There is a lot of talk about a Brexit transition but much less clarity about what it means.
In effect, a Brexit transition is a period of time beyond the two-year Article 50 negotiating period where there is little or no change.
There are two key drivers for a transition period:
- Negotiation: EU negotiators are sceptical that a new deal could be agreed and ratified by March 2019. A transition period could allow negotiating teams more time to finalise a deal.
- Implementation: As initially floated by the Prime Minister (see below), a transition would be a period between the UK leaving the EU and an already agreed, new partnership deal taking full effect. It would act as an “implementation phase” and give the UK (and other EU countries) time to put the necessary processes and systems in place.
The exact relationship the UK would have with the EU during the transition is not clear. If the Article 50 period was extended, the UK would continue to be a member of the EU. Alternatively, there would be a period when EU acquis on the Single Market applied even though the UK had left, and one suggestion is that this could be achieved through UK membership of the European Economic Area (EEA). Another could be that the UK simply commits to continue to apply all EU rules and regulations.
Why might we need a transition period?
Being ready for the major changes Brexit will require is a huge task. Transition would give more time for the Government to get in place the necessary new systems for migration and, crucially, customs. This would give industries more time to adapt their processes and business models to whichever deal finally emerges.
In her Lancaster House speech, the Prime Minister suggested that the UK would need an “implementation phase” before its new relationship with the EU was fully realised.
She repeated the need for an implementation phase to allow more planning for withdrawal, and thus avoid a “cliff-edge”, in her Article 50 letter to Donald Tusk, President of the European Council, in March. The letter put minimising uncertainty as one of the seven UK principles in approaching the Brexit negotiations.
In her Florence speech, the Prime Minister went further, suggesting that there could be a transition of around two years to account for implementation practicalities. She said that during that the transition period:
- access to one another’s markets should continue on current terms
- Britain should also continue to take part in existing security measures
- the framework for this strictly time-limited period would be the existing structure of EU rules and regulations.
She spoke of a “double lock” – a guarantee that there would be a transition but that it would be time-limited, with a period of about two years – although this period could potentially vary for different issues.
The significant changes were on the apparent acceptance that the transition would preserve the status quo and implied acceptance of jurisdiction of the European Court of Justice. She also offered to continue to contribute to the EU budget, (estimated to be an offer of around £20 billion over two years, to avoid an immediate black hole in the current EU budget period).
Has the UK Government formally said anything in its Brexit papers on transition?
Yes. In its position paper on citizens’ rights, the Government mentioned a grace period of up to two years after Brexit, to allow EU citizens resident in the UK to obtain settled status. In its Future Partnership paper on customs, the Government argued for an “interim period” where the UK would operate as though it was still in the Customs Union through a “close association” with the EU Customs Union itself.
Is the Cabinet agreed on the details of a Brexit transition?
The Cabinet met before the Prime Minister’s Florence speech and presumably all signed up to the language on transition in that meeting. But there is clear tension between those who want a definitive period with a clear end date and those who think the length of transition needs to be determined by practicalities and may be different for different sectors.
What does the Labour Party think?
Labour announced its new Brexit position in August. It argues for the UK to stay in a customs union and in the Single Market for a transition period. It is committed to making the transition “as short as possible but as long as necessary.”
What does business think?
Business generally wants early certainty that there will be a transition – and for there to be a new deal in place when it ends. The CBI argued in July that the UK should stay in the Single Market and the Customs Union until a new deal is in force. The Institute of Directors set out different options for addressing the transition in a paper in August. The head of the Prudential Regulatory Authority has argued that financial services need certainty on transition by Christmas.
Any transition has to be agreed with the EU.
The EU negotiating mandate envisages the possibility of transitional arrangements, but that they should be “limited in time, and subject to effective enforcement mechanisms. Should a time-limited prolongation of Union acquis be considered, this would require existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply”.
Michel Barnier, EU Chief Negotiator, reiterated this point before the start of the fourth round of negotiations, saying “any transition must respect the legal and financial framework of the Single Market.”
But there is as yet no clear agreement among the EU 27 member states on whether and on what terms they would agree to a transition. It will need to be agreed through a separate negotiating mandate.
When might a transition be agreed?
The UK’s preference would be for certainty, that there will be a transitional phase sooner rather than later. However, it is less in the EU member states’ interests to agree a transition early on. Reports suggest that Michel Barnier sees a transition deal as being in the third phase of the negotiations, after an agreement on withdrawal and the framework for the new UK-EU relationship. That position might soften.
Both the EU guidelines and the Prime Minister’s speech in Florence seem to suggest transition being agreed within the withdrawal agreement. In a speech to the Italian Parliament in September, Michel Barnier stated explicitly that the transition “will be part of the Article 50 withdrawal agreement.” This is important because the Article 50 agreement only requires Qualified Majority Voting in the Council of Ministers and a simple majority in the European Parliament, with no process of national ratification – this makes it much more likely to be approved quickly.
However, some legal experts think this process may be open to challenge.
How would a transition agreement interact with the EU (Withdrawal Bill) going through Parliament?
The EU (Withdrawal) Bill freezes most pre-Brexit EU law on to the UK statute books, but this alone will not be enough to give effect to any transitional arrangements in UK law. By repealing the European Communities Act 1972, the bill also removes the UK from the jurisdiction of the European Court of Justice, ends the supremacy of EU law and dissolves the mechanisms by which new EU laws can be given effect in the UK.
The Government wants Parliament to give ministers wide-ranging powers in the bill to ‘implement the withdrawal agreement’ through secondary legislation. This legislation could provide for the existing arrangements on EU supervision and enforcement, along with the adoption of new EU law to continue during the transition.
However, some constitutional experts believe that this would create confusion and be bad for legal certainty, arguing that the only “legally robust” way to achieve a standstill transition envisaged by the Government is to do extend the Article 50 negotiating period. This would require the unanimous agreement of the other 27 EU member states, and would mean that the UK would not leave the EU on 29 March 2019.