It has been widely observed that the new Brexit deal agreed by Boris Johnson leaves open the possibility of a form of no deal at the end of the transition. I have explained elsewhere how this differs to the version of no deal we are familiar with. While the ratification of the Withdrawal Agreement means it would be less disruptive overall, the consequences for UK-EU trade would be essentially the same—albeit with more time to prepare.
The problem arises because the transition is due to end in December 2020. The Withdrawal Agreement contains an option for the UK and EU to agree, by July, to extend the transition once for up to two years. But it is difficult to see a Conservative majority government opting for this. The party’s own manifesto commits to not doing so, and the conditions of an extension—particularly additional financial contributions—would be unpalatable. It seems likely that a Conservative majority government would go straight through the July deadline, making the new version of no deal the legal default in December 2020.
Some experts are growing increasingly alarmed about this possibility. In practice, however, there may be creative ways around the problem. It might be possible for the UK and EU to “fudge” the December deadline and buy more time—if it is needed. So how might that work?
There are broadly three things the UK and EU need to do in the next phase of negotiations: agree a trade deal, ratify and then implement it. The options available to the UK and EU in late 2020 will depend on which of these tasks is outstanding. A scenario where a deal is agreed but not ratified or implemented will be easier to address than one where a deal has not been agreed at all.
On ratification, a UK-EU trade deal is likely to require approval by all 27 national parliaments—and in some cases, regional parliaments too. This, unsurprisingly, takes time. However, trade deals can be applied “provisionally” before ratification is complete.
Provisional application has limits. Only those parts of the deal which come under “EU competence” could be provisionally applied, and this would not cover many aspects of services trade which remain the competence of member states. Further, agreement and preparation for provisional application is itself a process which can take time. Nevertheless, this tried and tested method is likely to be helpful to the UK and EU, and would prevent the two sides from being tipped into an “accidental no deal” scenario by a failure to get an agreement through over 30 different parliaments, despite it already having been agreed in principle.
Even if a deal is agreed and ratified, it will still need to be implemented. Replacing full single market membership with a UK-EU FTA will be a major economic step change; governments and businesses will need time to prepare for new customs systems, operating processes and “rules of origin” requirements. Additionally, implementation can only be done properly after the negotiation phase, not during it; after all, businesses won’t know exactly what they need to implement until a deal has been agreed. But there may be scope to phase in the implementation of different aspects of a UK-EU deal over time, with agreements on security, data and aviation likely to be ready before the main trade deal.
While both provisional application and an implementation period may help reduce the time pressure if a deal is agreed in principle, fudging the deadline will be more challenging if there is no prospect of the UK and EU reaching any agreement by December 2020. Nevertheless, it may be possible with political will on both sides.
There are two broad possibilities here. One would be to amend the Withdrawal Agreement itself to retroactively change the provisions for transition extension, and allow it to be agreed after the July deadline. This would need agreement on both sides, including on additional financial contributions from the UK during any extension. Retroactively amending the Withdrawal Agreement would also probably need to involve, at the very least, the same legal procedures as were used to adopt it: approval by a qualified majority of the EU Council, and votes in the EU Parliament and the UK Parliament. (The Withdrawal Agreement does allow the UK-EU “Joint Committee” to amend some parts of the legal text at a later date, but this does not apply to the transition provisions.)
Alternatively, the UK and EU could agree to some sort of bilateral temporary “standstill” agreement to stretch beyond December 2020. This would be different to the transition period, and would probably be called something else, but could operate in a very similar way in practice. While there are questions over what the EU legal basis of such an agreement would be, it might be possible if there is political will—though the less it looks like the original transition, the more difficult it will be to agree. Whether that political will exists is a different question, and will partly depend on how the negotiations have gone up to that point. There is clearly a big political difference between a scenario where the two sides are close to an agreement but need a little extra time (either for final negotiations or for ratification and implementation), and one where negotiations have broken down and there is no agreement in sight. The size of any Conservative majority, and the relative influence of pro-deal and more hardline factions within it, is also likely to come into play.
Ultimately, none of these routes are certain, and all come with political and legal obstacles; there is no room for complacency, and preparations for no deal must continue on both sides of the Channel. But the July 2020 deadline for extending the transition does not have to be the last chance. If both sides decide in November 2020 that they want more time, then a way can probably be found.