During the week commencing 12 December 2016, the House of Lords EU Committee – Parliament’s largest body responsible for scrutinizing the European Union – published six reports on Brexit. The reports identified key issues across a broad range of policy areas, and made recommendations to the Government on what it should prioritize in Brexit negotiations. This post includes the summaries of, and links to these reports.
In addition, the House of Commons Library has published Brexit reading list: economic, business and transport policy issues which provides information on and/or links to a selection of analysis, comment and statistics on: Trade negotiations, tariffs and custom duties; Domestic economic policy and public expenditure; the EU budget, contributions, grants and loans; Business and industry, state aid and SMEs; Employment, training, pay and the cost of living; Regional economic development and transport; and Issues for Scotland, Wales and Northern Ireland.
1. Brexit challenge needs new bilateral UK/Ireland agreement, Monday, 12 December
- Brexit challenge needs new bilateral UK/Ireland agreement
- Brexit: UK-Irish relations, 6th Report of Session 2016-17 – published 12 December 2016 – HL Paper 76
- Evidence: Brexit: UK-Irish relations
- Inquiry: Brexit: UK-Irish relations
The House of Lords European Union Committee publishes its report calling on all parties to the forthcoming Brexit negotiations, including the UK Government and the EU institutions, to give “official recognition to the special, unique nature of UK-Irish relations”.
Following the referendum of 23 June 2016, the Committee outlines the many economic, political, legal and institutional challenges of Brexit for Northern Ireland, the Republic of Ireland and for UK-Irish relations as a whole.
The Committee concluded that any negative impact of Brexit on the UK economy is likely to be replicated, or even magnified, for the Irish economy. The Committee agreed that the unique nature of UK-Irish relations requires a unique solution, and calls on the UK and Irish Governments to negotiate a draft bilateral agreement, incorporating the views and interests of the Northern Ireland Executive, which would then need to be agreed by the EU as part of the final Brexit negotiations, with key aspects including:
- Continuation of the current open land border between the UK and Ireland
- Maintenance of the Common Travel Area, the right of free movement within it for UK and Irish citizens, and their right to reside and work in both countries.
- Retention of the right to Irish (and therefore EU) citizenship for the people of Northern Ireland.
- A customs and trade arrangement between the UK and Ireland if the UK leaves the customs union.
- Reaffirmation by both Governments of their commitment to the Belfast/Good Friday Agreement and continued support for cross-border cooperation.
2. Brexit requires compromise between sovereignty and liberalising trade, report says, Tuesday, 13 December
- Brexit requires compromise between sovereignty and liberalising trade
- Brexit: the options for trade – published 13 December, HL Paper 72
- Evidence: Brexit: options for trade
- Inquiry: Brexit: future trade between the UK and the EU
The Government has stated that it will trigger Article 50 by the end of March 2017. This means the UK’s current terms of trade with the EU will end after the two-year period specified for the exit negotiations, unless extended unanimously.
The report evaluates the four main options for the UK’s trade relationship with the EU after this time and concludes:
The European Economic Area (EEA) is the least disruptive option for trade, but it is unlikely to be reformed to limit free movement or give the UK voting rights on EU legislation
The Government urgently needs to decide whether or not the UK will remain in a customs union with the EU. Doing so would mean no border checks for goods between the UK and EU, but would restrict the UK’s ability to sign trade deals with the rest of the world. It does not cover services
A Free Trade Agreement (FTA) with the EU is the most flexible option and could lead to a bespoke deal, but would be complex and take longer than two years to negotiate. Even the most advanced FTAs do not provide terms for UK-EU trade equivalent to membership of the Single Market
Trade under World Trade Organisation (WTO) rules would have the most dramatic effect on trade, resulting in significant tariffs for goods and increased restrictions on services. Establishing independent WTO schedules will not be straightforward
The report recognises that the Government is seeking a bespoke agreement with the EU post-Brexit, but concludes that tailoring existing trade models is difficult. It notes that an FTA with the EU would take longer than two years to negotiate.
It concludes that:
The Government will need to agree a transitional trade arrangement between the UK leaving the EU and full implementation of new trade terms;
Temporary extension of participation in the customs union could be one important element of this; and
The Government should establish a clear ‘game plan’ for a transitional arrangement at the outset of negotiations under Article 50
Chairman of the EU External Affairs Sub-Committee, Baroness Verma, said:
“It is unlikely that a bespoke EU trade agreement can be agreed within Article 50’s two-year period, so a transitional deal is vital for protecting UK trade, and jobs that rely on trade”
“The Government should focus on trade with the EU and its World Trade Organisation (WTO) schedules. Deals with non-EU countries are contingent on the outcome of these negotiations, and need to be sequenced accordingly”
“The complexity of the issues and the tight timetable require a significant scale-up in capacity in government departments and clear leadership across Whitehall”
Lord Whitty, Chairman of the EU Internal Affairs Sub-Committee said:
“Trade-offs will need to be made in whatever trading framework we eventually agree. The Government is committed to curbing the free movement of people and the reach of the European Court of Justice. This is incompatible with full Single Market membership”
“While an FTA would provide the greatest flexibility, and no commitment to freedom of movement, there is no evidence that it could provide trade on terms equivalent to membership of the Single Market.”
3. Brexit: acquired rights report published, 14 December 2016
The EU Justice Committee publishes its report on Brexit: acquired rights.
The Justice Sub-Committee’s report, Brexit: acquired rights, concerns EU citizenship rights. These are fundamental rights under EU law to live, work, study, and raise a family in an EU Member State of one’s own choosing.
There was much talk before the referendum that these rights would somehow be protected as “acquired rights”. This was misleading. If the UK wants to preserve certain EU rights on withdrawal, it will have to ensure they are safeguarded in the withdrawal agreement.
The majority of the safeguarded rights are likely to be reciprocal with EU rights. The report recommends that a mechanism be established to ensure that UK law can take account of relevant developments in EU law, and, importantly, that EU law can take account of relevant developments in UK law. The report points to a precedent for this type of judicial cooperation.
If EU citizenship rights are not safeguarded the consequences will be severe: EU nationals in the UK and UK nationals in other EU Member States could lose their right to live and work in their country of choice.
EU nationals in the UK and UK nationals in other EU Member States are, unsurprisingly, deeply anxious about their futures. The Government should give a unilateral guarantee now that it will safeguard the EU citizenship rights of EU nationals in the UK when the UK withdraws from the EU. The overwhelming weight of the evidence the Sub-Committee received points to this as morally the right thing to do.
Failing this, there is a strong case for agreeing EU citizenship rights as a preliminary and separate element of the negotiations as soon as Article 50 is triggered.
The Sub-Committee received evidence suggesting that many EU nationals who have been in the UK for over five years – the minimum requirement for permanent residence under EU citizenship rules – may not be able to prove that they meet the criteria for permanent residence as an EU citizen. The report asks the Government to explain whether this consideration will influence the decision it makes on the cut-off point for deciding which EU nationals in the UK are given a permanent right to reside after Brexit.
4. Transitional period for financial services vital following Brexit, 15 December
- Transitional period for financial services vital following Brexit
- Report: Brexit: financial services
- Evidence: Brexit: financial services
- Inquiry: Brexit: financial services
The report highlights the importance of agreeing a transitional period for financial services, so that a ‘cliff edge’ is avoided, both at the moment of withdrawal following the Article 50 process and as the country moves to a new relationship with the EU. It finds that the third-country equivalence provisions in EU legislation are not a substitute for the passporting arrangements, which UK-based firms can currently use, as they are patchy and vulnerable to political influence. A priority for the Government in the negotiations should be to seek to bolster those provisions, should passporting not be an option. The Committee also concludes that the wider EU economy relies on the financial services currently provided in the UK, which may not be easily replicated elsewhere in the EU, and that, therefore, it would be in the EU’s interests to preserve access to its market for UK-based firms.
Commenting on the report, Baroness Falkner of Margravine, Chair of the EU Financial Affairs Sub-Committee, said:
“The Government has a lot of work to do. First of all, it must, early in the negotiation process, agree a transitional period so as to prevent UK based financial services firms from restructuring or relocating on the basis of a ‘worst-case’ scenario. Last week, France’s leading financial regulator told the BBC that some major banks are in the advanced stages of planning to shift some operations from London to Paris.
“Second, it should go into negotiations with the strongest possible evidence base. It needs to determine as precisely as possible which firms currently rely on passporting and the degree to which equivalence provisions might provide a substitute. We found those provisions to be patchy, unreliable and vulnerable to political influence: the Government should seek to bolster them wherever possible.
“The EU should also carefully consider the findings of this report. EU firms rely on the services provided in the UK, and pain caused to the UK’s financial sector will not be the EU’s gain, but New York’s.” “We are in danger of a lose-lose scenario if pragmatism does not prevail”.
- London is the world’s leading financial services centre, it is closely followed by New York. Other European cities are far behind. Any attempt to unpick London’s highly developed financial services ecosystem could result in much of the business lost by the UK relocating to New York or other financial centres outside the EU, rather than the EU.
- There is a chance that the UK will lose the ability to clear euro-denominated transactions following Brexit. But it is unlikely that relocation of the business to the Eurozone would provide the benefits to the wider EU economy currently provided by clearing in the UK. New York could provide such benefits, but if the business moved there, the EU would not benefit from repatriating the business.
- Some firms do not themselves appear to be aware of their reliance on current passporting arrangements. It would be in the interest of the firms themselves, as well as in the national interest, if they were to work with the Government and regulators to determine the true extent of such reliance.
- The UK financial sector employs 1.1 million people, of whom around 60,000 are EU nationals and 100,000 non-EU nationals. The ability to access highly-qualified staff and easily transfer them between the UK and the EU is a key issue for the financial services industry. This is even more important for the FinTech sector, which relies heavily on talent, including entrepreneurial talent, from overseas.
5. Report identifies risk to UK if police lose access to EU tools, 16 December 2016
- Report identifies risk to UK if police lose access to EU tools
- Report: Brexit: future UK-EU security and police cooperation
- Evidence: Brexit: future UK-EU security and police cooperation
- Inquiry: Brexit: future UK-EU security and police cooperation
Access to EU tools and agencies such as the European Arrest Warrant, Europol, Eurojust, the Schengen Information System (SIS II) and the European Criminal Records Information System or to credible replacements is vital to the ability of UK law enforcement agencies to fight crime and keep the public safe, says the EU Home Affairs Sub-Committee in its report published today.
Maintaining the strong security cooperation the UK currently has with the EU will be one of the Government’s top four overarching objectives in the forthcoming negotiations on the UK’s exit from, and future relationship with, the European Union. Only two years ago, many of the measures the UK is now due to leave were deemed vital by the then Home Secretary in order to “stop foreign criminals from coming to Britain, deal with European fighters coming back from Syria, stop British criminals evading justice abroad, prevent foreign criminals evading justice by hiding here, and get foreign criminals out of our prisons”. In their report, the Committee examine the main tools and agencies that underpin security and police cooperation between the UK and EU, and explore the options available to the Government for retaining or replacing them when the UK leaves the EU.
Commenting on the report, Baroness Prashar, Chairman of the Sub-Committee, said:
“Protecting the lives of its citizens is the first duty of Government and should be the overriding consideration during Brexit negotiations. Without access to these vital EU tools or credible substitutes, we would be seriously harming the capability of our law enforcement agencies to fight crime and keep the public safe.
“The report agrees with the Government on the need to pursue an ambitious and effective agreement with the EU in this area, but cautions that Ministers may encounter tension between two of their four overarching objectives in the negotiation: bringing back control of laws to Westminster, and maintaining strong security cooperation with the EU. In trying to resolve these tensions, the Government must ensure that there is no diminution in the level of safety and security afforded to the public.
“Considering how instrumental the UK has been in shaping EU cooperation on police and security matters we hope the EU acknowledges the vital contribution we have and can continue to make.
“The common threats facing the UK and its neighbours require police and security cooperation to be sustained into the future. It is striking that during the referendum campaign this aspect of the UK’s withdrawal from the EU did not attract the level of attention the Government is rightly attributing to it now.”
Conclusions and recommendations
The UK and the EU-27 share a strong mutual interest in sustaining police and security cooperation after the UK leaves the EU. In contract to other policy areas, all parties stand to gain from a positive outcome to this aspect of Brexit negotiations.
It seems inevitable that there will in practice be limits to how closely the UK and EU-27 can work together if they are no longer accountable to, and subject to oversight and adjudication by, the same supranational EU institutions, notably the CJEU.
The Government will need to devise and secure agreement for a future relationship with Europol that protects the capabilities upon which UK law enforcement has come to rely, which goes further than the operational agreements with Europol that other third countries have been able to reach thus far.
Access to EU law enforcement databases and data-sharing platforms is integral to day-to-day policing up and down the country. Were the UK to lose access to them upon leaving the EU, information that can currently be sources in seconds or hours could take days or week to retrieve, delivering an abrupt shock to UK policing and posing a risk to the safety of the public.
The data-sharing tools that witnesses identifies as top priorities for the UK – SIS II (the Second Generation Schengen Information System) and ECRIS (the European Criminal Records Information System) – are also those it may be hardest to negotiate access to because they are currently used by Schengen or EU members only.
The European Arrest Warrant is a critical component of the UK’s law enforcement capabilities. The most promising avenue for the Government to pursue may be to follow the precedent set by Norway and Iceland and seek a bilateral extradition agreement with the EU that mirrors the EAW’s provisions as far as possible. An operations gap between the EAW ceasing to apply and a suitable replacement coming into force would pose an unacceptable risk.
6. Brexit: fisheries report published, 17 December 2016
The EU Energy and Environment Sub-Committee publishes its report highlighting some of the opportunities and challenges related to managing shared fish stocks following the withdrawal of the United Kingdom from the European Union.
- Brexit: fisheries report published
- Report: Brexit: fisheries
- Evidence Volume: Brexit: fisheries
- Inquiry: Brexit: Fisheries
In withdrawing from the European Union the United Kingdom will withdraw from the Common Fisheries Policy (CFP), which has hitherto been the source of fisheries management policy in the UK and the EU. But fish know nothing of political borders and the majority of commercial fish stocks are shared between the UK and the EU or other European coastal states to some degree. Species of these fish may spend different stages of their life cycles in different nations’ Exclusive Economic Zones (EEZs), and their spawning grounds may be in a different region from that in which they are caught when mature. These stocks are vulnerable to exploitation.
The Committee concluded that in leaving the Common Fisheries Policy the UK will become an independent coastal state under international law. This provides the UK with an opportunity to review current fisheries management practices and replace them where appropriate, bearing in mind the obligation to manage fish sustainably, and taking account of the needs of coastal communities and the industry. The Committee concluded the UK will be able to control the access that foreign vessels have to fishing in UK waters and to renegotiate the UK’s share of Total Allowable Catches (TACs) for fish stocks that are shared with other countries, including the EU. But the Committee cautioned that commercial fish stocks that are shared with other states risk over-exploitation on either side of political borders and concluded that the Government must pursue new, co-operative relations with the EU and other European neighbors to manage these shared fish. The Committee also concluded that the Government may come under pressure to balance new quota shares and access arrangements against access to the Single Market. Key areas considered include:
- The opportunity to review fisheries management practices in the UK.
- The extent to which the UK could control foreign vessels’ fishing access to its waters after Brexit.
- The UK’s obligation as a coastal state to manage shared fish sustainably in co-operation with adjacent states.
- The importance of agreeing, and sharing, Total Allowable Catches (TACs) for shared fish stocks on the basis of scientific advice.
- The significance of trade in fish and seafood to the wider seafood industry.
- The importance of fisheries to coastal communities and the necessity of involving the voice of the fishing industry in the wider Brexit negotiations.