by Frank Schnittger
Thu Aug 18th, 2016 at 02:04:41 PM EST
Luis de Sousa raises an important point. Will a Brexit agreement require ratification by 28 Member states, or can it simply be agreed, by majority vote of the EU Council as provided for in Article 50 of the Lisbon Treaty? He quotes legal opinion to the effect that all 27 remaining member states would have to ratify any trading agreement post Brexit: EU Law Analysis: Article 50 TEU: The uses and abuses of the process of withdrawing from the EU
In this context, it should be noted that (contrary to what is sometimes asserted), there's no legal obligation for the remaining EU to sign a free trade agreement with the UK. The words `future relationship' assume that there would be some treaties between the UK and the EU post-Brexit, but do not specify what their content would be.
This point is politically significant because while the withdrawal arrangement would be negotiated by a qualified majority, most of the EU's free trade agreements are in practice `mixed agreements', i.e. requiring the consent of the EU institutions and ratification by all of the Member States. That's because those agreements usually contain rules going outside the scope of the EU's trade policy. While it seems likely that in practice the remaining EU would be willing to enter into a trade agreement with the UK (see, for instance, the `gaming' exercise conducted by Open Europe), the unanimity requirement would complicate this.
In short, this legal opinion considers a Brexit agreement to consist of mainly transitional measures to facilitate the departure of the UK from the EU, which may or may not include special arrangements for ongoing free trade. I think we are in danger of confusing the process by which an exit agreement between the UK and EU might be reached, and the content of what it might contain.
The process is defined, in outline, in A50, and provides for an agreement to be ratified by the Council on a weighted majority basis, if reached within the two year time limit. The content, if similar to (say) the Free trade agreement between Canada and the EU, does not reach the status of a new Treaty. Otherwise virtually every FTA negotiated by the EU would be subject to a referendum in Ireland, and so far, no FTA negotiated by the EU has been the subject of such a referendum.
The question, for the Irish Courts, of whether a new FTA requires ratification by Referendum, rather than simply a weighted majority vote of the Council, is whether or not the new FTA requires the delegation of new powers to the EU, which can only be done by Referendum. Thus TTIP may require such a referendum, since it makes the Irish Government subject to the rulings of arbitrators set up under the Treaty, over and above the Jurisdiction of Irish courts. Effectively National Sovereignty is being replaced by global corporate sovereignty, insofar as the international arbiters could well be in a revolving door relationship with global corporates.
But insofar as the Brexit agreement provides for a pretty bog standard FTA between the EU and UK similar to many previous FTAs like that with Canada, it would seem that EU member states have already delegated the relevant competencies to the EU, and the EU can go ahead and agree such an exit agreement by weighted majority vote. An Irish Government, at its own discretion, might vote for or against such a FTA in the European Council, but it could be over-ruled by a weighted majority vote.
The main difference the UK is seeking in a FTA post Brexit appears to be that it also covers financial services and passporting rights. I do not know whether the EU already has the legal competency to grant such rights to a departing member, effectively a third party. I suspect the fact that it hasn't given such rights to any other third party would indicate that that is beyond the scope of existing Treaties pooling sovereignty in the EU. So yes, in that case we are probably talking about a new Treaty, requiring separate ratification by all 27 member states. I would love to see a legal opinion clarifying this point.
My (political) guess is that it would not be possible for the EU to craft an exit agreement with the UK that could achieve 27 distinct ratifications. Every other country would feel free to dump its wish list into the pot - raising all sorts of hares with Gibraltar, Northern Ireland, budget contributions, fishing rights etc.
My default assumption, therefore, would be that the exit agreement will be sufficiently limited in scope to avoid that scenario. Effectively that means WTO rules and a FTA similar to Canada. That means some tariffs, and no free trade in services. That means much of the City will, at least formally, decamp to other EU capitals. It remains to be seen to what extent they will get away with this merely being a "brass-plate" relocation, and to what extent it means real jobs and real companies moving elsewhere. Despite opposition from members such as Ireland, I suspect the EU will try to make the move as real as possible, and the UK will lose quite a bit of its GDP and tax take in consequence.
Within the UK, another rebalancing will also take place. Manufacturing and the regions, so long neglected, will benefit from devaluation offsetting the effects of any tariffs imposed. However it could be a very long time before any increase in output there will offset the losses suffered by the City (and the exchequer). In other words, a world of pain awaits, at least for the medium term.
Astute readers will have noted I sometimes use the phrase 27 members, and sometimes 28. One intriguing possibility emerges: The UK will still be an EU member if the Brexit agreement is negotiated within the 2 year period provided by A50. Consequently, any Brexit agreement will also have to be ratified by the UK, as well as the other 27 members. Normally the UK ratifies trade agreements by Parliamentary vote, but what is to prevent the UK holding a second referendum to ratify the outcome of the negotiations? Indeed, the very gravity of the decision would seem to imply that recent precedent in the UK would require such a referendum.
But this then raises another conundrum: What if the UK electorate were to reject the Brexit agreement in a referendum? A50 makes no provision for it's invocation to be rescinded, so would the UK simply be thrown out of the EU without an exit agreement two years after A50 was invoked? Again the legal opinion confirms this possibility:
EU Law Analysis: Article 50 TEU: The uses and abuses of the process of withdrawing from the EU
One important point is not explicitly addressed: would it be possible to withdraw a notification to leave the EU? In the absence of explicit wording, the point is arguable either way. It could be argued that since a notification to withdraw is subject to a Member State's constitutional requirements, the Treaty therefore leaves to each Member State the possibility of rescinding that notification in accordance with those requirements. On the other hand, it could also be argued that Article 50 only provides for two possibilities to delay the withdrawal of a Member State from the EU once notification has been given (an extension of the time limit, or a different date in the withdrawal agreement). There's no suggestion that this is a non-exhaustive list. Therefore the notification of withdrawal can't be rescinded.
Perhaps it can't be rescinded purely at the discretion of the putatively departing member, but is there anything to prevent the European Council agreeing to an A50 invocation being rescinded? And would the European Council not wish to respect the considered opinion of the UK electorate, if it voted to reject the Brexit agreement?
I think we could have the beginnings of a workable game-plan here:
- May appoints all the key Brexit proponents to Ministries where they will have to negotiate and stand over a Brexit agreement.
- Under increasing pressure from Brexiteers, May finally triggers A50 in 2017. In the meantime the economy has gone into recession.
- The Brexit agreement negotiated falls horribly short of delivering on the Brexiteer's promises: No access to the Single market (without free movement of EU nationals), no passporting rights for financial services, tariffs on key export, no reductions in EU budget contributions, no mutual recognition agreement for regulatory bodies without full compliance with the EU legal acquis communautaire...
- The EU Council delivers a draft of what it states is its final offer prior to the 2 year period elapsing - to outrage in the UK. "We are being held to ransom".
- May announces a new referendum on the terms of the Brexit deal. Brexiteers are gung-ho. "We will teach those Europeans we will not be pushed around"
- The Brexit deal is rejected in the referendum. The UK faces the prospect of being "out in the cold" in 2019 without any Brexit deal whatsoever. There is confusion as to whether a no vote means that the UK should Remain, or that a more acceptable Brexit deal should be negotiated. The EU rules out the latter.
- Behind the scenes a new EU/UK deal is negotiated providing for the agreed withdrawal of the A50 invocation and a "new relationship" between the UK and the EU. It doesn't change much of substance, but perhaps heralds a new era of a more cooperative and positive relationship between the the EU and UK.
- The Tory party is hopelessly divided and loses the subsequent general election...