As UK Prime Minister Theresa May returns to work, and with so many moving parts to the upcoming negotiations on the UK’s future relationship with the EU, Dechert looks at who the key players are and how best to make sure businesses' concerns are best addressed.
For companies and trade associations that are based in, or trade with, the UK, that have already worked out what the potential impact of Brexit may be on their business and who understand what they want to see out of the negotiations, there is the difficult question about how they go about securing the best outcome.
With so many players in the upcoming negotiations – the UK and the different business sectors with potentially competing interests; the 27 other Member States; the EU institutions and third countries looking for a trade deal – it is no easy task.
A lot of focus to date has been on the UK preparations for the Brexit negotiations. The creation of a Department for Exiting the European Union and a new International Trade Department have grabbed the headlines, alongside the appointment of leading Brexit advocates to head up those departments. All of which takes place in collaboration with the new Foreign Secretary, Boris Johnson.
The ‘big picture’ options for Brexit and the UK’s new relationship with the EU will be shaped by David Davis’ Department for Exiting the European Union – which is essentially a beefed up version of the previous European Secretariat, which sat in the UK Cabinet Office and was responsible for coordinating and adjudicating on the UK’s EU policy. Davis and his department will need to work closely alongside the UK’s EU experts in Brussels, as well as other Government departments and the Devolved Administrations, to understand and referee between the competing geographical and sectoral interests. The options that the Brexit Department develops will have a significant impact on the types of trading relationships that the UK can develop with those outside the EU, so Liam Fox and the International Trade Department will expect to have a strong voice in shaping the UK’s negotiating position with the EU.
Ensuring that a firm or a sector has a strong voice in all elements of the UK framework will therefore be crucial in trying to craft the right starting point (and red lines) for the upcoming negotiations.
But the UK is only one side of the negotiations. On the other side of the table are three institutions and 27 Member States representing 440 million consumers with a strong political interest in defending their political and economic positions.
Understanding the role each of these institutions and states will play and the influence they will exert is no easy task. The now infamous Article 50 of the Lisbon Treaty says that the EU will negotiate the arrangements for the withdrawal of State, taking into account the framework of the State’s future relationship with the EU. Article 50 states that these negotiations – on the EU side – will be conducted in accordance with Article 218(3) of the Lisbon Treaty, which will mean that the European Commission will put forward proposals for the negotiation to the 27 Member States, who will then decide on the scope of the negotiating mandate and formally appoint a negotiator.
In a bid to pre-empt that decision, the Commission has announced the appointment of Michel Barnier, a former French Foreign Minister and EU Commissioner on the crucial financial services dossier, as the lead Commission negotiator. Meanwhile the Council has set up a Brexit taskforce under the leadership of Didier Seeuws, the chief of staff to the former President of the European Council.
The Commission was always going to be pivotal in drawing on its technical knowledge and analysis of the EU law and how it needs to be unpicked in any withdrawal process and the appointment of Michel Barnier is a clear pitch for a more integral and political role in the process going forward.
There may yet be an institutional battle between the Council and the Commission, but the reality is that they will both play a significant role in the negotiations.
The 27 Member States will have to approve any withdrawal deal on the basis of a “qualified majority” - by which approval may be achieved even if not all Member States agree to the deal (in practice it generally requires around 16 of the 27 Member States, but the voting is weighted according to population with bigger States having a bigger vote) but the Council is likely to only act with a consensus of all Member States. The position of Germany and France will be by far the biggest influence and the savvy industries across the EU will be making sure their voices are heard in Berlin and Paris at an early stage. The Seeuws team in the Council will be a useful base to draw together the views and interests of other Member States in any negotiation.
Any deal also requires the consent of the European Parliament. Whilst this may not be a loud voice in the day-to-day negotiation, the Parliament will provide a useful negotiating tool for the EU, which will have to be able to get any deal through a Parliament that will want any new arrangement to have the smallest impact possible on the wider European project.
The Wider World
Alongside getting their voice heard in the UK-EU negotiations, every firm and industry will want to be clear about the types of deals they expect to see with third countries. The UK's departure from the EU will mean that the free trade agreements that many have come to rely upon in their day-to-day business could cease to apply to them. Understanding what this means for business and seeking to protect it in the months and years ahead could be crucial for businesses to protect their supply lines or access to markets overseas. The Department for International Trade may not be able to achieve anything substantive until the shape of the UK-EU relationship is known, but it will need to do more than deliver a few soundbites and appoint a few trade attachés in the interim, so being clear now on the needs of your firm and your industry – whether you are based in or trade with the UK – could pay dividends in the future.