How to “Roll Over” EU and Third Country FTAs During the Brexit Transition

Now that “sufficient progress” has been made in the negotiations between the UK and EU27 on the withdrawal agreement, discussions are likely soon to begin on the terms of the transitional period that, it is now agreed, will be needed between the date on which the UK leaves the EU and the date on which any new UK/EU long term trade arrangements come into force.

It is also widely acknowledged that during the transitional period the UK is likely to have to accept, more or less in full, the entire EU acquis (that is to say, the entire package of EU law rights and obligations that go with membership): there simply will not be time to negotiate an “EU minus” arrangement, and no-one wants businesses to have to navigate two sets of changes (status quo/transition then transition/final) rather than just one.

One difficulty that has been identified is, however, what happens to FTAs between the EU and third countries.  The UK would like to continue receiving the benefits of those FTAs (allowing UK exporters to those third countries to continue to benefit from the tariffs and provisions relating to non-tariff barriers negotiated under those treaties).  But if the UK is no longer in the EU, isn’t there, necessarily, a cliff-edge?  That would seem, legally, to be the consequence of cessation of EU membership: if the United Kingdom is no longer in the EU, then a trade treaty between a third country and the EU no longer applies to the UK.  But from a policy/practical point of view, it is an odd consequence: the UK will remain, under the withdrawal agreement, part of the EU “system” (subject to EU law, including, let us assume, all aspects of EU law – in particular customs and regulation – related to securing compliance by Member States with the terms of EU/third country treaties).  From a third country perspective, nothing real has changed: the United Kingdom is no longer a Member State, but it still has to behave as a member state in all regulation and customs matters.

Is there a way of squaring this circle?  I think there might be: and the inspiration for it comes from considering the position of Guernsey in the United Kingdom.  Guernsey is not, as a matter of its own law or the law of any part of the United Kingdom, part of the United Kingdom.  It is constitutionally separate: a Crown dependency and, with the other Channel Islands, the last remnant of the Duchy of Normandy rather than part of the realm of England.  However, as a matter of international law (i.e. relations between the United Kingdom and third countries), Guernsey is part of the United Kingdom, and the UK Parliament has a reserve power to legislate for it (and will do so where necessary to ensure that the United Kingdom complies, in Guernsey, with its international law obligations).  So Guernsey shows that the international law status of a territory can be different from the status it has under its own law and the domestic law of the other parts of the state of which, under international law, it is part.

Under the “Guernsey model”, the Withdrawal Agreement would provide that the United Kingdom would cease to be a Member State as of (say) 29 March 2019.  However, there would be a further provision (the “reservation provision”) that would state that, for all purposes connected with the EU’s rights and obligations in international law as against third countries, the EU Treaties would be regarded as continuing to apply in the United Kingdom until the end of the transitional period.

Would that work?  I see no reason why it would not.  Take the provisions of Article 1.3 of CETA (the EU/Canada FTA) that explain the territories to which CETA applies: –

(b) for the European Union, to the territories in which the Treaty on European Union and the Treaty on the Functioning of the European Union are applied and under the conditions laid down in those Treaties. As regards the provisions concerning the tariff treatment of goods, this Agreement shall also apply to the areas of the European Union customs territory not covered by the first sentence of this subparagraph.

If, as a matter of EU law (which would include the withdrawal agreement negotiated under Article 50 TEU), the United Kingdom remains, for the purposes (only) of relations with third countries “[a] territory[ies] in which the Treaty on European Union and the Treaty on the Functioning of the European Union are applied” it would not matter that (for other purposes under EU and UK law) it was no longer a Member State.  Nor would it matter that the EU (and UK) law mechanism under which the EU Treaties were applied to the United Kingdom was the reservation provision under the withdrawal agreement (and not the normal application of the Treaties to a Member State).    Finally, from a Canadian perspective, nothing would change: the rights of Canadians and Canadian businesses under CETA in the United Kingdom remain fully respected and (under the withdrawal agreement) protected by the powers of the EU institutions under that agreement to secure UK compliance with the EU’s obligations under CETA.

Further, as a matter of EU law, it is likely that the transitional arrangement will be based on the view that there is a wide power in Article 50 TEU to “phase out” the application of the EU Treaties to the United Kingdom, as argued by Kenneth Armstrong et al, in Implementing Transition: How Would it Work?.  On the assumption that this view is correct (and, as the paper explains, it is hard to see any other satisfactory basis for the type of transitional arrangement now being contemplated) it is hard to see why that power to “phase out” would not include a power, for a period, to keep “phased in” the application of the Treaties to the United Kingdom for all purposes connected with the EU’s treaties with third countries.

I see no reason why the withdrawal agreement (and the reservation provision) should not also make it clear, as a proviso, that nothing in the agreement prevented the United Kingdom from negotiating trade arrangements with third countries as long as such arrangements did not come into force any earlier than the end of the transitional period.

There are doubtless all sorts of complications: and I have not attempted to draft any provision of the kind I am contemplating.  It also raises presentational issues: the UK Government would doubtless need to be satisfied that the reservation provision would not provoke an unacceptable amount of concern that the United Kingdom was not, in fact, “leaving the EU” on Brexit day.  But it is a suggestion that could resolve what seems like an otherwise insoluble problem: it is therefore, perhaps, worth exploring.

George Peretz QC

@GeorgePeretzQC