s relations with the EU in the next couple of years, and also provide any of the certainty that business and others crave right now.
However, further complex domestic legislation for Brexit (given the critique already expressed of the EUWB – called a ‘monstrosity’ by Dominic Grieve MP, and ‘utterly pernicious’ by Chris Bryant MP) could be unnecessary if the simpler option of asking for an extension of Article 50, in order to give more time to negotiate withdrawal, were followed. But that seems unlikely to prove politically viable at present. So, resolving these transition issues as soon as possible is crucial.
Professor Sionaidh Douglas-Scott is Anniversary Chair in Law at Queen Mary University of London, and was formerly Professor of European and Human rights law at Oxford University. She was special advisor to the Scottish Parliament European and External affairs committee’s Brexit inquiry and is a member of the Bingham centre expert panel on the EU Withdrawal Bill and the rule of law chaired by Dominic Grieve QC MP.
Note: The views expressed in this post are those of the author, and not of the UCL European Institute, nor of UCL.
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