The Prime Minister Theresa May has today, 29 March 2017, triggered the so-called ‘Article 50 process’ for leaving the European Union. The UK’s Permanent Representative to the EU, Sir Tim Barrow, hand-delivered the Prime Minister’s letter to the President of the European Council, Donald Tusk, at 12:20 GMT, thereby notifying the European Council of the UK’s intention to leave the European Union.
From this date, the UK and the remaining 27 EU Member States (“EU27“) have two years (or longer if so agreed unanimously by the European Council and the UK) in which to negotiate a framework for withdrawal with the European Commission (the “Withdrawal Agreement“). According to the terms of Article 50 of the Treaty of the European Union, the Withdrawal Agreement must set out the arrangements for the UK’s withdrawal, whilst taking into account the framework for the UK’s future relationship with the EU. The Withdrawal Agreement will seek to unravel the UK’s rights and obligations from the EU and its institutions and processes. It will likely include provisions for any UK contributions to the EU budget, the status of UK and EU27 citizens and freedom of movement, any UK access to the EU Single Market, and other areas of joint collaboration between the UK and the EU. The Withdrawal Agreement may also provide for a phase of implementation, in order to allow businesses to adapt to the changes caused by Brexit.
It is widely acknowledged that two years is a very ambitious and tight time frame in which to negotiate such a complex agreement. This is especially so given that within this time the EU must confirm its negotiating mandate and allow time to ratify the Withdrawal Agreement in the European Council and European Parliament, which alone could take up to five months.
Separately from the Withdrawal Agreement, the UK and the EU27 must negotiate and agree the terms of the UK’s future relationship with the EU27 (the “UK – EU27 Future Relationship Agreement“). As noted in our previous Blog post (see here) the UK Government has made it clear that its objective is to have a bespoke agreement with the EU27. Prime Minister May has stated that “We seek a new and equal partnership – between an independent self-governing, global Britain, and our friends and allies in the EU […] We do not seek to adopt a model already enjoyed by other countries.” As noted in our previous Blog post, this agreement is likely to be a hybrid deep and comprehensive free trade agreement (“FTA“) with the EU27, with some form of customs arrangement.
Whether the Withdrawal Agreement and the UK – EU27 Future Relationship Agreement are negotiated in parallel or sequentially is yet to be seen. The UK Government has represented that its preferred option is to negotiate the two concurrently, and for the two agreements to enter into force simultaneously, while Michel Barnier, the EU’s Chief Brexit Negotiator, has indicated that negotiations for the Withdrawal Agreement must come first.
Aside from agreements governing the UK’s relationship with the EU27, the UK will also need to negotiate its Schedule of Commitments under the WTO, and new FTAs with third countries. The UK Government has made it clear that it intends to pursue a “Global Britain” by concluding trade deals with third countries once it has left the EU. The UK cannot conclude such agreements whilst it is still a member of the EU, and it is likely that third countries will want to see what the UK – EU27 future trading relationship looks like as part of the negotiating process. This means that, whilst the UK may look to begin informal discussions with third parties during the two year Article 50 process, these will not be able to be finalised until the UK has left the EU.