Brexit: a lead from the Lords

by Andrew Duff (@AndrewDuffEU)
20th December 2016

 

Brexit: a lead from the Lords

While MPs at Westminster continue to quarrel about the process of Brexit, the upper chamber of Britain’s parliament has been hard at work on the substance of Brexit — and in particular on the likely content of the impending Article 50 negotiations. In the week of 12 December, the European Union Committee of the House of Lords published six reports on different aspects of what Brexit might really mean. (Another batch of reports, possibly as many as sixteen, is planned by April.)

The EU Committee of the Lords involves directly about 75 peers, and indirectly many more as the debates it triggers play a large part in the agenda of the whole House. It has a long-standing creditable reputation in the nexus of scrutiny committees of the 28 national parliaments which attempt to monitor European affairs. Its efforts, which are based around enquiries conducted by its sub-committees, are not to be sneezed at. Dozens of witnesses, including hapless government ministers, took part in this exercise.

The first six reports

What are we to make of the first tranche of Lords’ reports? Their overall impression reflects that of the famous ‘balance of competences review’ that was conducted under the 2010-15 coalition government but then suppressed on the grounds of its insufficient euroscepticism. 43 years of EU membership has left the UK deeply entwined in all manner of inter-connected strands of integration. The EU is not like a St James’s club, so beloved of the old British Establishment, where one obeys the rules, dresses correctly and pays a fee — or leaves. A reader of the Lords’ reports gets to know what the EU is really like. A picture is revealed of a system of transnational and multi-level government in which business, academia and citizenship operate passably well within a uniform regulatory framework.

EU membership has left few aspects of British life untouched. Brexit will not be a simple sharing out of the spoils between an incompatible couple. It will require re-erecting the structures and processes of the British state that European integration had allowed us to abandon. Unpicking EU membership means exhuming the old nation-state. Thousands of civil servants will have to be recruited, trained and housed. New regulatory authorities and agencies need to be created to fill the gap left by the departing European Commission. Britain’s border and customs controls require reinforcement.

And all this has to be done not because the EU, despite its many crises, has reached the end of the road but, on the contrary, because it is proving to be resilient and, in many areas that touch its member states deeply, even dynamic. The UK has decided it does not want to continue on this journey. Brexit requires jumping off a moving train.

Nobody ‘in Europe’ has asked Britain to leave. Brexit is self-inflicted. Its consequences are huge. The process of resurrecting the apparatus of the national state has got to take place at a time when the United Kingdom has seldom if ever been more divided internally on grounds of class, age and province – divisions which have been greatly accentuated by David Cameron’s feckless referendum. Cutting the ties that have bound the UK to the EU for decades will be problematic and protracted. While nationalist opinion will doubtless remain steadfast to the cause of Brexit, others will hesitate. And it is this moderate opinion that should take comfort from the work of the House of Lords.

For the Lords’ reports subtly reveal that many British citizens and organisations have become attuned to the idea that tackling contemporary challenges transcends the capability of the individual nation-state. For the vast majority of witnesses who spoke to the enquiry, the EU has long-since become the natural place for dealing with the complex and large issues of the economy, security, justice, environment and general well-being. In this sense, real working Britain is way out in front of its political class.

The paradox of Brexit is not only that British nationalism is a stronger force than was realised but also that British Europeans are more European than is generally recognised by the political parties which clamour for our allegiance. British Europeans have had a huge influence in the development of the European Union over the last four decades: British officials, diplomats, businessmen, financiers, scientists, judges, police, parliamentarians and even journalists have shaped decisively the legislation and jurisprudence, common policies, political culture and practice of the European Union. The EU’s role in establishing international standards has drawn from Britain’s global engagement. While London-based politicians and media have concentrated on how different Britain is from mainstream, mainland Europe — and successive British prime ministers have gloried in their opt-outs, cop-outs and budgetary rebates — the steady business of building the EU has been carried on with Britons playing leading roles. Accordingly, the EU institutions, lobbies and non-governmental organisations in Brussels will be transformed (and diminished) once the Brits have gone.

The current systematic inquiry of the House of Lords reveals some of this innate British influence in Europe. More eloquent than the argy-bargy of the House of Commons, the Lords have gone beyond the battle of ideology between Leavers and Remainers by speaking to, and now in their reports speaking for, those British Europeans for whom Brexit is fundamentally counter-intuitive.

Brexiteers will accuse the Lords of being in denial about the result of the referendum, but the tone and recommendations of these first six reports is fundamentally pragmatic as the peers listen to what knowledgeable people have told them and try not to over-dramatise the scale of the constitutional crisis into which the referendum has undoubtedly pitched the country. After years of half-truths and falsehoods have distorted the European debate in Britain, the Lords’ analysis of the European nature of contemporary Britain is refreshingly uninhibited. Historians may come to marvel that this exercise in parliamentary scrutiny — like the earlier balance of competences review and the current deliberations of the UK Supreme Court — was not completed before rather than after 23 June 2016.

UK-Irish relations

The first report looks at the critical situation with regard to relations with the Republic of Ireland, in particular to the management of the land border in Ulster, and to the impact of Brexit on the delicate sectarian conflict in Northern Ireland.[1] It argues that the best way to sustain the improving peace process is for all parties to cleave to the status quo in so far as that is compatible with Brexit. Preferably, therefore, the UK should remain within the EU’s customs union. If that option does not prove viable, a new agreement must be sought to maintain the common travel area arrangements. In any case, the unique status of UK-Irish relations, East-West as well as North-South, should be recognised and dealt with as part of the Article 50 negotiations. Any new bilateral treaty between London and Dublin will need the political approval and legal assent both of the Northern Ireland Executive in Belfast and also of the EU, the continued adherence to which Ireland is committed.

The options for trade

The debate about the customs union plays a large part in the second, and arguably the most important report.[2] The Spanish land border with Gibraltar is flagged up as an additional problem to that of Northern Ireland. The committee examines and dismisses the various existing precedents for the EU’s trade relations with third countries. The EEA option does not meet the presumed Brexit prerequisites of ‘taking back control’, stemming immigration or ending UK contributions to the EU budget. It would also involve difficult negotiations with Norway and the other EFTA countries. The Swiss option is less of a model and more of a mess, especially with regard to migrant labour. Turkey’s membership of the customs union gives it only limited access to the EU internal market and constrains its own autonomy on trade policy with third countries. Canada’s controversial free trade agreement with the EU (CETA) excludes in large part services, which is inconceivable for the UK. Falling back on WTO rules constitutes the worst option for the UK.

The committee asks the government to investigate the Ukraine Association Agreement as providing both a template and a precedent for post-Brexit Britain and EU 27. Such an association agreement would have at its heart a deep and comprehensive free trade area and be complemented by an institutional machinery akin to that of the EEA, as well as with provisions for political cooperation in both internal and external security policy.[3] The committee admits that the final trade agreement with the EU will be a hybrid solution: it notes that the government has talked of “a bespoke agreement” but comments: “We are not clear what the Government means by this term”. The report points to the inconsistency of wishing to maximise access to the EU single market on the one hand, and ‘taking back control’, on the other. The more open the market, it points out, the tighter regulation needs to be.

The report finds that a transitional period will be essential to tide things over after leaving the EU until such time as the future trade treaty can be put in place. Staying in the customs union at least temporarily might be part of transitional arrangements. On closer examination, however, the customs union looks less like a privileged club and more like a limited version of the same regulatory regime applicable to the single market – including oversight by the European Court of Justice (CJEU). While clear about the delicate nature of securing a new trade agreement with the EU, and critical of the apparent ill-preparedness of government to accomplish such a thing, the committee insists that defining precisely Britain’s final landing zone must be a part of the Article 50 negotiations. The government, moreover, must have a clear game-plan for the transition before triggering Article 50.

Acquired rights

The third report deals with the acquired rights of more than 2m British nationals residing elsewhere in the EU and of over 3m EU citizens living in the UK.[4] It pours cold water on the assumption that current rights are somehow automatically ‘acquired’ once EU membership ceases, or that they can be easily replicated in domestic or international law. While the ECHR offers some protection against the more extreme penalties, such as deportation, unless rights attendant on EU membership are transcribed into the Article 50 withdrawal agreement, their legacy will be lost. Ideally, there will be reciprocal arrangements between the UK and the EU 27, but the UK will then have to put in place measures to ensure its future consistency with EU law as it evolves (as it certainly will in this dynamic field). The report argues that the much-vaunted Great Repeal Bill needs to deal with the retention or amendment of EU rights, and to lay down constraints on the power of the executive to suppress those rights, not least in circumstances where a British Human Rights Act is introduced. In a rare lapse, the committee makes no reference at all to the EU’s Charter of Fundamental Rights, or its inevitable loss.

The government, say the Lords, is under a moral obligation to provide the millions of EU citizens now residing in the UK with legal clarity as to their future status. There are also eminent economic reasons for protecting the rights of current mobile workers – including the 135,000 EU citizens who now work for the NHS. The greater the uncertainty, the less attractive will the UK be as a place to live and work. Britons who continue to live in the 27 EU states will enjoy the status of third country nationals under EU immigration law; that protection will not be available to their EU counterparts who stay on in Britain. The report foresees higher volumes of litigation by aggrieved citizens. It suggests that the UK introduces a new legal category for the permanent residency of EU citizens. It ends by urging the government to tackle rights issues at the outset of the Article 50 negotiations.

Financial services

The most telling of the Lords’ six reports concerns financial services.[5] While it is accepted that the size and shape of the UK’s financial services industry will shrink with Brexit, great emphasis is put on the need for a long transitional period in order to allow business to adapt and to limit collateral damage to the economy. The importance of the sector to the UK is established: perhaps more could have been made by the committee of the importance for the EU of having in London the world’s most eclectic and liquid financial market, in effect a one-stop megastore. It is acknowledged that other European cities are already vying for some of London’s business, but the committee believes it is New York that will benefit most from a depletion of the UK’s financial services sector. The report notes the importance of keeping open migration for highly-skilled EU workers.

The difficulty of retaining current passporting rights once the UK becomes a third country is well rehearsed. Existing EU arrangements for third countries are not fit for the purpose of the City of London. Maintaining regulatory equivalence between the UK and the EU has been a growing problem once the UK decided to opt out of the eurozone’s Banking Union: such dissonance will only grow with Brexit. The committee expects the European Central Bank to take the necessary legal measures to insist that euro-clearing is located within the eurozone. Even with a bespoke equivalence regime for the City of London, it is the European Commission (backed up by the CJEU) which will remain the final arbiter of market access. The report asks rather than answers the big question as to where the UK expects to end up after Brexit.

Future UK-EU security and police cooperation

The fifth report finds a similar sub-optimal situation with regard to justice and home affairs.[6] It sets out clearly the widespread and increasingly deep collaboration between the UK and the EU in combating criminals and terrorists, and it adumbrates the several tools and agencies which make this collaboration effective in practical terms of law enforcement. It points out that this is well-charted territory because the UK’s multiple opt-outs from EU policies in this sector require constant agility by government and scrutiny by parliament. It welcomes Theresa May’s choice in her previous job as Home Secretary to opt back into 35 pre-Lisbon measures, as well as her more recent decision to remain in Europol.

The committee sets the bar high for continued British involvement in and reliance on the EU’s security and police cooperation. Above all, the UK must not sacrifice a high level of engagement with and participation in Europol. Likewise, a “continuing close partnership” with Eurojust, the prosecutors’ network, is desirable. The committee will not be heartened by the tough line taken by the EU with Denmark (3 December) aimed at minimising the negative effects of the Danish exit from Europol following its own negative referendum one year ago.[7]

The issue of data protection will rank highly in the Article 50 negotiations: once the Charter of Fundamental Rights ceases to apply to the UK a new legal basis will be required. It is essential to continue to respect EU standards in data protection if the UK is not to lose access to intra-EU Passenger Name Records. An agreement similar to that of Norway and Iceland could mirror the European Arrest Warrant.

The report stresses that post-Brexit UK will be in a uniquely under-privileged position in this sector: even Denmark, with Norway and Iceland are members of the Schengen area. The UK’s asset as a known security commodity will diminish rapidly in the absence of a new cast-iron treaty arrangement to cover cooperation in these sensitive fields. The committee recommends that the UK tries “to remain part of certain channels and structures” of the EU because the chance of finding adequate substitutes is narrow. Continued involvement of the European Court of Justice is some capacity is, therefore, unavoidable.

Fisheries

The last report in the series concerns EU fisheries policy.[8] The UK fisheries industry contributes less than 0.5% of GDP (compared to 7% for financial services), but its social and political importance is great. Brexiteers have argued that it will be a moment of liberation when the UK withdraws from the EU’s Common Fisheries Policy, but the Lords’ report makes clear that the situation is very much more complex than supposed. If fish stocks are to be made sustainable, ‘taking back control’ by banning foreign fishers from British waters is not an option. The UK will have to negotiate its way through several international and regional agreements with third countries, notably Norway, Iceland and the Faroe Islands, as well as defining a new trading and scientific relationship with the EU. Apparently there is no such thing as an authentically ‘British fish’. And the domestic situation is complicated by the fact that fisheries policy is devolved to the executives in Edinburgh, Belfast and Cardiff.

Certain tough choices cannot be avoided. A new legal basis will have to be created to manage the waters in the UK’s exclusive economic zone. The government needs to decide how to cope with the inevitable ending of the EU structural fund support received by fishing communities. The committee warns that negotiations on trade in fish are always hotly contested, and an approach that attempted to freeze out EU fishers from UK waters would inevitably provoke retaliation. Disruption in current trading patterns will have “profound effects” on the fish catching and processing sectors. The EU 27 is bound to take a holistic approach to trade, quota arrangements and access conditions. “The Government faces a huge challenge in seeking to achieve a successful outcome to these negotiations”.

Next steps

So far so good. The government must now respond to the specific queries and demands for more information made by the Lords. This should mean less vague talk by ministers of ‘bespoke’ deals for Britain and more thorough analysis in Whitehall of the few plausible options that are known to exist, especially that of an association agreement incorporating a free trade area (possibly coupled with customs union). The Brexit negotiations have no chance of success unless and until the UK dares to define its preferred final landing zone — or as Article 50(2) has it, “the framework for its future relationship” with the Union.

There needs to be greater understanding of the notion of the transitional arrangements that will have to be agreed as part of the Article 50 withdrawal treaty. The EU cannot accept that a transitional period is merely an extension of the status quo, craftily designed to postpone Brexit and avoid the difficulty of requiring a formal extension under the terms of Article 50(3). A transition is not just a static bridge or passerelle to be crossed later at some indeterminate time, but rather a tapis roulant, carrying both parties to their final agreed destination.

The House of Lords should be encouraged to continue with its efforts to make sense of Brexit by bringing the government to account. It should not let ministers slip through the net as they did with the ill-fated balance of competences review in 2014. The EU Committee itself must not duck the trickiest issues. It should therefore address directly the relevance of the EU Charter of Fundamental Rights. And it should aim to assert the role of the European Court of Justice in any post-Brexit relationship by making it clear that the UK can expect no formal agreement with the EU 27 that ignores the jurisdiction of the CJEU. The prime minister must be encouraged to drop her antipathy towards the Luxembourg court, and she can best do that by learning more about it. In one way or another the CJEU will be involved in any judicial tribunal set up to arbiter disputes between the UK and its erstwhile partners.

Lord Boswell, who presides over the whole exercise, must insist on the tighter coordination of the work of the sub-committees especially as the number of the sectors covered rises in further reports over the next weeks. Above all, he and his colleagues must be faithful to the pleas of most of their witnesses that the newly liberated British state should orientate itself in a European direction.

Direct contact between the Lords and their counterparts in the European Parliament, who are looking simultaneously at how to protect EU interests in the Brexit process, would also be useful preparation for the official negotiations between the Commission and the British government whenever they eventually get going.

 

Andrew Duff is Visiting Fellow at the European Policy Centre, Brussels. He was a Member of the European Parliament 1999-2014 and Director of the Federal Trust from 1993-99.He tweets at @AndrewDuffEU

 

Notes:

[1] http://www.publications.parliament.uk/pa/ld201617/ldselect/ldeucom/76/76.pdf

[2] http://www.publications.parliament.uk/pa/ld201617/ldselect/ldeucom/72/72.pdf

[3] http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/eu-external-affairs-subcommittee/brexit-future-trade-between-the-uk-and-the-eu/written/43513.pdf

[4] http://www.publications.parliament.uk/pa/ld201617/ldselect/ldeucom/82/82.pdf

[5] http://www.publications.parliament.uk/pa/ld201617/ldselect/ldeucom/81/81.pdf

[6] http://www.publications.parliament.uk/pa/ld201617/ldselect/ldeucom/77/77.pdf

[7] http://www.consilium.europa.eu/press-releases-pdf/2016/12/47244652421_en.pdf

[8] http://www.publications.parliament.uk/pa/ld201617/ldselect/ldeucom/78/78.pdf