Theresa May delivers Brexit speech in Florence

Posted in UK and EU legal framework WTO and international trade

Theresa May has delivered an important speech on Brexit. Following limited progress in the initial rounds of negotiations, the Prime Minister’s speech marks an attempt to try to break the deadlock in negotiations between the UK and the EU.

In advance of the speech, it was reported in the press that the UK would offer to pay €20 billion to secure an implementation period for up to two years.  Although no figure was eventually referred to by the Prime Minister, she sought to reassure EU Member States that the UK would honour commitments it had made during its period of membership: net contributors to the EU budget would not have to pay more and net recipients would not receive less over the current budget plan. In addition, the Prime Minister confirmed that during any implementation period, the UK would effectively  remain within the Single Market and Customs Union. Freedom of movement would also continue, albeit with a registration system for new arrivals. 

As regards the future economic relationship, the Prime Minister suggested that neither the EEA model nor the Canadian model would be appropriate for the UK or the EU but instead sought a more creative and ambitious bespoke economic partnership, although little by way of detail was provided as to what this would look like.

Interestingly, the speech touched on the possibility of future regulatory divergence. The Prime Minister noted that the EU and UK are starting from a unique position of equivalence and commented that there are areas where areas where the UK would be willing to maintain uniformity. However  the Prime Minister rejected the notion that disputes could be resolved by either the CJEU or the UK courts – a new method of dispute resolution would need to be found. In other areas, she stated that the UK would have separate objectives which would inevitably lead to divergence in standards or enforcement mechanisms. Little clue was given as to which areas or industries fall into which category and businesses will be eager for greater detail on this issue. The Prime Minister did, however, emphasise the importance of business to the UK, highlighting strengths including a legal system respected around the world; a keen openness to foreign investment; and enthusiasm for innovation; [and] an ease of doing business.

Ultimately,  the Prime Minister emphasised that a successful deal would be in the interests of the both the UK and the EU, suggesting that both sides shared a responsibility for the change to proceed smoothly and sensibly. As in the UK’s Article 50 letter, repeated reference was made to continued cooperation on security issues once the UK left the EU.  The Prime Minister stated that the UK was committed to maintaining Europe’s security and indeed proposed a new security agreement, although what precisely this would entail was unclear.

Although the Prime Minister reiterated the aspiration to have a deep and special partnership between the UK and the EU in the future, the immediate objective of the speech will be to break the deadlock in the current negotiations in an effort to avoid a cliff edge in 2019. Since Article 50 was triggered, the UK has been keen to make progress on a future free trade agreement alongside talks about the terms of the UK’s departure, the EU has been clear that trade talks can only commence once sufficient progress is in relation to the UK’s withdrawal as set out in our previous blog post. This position has been reaffirmed by the EU in the initials rounds of negotiations.

Indeed, the day earlier, Michael Barnier suggested that there remained major uncertainty on each of the key issues of the first phase. Moreover, he noted that that time in which a deal was rapidly diminishing. Insofar as six months have elapsed since the UK’s Article 50 notification, only a year remained given that 6 months will be necessary to allow for ratification before 29 March 2019. He also made clear that there would be no transition period if no deal could be reached and that any transition period would require existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply.

Immediately following the Prime Minister’s speech, Michel Barnier described the speech as ‘constructive’ but indicated that its aspirations must be translated into negotiating positions to make meaningful progress. The fourth round of talks get underway shortly and businesses will be keen to see greater progress between the parties. 

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