1.In the six months since our predecessor Committee last reported, the Government has triggered Article 50, published a range of position and future partnership papers, and completed five rounds of negotiations with the EU. The timetable is tight; negotiators aim to strike a deal under Article 50 by October 2018 but if that slips significantly, the UK and the EU face the prospect of not reaching a deal before the UK exits the EU on 29 March 2019. Business, individuals and the public sector need time to prepare, but formal talks on either the future EU-UK relationship, or on a potential transition or implementation period have not yet begun.
2.From the outset of the Article 50 negotiations, the Government has wanted to discuss the future relationship in parallel with the withdrawal. The Government has argued that many aspects of the withdrawal, such as border arrangements on the island of Ireland, cannot be resolved without simultaneous discussions on the framework for the future relationship. Our predecessor Committee also recommended that the future relationship and the withdrawal should be negotiated in parallel, so that there is clarity about both the divorce settlement and the new relationship at the moment that the UK leaves the EU. However, the EU27 devised a two-stage process, in which ‘sufficient progress’ would have to be made on citizens’ rights, specific issues affecting the Northern Irish border and the financial settlement before talks could begin on the future relationship. The Government accepted this timetable in the first round of negotiations in June but has criticised it.
3.While there has been progress in some areas, notably citizens’ rights, the disagreement on the sequencing of the negotiations has, at least until now, led to deadlock, particularly on the financial settlement. The Prime Minister said in her Florence Speech that the financial settlement can only be resolved “as part of the settlement of all the issues [ … ]”, namely those that relate to the UK’s future relationship with the EU. She indicated that the Government requires more clarity on the future relationship before it makes any further commitments on the financial settlement. However, in October the European Council stated that the UK had not translated its position on the financial settlement into a “firm and concrete commitment” to settle its “obligations”. It deemed that sufficient progress had not been made and negotiations on the future relationship could not yet begin. On 10 November, Michel Barnier confirmed that he had given the Government a two-week deadline to make “clarifications or concessions” if the negotiations are to move on to phase two in December. The Committee believes that it is in the interests of both the UK and the EU to move on to discussions about the future relationship as soon as possible, particularly given the stated policy aim of reaching agreement by October 2018.
4.Once the EU27 decides that sufficient progress has been made to allow the parties to move on to phase two, the Government is optimistic that it can agree a deal on the UK’s future relationship with the EU, including a free trade agreement (FTA), by October 2018. In our meeting with Mr Barnier on 8 November, he explained that the EU expect to “scope” the terms of a future relationship from January 2018. He thought it possible that a political declaration on that future relationship could be reached by October 2018, but said that agreement on a free trade deal would be on a different legal basis. Figure 1 below is a slide shown to us during our meeting with Michel Barnier setting out the Commission’s expectations for the timeline for negotiations. The Government is seeking an ‘implementation period’, of around two years, during which it will introduce measures necessary for the future relationship. While the European Council has said that it will begin “internal discussions” on transitional arrangements and the future relationship, questions remain on what any implementation period would include, its legal basis and what rights and obligations the UK might have for its duration. The lack of clear answers to these questions has implications for businesses in different sectors, some of which will be making significant organisational and investment decisions from early 2018 onwards. The Secretary of State and the EU have both indicated that they hope to reach agreement on an implementation period in the first quarter of 2018.
Figure 1: The European Commission’s expectations for the timeline for negotiation
5.In this report, we consider the current state of the negotiations. We also examine the prospects for the European Council meeting in December when the EU27 will consider again whether sufficient progress has been achieved before talks can progress to phase two. We took evidence from Rt Hon. David Davis MP, the Secretary of State for Exiting the European Union, shortly after the last European Council meeting. We visited the Port of Dover where we met individuals from the Port Authority, officials from executive agencies based at the Port as well as ferry operators, to learn more about how the border will be affected by the UK’s withdrawal from the EU. In November, we also visited Brussels and Paris where we met a range of interlocutors, including Michel Barnier, Guy Verhofstadt MEP, Danuta Hübner MEP, Mairead McGuinness MEP, French parliamentarians and representatives of French business. As in the last Parliament, we have also drawn on the work of other Select Committees in both the House of Lords and the House of Commons, and on documents published by the Government, to help to inform our work.
6.We intend to publish further reports on the progress of the Article 50 negotiations at regular intervals. Our next report on the state of the negotiations will be published after the December European Council.
1 The terms “implementation period” and “transition period” are often used interchangeably to refer to the period in which the UK will have formally exited the EU but (a) is in the process of implementing the withdrawal agreement that the Government and EU have agreed under Article 50, and/or (b) may continue to apply existing structures of EU rules and regulations pending agreement on the UK-EU future relationship. On the whole, we use the term “implementation period” in this report. However, we use the term “transition period” when quoting or paraphrasing sources that have referred to it in this way.
2 Exiting the European Union Committee, , First Report of Session 2016–17, HC 815, para 58
3 Commission, , 19 June 2017 & Department for Exiting the EU, , 19 June 2017
4 Prime Minister, , 22 September 2017
5 European council, , 20 October 2017
6 Channel 4 News [video], , 10 November 2017 [00.54]
8 An agreement between the UK and the EU on their future relations would be concluded using existing EU Treaty legal bases, for example Article 207 TFEU (common commercial policy) or Article 217 TFEU (association agreements), each in conjunction with Article 218 TFEU which sets out the procedures for the EU to negotiate and conclude agreements with third countries. An agreement limited to trade, based on Article 207, would fall within the exclusive competence of the EU and therefore need only the agreement of the EU Council and (likely) the consent of the European Parliament. A broader agreement covering areas of both EU and Member State competence—such as the recent EU-Canada Comprehensive Economic and Trade Agreement (CETA)—would require the agreement of the Council and the European Parliament, and would be likely to require ratification by each individual Member State. This would include, in practice, the approval of up to 38 national and regional assemblies.
9 Prime Minister, , 22 September 2017
10 European council, , 20 October 2017
30 November 2017