Brexit - Agreements, negotiations and other EU Member states

David Lowe: So Bernadine we're on the cusp of the Article 50 Notice being issued next week. You lead our European and Anti Trust Team and you've lived in Brussels, I imagine you're very excited about Brexit?

Bernardine Adkins: Quite. What's going to happen next, is the letter will probably be quite short, two pages and what will happen is governed by Article 50 of the EU Treaty. So very much Europe is a creature of law, it has to follow this particular procedure. So the Council of Ministers, which is the political arm, representing the 27 Member States, will give a mandate, a negotiating mandate to the European Commission, which is the Civil Service. So the Council is going to have to meet up that will take five to six weeks for them to determine and work out between themselves what that mandate should comprise and then we will be off. So perhaps possibly from early June starting the hard negotiation. Everybody seems to have seen that it is this longstop date of Article 50, in fact that can be extended if all Member States including the United Kingdom agree to an extension but otherwise the Commission and the Council are looking at a very tight timetable. They want this to be done and dusted and over by October 2018 in order to give it six months to get to the European Parliament. So we are talking 18 months maximum in terms of negotiating space at the moment.

David Lowe: Is that just to negotiate one agreement, a withdrawal arrangement or…what, what do you think…?

Bernardine Adkins: Yeah there are obviously different views as to how many agreements should be concluded from an EU perspective it is going to be quite tight, quite limited to the Article 50 exit agreement, which is basically thank you, close the door after you. The Article 50 does envisage that within that exit agreement there will be an arrangement as to the framework of the future arrangement. That could be very loose it could be a page, it could be a picture, it doesn't have to be very much at all. Also transitional arrangement as to how the different economies migrate towards the new regime of the UK being outside of it. The UK is now looking also at the possibility of a free trade agreement, but that won't necessarily happen because there are so many demands we are putting on the table around immigration for example and the fact that we don't want to be bound by the European Court of Justice. Query whether a free trade agreement is possible and then the UK Government is also saying that they would like a specific customs arrangement. So those two last agreements are still very much up in the air as to whether they are achievable and achievable in any reasonable timeframe.

David Lowe: So if we get to the two year mark and we don't agree to extend it, we've failed to enter into any of these agreements what happens then?

Bernardine Adkins: Well Article 50 says the treaty ceased to apply to the United Kingdom. So we essentially crash out of the EU. At the moment everyone is talking about this bill, the big bill around Britain will be on the hook for about £60 million. How does that arise? That arises because we set the budget, the EU agrees the budget in six year periods but at the moment we got a set budget for 2014-2020, so obviously they are saying well the UK's on the hook for those budgetary payments for that time. However if we crash out of the EU Article 50 says the treaties no longer apply, so therefore querying whether we are actually on the hook to make those payments.

David Lowe: But I image we wouldn't be very popular for future relations if we don't contribute?

Bernardine Adkins: Correct. Actually that's a very unpalatable position for the United Kingdom to be maintaining. So clearly there is going to be a negotiation as to what are we willing to pay to keep everybody sweet and what do we get in return, but clearly there are limits to what we can get in return because it is a very strong consensus that Britain should not be in a better position outside of the EU than it is within the EU.

David Lowe: Of course the membership of the EU, the Common Market, the single market and all those kinds of those core things but there are lots of other arrangements out there, research and other flanking arrangements.

Bernardine Adkins: Correct.

David Lowe: Where do they all fit into this?

Bernardine Adkins: Well at the moment there's a certain lack of reality as other people are saying in the EU as to the current UK position, because yes you have the fundamental four freedoms, freedom of movement of people, of goods, of service and of capital. Around that are these things called horizontal or flanking measures, really to secure in the disparate local economies, national economies, of the members states, so you have the cohesion funds to bring on the poorer areas of Europe and the United Kingdom has benefited from it, Northern Ireland, other deprived areas, parts of Wales for example, has been a net beneficiary over the years. R&D projects, to have across EU collaboration and industrial projects and the pharma industry is going to be a net loser in that respect as well. At the moment the United Kingdom Government is saying yes we will no longer be on the hook for this and these massive budgetary payments, but we will pay, we quite like access to these flanking horizontal arrangements. Whereas the rest of Europe are saying no you are not a willing member of the European project, moving everybody towards a solid democracy, a single economy across the board, moving towards quite frankly the end game is a federal Europe. If you are not party to that project to the European Court of Justice, to the four freedoms, you cannot benefit from these, you cannot be in or out and cherry pick those particular projects.

David Lowe: Okay so hopefully some form of agreement is reached because there are lots of reasons why we hope for everyone we have reached some form of agreement, may not be the agreement our Government wants but hopefully we reach some kind of agreement. Does it require every member of the EU to agree to their side to it?

Bernardine Adkins: What is quite interesting about Article 50, it applies for - the agreement shall be decided upon the Council of Ministers on the basis of what we call qualified majority voting. So that means we don't quite know how it is going to be weighted out because the UK is no longer in the weighting any more. So loosely speaking it is probably about 20 of the Member States can vote in favour out of the 27 and get this through. So not everybody has to sign up to it. I think politically they are going to try and get complete consensus but it is not necessary.

David Lowe: Okay but if the agreement becomes more complex, which it could well do, if deals are done on the flanking arrangements perhaps while we…would that still be subject to qualified majority voting?

Bernardine Adkins: One of the fault lines in terms of the development of Europe at the moment is this distinction between what can the EU agree, which is within any Article 50 arrangement and exit agreement, that falls within the exclusive competence of the EU, the collectivity of these 27 Member States and areas that still fall within the competence of the national Member States. And that is quite frankly quite difficult to delineate and we have had a number of Court cases on that question. So from an EU perspective the simpler they can make the deal, the more they very much keep it within the tramlines of exclusive competence, the simpler it will be to get though. If it gets more complex and starts to have other areas that arguably bleed over into areas of national competence obviously you are going to need ratification from the national parliaments all of which is going to take a longer time and be a much more febrile situation.

David Lowe: Right so that will drive us towards a simple narrow arrangement just because that's more possible.

Bernardine Adkins: Correct, that's the legal position but we may find politically that all the various national parliaments are saying this is such an important issue, none the less irrespective of the Article 50 position we would like to be consulted and we want to be kept in the loop, we want to know what's happening here and we want to give our approval.

David Lowe: Okay so that sort of sets out the sort of legal political landscape in terms of how the Article 50 would work and negotiations and potential output. But just turning, you talked about how did the national parliaments think. What is the sense amongst the rest of Europe to Brexit? What is their reaction to this?

Bernardine Adkins: I think like in Britain it's a grieving process. But there's no denying that Brexit is a crisis for Europe but what is happening is I don't think people quite fully appreciate, this is not the only game in town. In terms of crisis facing the EU, you've got the immigration issue, you've got the uncertainty of what's happening in the US. All of these are big issues, you've got issues around defence as well and what it is leading to is very much, Europe is saying this is a crisis, we have to look to ourselves and ask well what went wrong here, how do we have to shape and reshape things in moving forward and as ever a lot of this is happening around the issue of budget and money because now there is going to be moving forward a 7%25 gap in the European budget. A lot of Member States are reluctant to pay more, those who are willing perhaps to pay more are going to say okay we need to have a reform, a wholesale reform around how we do things, how we are engaging with our own populous to have an engagement by the citizenship which currently there's clearly a sense that that's not happened and Europe is now … the EU is basically very much on a project to address these issues. The Commission has produced a White Paper looking at the various scenarios moving forward. We've had a declaration from the French, German, Italian, Spanish leaders saying we now want to have a multispeed Europe. The EU is moving towards what Britain always wanted ironically as we leave. So there's a big thought process going through, a number papers are going to be coming through at the same time as we are negotiating. So we are basically negotiating with, it's like the speeding wagon that's changing, sort of medusa like changing form and shape as the negotiations take place And don't forget also we've got the national elections at the same time so we may be differing, the suits may be differing with whom our counterparties are in the Council of Ministers.

David Lowe: Yes of course because we've had the Dutch election but we've got France and Germany and Italy I think as well.

Bernardine Adkins: Italy and the Czech Republic as well yes.

David Lowe: Right so we have a whole series of national elections going on the back drop to this.

Bernardine Adkins: …that's right and there is also a tension emerging between the richer, more established EU Member States and the Visegrad countries, Czechoslovakia, Hungary, Poland. They are feeling very uncomfortable about a multispeed Europe. They are saying we will become second class citizens in the EU because they're net beneficiaries from the EU budget and they are worried that they are going to be sort of pushed to one side while the richer Member States move forward, more towards federalism and integration.

David Lowe: So Bernardine one of the ambitions of the UK Government is to enter a free trade agreement with the EU. How do you see that shaping up?

Bernardine Adkins: That may be problematic. There is a very very firm desire, expressed desire on the part of the EU. I think led particularly by the French is that Britain should not be better off outside the EU than inside the EU. And so you come back to this notion of the fundamental four freedoms. So very much the thinking is if you don't sign up to every single one of those four freedoms, including in particular the free movement of persons, you cannot benefit from a free trade agreement. So I think we are being naive to think oh well we can do something like the Canadians did. That's I think because our acquis communautaire we say the body of community laws that is already in our laws already. So I think it may well be a stretch if we get a complete free trade agreement because we're setting out our stall saying we want a block on immigration and also we refuse to have the jurisdiction of the European Court of Justice. Straight away that paints us into a corner and limits what we can achieve in terms of a free trade agreement. The other thing we have to bear in mind is the WTO. So Theresa May has said we want to have, we would like a bit of preference to certain sectors for example, the car sector. Again the noises from Europe and other Member States are clearly no – unless you sign up to the fundamental four freedoms which you refused. We gave you, under the TUSK project, we gave you some flexibility around freedom of movement of workers, which you rejected, until such time as you don't do that, all bets are off. So we can't very well have a comprehensive free trade agreement with the EU, so we cannot cherry pick, (1) because it is against the fundamental four freedoms and (2) because the WTO rules won't let us. Because if we have that sweet deal with the rest of EU we must do similar sweet deals with the rest of the world under the WTO most favoured nations clauses.

David Lowe: So we may well end up with no or limited free trade agreement of the EU.

Bernardine Adkins: I think that is possible given the current uncompromising position we are in. I mean it's a lovely idea to think we can have what we would call UKEEFTA, a United Kingdom Economical European Free Trade Agreement. But I think given the differences in views and difference in positions currently it is going to be a long shot to get that.

David Lowe: Then another issue that has been talked about in the context of EU law is our ability as the UK to go in and negotiate free trade agreements or other trade agreements with non EU countries, Australia, New Zealand, the US and people say we're not allowed to do that. Is that true?

Bernardine Adkins: Yes and no. There is a fundamental and constitutional principle of the European Union that a Member State should not do anything to interfere or compromise the objectives of the European Union and obviously that wouldn't necessarily include you, you can't agree or you don't have confidence to agree a trade agreement with a third country. But here we're talking about initial exploratory talks, so I think it's a stretch to say we would be in breach of that constitution on principle which is a treaty article and also at the end of the day if the European Union wanted to chase after Britain for breach of its constitution or commitment to the rest of the EU it's going to be out of time. And realistically so many of these third countries are saying, yes we want to talk can we will just wait and see what shape and size the United Kingdom is going to have in its relationship with the rest of the EU and then we will start to talk turkey.

David Lowe: So that's the real politic of this isn't it?

Bernardine Adkins: Yes.

David Lowe: That other third party countries are going to hesitate to do deals until they see the shape of whatever our future EU deal is, why waste time.

Bernardine Adkins: Correct yeah.

David Lowe: But equally if you're the various Governments or the UK Government you probably are having exploratory talks about what in principle a deal might be.

Bernardine Adkins: Yes.

David Lowe: To sort of warm up but they are not going to do any real deals.

Bernardine Adkins: That's correct because they are not quite sure what's going to be on offer.

David Lowe: Great thank you very much Bernardine.

Bernardine Adkins: Pleasure.