Theresa May arrived in Brussels on Monday in expectation, as much as hope, of finalising an agreement on Phase 1 issues that would allow Brexit negotiations to progress onto trade and transitional arrangements.
The day began with optimism on all sides but, ultimately, a deal did not materialise. Despite indications that sufficient progress has been made on citizens’ rights and the financial settlement, the issue of the Irish border proved to be the stumbling block. And it was domestic disagreement, rather than with conflict with the EU, that stymied the negotiators.
The main concern is how to avoid a hard border being implemented, which neither the UK nor the EU wants, whilst allowing the UK to leave the single market and customs union. The UK and EU hoped to formulate a joint statement announcing continued regulatory alignment between the Republic and Northern Ireland, regardless of the outcome of future trade talks. Effectively, this would keep Northern Ireland in key aspects of the single market and customs union after Brexit.
However, the Democratic Unionist Party (DUP), the largest party in Northern Ireland and a key player in the UK government’s hold on power, refused to accept this arrangement on the basis that it does not want Northern Ireland’s post-Brexit customs arrangements to differ from those of the rest of the UK. The wording of the draft statement also troubled ‘hard’ Brexiteers, some of whom are in government, who saw it as going against the principles of Brexit and an obstacle to negotiating new trade deals with other nations.
Eventually, Mrs May and Jean-Claude Juncker had to make a brief appearance before the press to announce that, although they believe a deal is closer than it was before, final agreement concluding Phase 1 could not be reached and the Prime Minister will return for a second round of talks later this week pending further discussions with colleagues to resolve the outstanding issues. A deal must be brokered before the next summit meeting of European Council on 14th December, in order for progress to Phase 2 of negotiations to be formally agreed. If this not the case, Phase 2 will be delayed until March 2018, a prospect which deeply concerns businesses, limits the time left to secure a trade deal with the EU, and increases the chances of an overall ‘no deal’ outcome to Brexit.
The possibility that Northern Ireland could remain in the single market and customs union prompted the Scottish Nationalist Party, the First Minister of Wales and the Mayor of London to argue that other parts of the UK should be allowed to do the same.
The proposed arrangement also raises questions of how the theory of continued regulatory alignment might work in practice. Details of how it would be administered and by whom have not been presented and, equally, a related dispute resolution mechanism has not been identified. David Davis has subsequently told parliament that the UK government wants the entire UK to operate under continued regulatory alignment but that this meant neither convergence nor harmonisation. However, in leaving the EU, the UK will relinquish any influence in formulating EU regulations.
As for the financial settlement, once regarded as the most intractable Phase 1 issue, the UK government has reportedly increased its offer to €50bn and met with EU approval. Meanwhile, on citizens’ rights, a provisional deal is also believed to be close. ‘Hard’ Brexiteers are calling for the Prime Minister to insist on ending ECJ jurisdiction in March 2019, but it is more likely that this will continue into the transition period that is due to follow. UK courts would be able to take into account ECJ rulings but not be bound by them. Other citizens’ rights issues which still require agreement include potential charges to be imposed on EU nationals when applying for settled status after Brexit, and the rules relating to family members of EU nationals living in the UK and the benefits to which they will be entitled.
Article published: 7th December 2017
