What Comes after ‘No Deal’?

Tobias Lock | 22 February 2019

© 2018 European Union

Recent weeks have seen a flurry of no deal scenarios played out in the media, by governments and by Brexit watchers. These have almost exclusively focused on the immediate economic impact of a no deal Brexit with concerns of food and medicine shortages making the headlines. One question that has remained somewhat unexplored is: what deal comes after ‘no deal’?

This blog post sketches some of the legal ramifications that a no deal scenario would have for any future deal between the EU and the UK. It all comes down to the procedures for approving such a deal under EU law and under UK law. Both would be different from the procedures prescribed for the Withdrawal Agreement with the situation under EU law becoming markedly more complex whereas under UK law things might become a good deal easier.

Taking stock

First a quick reminder of where we are right now: EU and UK negotiators agreed a draft Withdrawal Agreement last November. This was subsequently endorsed by the leaders of the EU-27 and by HM Government. The Withdrawal Agreement is chiefly concerned with winding up the UK’s membership of the EU. It will be followed by an agreement on the future relationship which is sketched out – albeit very roughly – in the political declaration accompanying the Withdrawal Agreement.

The Withdrawal Agreement contains rules on the rights of EU and UK citizens who have made use of the right to free movement; on the financial settlement (the ‘Brexit bill’); and various technicalities about ongoing procedures, goods on the market, etc. It also provides for a transition period lasting until the end of 2020 – and renewable up until the end of 2022 – which would keep alive the status quo of the UK’s membership in all but name. And crucially, it provides for the so-called backstop on the border between Ireland and Northern Ireland: unless the future relationship ensures that there will not need to be any border infrastructure on the Irish border, the backstop requires the UK to remain in a customs union with the EU, and additionally, Northern Ireland to remain in the single market for goods.

The EU has the competence to conclude the Withdrawal Agreement on the basis of Article 50 TEU. Ratification requires approval by the European Parliament and a qualified majority in the Council. According to the European Union (Withdrawal) Act 2018, the UK can only ratify the Withdrawal Agreement if three conditions are met: the Withdrawal Agreement must be approved by the House of Commons; it must be laid before the House of Lords; and an Act of Parliament implementing the Withdrawal Agreement must be passed by both houses.

As is well known, the Withdrawal Agreement is currently stuck at the first stage and unless the House of Commons changes its mind or the UK Government calls off Brexit completely by withdrawing the Article 50 notification, the UK will leave the EU without a deal. This can happen either on 29 March 2019 or at a later stage if the negotiating period is extended.

A new deal after no deal

So what would happen then? In theory, one can conceive of two scenarios: either the EU and the UK will live with ‘no deal’ between them for the long term. Or they will come together and forge a new deal. The former scenario is highly unlikely. In case of no deal both sides would likely suffer an enormous economic and political shock and would probably quickly return to the negotiating table to mitigate the damage and to avoid being blamed for any further negative consequences.

What might a new deal look like? There is a fair chance that it would look very much like the Withdrawal Agreement. The need to wind up the UK’s membership will largely continue: citizens’ rights and the financial settlement will almost certainly feature as they are key interests to the EU and not perceived to be overly problematic by the UK. The fate of the two other main features of the Withdrawal Agreement is more interesting. Would there be a transition period? And might a no-deal-first strategy lead the EU to abandon or soften its stance on the backstop? As for transition, much would depend on the circumstances. Transition is meant to ensure a smooth exit from the EU by allowing the UK to remain part of the single market and all EU policies for a limited amount of time. Depending on how long the time-lag between ‘no deal’ and the new deal would be, a transition period, perhaps in a modified form, may or may not make sense. The longer the UK will have spent outside the customs union and single market and the more it will have deviated from EU rules, the more difficult its reintegration would become.

The Irish border is different in that the EU’s concern with the preservation of the Good Friday Agreement will not have gone away; in fact, in a no deal scenario Ireland and the UK would sooner or later be forced to conduct checks on goods crossing the border, so that there would be at least as much urgency to resolve this issue as there is now.

EU ratification procedure after no deal

So how likely is it, that the Irish Protocol would make it into a ‘new deal’; and how likely is it that the UK-side would ratify such an agreement? This is where the procedural aspects become relevant. Once the UK is no longer an EU Member State, the EU is no longer in a position to agree a withdrawal agreement on the basis of Article 50 TEU. This follows from the wording of that provision, which says that the agreement shall be concluded with a Member State that decides to withdraw from the EU. After a no-deal Brexit the UK is evidently no longer a Member State.

This does not mean that the EU cannot conclude a new deal based on or even identical to the Withdrawal Agreement. It simply means that the EU-side must piece together various competence bases for the EU to be able to do so. For instance, the EU’s common commercial policy would allow it to conclude the ‘trade’ parts of the agreement. But if certain services – such as health services or education services – are included, the agreement can no longer be ratified with a qualified majority, but only by unanimity. This means that each Member State would be able to veto it.

Moreover, the EU is unlikely to possess the competence on all the matters currently contained in the Withdrawal Agreement. The transition period, for instance, entails the UK’s participation in the EU Common Foreign and Security Policy, including its defence aspects. Foreign and defence policy remains however largely exclusive competences of the Member States.

But even if a transition period were not included, the EU might not have sufficient competence to conclude the essential citizens’ rights part of the agreement on its own: after Brexit UK nationals will be third country nationals. While the EU has a competence to legislate in the field of a common immigration policy, it has not done so exhaustively, so that the Member States retain some competences in this area.

This all means that if modelled on the Withdrawal Agreement, the ‘new deal’ would need to be concluded and ratified not only by the EU, but also by all 27 EU Member States. Such ‘mixed agreements’ are quite common in EU law. But they bring with them additional procedural difficulties as each Member State must ratify the agreement according to its own constitutional requirements. Two recent examples show how tricky this may prove. In a referendum in 2016 Dutch voters rejected ratification of an association agreement between the EU and Ukraine; and later that same year the Walloon Parliament – that is a regional parliament of Belgium – rejected ratification of the EU-Canada trade deal. While in both cases, these hurdles have been overcome, the full entry into force of both agreements was delayed. In the context of a no deal Brexit, any further delay might be more than inconvenient.

Hence in the event of a new deal after a no deal, Ireland could veto any agreement that did not include the same guarantees on the Irish border as those provided for in the Withdrawal Agreement. It also means that other Member States could bring new demands to the negotiating table: fishing rights for French fishermen or co-sovereignty for Spain over Gibraltar are obvious candidates. This does not mean that such demands will definitely be made, however. The EU-side will be suffering under a no deal scenario as well and might well be motivated to resolve things as quickly as possible.

UK procedure after no deal

Finally, one needs to consider the process of ratification of a new deal by the UK. The procedure is normally covered by the Constitutional Reform and Governance Act 2010. According to this Act, the UK Government may ratify treaties concluded by it after the expiry of a period of 21 sitting days after a copy of the treaty has been laid before Parliament. The House of Commons is in a position to pass a motion that the Treaty should not be ratified; but this would not be the end of the treaty as the Government can simply lay it before Parliament for another 21 days, and so on.

As far as the Withdrawal Agreement is concerned the European Union (Withdrawal) Act 2018 stipulates the additional, stricter requirements mentioned above. These relate to the ‘withdrawal agreement’ which the Act defines as ‘an agreement (whether or not ratified) between the United Kingdom and the EU under Article 50(2) of the Treaty on European Union which sets out the arrangements for the United Kingdom’s withdrawal from the EU’ (emphasis added).

Crucially, the new deal would no longer be concluded ‘under Article 50 (2) of the TEU, but under different legal bases. Hence it would not constitute a ‘withdrawal agreement’ for the purposes of the Act, so that the additional requirements laid down in the Act – approval by the House of Commons and passage of implementing legislation – would not need to be met.

Hence the much laxer ratification requirements contained in the Constitutional Reform and Governance Act 2010 would apply to a new deal. And this might mean that the Tory and DUP opposition to the backstop – and potentially to other parts of the Withdrawal Agreement – might simply become irrelevant as it is one thing for an opposition party such as Labour or the SNP to be voting with the government and supplying it with a majority that it would not otherwise have, but quite another to simply sit still and not oppose a treaty laid before Parliament.

Conclusion

Should the UK leave the EU with no deal on 29 March this will not be the end of the Brexit story. It is very likely that both sides will return to the negotiating table sooner or later. How long this will take, will depend on a number of factors. According to the Financial Times, the EU is planning to do so immediately with the aim of concluding an interim agreement by 18 April. Yet the political fallout in the UK and its resulting ability to negotiate, let alone ratify any deal, is difficult to predict. It may well result in a general election, a new government and a new prime minister. This would take time and depending on any new government’s Brexit policy, such a deal might materialise quickly or not.

This blog post aimed to show that the procedure for ratifying any new deal after a no deal Brexit will differ on both sides of the Channel. The EU-side will – at least in procedural terms – become a more difficult negotiating partner whereas the UK government might have more leeway than it currently has. Whether this might lead to a resolution would of course also depend on many other factors, in particular how hard the no deal shock would hit either side in reality. What seems clear, however, is that even in a no deal scenario the UK would find it difficult to escape the EU’s basic demands on citizens’ rights; the financial settlement; and, most importantly, the Irish border.

Tobias LockTobias Lock | Twitter

National University of Ireland Maynooth

Prof Tobias Lock is Professor of Law at the National University of Ireland Maynooth. His research focuses on the EU’s multilevel relations with other legal orders, including the European Convention on Human Rights. He is Advisory Board member of the Scottish Centre on European Relations.