The Repeal Bill, a transitional deal and staying in the single market
Peter Wilding, Director, Influence Group
This week the third round of negotiations has kicked off. Recently, EU Chief Negotiator Michel Barnier, set out the options for a future relationship between the UK and the 27 other EU member states. As he saw it, the best would be for the UK to remain a member of the EU; the second best would be for the UK to be a member of the European Economic Area (EEA) (like Norway and others), and accept the strict conditions for participation in the single market. If the UK opts for neither of those relationships, then – according to him – the relationship would have to be a different and inferior one. With the consequences for business of the UK leaving the single market becoming clearer by the day, and increased support for a soft Brexit, the issue of the UK’s membership of the EEA will be at the forefront of debate; as is the allied issue of the UK’s continued participation in the customs union.
If, by contrast, HMG seeks a “bespoke” arrangement, whether transitional or permanent, it will need to achieve the following:
- Passage of the “Repeal Bill” (EU Withdrawal Bill) un-amended by 29th March 2019;
- Agreement with the EU on citizens’ rights, the Irish border and the financial settlement by October 2017 (“the divorce issues”);
- Agreement on the “bespoke” arrangement by September 2018, so that it can be agreed by the EU Council, the EU Parliament and, if necessary, ratified by the remaining 27 member states.
It is unlikely that these steps will be completed in time. There is therefore a real danger of a “cliff- edge” Brexit, whereby WTO rules will apply to all EU-UK trade, if a “bespoke” arrangement is sought (even discounting the possibility of negotiations with the EU collapsing or stalling). In order for the UK to avoid a “cliff-edge” departure from the EU on 29th March 2019 and lose free and frictionless access to the single market overnight, it must stay (at least for a temporary period) in the EEA and negotiate a customs union arrangement with the EU.
The EEA is what is called the European single market. It comprises 31 countries and is governed by the EEA Treaty of 1994. Most EEA countries (28) are also member of the EU, which is governed by the Treaty of Lisbon.
In early 2017 I, together with other claimants, applied to court for a declaration that HMG is legally required to secure parliamentary approval before it can take the UK out of the EEA. The court held that the application was premature, but did not dismiss it on the merits. However, the Repeal Bill potentially changes the legal analysis. The Bill as currently drafted seeks parliamentary consent to amend UK domestic law so that both the EU and EEA rights and obligations are no longer automatically effective in the UK.
In the explanatory notes to the Repeal Bill (paras.7 and 6) HMG has also indicated that it considers that when the UK leaves the EU, it automatically leaves the EEA, implying that the UK does not need to give formal notice under Article 127 of the EEA Agreement to leave the EEA. We disagree, but a UK court would be unlikely to entertain an action on the interpretation of the EEA Agreement if Parliament had already legislated that the EEA Agreement (and the EU Treaty) should no longer have domestic effect in the UK; which will be the effect of the Repeal Bill if it is passed un-amended. Further, unless the Repeal Bill is amended, it is still open to HMG to give notice under Article 127 if subsequently it considers it necessary.
As we speak, contracts are being concluded for 2019 and beyond. Companies on either side of the Channel need certainty whether their deals are underpinned by single market rules or will have to be reconfigured to reflect WTO terms.
The upshot is that, now more than ever, if the UK is to remain in the EEA, the political/parliamentary process is paramount. The Repeal Bill has to be amended so that it does not end EEA membership and/or the mechanism by which the UK implements EEA rights and obligations into UK domestic law.