The logic of the Attorney General

This note focuses on a narrow front in the Brexit wars, the Attorney General’s (AG’s) advice on the Ireland/Northern Ireland Protocol to the Withdrawal Agreement and the implications of that advice for a different issue, the UK’s status as a party to the European Economic Area Agreement (EEAA) immediately following Brexit. Though narrow, the front is nevertheless one of enormous significance for Brexit policy. Mr Cox’s letter to the Prime Minister of 13 November 2018, headed “Legal effect of the Ireland/Northern Ireland Protocol”, should, when duly considered, be a game changer.

The question of interest

Brexit has created circumstances that were not anticipated at the time of the drafting of the EEAA. The emergence of such circumstances is a very familiar, recurring phenomenon in the operation of complex agreements of all kinds, including international agreements.

These agreements typically take the form of incomplete contracts, meaning that they do not attempt to specify, with any great precision, the performance requirements of parties in all contingencies (all sets of circumstances). Hence, they frequently contain provision for arbitration arrangements to resolve the significant ambiguities that can easily arise and to settle the disputes that those ambiguities can trigger.

For international agreements, where the arrangements established by a Treaty are inadequate for resolving an ambiguity/dispute, the function of settling matters is served by the processes of international law. Brexit is such a case and the question of interest is: what are the implications of withdrawing from the EU for the UK’s participation in the EEAA?

The AG’s reasoning on the ‘indefiniteness’ of the Protocol

Mr Cox opens his substantive remarks at paragraph 3 of his letter of 13 November 2018 by noting that the Protocol on which he was asked to advise is part of an international agreement (the Withdrawal Agreement) that is binding on the parties and that must be performed by them in good faith and in accordance with the ordinary meaning to be given to its terms in their context and in the light of the Treaty’s object and purpose.

The words here are taken straight from the interpretive principles of the Vienna Convention on the Law of Treaties (VCLT, Article 31(1)), signifying the relevance of international law to the AG’s task. That is an important point to note, because very many of the blogs and comments on the EEAA issue have entirely ignored the implications of international law. In contrast, it is where the AG starts.

The references to context and to object/purpose are critical because international agreements rarely give rise to disputes that are easily adjudicated by reference to very narrow snippets of text alone. Thus, when it comes to the critical question of whether or not the Protocol is of an indefinite nature, the AG proceeds on a ‘wider-look’ basis as follows.

In the relevant sections of the advice (paras 12-16) he makes reference to Article 50 TEU, to Article 5 (good faith) and Article 184 (best endeavours) of the Withdrawal Agreement, to Articles 1.3, 1.4 and 2.1 of the Protocol, and to the Protocol’s preamble, thus covering material from a range of textual contexts. He first notes that different readings of this material can lead to different conclusions concerning ‘indefiniteness’. Hence there are ambiguities to be resolved.

The AG resolves them by reference to the overarching object or purpose of the Protocol, as summarised in the preamble where it recalls “the commitment of the UK to protect North-South cooperation and the UK’s guarantee of avoiding a hard border, including any physical infrastructure or related checks or controls”. Thus, the reasoning goes, if it turns out to be the case that the parties have negotiated in good faith and used best endeavours to reach an agreement, but have nevertheless failed to reach an agreement, that does not give grounds for disapplication of the Protocol, notwithstanding that there exist snippets of text suggesting otherwise. In a nutshell, that is because the disapplication of the Protocol in those (no-agreement) circumstances would work against the achievement of the Protocol’s overarching object/purpose. Only if another agreement is reached that commensurately serves the Protocol’s overarching object/purpose could the Protocol ‘fall away’.

The VCLT’s words “in the light of the Treaty’s object and purpose” are clearly central here: they are the taken as the touchstone for resolving ambiguity.

The same reasoning applied to the EEAA

There has been a long-running debate since the referendum as to whether the UK will continue to be a party to the EEA Agreement following the UK’s withdrawal from the EU. The relevant question can be put as follows: will the UK’s EEAA’s obligations and rights continue ‘indefinitely’ until such time as a VCLT-compliant exit from the EEAA has been achieved, or will the obligations and rights end, ‘definitely’ and ‘automatically’, in consequence of Brexit?

This is not the time or place to rehash those arguments in detail, but a general feature of the interchanges can be noted. Those who conclude in favour of ‘indefiniteness’ – what I have referred to as “EEA continuity” – tend to emphasise the centrality of international law and of the object and purpose of a Treaty in resolving ambiguity, whereas those who argue for ‘automaticity’ tend to look at things through the lens of European Law and to rely on inferences that could possibly be drawn from narrow snippets of the EEAA’s main text (EEAA Articles 2(c), 126(1) and 128 are favourite sources of cited text).

In his approach to the Ireland/Northern Ireland Protocol, it will be obvious from the earlier remarks that Mr Cox has relied on the first of these two approaches, focusing on the primacy of international law (even for a Treaty so intimately linked to European Law as the Withdrawal Agreement) and on object or purpose as a touchstone for resolving the ambiguities that arise from different readings of snippets of text. His central conclusion on ‘indefiniteness’ was “… in international law the Protocol would endure indefinitely, until a superseding agreement took its place, in whole or in part …” [his emphases].

The relevance and centrality of international law are, I think, even clearer for the EEAA than for the Withdrawal Agreement. The EEAA is a multilateral Treaty that was originally drafted to accommodate seven, fully sovereign states that were not members of the EU and which declined to accept the judicial authority of the CJEU. In contrast the Withdrawal Agreement, if it is signed and ratified, will be a Treaty between the EU and a state that, at the time of its signing, was one of the EU’s own members and subject to the authority of the CJEU.

The EEAA issues also appear clearer when it comes to using the object and purpose of a Treaty to resolve ambiguities. The immediate questions here concern (a) the nature EEAA’s object and purpose and (b) the implications of alternative interpretations of the Treaty’s text for the achievement of that object or purpose.

The object/aim/purpose of the EEAA is admirably succinct and is of an economic nature. It is specified in Article 1(1):
“The aim of this Agreement of association is to promote a balanced strengthening of trade and economic relations between the Contracting Parties with equal conditions of competition, and the respect of the same rules, with a view to creating a homogeneous European Economic Area, hereafter referred to as the EEA.”

I have emphasised “between the Contracting Parties” because the UK is one of those parties, each and all committed to pursuit of the shared aim/object/purpose. Under international law, it achieved that status by signing and ratifying the Agreement. All the other parties have therefore made commitments to promote a balanced strengthening of trade and economic relations with the UK, just as the UK has made the same commitment to each of the other parties. It is a basic principle of international law that these commitments must be met (pacta sunt servanda).

Given the overarching aim set out at Article 1(1), if there are conflicting interpretations of parts of the text of the EEAA, resolution of the ambiguities can proceed by asking the question: how would adoption of each of the ‘candidate interpretations’ bear upon the capacity to achieve the specified, shared aim/object/purpose?

If the object or purpose is of economic nature, as it is in the case of the EEAA, then judges or arbitrators necessarily have to make economic assessments. Explicit statement of this fact can make even judges nervous (something I have directly experienced as a participant in judicial training exercises). But it is unavoidable: they do not get to pick and choose the factual matrix with which they are presented when their judgments are sought.

In the EEAA case though, there should be no reason for judges/arbitrators to doubt their own capacity to undertake the relevant assessments: the economic points are very simple. All that needs to be assessed in the event of a dispute about interpretation is which of the contested ‘automaticity’ or ‘indefiniteness’ interpretations better serves the overarching aim of Article 1(1), and that is something of a no-brainer. It is very difficult to see how the UK falling out of the EEAA could do anything but weaken, rather than strengthen, the trade and economic relations between say, the UK and Norway, given that the EEAA serves as an FTA between the two countries. Similarly, if WTO tariff schedules are taken as a relevant comparator, the ‘automaticity’ interpretation would lead to the sudden appearance of a 10% tariff on autos for all UK trade with the 27 remaining EU Member States. That again would serve to weaken trade between the Contracting Parties of the EEAA.

At a general level, it would I think be difficult to conclude that the aim of promoting trade and economic relations across an economic zone or area would not be significantly harmed by the removal of the zone’s second largest economy.

To avoid any misunderstanding, this is not an argument for the EEA as a policy choice. Some would no doubt prefer an immediate exit from the EEA in the UK’s own interests. However, the UK’s interests are not the relevant criterion in answering the question posed: the criterion is rather the impact on the Agreement’s shared purpose, its Article 1(1) aim. Moreover, those who favour EEA-exit on policy grounds should properly have sought to trigger the EEAA’s Article 127 (the exit provision), which would have led to UK withdrawal in a way that would have been compliant with the Agreement itself and hence with international law. The UK gave a solemn commitment to do things that way when it signed and ratified the Agreement, but the current Government has, de facto, not honoured the commitment, most likely because of a perception that nothing close to a majority could be mustered, whether in Parliament or among the public, for that course of action. Pacta non sunt servanda now.

Following the AG, therefore, it might be said, perhaps with greater force than for the Ireland/Northern Ireland Protocol, that in international law the EEAA will endure indefinitely, until such time as a withdrawal process that is not in breach of the Agreement is completed.

On that basis, in the absence of a consensus among the Contracting Parties, including the UK itself, that the UK should withdraw on 29 March 2019, a ‘deep and special’ trade and economic cooperation agreement with the EU, its Member States, Iceland, Liechtenstein and Norway will remain in place on 30 March 2019.


In the post referendum period the Government has been faced with two questions on which legal advice has been sought, each of great importance for Brexit policy and each engaged with the same basic issue, whether or not an international Treaty is ‘temporally indefinite’. In one case (the Ireland/Northern Ireland Protocol) the Government, has received advice from the Attorney General – now in the public domain and with its reasoning fully laid out for all to see and examine – that the answer is in the affirmative. In the other case, concerning the EEA Agreement (where prima facie the AG’s reasoning leads more quickly and more definitely to the same answer) the Government has proceeded on a presumption that the answer is in the negative.

The much earlier advice on the EEAA, which the Government has claimed justifies its view that that the UK’s Treaty rights and obligations will be extinguished, definitely and automatically, on Brexit Day, has never been disclosed. Its authors have not been identified. The basis of the conclusion (which could have been provided without disclosing the advice itself) has never seen daylight. We can’t even be sure that the advice actually exists in any written down or formally presented way. There is no indication in political speeches or articles that the object or purpose of the Agreement has been considered to be a relevant factor in reaching a conclusion on “EEA Continuity” (i.e. no indication that VCLT interpretive principles have been followed). Nor is there any indication that the Cabinet has been able to see and discuss the advice. It all seems to be locked away in a secret garden.

In these circumstances, there would be great merit in asking Mr Cox quickly to provide the PM and the Cabinet with a review of the integrity and robustness of any earlier advice on ‘automaticity’. If that were done, and if he were to reach the same conclusion as he did in relation to the Ireland/Northern Ireland Protocol, Brexit prospects and options ahead would come to look very different by the opening of the new year. Moreover, if that did indeed turn out to be the case, the Prime Minister, Cabinet and Parliament would then have the advice of Lord David Owen to turn to for one, immediately relevant and manifestly feasible answer to the question: What is to be Done?

31 letters making 8 points

In the Sunday Times today, in the form of a letter to Parliamentarians, David Owen summarises a suggestion that we have both advocated since 2016. It is an approach that has been consistently blocked by Mrs May’s red-line against participation in the European Economic Area (EEA).

If the Withdrawal Bill is defeated in Parliament on 11 December, it would pass beyond the bounds of sanity to maintain the red-line. In such an uncertain moment it would be certain folly to refuse seriously to contemplate and consider an option that could be of significant value in the new circumstances. And by serious consideration I mean an assessment stripped of myths and erroneous ‘assumed facts’ when engaging with issues such as rule-taking, budget contributions, and free movement of workers provisions in the EEA. If the facts change substantially, only the most inflexible of minds would fail to contemplate a change of opinion.

Lord Owen poses the issue in a very concrete context. The Withdrawal Bill has been defeated and we are faced with Lenin’s question: What is to be Done? The answer he gives is very specific: ‘this’ is what should be done.

Almost identical letters should be sent to each of the other 31 contracting parties of the EEA Agreement (EEAA) making 8 points, as follows:

• The UK reaffirms its full commitment to the Article 1(1) aim/purpose of the EEA Agreement and intends to continue its membership of the EEA from 29 March 2019.
• The UK assures all other parties that it will continue, post Brexit, to perform its obligations under the Agreement, recognising that these obligations will expand in scope as EEA competences currently lying with the EU are transferred to the UK (an automatic consequence of the transfer of sovereignty that Brexit entails).
• The UK reaffirms its commitment to the existing territorial scope of the application of the EEAA to the territories for which it has responsibility.
• The UK expects all other parties to the Agreement to continue to meet their own obligations to the UK under the Treaty, again recognising that, for the EU, these will be diminished by the transfer of competences that will occur in consequence of Brexit.
• The UK expects its obligations to be equivalent to those of Iceland, Liechtenstein and Norway.
• The UK notes that a switch of EEA governance pillar status occurred, with relative ease, when Austria, Finland and Sweden ceased to be ‘EFTA States’ and became members of the EU in 1995. Though it would have been arguable on a narrow reading of EEAA Art 128(1) that those countries should have re-applied to join the EEAA, that is not what happened.
• In the event of any serious dispute the UK will seek arbitration under international law, for example via the Permanent Court of Arbitration.
• The UK formally gives notice that it reserves its EEAA Treaty rights under international law, recognising that, after 29 March 2019, it will be international law that will be relevant for the settling of any disputes.

Taken together, these points amount to an exhortation to follow international law in relation to the issue of the UK’s immediate post-Brexit EEA status. No action has to date been taken by any party to change the contracting party status of the UK: the UK has not given Article 127 notice to withdraw from the EEAA, no other party has taken steps to remove the UK from the Agreement. There would be modalities to settle as to the operation of the Agreement in the new circumstances, but no issue of membership to settle. The letters would resolve any uncertainties surrounding the UK’s intent,

The proposal merits some additional commentary. First, keeping minds focused on the proposal (and not letting them wander immediately off on to other issues), there is no question of feasibility. The government can write 31 letters making 8 points, if it so chooses. It can’t of course control the responses, but it has 100% control of the act itself. That may look to be a trivial point, but I suspect the sending of the letters would itself feel liberating. The people yearn for a government capable of taking initiatives and it would be liberating in the very real sense of releasing policy thinking from the choking grip of an irrational red-line.

Second, the act itself has near zero cost. It might be argued that it would eat up valuable time, but, if the alternative is further delay and dithering with no other Parliamentary consensus is in sight, it could also speed things up. And there is good reason to think that an EU first response would not be long in coming.

The EU negotiators have tracked the Article 127 debate in the UK since the Autumn of 2016; they have developed temporary (ultimately unsustainable) holding positions on the issue that can and have been repeated by officials and friendly lawyers in those debates, and have been played as a straight bat when questioned by inquisitive journalists; they have considered what to do on 29 March 2018, the last day on which Article 127 notice could have taken the UK out of the EEA on Brexit Day. They will have contemplated the situation that has now arisen and have likely formed views on how to respond.

As to what the response will be, we simply do not know, although over-confident assertions will no doubt abound, as they always do (it is amazing how many people think they have possession of a reliable crystal ball). There is a range of possibilities, at least some of which would be highly favourable to both parties, and that is enough to make the exercise valuable. At a minimum we will discover something new, getting more insight of how things would stand in the absence of the limiting red-line.

The EU could say something along the lines of “Our position remains fixed, see you in Court”. Then again it may not. It might be the case, for example, that Michel Barnier spoke truly when he offered the EEA as an option in the past and when he said that, if the UK’s red-lines were changed, that would draw a positive response from the EU (and I think he did speak truly, although the lateness of the hour would provide some ground for resiling from that position now). Or that the EU will behave as it usually has in the past by being willing to keep talking until nearly the last moment in search of a better outcome. Or that it will be very wary of being seen to be operating beyond the limits of international law in its response: the parties to the EEAA having made promises/ commitments to each other in signing an Agreement to work together in pursuit of the Treaty’s Article 1(1) aim: and, as the Vienna Convention on the Law of Treaties states firmly, Pacta Sunt Servanda.

For the non-ideological empiricists who make up the bulk of the UK population, I think that the best way to look at David Owen’s proposal is to think of it as an experiment. That may sound scary, but it’s not. The situation calls for adjustments and adaptations and the only realistic way to find out what will and won’t work is to experiment, to try something new and different. The great bulk of human knowledge has accumulated in this way. Every significant advance, including in economic policy, has been made without foreknowledge of the full consequences of the step to be taken. (To which it might be added that where innovations are perceived as having potentially substantial effects, they are generally opposed by a much more numerous band of naysayers.)

What is more certain is that: we will at least learn something new; the response will not be long in coming; and there are potentially valuable things to be discovered. Defeat of the Withdrawal Bill therefore presents the UK Government and Parliament with an opportunity and, as Sun Tzu said, and as all followers of the former ECJ Judge Franklin Dehousse will know, “Opportunities multiply as they are seized”, to which I will add “and diminish as they are not seized”.

Finally, I think the saddest type of domestic response to the proposal would be – and I anticipate there will be responses of this kind – ‘it just won’t work, so its not worth trying’. That is defeatism pure and simple: it is way out of line with what is advised by a cost-benefit analysis and, I suspect, with public attitudes too.

An explanatory note to accompany the letter is to be found on the website,uk 

Mrs May’s assault on freedom: an intellectual error?

The Prime Minister’s letter to the nation of 24/11/18 reveals again the over-riding priority she attaches to reducing immigration, which might reasonably be described as an obsession that has developed since she first became Home Secretary in 2010. For some this will be viewed as a moral failing, but I want to argue here that it is much more of an intellectual failing.

The issue is the fallacy of composition. For those who don’t know it, it refers the false belief that something that is true for a part of a whole is necessarily true of the whole itself. E.g. if I stand up at a football match I see better, but it can’t from that be inferred that if everyone stands up they will all see better.

Just about all students of macro-economics become immunised against it when they learn that, if they decide to save a higher proportion of their income they can expect that their savings will increase, but if everyone makes that same decision at the same time, aggregate savings for the economy as a whole may very well fall.

The key point to recognise is that economic freedom, of which free movement of persons is a dimension, is an attribute of individual parts of a whole. Thus, the provisions of the EU and EEA Treaties afford rights to individuals to move around freely within given sets of territories, unhindered by many (though not all) of the constraints that might otherwise be placed upon them by public authorities, e.g. by the Home Office in the UK. This is what freedom of movement means in these Treaties: they limit the degree of control over an individual that a national government might otherwise seek to exert.

It would, though, be to fall under the spell of the fallacy of composition, if it were to be inferred that, because the control of a government over individual migration decisions is limited, that its control over aggregate migration is similarly limited. That is a logical error, and policy practice shows that it just ain’t necessarily so.

Consider, for example, the EU Emissions Trading Scheme (EU ETS) for controlling the aggregate emissions of greenhouse gases, an arrangement that was heavily influenced by British, liberal economic thinking of the time. The scheme does not constrain the freedom of an individual emitter of CHGs to increase or reduce its emissions, but it does constrain the aggregate emissions in the jurisdiction (the EU) as a whole.

How then does this reconciliation between the part and the whole occur? The answer is simple: by recourse to the price mechanism, the most familiar method of balancing supply and demand in a commercial society like ours. EU ETS makes available a given number of ‘carbon certificates’ that each entitle an emitter to discharge a defined (carbon equivalent) level of CHGs into the atmosphere. That first exercise determines a cap on emissions for the EU as a whole. The certificates are, however, tradeable, meaning that their holders are free to buy and sell certificates among themselves. If the owners of a particular production facility covered by the scheme want to increase or decrease their emissions in a given month, year or period of years, they are not constrained by public authority from doing just that.

EU ETS is a relatively recent regulatory innovation (2003), but the underlying practice has been obvious for centuries. Land is in relatively fixed supply from year to year (it might be said that the whole is highly constrained by nature). However, markets in land mean that individuals can vary their own, individual holdings from time to time via quotidian buying and selling transactions.

And so it could be for migration policy. A government with the sovereignty that a post-Brexit UK will possess could impose a cap on the aggregate number of residence permits on issue, i.e. on the whole, but allow trading of those permits, i.e. allow individuals the freedom to buy or sell. This tradability right would render the overall cap consistent with individual freedom of movement.

The UK cannot do this as a member of the EU, because it doesn’t yet possess the necessary sovereignty, although the EU as a whole does (which it might one-day use, for example, because this type of arrangement could be expected to significantly reduce the incentives for illegal people-smuggling and simultaneously render the policing of illegality a smaller-scale challenge). As a member of the EEA with the same status as Norway, however, it could, which is why I looked at this approach in a little more detail in an earlier blog, “A cap and trade system for residency”.

The bottom line is that there is no fundamental trade off between membership of the EEA’s Single Market and a capacity to control aggregate migration flows.  Rather, it is a matter of ensuring that the chosen means of control are EEAA-compliant. The fact that the Home Office’s currently preferred administrative methods, entailing gross interference in individual decisions, would be non-compliant means only that they should be abandoned in favour of market-based approaches that do not impede individual economic freedom.  The risk of a protracted civil division over this issue is, in my view, largely attributable to a lack of (a) imagination and (b) relevant expertise in our own, not-so-dear, Home Office.

Article 129(1) of the draft Withdrawal Agreement: a modest suggestion

When first posted this blog referred to Article 124(1) of the draft Withdrawal Agreement of March 2018.  It has been adjusted to reflect the Article numbering in the November 2018 version. End comments have also been added in the light of the current (19/11/18) situation.

In current circumstances, the EU Brexit negotiators must necessarily consider the likely effects of their own conduct on the state of affairs in British parliamentary politics. This is not a question of interfering in British politics, it is simply a recognition of realities. Any new offer made by the EU affects the political balance in Britain, which in turn affects the prospects for a satisfactory outcome for the EU itself. The balance is simply part of a causal chain linking EU actions to EU consequences.

With this in mind, let me run a suggestion up the flagpole to see if it catches any wind. It is directed chiefly at EU negotiators, since things in the NW archipelago seem a bit stuck in a groove at the moment. It could possibly transform the state of play in Westminster in a way that would open up a path to a Brexit outcome that would be judged satisfactory on both sides. By the ‘British side’ here is meant majority public opinion, not the opinions to be found in the ideological factions of a fractured politics. The suggestion concerns Article 129(1) of the draft Withdrawal Bill.

Article 129(1), which appears under the heading Specific arrangements relating to the Union’s external action, reads as follows:

Without prejudice to Article 127(2), during the transition period, the United Kingdom shall be bound by the obligations stemming from the international agreements concluded by the Union, by Member States acting on its behalf, or by the Union and its Member States acting jointly, as referred to in point (a)(iv) of Article 2.*  (The end asterisk points to a footnote.)

These international agreements include the much discussed Free Trade Agreements with third countries, egs Canada and Korea. Amongst them is the sui generis European Economic Area Agreement.

Article 129(1)’s confirmation of the EU’s support for the continued applicability of the EEA Agreement without recourse to any need for international dispute resolution has been of comfort to many in the UK, but there is one snag. The footnote to Article 129(1) says that:

The Union will notify the other parties to these agreements that during the transition period, the United Kingdom is to be treated as a Member State for the purposes of these agreements.

In relation to the EEA Agreement, it is the footnote that gives rise to the ‘vassal’ or ‘colonial’ status that has created and is creating significant opposition to the proposed Withdrawal Agreement. It obviously fans the flames of the nationalistic sentiments that can cause ruptures in the fabric of international cooperation, but that is not its only effect. It entails the following of market rules without any ability to shape or influence those rules. Its repudiation would therefore likely be supported by at least some Parliamentarians with strongly democratic, but not particularly nationalistic, sentiments.

My suggestion is therefore this. Provide for the sui generis EEA Agreement to be an exception to the general rule established in the footnote (that the UK is to be treated as an EU Member State). Specifically, introduce an option that the UK can instead choose to be treated as an EFTA State, subject of course to the consent of Iceland, Liechtenstein and Norway.

In respect of trading arrangements at least, that would make ‘vassal’ status optional and, when in a tight spot, additional options are nearly always good to have.  Although the option would be exercisable by the UK, the amendment would have benefits for the EU too.  The European Commission has a big agenda and is heavily stretched in terms of technical resources.  Particularly if the transition period is to be extended, the retention of UK experts in the ‘engine rooms’ of regulation could be of significant value, just as Norwegian officials have added significant value in a number of important, regulatory areas over the past years.

Brexit sequencing and the ‘interim period problem’: Limbo in our time?

Withdrawal from the EU (Brexit) will occur at an instant on 29 March 2019 and that moment divides the policy questions and processes entailed by Brexit into two periods. The post-Brexit period will itself be divided into two stages since any new, long-term trade arrangements will not be in place on the day after Brexit. It will take time for them to be negotiated, then ratified and implemented. The time sequence we face is therefore:

Article 50 period -> Interim period -> Operational long-term agreement period

Over the two years since the referendum the great arguments about Brexit have revolved largely around the first and third intervals of this sequence, but the interim period is important too. It will be when the substantive long-term negotiations take place and some of its features will be important influences on the outcomes of those later negotiations. The two that I will focus on are the likely length of the period and the degree of control over rule-making that the UK will enjoy during it.

Even now, close to its opening though we are, it is impossible to forecast the detail of how things will pan out during the interim period: there are too many possibilities to contemplate and assess. Even if it were feasible, there is little value in trying to plan out now, in any great detail, what the UK’s ‘positions to take’ on particular issues should be. As Field Marshall von Moltke (the Elder) put it: “No plan of battle survives first contact with the enemy”. Flexibility is required to adjust to changing realities and to have influence on them. It depends on having (a) a menu of options to choose from and (b) the power to exercise those options. This is what is meant by ‘control’ or, in broader terms, possessing ‘sovereignty’ over decisions.

Since ‘taking back control’ was the major theme of Vote Leave’s referendum campaign, it is natural to ask the following question: In the early part of the interim period, what progress in ‘taking back control’ can be expected? The ‘taking back’ aspect of the question implies that the assessment is benchmarked against the current status quo, in which the UK is a Member State of the EU.

More specifically, consider first what the UK’s degree of control over market rules and regulations will look like on the day after Brexit. Ask of each of the two long-term Brexit proposals currently receiving most attention (Canada+ and Chequers): Will it lead to a stronger or weaker position for the UK on the 30 March 2019? Will it provide more or less control/influence over rule-making?

Approaching things in this way, it is immediately apparent that the terms of the current, draft Withdrawal Agreement (WA) imply that Brexit Day will see a reduction in UK control. That is, in response to a popular injunction to ‘take back control’ the Government will have delivered a surrender of control (judged relative to the status quo ante, the EU system). This can be called the “interim period problem”, since it is likely that this initial control deficit will persist throughout the period (although its severity may vary over time). On the control/sovereignty agenda of the referendum campaigns, the UK will have paddled backwards.

That is a major point, because other things equal very few voters would favour a reduction in sovereignty.  Remainers are no different to Leavers in this respect: they might argue for a lesser sovereignty, but only if it was accompanied by the prospect of compensating benefits of greater value.  Taken by and of itself (i.e. ‘other things being equal’) a loss of sovereignty is a negative factor.

As things stand under the draft WA of March 2018 there is a plan for a ‘transitional period’ that will last for 21 months, but ‘no plan survives its first contact with realities’. At the start of almost any complex process of negotiation it is difficult to be confident about how long it will take. Benchmarked on international FTA experiences, a four-year start-to-implementation length would be a very impressive achievement for an agreement of the depth, scope and complexity anticipated by the Canada+ and Chequers proposals. These things look simple in abstract, but they invariably turn out to be more challenging in practice. It has, after all, taken the Government more than two years even to come up with only a very broad outline of its own aspirations (Chequers).

The WA in its present form would therefore see a division of the interim period itself into two: (a) the first 21 months and (b) a yet to be agreed extension, necessary to bridge the remaining gap until such time as a new long-term agreement is operative. There would likely be a further price for the UK to pay for the extension and the closest, identifiable benchmark appears to be around £10 billion per annum (the sort of payment that the draft WA indicates has been agreed for its 21 month transition period, although things are not put that way in that document).

There is an underlying three-dimensional trade-off between depth, speed and cost at work here. Mrs May opted at the outset for a “deep and special relationship” and that aspiration remains UK policy. The interim period could be shortened by giving up on depth and opting for a shallower, simpler agreement, but that would entail a major shift in government policy and the likely benefits of the agreement would be lower.

A more basic Canada-style agreement, without pluses, might shorten the interim period, but even then it is not just a case of replicating an existing FTA template. The value of UK-EU trade is many times the value of Canada-EU trade and the goods and services mixes involved are rather different. A UK-EU agreement would be a significantly bigger thing than Canada-EU from the outset.

Then there are the customs issues to consider. The operation of even a basic agreement would require a major upgrade in systems and businesses throughout the land would have adjust to rules-of-origin reporting. These adaptations are perfectly feasible, but there is another trade-off to consider: the faster things need to be done, the higher will be the costs, including costs arising from operational failures.

The UK cannot unilaterally determine the length of time things will take. EU systems will need to be adjusted too and there is an obvious question to ask about the incentives of EU Member States regarding speed of progress. The transitional arrangements contemplated in the WA are very comfortable for the EU: the longer the interim period the larger the financial contributions of the UK are likely to be. A UK request for greater speed could be expected to elicit a request for higher financial contributions to cover the EU’s own incremental adjustment costs that a greater pace would entail. There is also the issue that 28 counterparties with differing interests will have influence in the negotiations, each of whom will be unlikely to stay silent on matters that touch on its own, economic and political sensitivities.

In the case of the Chequers proposal there is a very real question as to whether it is realistically feasible at all. By and of itself the first sentence of the list of Chequers proposals raises enough difficult operational questions to indicate that this would be an administrative snake pit. For the EU and the other EEA contracting parties, the UK discretions (rights) sought in the proposal would serve as an ever-present risk to the well-functioning of the Single Market rule-books (which work as systems of rules – the addition or subtraction of a rule can affect the way the other rules function). The detail here can be left aside for current purposes: the only point that matters is that the interim period entailed by a negotiation based on Chequers could be expected to be particularly protracted.

The problem in all this is obvious. It can be reasonably be expected that it will take four years or more, possibly several more years in the case of Chequers, to settle long-term future trading and commercial arrangements. The UK will face four or more years in a sort of fee-paying Limbo. The interim period could be expected to end in 2023 at the earliest, which lies at the far side of the next scheduled General Election.

A double, public stocktaking of how well things are going on the ‘take back control’ agenda can the be expected: the first around the time of the Brexit (29 March 2018), the second at a subsequent General Election. On both occasions the government of the day will likely have to acknowledge that, relative to where the UK stood when in the EU, the UK will have surrendered control, the opposite of the Leave injunction to take back control. No doubt the word ‘temporary’ would be used a lot in the Conservative Party campaign and better things would be promised soon, but, at a General Election in 2022, a record of nearly six years of promising benefits that had not yet arrived would likely pose something of a credibility problem.

Fortuitously, history has presented the UK with a potential solution to the ‘interim period problem’. Evaluated against the principles of best-practice policy making (which in their regulatory version are enshrined in domestic statute) it is pretty much a bull’s eye: it comprehensively deals with the problem by eliminating the interim period. Whilst, being precisely targeted on the ‘interim period problem’, it causes minimal collateral economic harm and has a minimally foreclosing effects on other paths of policy development. Since it rests on an extant international trade agreement, already ratified by all its contracting parties, it can be implemented immediately upon a consensual agreement. Its most accurate shorthand descriptive label is “Norway First”.

The opportunity arises because of the existence of the European Economic Area Agreement (EEAA) and seizing the opportunity is facilitated by the fact that the UK is itself an existing contracting party to that Agreement, and indeed was one of its founding parties. Although not heavily advertised, the draft WA signifies acceptance by both the UK and the EU that the EEA should continue operating for at least the first 21 months of the interim period.

As things stand, the anticipated rollover of the EEAA will be on the basis that the UK continues to be treated as an EU Member State. If that remains the case the UK will fall within the EU governance pillar of the EEA Agreement. There it will be subject to decisions about EU and EEA legislation and about its operation that are taken on the UK’s behalf by the European Commission, supervised by the European Court of Justice, without any significant UK role in the making of that legislation or the taking of decisions.

The position would change, however, if the UK transitioned to the EFTA governance pillar of the EEA Agreement, in which sit Iceland, Liechtenstein and Norway. These sovereign nations do not share EEA competences with the EU as EU Member States do, nor are they subject to the authority of the ECJ. The EFTA States have their own supervisory arrangements.

This is the ‘Norway option’ in its full sense and, if the transition between pillars occurred simultaneously with Brexit (UK withdrawal from the Treaty of Lisbon), it would eliminate the interim period entirely, for trading and regulatory arrangements at least (there would still be need for transitional arrangements in other areas such as customs). If the transition to the EFTA pillar occurred at a later date (than 29/3/19), the interim period would end on that later date, for example three or six months after Brexit Day.

Adopting this pillar-switching approach, the question of the precise nature of the longer-term relationship would be a can that is kicked down the road until after Brexit Day, which is something that will likely happen anyway given the compressed timetable of the Article 50 process. What Norway First would add is UK empowerment during the interim period: in respect of trade-related matters, UK sovereignty would be increased, not diminished, relative to the EU benchmark.

It can be noted at this point that Norway First has a strong resonance with the strategy adopted by the Leave campaigns before the referendum: in a sense it can be viewed as the natural continuation of that strategy. As a matter of conscious choice, those campaigns did not try to specify a ‘plan’ for what should happen in the event of a Leave victory: that would be a matter for democratic determination in the post-referendum period. The electorate voted knowing that the basis of the choice was ‘Leave First and let Government and Parliament determine the future EU relationships later’ vs Remain (although I suspect that few of us expected such hapless governance to follow).  Nothing about the strategy was concealed: the can labelled ‘what next?’ was, transparently, to be kicked down the road.

Given that, the only mandate that properly needs to be met by 29 March 2019 is withdrawal from the Treaty of Lisbon. There is no mandate to leave the EEA: it was one of the matters that was put in the kicked can at the time of the referendum. Norway First is therefore a full and complete response to referendum vote: it would deliver the Leave First result that the majority voted for.

A Prime Minister speaking on the day after Brexit could then truthfully say “We have delivered the Brexit mandate to withdraw from the EU and have already achieved the greater part the implied injunction to take back control. We have done that in these areas: [insert list of areas here].” The list of areas would include free movement of workers, which may come as a surprise to many, but is no less true for that: the EU Treaties themselves allow for limitations to be placed on freedom of movement and the EEA Agreement provides greater scope to do that than do the EU Treaties (Lisbon and TFEU), but the really big point is that Norway First would transfer the competences to make the relevant decisions from the EU to the UK. This transfer of competences can be most easily seen at the final sentence of Article 113(3) EEAA, but it runs through the entirety of the EEA Agreement’s provisions.

At the time of writing, Norway First is receiving attention because of interest in a NorwaythenCanada Brexit strategy that has been advocated by the Conservative MP Nick Boles. The strategy comprises an aspiration for a long-term Canada+ agreement, but with the earlier, interim period problem resolved by Norway First. It has very obvious attractions for a significant group of parliamentarians who favour Canada+ or some shallower type of FTA for the longer term, but its key aspect should command a wider support. That key aspect is the elimination of the interim period, i.e. the avoidance of a potentially protracted period of Limbo.

Norway First is directed solely at the interim period problem and can be combined with any of several alternative approaches to the operational long-term agreement period. These include, in increasing order of depth and scope: a bare bones FTA, Canada, Canada+, EFTA, EFTA v2.0, Chequers, Norway (EEA only), Norway (EEA+EFTA), and return to the EU.

The can labelled ‘long-term arrangements’ should, advisedly then, be kicked down the road, and in all probability it will be anyway. It is a can that has given rise to lots of noise, game-playing, and bitter personal rivalries, all of which have distracted attention from the second can in play, which carries the label ‘the interim period’. The contents of the latter can should be dealt with immediately, because the opening of the interim period is getting very close now. The most important question the can contains is: Empowerment or Limbo?

It is not the most difficult question a government has ever faced, but for some reason I cannot suppress a picture in my mind of a UK Prime Minister returning from Brussels with a document that says “Successful Agreement” on the cover, but whose content implies “Limbo in our time”.

The bespoke agreement option

This is an extract from a submission to the Scottish Parliament made on 15 August 2016.
One argument in circulation at the moment is that the UK should withdraw from the EEAA in order to negotiate a better, bespoke agreement with the EU. There are two points that I would make about this policy position.

First, there is the timing issue already raised. Bespoke arrangements may take a long time to be negotiated and hence might be expected to contribute to a protracted period of political and economic uncertainty. Added uncertainty can be expected to have adverse effects on investment. Such negotiations also tend to absorb significant administrative resources.

Second, whilst it is highly likely that there are arrangements that would be better for the UK/Scotland than the existing terms of the EEAA Agreement – the Agreement was, after all, negotiated and drafted a quarter of a century ago and I think that would fair to say that it is not one of the finest pieces of legal draftsmanship in existence – it should always be borne in mind that the possibility of achieving something better is accompanied by the possibility that something worse could be negotiated. One of the maxims I have used in my working life in public policy is “never underestimate the capacity of well-intentioned government to make matters worse” (and governments are not necessarily always well intentioned).

In current circumstances there are also some severe doubts about the availability of negotiating skills on the UK side. This is not just a matter of a dearth of experienced trade negotiators: the number of old-fashioned trade unionists (brought up in a culture of hard bargaining on behalf of their members) now to be found in front line politics, and who might in other circumstances have served, is much diminished.

A concrete example illustrates the possibility of ending up with something worse. In a referendum the Swiss rejected membership of the EEA at its outset and subsequently negotiated a series of bespoke agreements with the EU (reported to total over 120), including in relation to the free movement of persons. Much more recently, in referendum on 9 February 2014, the Swiss have voted to impose stricter immigration controls, but, under the terms of the relevant agreement, this has to be negotiated with the EU. Two and a half years’ later the negotiations are still ongoing. In contrast, as a Contracting Party to the EEAA, the relevant actions could have been taken unilaterally and without significant delay.

Negotiating bespoke arrangements could pose particular issues for Scotland. For example, I understand that Scottish fishermen have already expressed anxieties that the potentially beneficial effects of repatriation of fisheries policy powers will be bargained away in Brexit negotiations. My general view is that the Scottish Government and Parliament will have an easier task in monitoring developments and influencing outcomes in the context of a negotiation based on making “necessary amendments” to a relatively simple, existing Agreement than in staying abreast of the more complex, more protracted negotiations that starting from scratch would likely entail.

This last point is reinforced by the fact that the ‘off-the-shelf EEAA’ has been previously scrutinised by the Parliaments of Iceland and Norway, countries whose interests have a more than average degree of alignment with Scottish interests in some major policy areas.

Brexit strategy in one diagram

This is another golden oldie, from the beginning of 2017, before Article 50 notification.  It recommended a three-track approach to the Brexit process (a) not getting entangled in discussions of longer term trade arrangements in the Article 50 process itself, (b) sticking with the EEA throughout, and (c) making an immediate start on the reform of immigration/residency policy.

No formalised transition period was proposed in relation to EEA matters, since Art 127 allows for a simple, unilateral withdrawal with 12 months notice.  Withdrawal might be triggered in the event that some better, longer-term arrangement could be negotiated or if no accommodation could be found on free movement of workers issues.  These were matters that would be determined post-Brexit.

Less sensitive issues — customs arrangements, agricultural and fisheries policies, VAT — would, on the other hand, have required transitional arrangements.  Contrary to conventional assertions, an EEA Brexit alone would have been too hard for practical purposes.

In the event, (a) the government sought to make long-term arrangements a priority in the Art 50 negotiations, (b) closed off the EEA track from the outset, and (c) has not made any significant steps forward on immigration/residency policy.  That was pretty much the opposite of what was proposed.

Brexit in one diagram