Briefings

The May-Barnier Withdrawal Agreement: A Summary by Jonathan Story

theresa may
Written by Jonathan Story

What follows is a précis of the May government’s proposed draft deal. It is based on published documents.

Introduction

This paper starts  by briefly covering the timeline  from June 23 2016 when over 52% of the British public voted to Leave the EU, to December 2019. I then present the deal’s structure, with some explanation of the broad content; highlight provisions regarding the legal dimension; UK-EU relations; what the agreement says about UK trade policy and the Irish “backstop”; the financial settlement; governance; and the future dimension of the Withdrawal Agreement.

Timeline.

Following Parliament’s approval of the European Union (Notification of Withdrawal) Act 2017, the Prime Minister wrote to the European Council President, Donald Tusk, on 29 March 2017 to notify him of the UK’s intention to leave the EU. Since then, the UK and the EU have undertaken detailed technical negotiations to agree the terms of the UK’s exit. On 8 December 2017, the UK and the EU published a Joint Report on the negotiations, notably with regard to the rights of UK-EU citizens;  the framework dealing with  Northern Ireland; the financial settlement; and initial progress on  “other separation issues”. On 19 March 2018, the UK and the EU published draft elements of a Withdrawal Agreement regarding  the time limited implementation period, citizens’ rights , the financial settlement, and a significant  number of other articles. On 19 June 2018, the UK and the EU published a Joint Statement setting out further details about the “other separation  issues”. The Withdrawal Agreement (WA) was published on 14 November 2018.

Structure and content.

The government considers that the WA defines the terms of the UK’s departure on 29 March 2019, and provides the conditions for a  smooth exit and orderly transition to the future relationship between the EU and the UK. It emphasizes that much of the WA focuses on the winding down of existing arrangements, is time limited, and is comprehensive, complex and interlinked. The deal  stands alongside the outline Political Declaration on the future relationship. Both Withdrawal Agreement and Political Declaration are linked on the basis that nothing is agreed until everything is agreed. The format of the WA is as follows:

A Preamble:

The preliminaries (recitals)  in this section of the Withdrawal Agreement set the tone for what follows: for instance, it specifies that the UK may prepare new international arrangements of its own, “provided such agreements do not enter into force or apply during that (transition) period”.

Part One: Common Provisions.(Articles 1-8)

These articles stipulate  the territorial scope, assert that the WA take “direct effect” in the UK, and  that   EU law is supreme. Article 7 states that the UK be considered for the purposes of the WA as a member state, “except as regards  the nomination, appointment or election of members of the institutions, bodies, offices and agencies of the Union, as well as the participation in the decision-making and the attendance of the institutions.”  Article 8 adds that “at the end of the transition period the UK shall cease to be entitled to any network, any information system and any database established on the basis of Union law”. In short   EU law is applicable up to the last day of the implementation period. Part one also sets out how the Withdrawal Agreement should be interpreted and enforced. This is intended to provide Parliament and the courts with clarity on how to interpret and implement the provisions in the Withdrawal Agreement.The final court of appeal on how it is applied is the ECJ.

Part Two: Citizens Rights.(articles 9-39)

Part two ensures that EU and UK nationals living in each others’ countries, will have broadly the same entitlements to work, study and access public services and benefits as now.  UK nationals and their families lawfully residing in a member state  at the end of the implementation period will be able to stay, as will all EU citizens lawfully residing in the UK. The WA also protects the rights of those citizens who reside in one state and work in another (‘frontier workers’). They have a right to not be discriminated against due to nationality, and the right to equal treatment with host state nationals. Professionals resident or working in the UK, or vice versa, will continue to have their professional qualifications recognised, where they obtained or applied for a recognition decision before the end of the implementation period.

Part Three: Separation Provisions (articles 40-125)

At the end of the implementation period, it will be important that the application of the EU legal order in the UK is brought to an orderly conclusion, particularly in respect of ongoing processes and arrangements. Part three of the Withdrawal Agreement provides the technical basis for the winding down of those arrangements to ensure an orderly withdrawal. The reference to “winding down” is the UK  government’s; these words do not appear in the WA. The arrangements aim to start laying down the framework of law required to underpin the  economic and security relationship between the UK and the EU. The arrangements set out in this part are without prejudice to negotiations on the future relationship.

This part of the Withdrawal Agreement covers arrangements for:

a. Title I: Goods placed on the market; (articles 40-46)

b.Title II: Ongoing customs procedures; (articles 47-50)

Under this title, the UK will continue to have access to a number of EU networks and information databases to allow the UK to fulfil the obligations in the Withdrawal Agreement. These systems and timelines for access are listed in Annex IV. The EU networks include information databases to allow the UK to share information on VAT and excise and to fulfil the obligations listed in the Withdrawal Agreement. These systems and timelines for access are listed in Annex IV.

c. Title III: Ongoing value added tax and excise duty matters; (articles 51-53)

Goods moving from the UK to an EU Member State, and vice versa, which commenced their journey before the end of the implementation period, will continue to be treated under the rules on intra-EU movements of goods set out in the VAT Directive and the EU rules on intra-EU movements of excise goods.

d. Title IV: Intellectual Property (articles 54-61)

EU trade marks, registered and unregistered Community designs and Community plant variety rights currently give protection throughout the EU with a single right. These rights will cease to be valid in the UK after the end of the implementation period. The UK will therefore grant national rights in place of existing EU rights so that right holders do not have any loss of rights or gap in protection in the UK. The WA also gives continued protection for existing database rights and guarantees continuity of process in applications for patent extensions. Finally, as regards intellectual property rights, goods put on the market before the end of the implementation period can continue to circulate freely between the UK and the EU.

e. Title V: Ongoing police and judicial cooperation in criminal matters (articles 62-65)

The title sets out how ongoing police cooperation and judicial cooperation in criminal matters would be brought to a close at the end of the implementation period to provide clarity for law enforcement authorities and the judiciary. For example, a request for evidence may be outstanding under a European Investigation Order or an individual may have been arrested, awaiting surrender under a European Arrest Warrant. These arrangements are without prejudice to what may be agreed in the future relationship.

f. Title VI: Ongoing judicial cooperation in civil and commercial matters (articles 66-69)

The title provides for the continuation of cooperation on cross-border civil and commercial proceedings underway at the end of the implementation period.

g. Title VII: Data and information processed or obtained before the end of the transition period or on the basis of this agreement (articles 70-74)

The UK and the EU have exchanged data and information for a range of purposes. This includes personal data, data subject to specific rules, and classified information. It is important that data and information exchanged between the UK and the EU before the end of the implementation period or processed on the basis of the Withdrawal Agreement (the “stock” of data), is protected appropriately after the UK’s withdrawal from the EU. This title of the Withdrawal Agreement sets out these protections.

h. Title VIII: Ongoing public procurement and similar procedures(articles 75-78)

EU procurement rules, which are currently implemented in domestic regulations, will continue to apply to public procurement and similar procedures which are ongoing at the end of the implementation period. The rules cover the procedures for the award of public contracts for works, services and supplies, utilities contracts, concessions contracts and non-exempted defence and security contracts above the relevant EU financial threshold values.

i. Title IX: Euratom related issues;. (articles 79-85)

This title resolves separation issues related to the UK’s withdrawal from  Euratom. It clarifies the UK’s responsibilities in relation to certain types of nuclear materials and radioactive waste after exit, makes provision in respect of the ownership of special fissile material located in the UK, and provides for the transfer of specified Euratom equipment and responsibilities to the UK at the end of the implementation period.

j. Title X: Union judicial and administrative procedures. (articles 86-97)

This title sets out how the UK’s involvement in the EU’s judicial procedures should be wound down and the rights of the UK to participate in CJEU cases after the end of the implementation period.

Chapter 2: Administrative procedures (articles 92-97)

This chapter explains how EU administrative procedures, such as competition or state aid, which are ongoing at the end of the implementation period will be dealt with; which procedures can be started after the end of the implementation period in relation to facts that occurred before its end; and the applicable procedural rules and enforceability of resultant decisions. For up to four years from the end of the implementation period, the EU will be able to bring a case against the UK on facts arising before the end of the implementation period but which may come to light after the end of the implementation period that relate to alleged illegal state aid and investigations by the European Anti-Fraud Office (OLAF). The EU will also be able to bring a case in relation to certain customs debts arising after the end of the implementation period.

  1. Title XI. Administrative procedures between member states and the UK (articles 98-100)

This title allows for ongoing administrative cooperation on tax and customs matters, including access to the EU systems involved, after the end of the implementation period. It includes provisions for sharing information on transactions that occurred before the end of the implementation period or that are covered by Titles II and III on Ongoing Customs Procedures and Ongoing Value Added Tax and

2. Title XII. Priveleges and immunities (articles 101-119)

This title makes arrangements for certain privileges and immunities for EU institutions to continue to apply to the ongoing functions of the Union in relation to the UK after the implementation period. An arrangement which closely mirrors the existing privileges and immunities will apply to activities that are agreed under the WA  In broad terms, immunity for official actions taken by UK and EU representatives before the end of the implementation period will also be preserved. The privileges and immunities granted to the EU are similar to the privileges and immunities afforded to other international organisations in the UK.

3. Title XIII Other issues relating to the function inf the institutions, bodies etc. (articles 120-125) The title provides for a range of miscellaneous institutional issues as well as continuity of the operating conditions for the European Central Bank’s (ECB) and European Investment Bank’s (EIB) residual activity in the UK at the end of the implementation period.

Part Four: Implementation (Transition) Period(articles126-132)

Creating a transitional or implementing period (TIP) up to 31 December 2020 during which EU law essentially applies to the UK but the UK does not participate in the making of that law, nor in the agencies and bodies of the EU, and cannot participate in any new JHA/Schengen regime. The government considers that this will mean that businesses will be able to trade on the same terms as they do now. The agreement is of mutual benefit, building an important bridge to our future relationship, and giving citizens and businesses in both the UK and the EU the time and confidence they need to plan for the UK’s future relationship with the EU.The TIP is extendable by a mutually agreed decision of the Joint Committee, which must be made by 1 July 2020, for one further fixed period of either one year or two years. Such extension will entail a further decision of the Joint Committee on the financial arrangements applicable, and also entail (a) treating the UK as an ordinary third country in respect of EU programmes during any extension, and (b) capping UK agricultural support.

The WA provides for the possibility of the future relationship in the areas of foreign policy, defence and security to come into effect during the implementation period, reflecting the unique nature of the EU’s Common Foreign and Security Policy and Common Security and Defence Policy in the Treaties. Where there is a need for coordination, the UK could be consulted on a case-by-case basis. The UK will not command or lead EU operations and missions, nor provide their headquarters. In exceptional circumstances, the UK may be excluded from certain exchanges of EU security-related sensitive information during the implementation period.  The UK’s involvement in EU institutions will be essentially at the behest of the EU. Similar provisions apply for UK temporary participation in Justice and Home Affairs (JHA). On fishing, the  UK and the EU intend to conclude a new fisheries agreement in time to determine fishing opportunities for the first year after the Implementation.

The section on the Protocol for Northern Ireland describes the process if a potential extension of the implementation period beyond 31 December 2020 is sought.  If the full implementation of a future agreement to supersede the Protocol cannot be finalised by December 2020, the Protocol gives the UK a choice to either implement the Northern Ireland backstop or to seek an extension of the implementation period, affording flexibility as to the appropriate course of action at the time. The mechanism to extend the implementation period is set out in part four of the WA.

The backstop is a position of last resort, to maintain an open border on the island of Ireland in the event that the UK leaves the EU without securing an all-encompassing deal.The EU originally proposed a backstop that would mean Northern Ireland staying in the EU customs union, large parts of the single market and the EU VAT system. If a backstop only applied  to Northern Ireland, then the customs and regulatory border would essentially be drawn down the middle of the Irish Sea. Goods coming into Northern Ireland from elsewhere in the UK would have to be checked to make sure they met EU standards. In other words, Northern Ireland would have a separate status to the rest of the UK. May suggested a backstop that would see the UK, as a whole, remaining aligned with the EU customs union for a limited time after 2020. How limited would be co-decided with the EU.

If the implementation period is extended the UK would cease to participate in the EU budget as  a Member State at the end of 2020, and the financial settlement but the  UK would make an appropriate financial contribution for the duration of the extension. The UK-EU Joint Committee would agree the amount as well as the payments schedule.  The next generation of EU programmes are due to begin in 2021, and are currently under negotiation in the EU. The Government will make decisions on participation in specific programmes in light of these negotiations. The UK  would be free to introduce a new agricultural policy providing the payments remain within certain agreed limits.

Part Five: Financial Provisions (articles 133-157)

Following  the outline agreement on the financial settlement in December 2017 the Government used publicly available European Commission data to set out a reasonable central estimate of the settlement of £35-39 billion. The settlement is based on three agreed principles which ensure a fair deal for UK taxpayers:

  1. The UK will not finance any commitments that do not require funding from Member States, and will receive a share of any financial benefits that would have fallen to it had it remained a Member State.
  2. The agreement establishes that the UK’s share will be the average of its share of the EU budget (taking into account the rebate) over 2014-20.
  3. The UK will only be required to make payments as they fall due. An exception can be made in a few specific cases where it might be in both sides’ interests to settle these early. This is particularly relevant for pensions, where costs will decline steadily over a long-term period.

Among the components of the financial settlement, the UK will participate in the EU’s annual budgets over 2019 and 2020, and receive its rebate in 2019 and 2020; will share liabilities such as pensions and employee benefits; will be reimbursed the UK’s EIB paid-in capital of almost €3.5 billion over 12 years, starting in 2019; ditto for the UK’s paid-in capital for the ECB; The UK will continue to participate in the current European Development Fund (EDF), for the  2014-20 budget plan. The government has negotiated the right to appoint auditors to vet implementation of the financial settlement.In addition, there will be a specialized committee on the financial provisions, co-chaired by the UK and the EU.The government will continue to lay an annual statement before Parliament on EU finances that presents information on our contributions and receipts.

Part Six: Institutional and Final Provisions(articles 158-185)

Part six sets out the procedures to ensure consistent interpretation of the WA, the institutional framework to oversee the agreement and the procedure for settling disputes after the end of the implementation period.

As noted in the Citizens’ Rights section, the title confirms that UK courts will be able to make preliminary references to the ECJ  for eight years from exit day for the issue of citizens with settled status and eight years from the end of the implementation period for all other Citizens’ Rights provisions.

The title also sets out arrangements for submissions to be made by the Commission or by the UK, or UK lawyers, to UK courts or to the ECJ.

The title sets up an independent monitoring authority (IMA) regarding Citizen’s Rights, with procedures to report to the UK-EU joint committee. A Joint Committee is created to overseas implementation of the WA. In addition to the Joint Committee, the title provides arrangements for the creation of six specialised sub-committees and measures to establish additional sub-committees if required. These sub-committees will be the first point of contact for issues concerning Citizens’ Rights, Separation Provisions, the Financial Settlement and the protocols on Northern Ireland/Ireland, Gibraltar and the Sovereign Base Areas.

Annex VIII sets out the rules of procedure for the Joint Committee and the specialised committees. The Joint Committee will be co-chaired by high level representatives from the UK and the EU and will meet alternately in Brussels or London, unless the co-chairs agree otherwise.

A dispute settlement system is set up.  A five person arbitration panel will be composed of two members proposed respectively by the UK and the EU, and a single chairperson agreed jointly by both. Where a dispute involves a question on the interpretation of EU law, a ruling will be requested from the ECJ. The arbitration panel’s ruling on a dispute will be binding and the parties will be obliged to comply with the ruling within a reasonable period.

The final provisions to the WA record the UK and the EU’s commitment to negotiate in good faith and conclude agreements envisaged by the Political Declaration on their future relationship.

The title confirms that the WA will enter into force at the end of the Article 50 period, 29 March 2019, but that the Northern Ireland, d Sovereign Base Areas protocols and  Citizens’ Rights  provisions only have effect at the end of the implementation period unless otherwise specified.

Protocol: Northern Ireland

The Protocol on Ireland/Northern Ireland includes the“backstop” provisions intended to prevent a hard border, to uphold the 1998 Belfast (Good Friday) Agreement and its successors in full. Essentially, the backstop refers to customs checks running through goods traded across the Irish channel, not along the inter-Irish border. The government considers that the best way to avoid a hard border is through a deep and special future economic partnership which applies between the UK and the EU as a whole. The December Joint Report, committing to a so-called “backstop”, is codified in the Protocol. The government considers that in all circumstances, the economic and constitutional integrity of the UK will be maintained; that there will be no split in the UK’s customs territory; and that the conditions which underpin the lives and livelihoods of the people of Northern Ireland will be maintained.

The text states that the backstop is not the preferred or expected outcome. It sets out a best endeavours commitment to reach a future agreement which supersedes the backstop by December 2020. There is also a provision to extend the implementation period as an alternative  to the backstop coming in to force.

The government maintains that the Protocol meets the four key objectives outlined by the Prime Minister: a UK-EU joint customs territory that is legally binding in the WA; an option to extend the Implementation Period; assurances that the UK  cannot be kept permanently in the backstop; and protections to ensure Northern Ireland’s businesses have full access to the UK internal market.

In  December 2017, the UK-EU Joint Report stated that ‘in the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement’. The government maintains that this guarantee helps to  assure the people of  Northern Ireland and Ireland that, in all circumstances, a hard border would be avoided.

The UK and the EU have agreed  that, even in the unlikely event that the EU-UK future relationship with the EU is not in place by the end of the implementation period, there will be no hard border between Northern Ireland and Ireland or a splitting of the UK customs territory.

Articles 1-2 of the Protocol declare both parties’ clear intention that it should apply temporarily, along with an obligation for both parties to work towards agreeing a subsequent agreement that will supersede the application of the

Article 3 allows the UK to request  an extension of the implementation period. This article gives the UK a choice to either implement the backstop or to seek an extension of the implementation period. affording flexibility as to the appropriate course of action at the time.

Articles 4-5 deal with guarantees regarding the continuation of the Belfast (Good Friday) Agreement.

Article 6 sets out the provisions to establish a Single Customs Territory between the UK and the EU, and to ensure the free flow of goods between Northern Ireland and Ireland.

Annexes 2 and 3 set out the core rules governing the single customs territoryThe UK commits  to align with the EU’s Common External Tariff, and with the Common Commercial Policy on trade in goods with third countries to the extent necessary give effect to these provisions. The text provides for the UK to remain within the EU’s trade defence regime for the duration of this Single Customs Territory regime.

Article 12, Annex 4 sets out the requirements to maintain fair and open competition within the single customs territory, which are fundamental to all trading relationships. The Annex includes a joint commitment by the UK and the EU to good governance on tax, with additional commitments by the UK to continue administrative cooperation and anti-tax avoidance practices, as they stand at the end of the implementation period. The Annex includes a commitment by both sides to maintain environmental and labour standards, in terms of a  non-regression provision.  The Annex includes a requirement for the UK to harmonise on an ongoing basis with the EU’s state aid rules, and for close cooperation between UK and EU regulators.

Article 6 sets out the basis to ensure that goods continue to be able to move freely across the border between Northern Ireland and Ireland. The Protocol includes a commitment by the UK to apply, in Northern Ireland, EU legislation on industrial, environmental and agricultural goods.

Article 7 underpins the December  Joint Report commitment to ensure that Northern Ireland businesses continue to enjoy the same unfettered access to the whole of the UK’s internal market.

Article 9 provides that certain EU VAT and excise rules will apply in Northern Ireland with respect to the movement of cross-border trade in goods. However, Northern Ireland will remain part of the UK’s VAT area, with HMRC continuing to be responsible for the operation and collection of VAT, and Parliament for the setting of VAT rates, across the UK in line with the Northern Ireland Act 1998.

Article 11 supports the continuation of the  that has been in place since 2007, and is underpinned   by EU law.

The government maintains that EU law will apply in Northern Ireland but  for a much narrower area of law than today.For aspects of EU law applied by the Protocol, the ECJ  will remain the ultimate arbiter.

Protocol: Sovereign Base Areas of the UK in Cyprus

The Protocol Relating to the Sovereign Base Areas of the UK in Cyprus, making these parts of the customs territory of the Union, applying certain EU law (and ECJ jurisdiction) to them and specifying the checks to be made on persons crossing their external borders (other than with Cyprus);

Protocol: Gibraltar

The Protocol on Gibraltar covering preparation for the application of the Citizens’ Rights part of the WA, permitting EU law to be applied to Gibraltar Airport if the UK and Spain reach agreement, establishing cooperation between Spain and the UK on fiscal matters, environmental protection and fishing, and police and customs matters.

Annexes to the Withdrawal Agreement

A number of annexes are attached to the WA, that provide additional information regarding  the technical interpretation and application of the agreement and include:

  • Annex I: Social Security Coordination
  • Annex II: Provisions of Union law referred to in Article 41(4)
  • Annex III: Time limits for the situations or customs procedures referred to in Article 49(1)
  • Annex IV: List of Networks, Information Systems and Databases referred to in Articles 50, 53, 99 and 100
  • Annex V: Euratom
  • Annex VI: List of Administrative Cooperation procedures referred to in Article 98
  • Annex VII: List of Acts/Provisions referred to in Article 128(6)
  • Annex VIII: Rules of Procedure of the Joint Committee and Specialised Committees
  • Annex IX: Rules of ProcedureEU Legislation Team

Jonathan Story Emeritus Professor of International Political Economy  INSEAD Paris and Shell Fellow in Economic Transformation, Emeritus

http://www.insead.edu/facultyresearch/faculty/profiles/jstory/

NOTE: The original article can be found here https://storybookreview.wordpress.com/2018/12/06/the-may-barnier-withdrawal-agreement-not-the-end-of-this-story/

The article is based on the following official documents:

  • HMG: Explainer for the agreement on the withdrawal ofthe United Kingdom of Great Britain and Northern Ireland from the European Union 14 November 2018.
  • House of Commons, The Withdrawal Agreement: Legal and Governance Aspects.
  • The Draft Agreement, TF50(2018)55-Commission to EU27.

 

About the author

Jonathan Story