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September 10, 2020

Europe

UK/EU: Ultimatum from Brussels – deal or no-deal by end-September

BY Carsten Nickel

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At an emergency meeting of the Brexit joint committee, the EU has handed an ultimatum to the UK. Either the government amends its UK internal market bill which is deemed – by both sides – to be in breach of the international law created by the withdrawal agreement; or Brussels will reconsider the currently still ongoing future relationship talks.

The internal market bill was eventually published yesterday. The substance on state aid and customs had been the subject of speculation beforehand. By claiming the last word on these issues for the UK government, both passages indeed turned out to be problematic regarding the status of Northern Ireland. But while this substance might still have been manageable, two previously not discussed aspects have drastically worsened the outlook.

The first factor is legal. Another clause of the bill does not only claim wide-ranging powers for the UK government to disregard obligations agreed in the withdrawal treaty regarding the application of EU law in Northern Ireland. It also specifically overrides any review by the Court of Justice of the EU, and, in fact, by any international or even domestic court.

The second factor is political. Tensions with the EU resulting from the distribution of state aid competences in the UK might perhaps still have been ironed out if both sides had finally made progress on a state aid regime in their future relationship talks. However, the UK government announced yesterday that it would not publish any guidelines regarding its own post-Brexit state aid policy before next year.

Today, the EU reacted with an outspoken rejection of the UK attempts to legislate domestically against an agreement struck on the international stage. The effective ultimatum until end-September is such a signal, although it should be noted that this shortens the window for talks by merely two weeks, before the mid-October European Council (which coincides with the 15 October deadline previously set by the UK government).

Looking ahead, signposts for potential political pushback should be searched for in the Commons, not the Lords. The key factor to focus on is the issue of judicial review. One question is whether precluding it in such a wide-ranging way will be deemed legally watertight under domestic UK law. This connects with the repercussions for the UK’s standing in the world, affecting trade agreements with partners such as the US as well as the UK’s ability to effectively criticize China and Russia. The ultimate question is whether these issues will raise enough eyebrows to increase the appetite for toning the bill down via amendments.

The broader lesson from the latest standoff is that, as discussed since late last year, the withdrawal agreement has only kicked a can full of the most difficult Brexit questions down the road into the future relationship talks, including the issues of Northern Ireland, sovereignty, and – very important in the context of UK political change – the future role of the (British) state in the economy.

While the EU ultimatum marginally narrows the time window still available, the biggest risk to a deal remains that the agreement under preparation is so unambitious that its upside over no-deal may not be politically obvious. On the flipside, the future relationship will keep both sides busy for the better part of this decade – with or without the basic deal that is currently still possible.