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The first key issue to address is whether the interim phase should cover the period during which the UK is still a member state negotiating withdrawal or whether this phase only begins when the UK has already left the EU. From the perspective of EU constitutional law, it is the latter. It would be very difficult to square this circle before the UK leaves the EU. The way in which Article 50 structures the withdrawal process stipulates that, until the point of exit, the withdrawing state remains a member state and it (and its citizens) continues to be subject to the rights and duties that EU law imposes. This may not be acceptable to some Brexiteers, but without agreement on this point a bespoke transitional phase might be easier said than done.
The second important question is what the transitional phase should cover and for how long. The EU seems to be waiting for the UK to make up its mind, although we already know that the European Parliament is happy to agree to a maximum three-year transitional regime. The logic of a transitional regime is that the UK would remain in the customs union and the internal market until an agreement on future relations enters into force. Alas, Whitehall is creative in its slogans and soundbites but short on precise proposals for how to take this forward.
The third key question is what the transitional regime would be based upon. Since a transition to the European Economic Area would be too complex and time consuming, the interim phase would either have to be a bespoke arrangement anchored in the withdrawal agreement or it would amount to an extension of the two-year deadline laid down in Article 50. We consider both options in turn, below.
Transition through a withdrawal agreement
The first way to agree upon a transitional regime in accordance with Article 50 is to build it into the withdrawal agreement itself. Indeed, that appears to be the position of the institutions, whose stated goal is to settle, in the pre-withdrawal phase, matters such as citizens’ rights, the succession of obligations and legal certainty, and the outstanding UK contributions to the EU budget. The idea is to put these matters into a first agreement that, in the terms of Article 50, will set out the arrangements for the UK’s withdrawal “taking account of the framework for its future relationship with the Union.” A further agreement on future UK-EU relations would then be negotiated as an agreement concluded by the UK – by that point a third country – and the EU. Only that agreement would settle for good the obligations between these parties after the end of the transitional phase.
Providing for such a transitional regime in an initial withdrawal agreement would, however, open a procedural and legal Pandora’s box. First, the withdrawal agreement would have to regulate the participation of the UK in the EU institutions and its continued contributions to the EU budget. While participation in the Council and European Council may prove reasonably straightforward, participation in other institutions, particularly the European Parliament and the Court of Justice, could be more difficult. Should the UK keep the right to have members of the European Parliament during the transitional period? Furthermore, what would be the involvement of UK representatives in EU agencies and advisory bodies? On the one hand, insofar as it would be bound by a range of existing key policies and, quite possibly, the bulk of EU single market regulation, restricting participation in the representative bodies would undermine the EU’s principle of representative democracy. On the other hand, to guarantee such participation could be highly disruptive for the Union.
Another crucial issue is the role of the Court of Justice during the transitional period. Indeed, the most significant legal question that a bespoke transition raises is whether the UK would continue to be bound by EU law directly during the transitional phase. If it were to remain in the internal market and customs union, surely the EU would expect the UK to do so. That, however, is difficult to marry with the fact that the UK has already taken steps to sever links with EU law and end the jurisdiction of the Court of Justice. For instance, in a recent paper, the UK government highlighted that the Court’s jurisdiction in the UK would cease at the point of exit from the EU, not at the end of a transitional phase (or, in any case, without clarifying whether a transition would qualify as exit for the purposes of UK law or not).
Furthermore, if the European Union (Withdrawal) Bill 2017-19, currently being debated in the House of Commons, is enacted in its current form it would terminate the direct application of EU law in the UK upon withdrawal. While it will maintain existing EU law through UK implementing legislation, it does not protect against potential repeal during a transitional period and altogether excludes significant parts of EU law from the UK, such as the application of the Charter of Fundamental Rights.
Another outstanding elephant in the room would be EU external relations. Would the existing EU agreements with third countries cease to apply to the UK as of the date of exit or at the end of the transition phase? As a consequence, would the UK then be granted the right to negotiate its own deals? If so, as of when? And how could its automatic exit from the EEA be managed? Would it continue to be represented by the EU in the WTO? These are in themselves fraught legal matters concerning the succession of the customs union and the future renegotiation of tariffs. Secretary of State for International Trade, Liam Fox, is vehemently opposed to the idea of a transition in these fields. Yet the idea that the UK could simply copy-paste the existing trade agreements into its future deals with third countries is problematic. While some of the straightforward trade agreements could serve as a blueprint, the majority of agreements with neighbouring countries are bespoke EU deals, for example the Stabilisation and Association Agreements with the Western Balkans or the comprehensive trade agreements with Ukraine, Georgia and Moldova.
There are, therefore, key constitutional issues to be agreed before any transitional regime is possible. In fact, the idea of a withdrawal agreement in which a provisional regime is set out appears to retain all the legal problems of arranging for the UK to leave the EU in less than two years. It is too short a timeframe for a solid agreement to be drafted, but does not bring any substantial benefits because it is – precisely – non-permanent. [...]
Article 50 is a de facto transition. For instance, it is already being treated as a window for EU citizens to consolidate their stay in the UK and for UK citizens to do the same in the EU. It can also be considered as a transition in legal terms. Constitutionally, Article 50 sufficiently represents the change in status that the EU and the UK seem to be seeking: it labels the UK a ‘withdrawing state’ and Art. 50(4) provides that in this period it will not participate in the European Council and Council meetings that concern it. [...]