Ahead of the UK Parliament’s “meaningful vote” on the draft EU Withdrawal Agreement, we discuss below the contents of the deal and what it may entail for a future EU-UK relationship. 

As was the case at the time of our previous review of the possible future relationship between the two – with the “Chequers Plan” – the real detail on a future arrangement, and its impacts on trade, services, farming and other key areas, remains to be decided. 

Aspirations on these and other areas are contained within the Political Declaration – one of two instruments which make up the agreement – which we discuss below.  Where there has been some detail further than mere aspiration, however, is in the relationship immediately post-exit day, prior to a future trade or similar deal being agreed.  This is set out in the Withdrawal Agreement, which is looked at now.

EU Withdrawal Agreement

While the Political Declaration is to have no binding effect – other, perhaps, than a political one – the Withdrawal Agreement is to be legally binding on both parties.

This status has contributed to much of the discussion being focussed on this particular document, something compounded by concerns over the Irish border and the “backstop” which has been negotiated and included as a Protocol to the Agreement.  As both of the main UK political parties have stated that the backstop is not something they would wish to come into force, we do not expand any further on this here and add to the volume of material on the topic.  It is, in any event, something which would only come into play at the end of any transition period.

The Withdrawal Agreement aspect of the deal does not set out a future trading relationship. It does make provision for other key features post-exit, split into the broad headings below, and a brief description of the type of areas covered under each heading is provided.

  1. Common Provisions:  This sets out the framework, including the scope and definitions of the Agreement, and that the content is intended to be directly effective in UK courts.  This would mean that the principles of the Agreement could be relied on in the UK courts without any implementing legislation.  For some further discussion on direct effect and how current EU law may be given effect post-exit see our earlier briefing note.
  2. Citizens’ Rights:  Free movement of UK and EU citizens is to continue during the transition period, and it is intended that those who are living in their host state before the transition period comes to an end will have permanent residence rights.  In the UK, this will be subject to applying for “settled status”, and other EU countries may choose to implement similar schemes.
  3. Separation Provisions:  This section sets out how certain existing arrangements will be dealt with, and come to an end, at the end of the transition period.  For example, goods which entered the market prior to the end of the transition period will be allowed to reach their end consumer after that period has ended.
  4. Transition:  This section sets out the detail of the transition period, which is to commence immediately after exit planned for 29th March, and end at the end of December 2020.  It will be possible to extend this period for up to two years.  During the transition, EU law is to apply almost in its entirety to the UK, with the EU institutions, agencies etc to continue to exercise their EU law powers.  The Court of Justice will have jurisdiction with regard to these continuing elements of EU law.  The UK will not have any EU decision-making role during the transition period.
  5. Financial Settlement:  This concerns the so-called “divorce bill” of the UK’s financial commitments within the EU.  In addition to the sums, the method by which payments will be made, and how they have been calculated, are also set out.
  6. Institutional and Final Provisions:  This sets out how the Agreement is to be governed, and how disputes are to be resolved.  There is to be a “Joint Committee” made up of UK and EU representatives, which will have broad oversight of the Agreement.  Should any disputes arise which cannot be settled by the Joint Committee, a binding, independent arbitration process is to be used.  Where there are any areas of dispute which require the interpretation of EU law, this arbitration tribunal must refer those matters to the Court of Justice.
  7. Protocols:  As indicated above, perhaps the most contentious area of the deal within the UK Parliament has been the Protocol regarding Northern Ireland, and we shall not add to the discussion here.  In addition to this, there are protocols on Cyprus and Gibraltar.

It is hoped that the framework established by this Agreement can provide stability in the immediate post-exit period, with the longer-term relationship to be thereafter negotiated.  As can be seen, this part of the deal does not set down that long-term trading relationship, or make much mention of trade outside of the limited context of those goods already on the market at the end of the transition period.

This job is left to the accompanying Political Declaration, the second part of the deal to be voted on by Parliament. 

The Political Declaration

The Political Declaration is neither binding, nor is it the final deal on a trading relationship.  That agreement is to be negotiated during the transition period.  The Withdrawal Agreement does state, however, that both sides are to negotiate that final agreement in good faith should the Withdrawal Agreement be finalised, and so the Political Declaration can be seen as a starting point in setting the terms of that good faith negotiation, and for assessing how that future deal may look.

The declaration calls for an “ambitious, wide-ranging” future economic partnership.  Envisaged as part of this are a free trade area, and cooperation in particular sectors.  It will not, however, be as close or as open a relationship as currently experienced with the UK as part of the EU, with some commentators comparing the broad themes of the declaration to the deal agreed between the EU and Canada, and others to the Association Agreements agreed between the EU and non-member countries such as Turkey and Ukraine.

Trade in Goods

The declaration promotes a trading relationship which is “as close as possible” but in which the EU and UK are “separate markets and distinct legal orders”.  It is stated that tariffs and quotas are to be avoided, and that there is to be deep customs and regulatory cooperation.  It is intended that this would be agreed in a manner, however, which would enable the UK to have an independent trade policy.

While it is intended that there be a close trading relationship in goods, this does not appear to be as close as envisaged in the earlier Chequers plan.  References in that earlier plan to “frictionless” trade and a “common rulebook” between the UK and EU have been removed.

Trade in Services, and Financial Services

There is little detail provided in this area, with the matter largely left for future negotiations.  It is made clear that the UK will leave the single market for services and pursue its own regulatory regime.  The ambition is stated that the relationship will go beyond WTO and existing free trade agreements, but the form this takes remains to be seen.

On financial services, the declaration makes clear that the current “passporting” regime will end, and instead an “equivalence” framework will be adopted.  This is to be a looser relationship, with the possibility of market access being removed at 30 days’ notice.  There will be an aim for close cooperation in international bodies, and transparency.

Free movement of persons

The declaration is clear that the UK has decided that free movement of persons between the EU and UK will not apply, and that “mobility arrangements” should instead be established.  These are to concern visa-free travel for short-term visits, which could include business trips, and also the likes of research and study.

There is a general agreement to “consider” addressing social security coordination, and the issue of family law matters is also addressed, with the expression of a desire to “explore options” for judicial cooperation in those areas.

Transport and Fishing

While these areas are touched upon, there is little detail expressed other than a general agreement on cooperation.

The desire to agree an aviation agreement, with future cooperation, as well as ensuring passenger and freight road access is expressed.  Maritime transport is to be arranged through international frameworks.

The need to cooperate on fisheries and establish a future agreement is stated.

Agriculture is not expressly mentioned within the declaration, although certain elements will fall within the statements more generally made on goods.

Conclusion

The reality is that much remains to be agreed in order to establish a firm basis for a future trading relationship between the EU and UK.  The Withdrawal Agreement provides what is hoped to be a stable basis on which the necessary negotiations can be conducted, with the Political Declaration offering the broad brush-strokes of how the final deal could look.  Should Parliament eventually approve each of the instruments, there is still much to agree.