On 22 January 2018, the Council of the European Union, acting in its EU27 format, adopted additional negotiating directives on the transitional arrangements for the UK. These directives supplement the first set of negotiating directives adopted on 22 May 2017, which set out the EU’s redlines, including:

  • Single market participation on a sector-by-sector approach is precluded due to the need to preserve the integrity of the single market rules;
  • A non-member cannot have the same rights as a member of the EU;
  • There can be no “cherry-picking” of the four freedoms of the single market; and
  • The autonomous decision-making of the EU must be preserved, including the competence of the European Court of Justice.

The First Phase

The Council’s decision to move discussions onto the transitional arrangements, as well as the framework for the future relationship between the EU and the UK, follows on from the first phase of the negotiations focussed on citizens’ rights, the financial settlement, Ireland and other separation issues, and the governance of the Withdrawal Agreement. That phase closed towards the end of last year with the issue of a joint report from EU and UK negotiators, which the Council determined showed that sufficient progress had been made to move to the second phase.

Orderly Withdrawal

Issues still to be determined include intellectual property rights, ongoing public procurement procedures, customs-related matters, protection of personal data and use of information obtained or processed before the withdrawal date.

Transitional Arrangements

The directive states that the “negotiations may seek to determine transitional arrangements which are in the interest of the Union and, as appropriate, to provide for bridges towards the foreseeable framework for the future relationship in the light of the progress made.” The transitional arrangements must be clearly defined, time limited and subject to enforcement mechanisms. The EU’s proposed end date for the transition period is 31 December 2020.

The Acquis

The directive states that during the transition period, the EU acquis (i.e., the accumulated legislation, legal acts and court decisions that constitute the body of European Union law) will continue to apply to the UK as if it were still a member state. This will include changes to the acquis adopted by EU institutions, bodies, offices and agencies during that period as well as existing EU regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures which will also apply, including the competence of the European Court of Justice.

The UK will continue to take part in the single market, and customs union, and all union policy. It will continue to have all the economic benefits, therefore it must apply all EU rules.

Michael Barnier, Chief Negotiator, European Commission

EU Decision Making

However, as the UK will, by the start of transition, be classified in EU terms as a third country, it will no longer participate in the institutions and the decision-making of the EU. It will no longer attend meetings of Commission experts groups, committees or other similar, although on an exceptional basis the UK might be invited to attend such meetings, albeit without voting rights.

International Trade

According to the Council, the UK will also remain bound by the obligations stemming from the trade agreements concluded by the EU before and during the transition period. It will, however, no longer participate in any bodies set up by those agreements, nor will it be able to enter international agreements in its own capacity in fields of competence of EU law, unless authorised to do so by the EU. This is because the UK will continue to participate in the customs union and the single market during the transition. Therefore it will have to continue to comply with EU trade policy, apply EU customs tariff, collect EU customs duties and ensure all EU checks are being performed at its borders.

Clarity Achieved?

The shape of the future relationship between the UK and the EU remains far from clear with the EU continuing to press the UK government for more detail on its position, although the Council plans to adopt its own guidelines on the framework for the future relationship in March. What is now much clearer is the EU’s view of the transition period, during which the UK will move from being one of the rule makers to a rule taker, becoming a third country with no say in decision-making, whilst remaining, for the transition period, within the single market and the customs union, bound by EU policy and contributing to EU budgets, and, in particular, that the direct effect and primacy of EU law would continue during this period. Although the UK government is yet to formally respond it has already raised a red flag on the rule-taking issue. Businesses, although relieved that a two-year standstill appears to be in the table, will be carefully watching as the detail emerges when phase two starts towards the end of March.