The Election

On 29 March 2017, the U.K. invoked Article 50 of the Treaty of the European Union, setting in motion the two-year period to negotiate a settlement for their political separation.

The two sides began settlement negotiations in June. The talks are time-limited: under Article 50, the U.K. will leave the EU automatically in March 2019, absent either unanimous consent from the 27 remaining Member States or ratification of an exit treaty.

U.K. Prime Minister Theresa May sought to strengthen her hand in the Brexit negotiations by calling a snap election, which took place on 8 June 2017. Defying early expectations, the election resulted in Mrs May’s Conservative Party losing its slim majority in the House of Commons. The Democratic Unionist Party (DUP) of Northern Ireland agreed to provide the Conservatives with support for key legislation, providing the Conservatives a majority in Parliament. Mrs May remains Prime Minister.

The Government presented the Queen’s Speech, its legislative program for the coming two parliamentary years, on 21 June 2017. That program includes the “Great Repeal Bill”, the somewhat erroneously-named legislation which would convert all existing EU law into domestic U.K. law – thus allowing the U.K. to amend or discard EU rules as it sees fit after Brexit. The Conservative Party agreement with the DUP includes support for the Queen’s Speech. It was approved as the primary legislative agenda by a narrow Commons vote on 29 June 2017.

Negotiations Begin

The governing arrangements for the U.K. having reached a point of clarity, at least in the short term, allowed formal separation negotiations to begin on 19 June 2017. The lead negotiators are David Davis, a Member of Parliament and Minister at the Department for Exiting the European Union, and Michel Barnier of the European Commission.

At the first plenary session a terms of reference was drawn up which envisions further sessions every four weeks until the week of 9 October 2017. At present, the scope of negotiations under the terms of reference has been narrowly defined to establish initial working groups for the detailed negotiations regarding citizens’ rights and the U.K.’s financial settlement.

The principal focus of early negotiations has been on the status of EU citizens who have settled in Britain and Britons who have settled elsewhere within the EU under “freedom of movement” rules which allow EU citizens to live and work in other Member States. By those rules, all EU citizens are granted a right of permanent settlement after five years of residence in a host Member State.

The U.K. has published a policy paper proposing that those EU citizens already present in the U.K. for five years be treated equally with British citizens under local law, and for those citizens already settled in the U.K. by a certain cut-off date (likely 29 March 2017 or after) to be eligible to gain such rights after living in the U.K. for five years. The same would apply to British citizens settled elsewhere in the EU.

The EU position is for the reciprocal rights of EU and British citizens to have a wider scope, essentially on the basis of existing EU rules. Moreover, the EU wishes for the European Court of Justice to have continued jurisdiction over questions of immigration rights regarding U.K. and other EU citizens covered by this aspect of an eventual Brexit deal. It is highly unlikely that the U.K. will agree to such continued jurisdiction.

The “Divorce Bill”

The financial settlement, which has become colloquially known as the “divorce bill” that the U.K. may have to pay, is also contentious. On 4 March 2017, the European Union Committee of the U.K.’s House of Lords (the senior legislative chamber), published a report which questioned the enforceability of such a divorce bill in international law with reference to the Vienna Convention on the Law of Treaties.

Nevertheless, the EU’s initial position paper declares that there should be a financial settlement “based on the principle that the United Kingdom must honour its share of the financing of all the obligations undertaken while it was a member of the Union.” Regardless of the legal considerations, the political calculus of Brexit negotiations will doubtless hinge on further developments over what price the U.K. is willing to pay in this divorce bill debate. However, the U.K. has yet to publish an official position paper on a financial settlement.

Trade after Brexit

If no withdrawal treaty or agreement to extend negotiations can be confirmed before March 2019, the U.K.’s immediate relationship with its trading partners, including the EU, would revert to WTO rules until alternative trade treaty relationships can be established. However, one may note that this scenario also has its challenges. For example, although the U.K. is a WTO member in its own right, changes to its tariff schedule from the EU schedule of which it is currently part, could involve separate negotiations with the WTO.

For more information on the U.K. Government’s aspirations for Brexit, see its white paper, last updated on 15 May 2017.

For movement on potential U.K. trade policy more widely, please see Crowell & Moring’s recent alert, Update: Legal Considerations for U.K. and EU Investment and Trade Treaties after Brexit. Section 9 of the U.K. Government’s white paper on Brexit also notes the government’s hopes in this regard, stating, “Many countries including China, Brazil, and the Gulf States have already expressed their interest in enhancing their trading relationships with us. We have started discussions on future trade ties with countries like Australia, New Zealand and India. The new United States Administration, the world’s biggest economy, has said that they are interested in an early trade agreement with the U.K.”

However, given the U.K. cannot agree to trade treaties with non-EU countries until after its departure from the bloc, any further trade negotiations with third-party states are likely to remain preliminary for some time. Official negotiating documents and position papers of the parties are being made available on government websites as they are published. Please see the following two links: United Kingdom and European Union.

For more information, contact: Michelle Linderman, Gordon McAllister, Ed Norman, John Laird