Brexit: three potential permutations

Published on
7 min read

Deal or no deal, how will the UK establish a new legal framework after Brexit?

Introduction

With the informal summit in Salzburg ending on 20 September 2018 without any significant progress, the pressure is on to find a solution to the outstanding issues on the draft withdrawal agreement, of which the Irish border issue is the most prominent. 

No one can predict how these negotiations will end, but with just six months to go until the article 50 notice is due to expire, it is not too soon to assess how the new UK’s overall legal framework might change in the three most obvious scenarios. 

Scenario 1: a no deal Brexit

Defining “no deal” 
Currently the EU and the UK are negotiating a complex withdrawal agreement which addresses three key issues: the divorce bill, the treatment of EU citizens and what will happen to the border in Northern Ireland. It also provides for a host of subsidiary issues with the aim of making the departure as smooth as possible. A no-deal Brexit at its simplest level envisages that these negotiations break down, and the UK “crashes out” of the EU on 29 March 2019. 

As the Institute for Government infographic illustrates, there are in fact many possible routes to a no-deal Brexit. In particular, even if a divorce deal is done at a political level, it could fail to surmount the ratification hurdle, either in the UK or in the EU Parliament. 

Patching up the statute book 
A no deal outcome would be highly disruptive for both the UK and the EU, but there will be no legal vacuum. The EU (Withdrawal) Act will operate to preserve all EU-derived domestic law and incorporate all directly effective EU law at the point of Brexit, which would otherwise fall away at the point the UK ceases to be a member state. 

There will need to be some adjustments (to be made by statutory instruments under powers in the Act) to reflect the fact that the UK will no longer be a member state. Some cross-border provisions will also fall away because there is unlikely to be sufficient time to negotiate suitable bi-lateral arrangements prior to Brexit, though this may follow in due course. 

The UK will therefore emerge from a no-deal Brexit with almost exactly the same statute book as it had on its last day in the EU. It is only after that point that the UK’s “rule book” will begin to diverge from the rest of the EU. For more information about exactly how this new framework will work see our briefing here

Plugging the remaining gaps 
That is not to say that there will not be some gaps. For example the UK will need to have workable legislation on immigration, customs and VAT to reflect its new status as a non-member state. That is where the Taxation (Cross-border Trade) Act 2018 and other Brexit bills currently going through Parliament come into play. 

There are, however, limits to what the Government can achieve through purely domestic legislation where cross-border collaboration is required. To prevent disruption on Brexit day a series of bi-lateral agreements will be required, either with the EU or with international bodies and individual countries to replicate the agreements the UK currently benefits from as an EU member. The Government is hoping that in the event of a no deal Brexit the EU will take what steps it can to limit disruption, but this is not guaranteed. In recent weeks the Government has set out in a series of guidance notes what steps it is taking to address this issue and what businesses and individuals can do to prepare. 

Scenario 2: withdrawal agreement only

A transitional period 
One key term of the withdrawal agreement currently being negotiated is a transitional or implementation period, which, as things stand, is due to last until the end of 2020. It will also include a political declaration, but not a binding agreement, about the future UK/EU relationship. Scenario 2 envisages that it is not possible to translate this declaration into a binding agreement. This could be because the detailed negotiations break down, we run out of time to conclude them before the end of the transitional period, or the final agreement is concluded but falls at the ratification hurdle. Were any of these eventualities to occur, the UK would leave the single market at the end of the transitional period without any new trade agreement with the EU. 

Giving effect to the withdrawal agreement 
If a withdrawal agreement is concluded, it will need to be implemented by an additional piece of Brexit legislation, to be called the EU Withdrawal Agreement Act, which will incorporate key provisions of the agreement (for example, new settled status for EU migrants) into domestic law. 

The Withdrawal Agreement Act would also defer the implementation of the EU Withdrawal Act so that the incorporation of EU law into UK law will not happen on Brexit day, but at the end of the transitional period. That means that the European Communities Act 1972, which is the “pipe” through which EU law flows into UK law, will not be effectively repealed, or shut off, until the end of the transitional period. Similarly most other Brexit legislation – such as the Customs Act – would not need to be fully implemented until that point. 

The Withdrawal Agreement Act will also need to provide the legal framework for policing and enforcing the withdrawal agreement. The precise details have still not been worked out, but are likely to involve some continuing role for the European Court of Justice for a considerable period after the UK leaves the EU (for example for the lifetime of all EU citizens who, under current proposals, will be granted settled status if they are resident in the UK at the end of the transitional period). 

Smoothing the rough edges 
In the absence of a comprehensive trade deal which locks into place at the end of the transitional period, we will face similar issues to scenario 1 at the end of the transitional period. However, we will have had more time to prepare, and there will be some provisions in the withdrawal agreement itself which can smooth some rough edges: for example express provisions for how to deal with goods in transit at the point the transitional period ends. 

There will also be more to time negotiate new bilateral agreements to reflect the fact that the UK is no longer an EU member state – for example rolling over free trade agreements which the EU currently has with other states, to allow the UK to continue to benefit from similar terms when it leaves the EU. 

Scenario 3: an orderly Brexit

What new relationship? 
In an ideal world, we would move smoothly from our current status as an EU member to a new relationship with the EU, with an agreed transitional period to bridge the gap. However, the process is likely to take considerably longer that the 19 months currently allocated to the transitional period, assuming the UK holds out for a bespoke agreement, rather than falling back on the “Norway solution” and staying within the single market as a non-EU member (a possibility that both the Conservatives and Labour have firmly ruled out). 

More problematic still, there appears to be no consensus (even within the Conservative Party) about what this relationship should look like. For now the Chequers white paper is the nearest we have come to an agreed UK position. However, the EU27 made it clear at the Salzburg summit that in their view this plan “will not work”. 

Most people agree that the 19 months of the transitional period (which is all that is currently on offer) is still a very short period to reach agreement on and then prepare for such a major change. It is possible that a final withdrawal agreement could include a mechanism for the end of the transitional period (currently 31 December 2020) to be extended, though this will be politically difficult on both sides. 

Impact on domestic law 
There is widespread agreement that the closer the trade ties that the UK retains with the EU, the greater degree of alignment with its rule book. For example the Chequers white paper proposes a mutual commitment to “no-regression” of labour law standards. Were this commitment to be incorporated into a future trade deal, one solution for giving it legal effect would be to use a similar (if more limited) mechanism to that adopted by the European Communities Act 1972, which currently provides for the continuous flow of EU legislation and case law into UK domestic law. 

It is clear from the UK’s previous history with the EU, and the approach taken in the EU Withdrawal Act, that our domestic legal system is malleable. Parliament and the courts will be able to establish a new domestic framework to reflect whatever new relationship is agreed, whether this is simply an arms-length free trade agreement, full membership of the customs union, or somewhere in between. 

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