The UK will be leaving the European Atomic Energy Community (Euratom) as part of its exit from the European Union. Last week, two UK parliamentary committees published separate reports discussing the potential impact of Brexit/withdrawal from Euratom on the UK's nuclear industry and the Nuclear Industry Association (trade association for the civil nuclear industry in the UK) published a position paper on this subject. With this in mind, we thought we would share with you a high level summary on what the UK's withdrawal from Euratom could mean for the UK nuclear industry and we would be interested in discussing this further with you.
Background to Euratom
Euratom was established alongside the European Economic Community – now the EU – in the 1950s. The UK became a member of both on 1 January 1973. Euratom is a distinct legal entity from the EU, but the two bodies have a shared institutional framework. Euratom provides the basis for the regulation of civilian nuclear activity, implements safeguards to control the use of nuclear materials, controls the supply of fissile materials within EU member states and funds research. It has signed a number of international agreements on nuclear research, the peaceful use of nuclear energy and nuclear safety.
An EU member state needs to invoke Article 50 of the Treaty of the European Union (TEU) in order to leave the EU. The Euratom treaty states that (amongst other things) Article 50 of the TEU shall apply to Euratom and the references to the "Union", "TEU", "Treaty on the Functioning of the European Union" or "Treaties" shall be taken, respectively, as references to Euratom and the Euratom treaty. This provision has been interpreted in two ways:
• an EU member state is free to leave the EU but not Euratom (or the other way around), i.e. Article 50 is the exit route for leaving the EU and Euratom separately, or both of them together, as that EU member state desires; and
• if an EU member state wants to leave the EU, it must also leave Euratom.
The UK triggered Article 50 on 29 March 2017. Whilst Euratom is not mentioned in the legislation passed to enable the UK government to notify the European Council of the UK's intention to withdraw from the EU under Article 50, the Explanatory Notes prepared by the Department for Exiting the European Union state that the legislation also provides for the UK to leave Euratom. The UK government's position is that Euratom and the EU are legally entwined so triggering Article 50 also entails giving notice to leave Euratom. The legislation refers to withdrawal from the EU, which includes Euratom as certain existing UK legislation sets out that the term "EU" includes (as the context permits and requires) Euratom. David Jones, Minister of State at the Department for Exiting the European Union has said that "it would not be possible for the UK to leave the EU and continue its current membership of Euratom". From a political, practical and logistical perspective, continued membership of Euratom on Brexit would likely be unworkable. Proposed amendments to preserve the UK's membership of Euratom have been repeatedly defeated in Parliament. The UK Government's approach is disputed by some, who argue that the treaties establishing Euratom and the EU are separate, creating a parallel but separate process for leaving Euratom and that the above-mentioned definition of "EU" in domestic legislation does not apply to Article 50. Therefore, it is argued that triggering exit from the EU has no legal effect on the UK's membership of Euratom and the UK government requires specific parliamentary authority to trigger exit from Euratom and such separate authority should have been provided for in the relevant legislation.
Possible implications of a withdrawal from Euratom
• Euratom currently provides safeguarding inspections for all civilian nuclear facilities in the UK to ensure that materials are not being diverted for non-intended purposes. Going forward, the UK will need to put in place new UK arrangements for safeguards inspections in line with accepted international standards. The Office for Nuclear Regulation (or potentially a separate, independent agency) will have to take on the substantial regulatory and safeguarding task across the UK and IAEA involvement vis-à-vis safeguarding inspections will likely increase. Also, as a nuclear weapons state, the UK would need to enter into a new Voluntary Offer Agreement with the IAEA as currently, this is a tripartite arrangement with Euratom as a signatory.
• Nuclear cooperation agreements, which are entered into pursuant to and form part of international and domestic non-proliferation regimes, allow for nuclear trade and research collaboration between certain countries. The UK has entered into such nuclear cooperation agreements with countries outside of Euratom pursuant to the UK's membership in Euratom (e.g. the 123 Agreement with the US). Where the UK has entered into nuclear cooperation agreements on a bilateral basis, the majority of these are premised on the application of the Euratom safeguards regime in the UK. The UK will need to negotiate its own cooperation agreements with Euratom/EU member states and third countries (e.g. US, Australia, Canada, Japan, South Korea and Kazakhstan) and potentially re-negotiate existing bilateral cooperation agreements. Without such cooperation agreements in place, the trading of nuclear goods, materials, services, technology and know-how with other nuclear nations would be affected and potentially prohibited. This will affect operating nuclear power stations, nuclear new build (which are reliant on foreign technology), the nuclear fuel cycle and also the UK's waste and decommissioning programmes. UK nuclear sector exports of products, materials and expertise would be similarly impacted.
• The UK would cease to benefit from the EU common nuclear market, including access to the Euratom supply agency that ensures regular and equitable supply of nuclear fuels to EU users and the free movement of people for employment in the nuclear sector. Operators are likely to see increased costs and potential delays at all levels of their supply chains and hurdles to sourcing requisite goods, services, trained personnel and fuel. This could also affect projects in the pipeline.
• UK involvement in nuclear research programmes (particularly, the Joint European Torus (JET), the International Thermonuclear Experimental Reactor (ITER), the EUROfusion (European Consortium for the Development of Fusion Energy) programme and the Sustainable Nuclear Energy Technology Platform programmes) may be impacted. Euratom's research programmes provide substantial opportunities for UK businesses to supply equipment for such programmes. Also, the UK will lose access to funding and facilities from Euratom for its own research programmes, and the ability to influence the direction of European nuclear research.
• There will be a level of uncertainty in respect of the legislative framework governing the UK nuclear sector. On withdrawal, whilst legislation deriving from Directives can be assumed to have been implemented into UK legislation, requirements deriving from the primary legislation (i.e. the Euratom Treaty) and its related Regulations will no longer be directly applicable in the UK. This means that without transitional arrangements, Regulations governing safeguarding requirements and fuel supply contracts between EU Member States will no longer apply.
The UK Government is yet to set out its preferred option for the future relationship with Euratom. The possible options being discussed are:
• Complete exit at the point of departure from the EU. The UK Government will then have two years to:
• design, resource and implement new UK safeguarding arrangements in line with accepted international standards;
• replace current safeguarding commitments under the Non Proliferation Treaty (NPT) (which are also predicated on Euratom membership); and
• identify and plan negotiation of replacement nuclear cooperation agreements with every country with which the UK has ongoing nuclear trade. Vis-à-vis Euratom/EU Member States, the UK may enter into a cooperation agreement with Euratom as a 'third country' state or bilateral cooperation agreements with certain selected EU countries (noting that the EU countries would be subject to the Euratom treaty). "Third country" status would not automatically make the UK a member of ITER, and whilst Euratom is technically able to fund projects in third countries, it would be unlikely to continue funding JET.
• Euratom 'associate country' status to allow research and development cooperation (like Switzerland, which gained this status in 2014 and participates in ITER). Under this arrangement, Euratom would be more likely to continue funding JET, as such status allows non-EU countries to participate in the EU research system. A membership fee and acceptance of free movement of persons will likely be critical features in negotiations. The UK would still need to put in place new safeguarding arrangements and nuclear cooperation agreements as set out above.
• Ongoing membership of Euratom as a transitional arrangement. Doubts have been expressed about whether the two-year negotiating period provided for in Article 50 would be sufficient to put in place new arrangements – especially UK-Euratom agreements as ratification will be a lengthy process. Transitional arrangements may therefore be vital to give the UK time to negotiate and complete new arrangements with EU member states, particularly France, and third countries such the US, Australia, Japan and Canada. The cross-party Business, Energy and Industrial Strategy Committee report [link here] recommends that "the Government seeks to delay our departure from Euratom. This would give the nuclear industry a realistic window for setting up alternative arrangements—including safeguards and international nuclear cooperation agreements—so as to minimise any disruptions to trade and threats to power supplies… If the option of remaining a Euratom member proves untenable, we recommend that the Government seeks a transitional agreement to retain our existing arrangements until new arrangements can be put in place. The duration of this agreement may need to be longer than the three year transitional period proposed by the European Parliament." The House of Lords Science and Technology Select Committee report [link here] states that "The UK's membership of Euratom must not be allowed to expire without a suitable replacement being in place."
Possibilities for lobbying/engaging the UK Government
• The UK Government has reaffirmed its commitment to continued nuclear trade, cooperation and standards with Euratom, third countries and the nuclear industry more generally. The exact relationship will be subject to negotiation. David Jones has promised to "continue to engage with MPs, industry and stakeholders".
• The UK Government appear to be open to hearing from industry about their preferred post-Euratom landscape. Conducting a risk assessment for a post-Brexit/Euratom scenario can help with contingency planning and determining what to fight for when engaging the UK Government. Lobbying may help to influence the nature and form of the further nuclear power agreements that the UK will have with nations around the world. Moreover, if transitional agreements are deemed vital, these could be pushed for. Approaches could include: (i) direct engagement with government and MPs (e.g. sector round tables; 1:1 meetings); (ii) meetings with industry bodies (possibly the ONR) in the UK, EU-27 and in non-EU nations globally; and (iii) engagement with international nuclear agencies, such as IAEA and the Nuclear Energy Agency.
• A key concern will be getting the UK Government to see the nuclear industry as a priority in negotiations with the EU, as the current focus appears to be on the scope of any free trade agreement and customs legislation. Lobbying can help to guide the Government as to what to focus on – e.g., stressing the importance of transitional agreements and/or cooperation agreements with the UK's key nuclear allies.
• The NIA have published their position paper [link here] setting out six priority areas in respect of the UK Government's negotiations on the UK's withdrawal from Euratom.