By David Meyer
December 8, 2017

The United Kingdom and European Union reached a breakthrough in their Brexit talks on Friday morning, after British Prime Minister Theresa May and European Commission President Jean-Claude Juncker met in the early hours of the day to avert disaster.

The result is that the Brexit talks can now move on to their next phase—and really, there’s no time to waste. Brexit is set to take place on March 29, 2019, and businesses are desperate to know what the future relationship between the U.K. and EU will look like. For some companies that are based in the U.K., this is very much a ‘Should I stay or should I go?’ dilemma.

Several factors were blocking the negotiations’ progression, and what’s happened now is that those issues have been solved—just enough to stop everything grinding to a halt.

Here’s what’s going on—and what remains to be done:

The Ireland Border

The most astoundingly under-discussed aspect of Brexit, ahead of last year’s referendum, was what would happen to the border between Northern Ireland—which is part of the U.K.—and the Republic of Ireland, which is—and will remain—part of the EU.

The border between north and south is pretty much nominal, as in, it runs through farms. That’s been the case ever since the Good Friday Agreement that became effective in 1999, ending the so-called Troubles that pitted largely Protestant unionists (who want Northern Ireland to stay in the U.K.) against largely Catholic nationalists (who want to see a united Ireland).

However, the porous nature of the border could be a big problem when the U.K. leaves the EU, because anyone who is in the EU can freely travel to Ireland and stroll across it into the U.K. This is an issue both for the movement of people and for customs enforcement—particularly if the Brexit agreement sees the U.K. leaving the EU single market and customs union.

If the U.K. does make such a clean break, it will become subject to World Trade Organization rules, which demand that it maintains a customs border. And with the Troubles still being well within memory, there are genuine fears of a return to violence if people have to constantly go through border checks in their day-to-day lives.

Theresa May’s Delicate Deal with the DUP

There’s an added complicating factor here: Theresa May’s minority Conservative government is being propped up by the Democratic Unionist Party (DUP), which wants the U.K. (including Northern Ireland) to leave the customs union, but also wants to avoid a hard border.

And so we come to the “solution” agreed on Friday—and remember, this is all provisional until the final deal is reached at some point in the future; right now it’s just about unblocking the way to the next stage of talks.

Northern Ireland’s ‘Unfettered Access’

Under the agreement, the U.K. has committed itself to avoiding a hard border. This will ideally be the result of the overall U.K.-EU relationship that exists after Brexit, but if not, the U.K. will suggest a specific deal regarding that particular stretch of border.

If that proposal doesn’t fly, the whole of the U.K. will basically have to stay within the EU internal market and customs union—and there will be no new regulatory barriers separating Northern Ireland from the rest of the U.K.—unless Northern Ireland wants them. And whatever happens, Northern Irish businesses will retain “unfettered access” to the U.K. market.

On top of all that, everyone who was born in Northern Ireland will retain their right to EU citizenship (though this is less of a novelty, as Northern Irish people can already claim Irish citizenship anytime they like).

On the border issue, the U.K. and EU have essentially agreed to kick the can down the road, in order to stop talks from breaking down entirely. But what’s new—and huge—is that if there’s no resolution to this question, the default position will be the U.K. staying within the single market.

Not Sitting Well With ‘Hard’ Brexiteers

Do “hard Brexit” fans like that? Not in the slightest.

Some Brexiteers within both the Conservatives and the DUP will be furious, but they will have to accept it unless they want to bring down the British government—which remains a possibility.

 

The Divorce Bill

The cost of the U.K.’s departure from the EU was was agreed to last week.

As a member of the EU, the U.K. has debts and assets within the bloc—it puts money into the collective pot and benefits from the EU budget, too. Other member states have always been clear that the U.K. will have to honor its commitments during the current 2014-2020 budgetary cycle. In the U.K., this has been regularly portrayed by Brexiteers as a punitive demand.

In the end, again to Brexiteers’ dismay, the U.K. gave in. The financial settlement is estimated at €60 billion ($81 billion).

EU Citizens’ Rights

Around 3.7 million people currently living in the U.K. are citizens of another country in the EU. Around 1.2 million U.K. citizens live elsewhere in the bloc. All of these people currently enjoy broad rights in the countries where they live, so what happens to them after Brexit has naturally been a major sticking point.

Under the new agreement brokered Friday, EU and U.K. citizens will get to retain their rights “derived from Union law and based on past life choices, where those citizens have exercised free movement rights by the specified date.”

That means they will get to keep their social security and health care, their employment and education rights, and their “tax advantages.” However, there’s a big downside too—they will be bound to the country where they’re living. For Brits that already live in EU countries that aren’t the U.K., that means they would lose the automatic right to then move and live anywhere they like within the bloc.

EU Court of Justice Jurisdiction

The agreement says that if any U.K. legal cases have been referred to the Court of Justice of the European Union (CJEU) before the Brexit date, the court will still get to issue binding judgements on those cases after the U.K. has left the EU.

It also says that, because EU citizens living in the U.K. will get to retain their EU rights after Brexit, the British courts will still have to defer to CJEU judgements that affect those rights.

This will again annoy hardcore Brexiteers—and quite possibly the prime minister herself—who long to be free of the CJEU’s jurisdiction.

What’s Next?

The next formality is for the leaders of EU countries to sign off on the agreement at a summit next week. Then everyone moves on to the next phase of negotiations, where the U.K. and EU try to figure out what their future relationship will look like in detail.

Of course, the U.K. will first have to figure out what it wants out of that relationship. As European Council President Donald Tusk said on Friday, that remains very much unclear, thanks to internal division in the British government.

For now, though, a lot of people are very relieved, particularly in the financial sector. “Christmas has come early for financial firms with the news that Brexit negotiations can now move to Phase 2,” said City of London Corporation Policy Chair Catherine McGuinness. “Government has made a bold but necessary step forward. But the hard work starts now.”

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