Following the referendum held in June 2016 on whether the UK should continue to remain in the European Union, the UK Government notified the European Council in March 2017 of its intention to withdraw, officially triggering a two-year negotiating period stipulated under the EU Treaties (article 50 TEU).
The negotiations officially opened on 19 June 2017 in Brussels, headed by the EU’s Chief Brexit Negotiator, Michel Barnier, and the UK Secretary of State for Exiting the European Union, David Davis MP. Three working groups (financial settlement, citizens’ rights, and ‘other separation issues’) as well as a high-level dialogue on the Irish border support the process. Negotiations proceed on the basis of 4-weekly negotiation cycles, culminating in face-to-face meetings between the lead negotiators and their teams.
As has been stipulated by the European Union, and largely agreed to by the UK, the first Phase of the negotiations is intended to focus on settling the terms of withdrawal, including issues concerning the UK’s financial liabilities, citizens’ rights, and the Irish border. The second Phase of the negotiations will focus on the future relationship between the UK and the EU (in particular on trade), and possible transitional arrangements. Progress from Phase I to Phase II will occur once the leaders of the European Union’s 27 remaining countries, through the European Council, consider that ‘sufficient progress’ has been made on each of the three withdrawal issues.
At the European Council meeting on 19-20 October, the heads of state and government of the EU27 determined that ‘sufficient progress’ has not yet been made on the three withdrawal issues in order for the negotiations to move on to the second stage. This decision was made in light of the first five rounds of negotiations, taking into account the assessment EU Chief Brexit Negotiator Michel Barnier presented before the EU27 leaders during the summit. While the conclusions reiterate the need for sufficient progress on each of the three withdrawal issues, the principal obstacle remains the absence of clarity on the financial settlement. However, EU27 leaders agreed that internal EU preparatory discussions should now begin with a view to adopting new guidelines on ‘the framework for the future relationship and transitional arrangements’ at the next EU summit in December.
While the declared objective of both the EU and the UK is to ensure that a permanent Free Trade Agreement is put in place, that outcome cannot therefore be taken for granted. Both sides appear to have concluded that a transitional phase will be necessary to avoid a ‘cliff edge’, but the nature and duration of this period is as yet unclear, as is the final outcome.
Businesses for whom the UK is an important export market, or UK businesses that trade with the rest of the EU, will therefore now need to prepare for all scenarios, including the possibility of no agreement being reached and only WTO rules applying. Positions are not yet wholly entrenched and the next few months offer a key window of opportunity for businesses to make their views, concerns and preferences known to decision makers in London, Brussels and other EU capitals – especially on the need for and design of transitional arrangements.
How Fipra can help
Fipra can help firms assess potential risks, plan for the different scenarios that may arise, and engage with policy makers to ensure that their concerns are heard and understood.
Our Brexit practice draws on the expertise of our senior advisers, with experience of both the EU institutions and complex trade negotiations. Fipra’s Brexit team includes Lucinda Creighton (former Minister of European Affairs in Ireland, including during the 2013 Irish EU Presidency), Juan Prat y Coll (a former Director-General for External Affairs within the European Commission and former Spanish Ambassador to Italy and the Netherlands), Peter Chase (former Vice President, Europe for the US Chamber of Commerce, with responsibility for negotiations on the Transatlantic Trade and Investment Partnership) and Dirk Hudig, the Head of our Brussels office and formerly Secretary General of UNICE (now BusinessEurope).
The coming months – and particularly now, before positions harden – will be the time for businesses, both individually and collectively, to communicate their views. Representations are already underway both in Brussels, London and other European capitals. Fipra can support you to ensure that your analysis and objectives are effectively communicated to the key decision makers. With offices in Brussels, London and every EU Member State, Fipra is in a unique position to draw on political insight and analysis from across our network, providing up-to-date assessments of the direction in which negotiations are moving and advice on next steps.