Brexit - Domestic Politics Complicate Orderly Transition

With the official end of the two year period for the Article 50 negotiations between the UK and the EU27 on the former’s exit from the EU ending on the 29th of March 2019, there remains a lack of significant clarity over whether the UK’s membership of the EU will cease abruptly (no-deal Brexit) or whether the UK’s membership will be phased out over the course of a transition period that would allow sufficient time for businesses and financial markets to adapt, whilst also giving negotiations ample time to determine the modalities of the UK’s future trading relationship with the European Union.
 
With just two months to go, an orderly transition for the UK still depends on a timely approval and ratification of the Withdrawal agreement. However, the inclusion in the withdrawal agreement of the Irish backstop arrangement as a last resort insurance policy to prevent the re-emergence of a hard border on the island of Ireland between Northern Ireland and the Republic, has resulted in the Withdrawal Agreement being rejected with a significant majority in the House of Commons earlier in January.
 
The House of Commons has recently held a series of votes on potential ways to break the deadlock, with a majority of Member of Parliament voting in favour of an amendment that mandates the Prime Minister to reopen the negotiations on the Withdrawal Agreement with the EU27 in order to seek alternative arrangements for the Irish backstop. It is noteworthy that for the time being there was no majority to be found in favour of requiring the UK government to seek an extension of the Article 50 process beyond the 29th of March. From an EU27 perspective the notion of a renegotiation of the Withdrawal Agreement has already been rejected as politically untenable. Should the Prime Minister’s renegotiation prove unsuccessful, the UK government is then obliged to present next steps to the House of Commons in mid-February in the form of an amendable motion, which would allow Members of Parliament to once again propose and vote on amendments that set out the way forward.
 
Should at that point a majority of Members of Parliament vote in favour of requiring the Prime Minister to seek an extension of the Article 50 process to avoid leaving the EU without a deal on the 29th of March, this could change the dynamics between the UK and the EU27. Amongst the EU27 – should the UK government request it – there is a willingness to entertain the notion of an extension to the Article 50 process for a limited number of months. However, for many EU27 Member States, as well as from the point of view of the European Parliament and the European Commission, it would be challenging to extend the Article 50 process beyond early July 2019. The reason for the latter being that the first session of the European Parliament following the European parliamentary elections in May of this year is scheduled to take place in July, with the appointment of a new European Commission President and his/her College of Commissioners to follow over the summer. Should Article 50 be extended beyond July, a legally problematic situation could arise in terms of the UK remaining formally a full member of the EU with all commensurate rights and obligations – including the right to have representatives in the European Parliament as well as a Commissioner.
 
As things currently stand it would be difficult for the EU27 to consent to an extension of the Article 50 process beyond July. In terms of scenarios for the period ahead leading up to the end of March a number of fundamental choices will need to be made in the domestic political arena in the UK:
 

  • should an extension of Article 50 be sought and if so for how long, bearing in mind the likely limitations from the EU27 point of view – Likelihood: possible scenario.
     

  • no deal and exit on WTO terms on the 29th of March – Likelihood: a possible scenario that is also the default scenario unless the Withdrawal Agreement is approved or Article 50 is extended.
     

  • the UK government reconsidering full membership of the EU customs union to remove the need for the Irish backstop – Likelihood: very unlikely scenario.
     

  • a general election resulting in a different government in Westminster with a different outlook on the terms of the UK’s withdrawal from the EU – Likelihood: possible but unlikely scenario.
     

  • a second referendum requiring a political majority to decide in favour of calling a referendum as well as a majority in favour of the options being proposed to the electorate – Likelihood: very complicated due to the requirement of having a majority in the House of Commons in favour of this option.

 
 
Completed on 30 January 2019