Analysis. The agreement provides a general framework for future trade, with no legislative alignment but a uniformity of legal notions; however, it is one that leaves ample room for very likely litigation.

Brexit is done, but uncertainties remain

On Monday, ambassadors from the 27 EU countries unanimously approved the agreement on future relations between the bloc and Britain, concluded in a final rush, very near the deadline on Christmas Eve, December 24, after 11 months of negotiations which followed four years of tensions and wavering after the June 2016 referendum. Formal adoption of the agreement (which becomes law on January 1, 2021) by EU member states needed to take place by early afternoon on Tuesday. Westminster voted to approve the schism on Wednesday.

However, the approval of the European Parliament cannot take place in time for December 31, so a period of provisional application of the agreement begins from January 1: the MEPs will vote in the first plenary session of the new year, in the third week of January (with a “yes” or “no,” as no amendments are expected).

In the coming days, the translations of the 1,246 pages of the text of the agreement will arrive in the various countries, to which provisions must be added on nuclear energy and on the exchange of information between secret services, as well as a series of joint declarations. The Council has until February 28 for the final decision on the approval of the deal (if there are delays, a new postponement of the transitional period will have to be negotiated between Brussels and London).

On Monday, the British Prime Minister, claiming a victory for London, said he spoke to the president of the European Council, Charles Michel, underlining “the importance of the UK/EU Agreement as a new starting point for our relationship, between sovereign equals. We looked forward to the formal ratification of the agreement and to working together on shared priorities, such as tackling climate change.”

The agreement provides a general framework for future trade, with no legislative alignment but a uniformity of legal notions; however, it is one that leaves ample room for very likely litigation.

In recent weeks, there has been talk, above all, of fishing, where at the last minute an agreement was reached that is closer to the demands of the EU than to those of London (there are 5 and a half years to reach a 25% reduction in European fishing in British waters, while Great Britain had started with the idea of a reduction of at least 60%). French fishermen are, on average, satisfied. There will be time for further discussion, given that the British export 70% of the fish they catch to the EU, and therefore the dependence is mutual.

But the area where tensions are most likely is the much more important one of competition: in order to benefit from trade without quotas or customs duties, the EU has asked for guarantees of “fair” trade with regard to state aid, subsidies and respect for social and environmental standards. The agreement provides for each party—the EU and the UK—to decide on its own state aid regime (this was London’s request), but imposes a framework of common principles. The UK will have an independent authority to control public subsidies, and forms of state aid that are not considered fair can be challenged before national jurisdictions. In case of disagreement, there will be a process of mediation and consultation (there are 23 joint EU-UK sub-committees). The agreement provides for possible unilateral retaliatory measures by both parties in the event that the subsidies “significantly” alter trade and investment, including the imposition of tariffs (even for other products than those in question).

As requested by London, the final arbiter will not be the European Court of Justice (which will remain active only for Northern Ireland, which remains in the customs union), but an arbitration court, as exists in the agreements with Canada and Japan, a mechanism of “private justice” which is raising many criticisms. The agreement also features a “non-regression” clause on labor law and environmental standards. The agreement does not include the City, i.e. finance, one of the main British activities (which employs one million people). The EU can pat itself on the back: there won’t be any “Singapore on the Thames,” as COVID is putting the state and public investment back in the foreground.

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