Brexit: A Tale of Two Agreements?

By Hugo Flavier and Sébastien Platon

There seems to be a common assumption (see, among many others, here 3.6, here or here at 14:00) that there is a distinction between two kinds of « post-Brexit agreements », i.e. the withdrawal agreement (the divorce settlement) and the agreement regarding the future relationship between the United Kingdom (UK) and the European Union (EU). However, this distinction is, in fact, not very clear. It raises, in particular, several questions related to the legal basis and the nature (exclusive or not) of the withdrawal agreement. This contribution aims to clarify the distinction between these two agreements and identify the legal difficulties arising from their articulation. It will be argued that, due to some legal uncertainties, the negotiators of these agreements should be careful of their respective contents.

The two kinds of agreement

The theory is that the “withdrawal agreement” must be negotiated and concluded based on Article 50 TEU, according to which it “shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament”, and would not require Member States to ratify it (see however infra). Since such a “withdrawal agreement” is without precedent, one can only assume it would be a “reverse accession treaty”. Its main point, if we still think of it that way, would be the possibility of negotiating temporary provisions extending the scope of certain EU provisions (for example the four freedoms or some of them, or budget rights and obligations) to the “future former” Member State for a certain amount of time.

The “future relationship” agreement(s), on the other hand, would set, on a more permanent basis, the framework for the future relationship of the UK with the Union. Any such agreement(s) would be based either on Article 207 TFEU (Common Commercial Policy), if it falls within the scope of Common Commercial Policy, or more likely on Article 218 TFEU (negotiation and conclusion of international agreements by the European Union), if its scope is broader than just trade relations. Depending on their contents, their conclusion may require either a decision of the Council by a qualified majority or voting unanimously. It is likely to require the consent of the European Parliament. It is also likely to require ratification by all the Member States in accordance with their respective constitutional requirements (“mixed agreement”), except if it only contains provisions falling within the scope of the exclusive competences of the European Union (Common Commercial policy for example). This last hypothesis seems quite unlikely since this agreement is (or these agreements are) supposed to be comprehensive enough to encompass all the future relations between the UK and the EU.

The two agreements – or series of agreements – are supposed to follow a certain order. First, the “withdrawal” agreement organises the severance of the legal and institutional links between the UK and the EU, then the “future relationship” agreement(s) provide(s) the framework for the relationship between the UK and the EU on a more permanent basis. This sequence is confirmed by the wording of the treaties. Articles 207 and 218 both apply to treaties between the European Union and “third countries”, which the UK will only become after the end of the two-year period or after the conclusion of the withdrawal agreement (whatever comes first). As long as the UK is a member of the European Union, only Article 50 can provide a legal basis for an agreement – and apparently only for one agreement, since such an agreement would have the automatic effect of turning the UK into a third country.

The applicability of Article 50 as a legal basis

A question remains though. Is the applicability of Article 50 based only on the status of the UK, or also on the content of the agreement? In other words, is it possible to conclude an agreement based on Article 50 that would not only “set out the arrangements for [the] withdrawal” but would also lay down “the framework for [the UK’s] future relationship with the Union”?

Legally speaking, one could argue that the articulation between Article 50 and Articles 207 and 218 is based not on the content of the agreement, but only on the status of the UK. In this case, any agreement reached between the UK and the European Union would be concluded on the basis of Article 50 as long as the former is a Member State, regardless of its content (permanent or temporary provisions). Conversely, any agreement reached by the UK and the European Union once the former has ceased to be a Member State would be based on Article 207 or 218, regardless of its content.

This solution seems quite simple, since it would save the negotiators the trouble of matching the content of the withdrawal agreement with the exclusive aim of “setting out the arrangements for [the] withdrawal” of the UK. Moreover, if a “definitive” agreement were to be reached quickly, it would be possible to conclude it directly on the basis of Article 50, without any need for a previous simplified withdrawal agreement. However, in this case, Article 50, as a legal basis, would be virtually unlimited in its material scope, which may raise constitutional questions, in particular as regards the principle of conferral.

The alternative would then be that Article 50 can only provide a legal basis for agreements with a certain content, i.e. “divorce settlements”. However, the distinction between a “divorce” settlement and a “future relationship” agreement(s) may, in practice, prove complicated.

What if, for example, the withdrawal agreement was to contain “permanent” provisions (i. e. without explicit time limitation)? Would it be necessary to carry out an “accessory / principal” test, in order to assess whether the principal aim of the agreement is to “set out the arrangements for [the] withdrawal” of the UK or to lay down “the framework for its future relationship with the Union”?

What if a “future relationship” agreement is reached before the two-year period? This is, of course, highly unlikely given the short period. But what if a “pre-agreement” regarding the future relations between the UK and the EU, concerning questions on which there is a consensus, is reached before the deadline? For instance, if the UK and the EU would choose the “Norwegian” way (i.e. using the existing European Economic Area as a framework for their future relationship, even temporarily), this would not necessarily require a lot of negotiations, since the EEA is a “ready-made” solution. If such an agreement was considered to be “substantially” incompatible with the use of Article 50, it would have to be kept to one side until the UK becomes a third State, so that Article 207 or Article 218 could be used. Even if such an agreement were to include a clause stating that it cannot enter into force until the UK becomes a third State, it could be argued that it cannot be concluded neither under Article 50 (because its content goes beyond the scope of Article 50) nor under Article 218 (until the UK ceases to be a Member State).  In this case, the UK and the EU would have to push for a simplified withdrawal agreement quickly, with the sole purpose of turning the UK into a third country, and then, once this one has come into force, initiate the conclusion of the “future relationship” agreement. Even though this is possible, it does turn the withdrawal agreement into a mere formality.

There is also the question of Scotland and Northern Ireland. Is it possible to include their future status as regards the EU – if they have one and whatever that may be – in an agreement concluded under Article 50, even if this status is meant to be permanent?

Furthermore, even if the agreement to be concluded under Article 50 is not meant to be permanent or partially permanent, one can wonder how ambitious such an agreement can be while still being a “simple” divorce settlement. Damian Chalmers and Anand Menon have recently advocated a “transitional agreement”, to be agreed under Article 50, according to which:

– the UK would have access to the Single Market but would have the right to repeal any EU legislation and would only grant freedom of movement to EU citizens having an offer for a full time job;

– the UK would contribute to the EU budget, but only insofar as it gets back at least as much as it contributed;

– Scotland would retain a tighter relationship with the EU and a seat at the Committee of Permanent Representatives despite being neither a State nor a member of the EU;

– the UK would “follow the EU common commercial policy” while still being free to negotiate trade agreements with non-EU States during this period.

It seems that such an agreement, if agreed (which raises the question of why the EU would accept such a seemingly lopsided deal, but this is another issue), would be more than a divorce settlement. Indeed, it would rather be another “new settlement” for the UK, out of the EU this time, until 2024 (according to the authors), which “would provide time for post-exit commercial, financial and political relations”. But can such an agreement really be concluded under Article 50, with only a qualified majority at the Council?

The nature of the withdrawal agreement

Another question is the nature of the withdrawal agreement. The hypothesis that the EU could be exclusively competent to conclude the withdrawal agreement is far from obvious. It is true that Article 50, unlike Article 49 for accession treaties, does not explicitly require a “ratification by all the contracting States in accordance with their respective constitutional requirements”. However, it does not exclude it either. In the absence of explicit specifications, one could assume that the ordinary rules for the division of competences between the States and the European Union apply. Indeed, since the division of competences between the Member States and the Union is at the core of the EU constitutional framework, it is arguable that the ordinary rules of competences cannot be bypassed without an explicit provision of primary law.

The problem is that there is no compelling evidence that the competence to conclude the withdrawal agreement should necessarily be exclusive.

The exclusive competences of the European Union are listed in Article 3 TFEU. This list is supposedly exhaustive since, according to Article 4(1) TFEU, “The Union shall share competence with the Member States where the Treaties confer on it a competence which does not relate to the areas referred to in Articles 3 and 6 [supplementary competences]”. Since the first paragraph of Article 3 (explicit exclusive competences) does not refer to the withdrawal agreement, it is arguable that the second paragraph (implicit exclusive competences) is relevant. This paragraph refers to “the conclusion of an international agreement”, which the withdrawal agreement arguably is – even though it would not be an agreement with a third country. According to this paragraph, “the Union shall also have exclusive competence for the conclusion of an international agreement when its conclusion is provided for in a legislative act of the Union or is necessary to enable the Union to exercise its internal competence, or in so far as its conclusion may affect common rules or alter their scope”. If the withdrawal agreement only extends, for a certain period of time, certain “common rules” to the UK, one could argue that it could be concluded by the European Union alone under the third hypothesis (“its conclusion may affect common rules or alter their scope”). However, such an interpretation could be rejected by the European Court of Justice, who could consider that extending the common rules to a (future) third country does not, sensu stricto, “affect” them nor “alter” their scope. It could also happen that the withdrawal agreement contains provisions falling within the competences of the States – for example in the field of civil aviation (the Montreal Convention  for the Unification of Certain Rules for International Carriage by Air, signed on the 28th May 1999, is a mixed agreement) or environment (the Aarhus Convention on access to information, public participation in decision-making and access to justice in environmental issues, signed on the 25th June 1998, is also a mixed agreement). In both cases, the withdrawal agreement may then happen to be a mixed agreement, meaning that it would have not only to be concluded by the European Union but also ratified by all the Member States in accordance with their domestic constitutional requirements.

At best, such a situation would de facto neutralise the procedure laid down in Article 50. Article 50 only requires the withdrawal agreement to be concluded by a qualified majority of the Council. If the withdrawal agreement was a mixed agreement, this would de facto neutralise this procedure, because it would require the UK to come to an agreement with all the Member States of the EU. Hence, the very purpose of the procedure laid down in Article 50 – allowing a withdrawal agreement to be concluded without requiring the unanimous consent of all the Member States – would be defeated.

At worst, the European Court of Justice could consider that it makes the agreement impossible to conclude under Article 50, precisely because the procedure laid down therein would then be rendered ineffective. In this second case, the agreement would be impossible to conclude at all as long as the UK remains a Member State.

Concluding remarks

In conclusion, in order to avoid any legal complications, it would be advisable that the UK and the EU negotiate two formally separate agreements. The first one would have to focus only on “setting out the arrangements for [the] withdrawal” of the United Kingdom and should in any case only contain provisions pertaining to the exclusive competence of the European Union. This agreement would be concluded exclusively by the Union, by a qualified majority in the Council after the consent of the European Parliament. Once this first agreement is concluded, another agreement (or several other agreements) – which could well be negotiated simultaneously – could then be concluded based on Article 207 or, more likely, Article 218. This agreement, or these agreements, would likely be mixed agreement(s), subject to ratification by all Member States. If these conditions are not respected, each agreement could fall in a legal “grey area”. We can all agree that, in Brexit times, more uncertainty may not be what we need.