The initial reaction to Theresa May’s request to leave the EU has echoes of Charles de Gaulle’s famously dismissive “non!” when Britain tried to join.
There will be no special deal for the City of London, no parallel talks on trade (at least until divorce terms are agreed) and no privileged access to EU markets if Britain tries to become an offshore tax haven.
Twice as long as May’s letter on Wednesday, the European council’s draft negotiating guidelines contain some of the same perceived threats that muddied the waters when she invoked article 50.
Where the British worried their neighbours by seeming to link security cooperation to the successful conclusion of trade talks, the EU has introduced the future of Gibraltar into the mix – apparently at the behest of the Spanish government.
But not everything is getting more heated. Just as May’s letter was intended to improve the atmosphere, there are chinks of light in the emerging EU position. Britain will not have to wait to leave before it can talk about trade, it just needs to show progress on agreeing the divorce settlement.
Since both sides agree that some financial payment is required, there is less danger of things falling apart before talks start. What remains is a clutch of meatier challenges likely to consume negotiators for the next few months.
At the heart of the tension remains Britain’s desire to replicate the benefits of single market membership without accepting the core principle of free movement of people. Though the EU embraces for the first time May’s desire for “an ambitious free trade agreement”, it is adamant this must be accompanied by some harmonisation of social and tax rules to make sure Britain does not become the offshore pillager feared by De Gaulle and others.
There is a more practical short-term challenge for British business, which is that it is not likely to know where it will end up along this spectrum: somewhere close to full membership but with lots of regulation, or a low-cost pirate with no preferential market access at all?
Not only will the all-important trade talks have to wait until the divorce settlement has been broadly agreed, but even then things will only be at a framework level. As the devil is always in the detail, both sides envisage transitional arrangements that will provide temporary continuity for business after March 2019 while the detail is thrashed out.
But talks about transition will be third on the agenda, meaning British business may need to wait for talks about talks, talks about divorce and talks about talking about trade before they even find out how long their spell in purgatory will be. Many may decide to jump before waiting to find out.
It is a political imperative for the prime minister to be able to face the electorate in 2020 saying the UK has left the EU and she has delivered on her self-imposed commitment to make sure Brexit did indeed mean Brexit.
But the EU’s approach to the talks makes it increasingly clear that it will not be in her gift to claim she has met that objective, unless the UK walks out with no deal.
The EU looks as if it intends for the UK to be half in and half out by 2020. The compressed timetable, the EU’s chosen sequencing, the complexity of the negotiations, and EU insistence today that the EU body of law will apply in any transition makes a clean break in April 2019 harder to achieve.
May still hopes to have an agreement on the divorce, and the future trading relationship agreed within two years, the agreed timetable for the two sides to reach a deal before one or other could if they wished to pull the plug on the talks.
Before then she will need to win a vote in the Commons on a half complete deal probably in autumn 2018, and hope subsequently all EU institutions and the member states back the deal.
The status of EU law in the UK will be critical to May’s claim the UK has left. The draft guidelines do not insist in a transition that the European Court of Justice (ECJ) be the only arbiter of disputes between the UK as a non-member and the EU. But they state that “should a time-limited prolongation of union acquis [the relevant body of EU law] be considered, this would require existing union regulatory, budgetary, supervisory and enforcement instruments and structures to apply”. This would mean EU law, and budget contributions would continue to hold sway in the UK.
The draft also says any pending ECJ cases, and any cases arising from a dispute during the UK’s membership of the EU, would still be justiciable by the ECJ. May can present this as merely as a phase implementing the departure, but it is likely to look a lot messier than that.
Disentangling the remnants of the British empire including Gibraltar, Cyprus, Ireland and some of the overseas territories have emerged as the surprise stumbling blocks to an agreement in the draft guidelines.
The Irish government will feel the diplomatic shoe leather worn out trying to alert fellow EU members to the special status of the Irish border with Northern Ireland appears to have paid off. The draft guidelines say “flexible and imaginative solutions will be required, including with the aim of avoiding a hard border, while respecting the integrity of the Union legal order”.
There is also a reference to the UK sovereign base in Cyprus, including the “compatibility of the bilateral agreement between Cyprus and the UK with EU law”. Any deal will have to address the citizenship rights of those working in the base, though that looks surmountable. The guidelines are silent on the overseas territories but that may yet change.
The surprise is Gibraltar, where Spain has lobbied in effect to get a veto on the deal. “No agreement between the EU and the UK may apply to the territory of Gibraltar without the agreement between Spain and UK.” The wording puts pressure on Gibraltar to barter its sovereignty in exchange for access to the single market. Britain should not have been blindsided by the issue. It had been the subject of an EU Lords committee report and bilateral discussions, but officials were surprised by the starkness of the wording.
Progress on all of the above is also contingent on progress on the key exit demands set out by the EU.
The first two of these – a reciprocal deal on citizens’ rights and a “imaginative” solution to the Irish border question – are complex enough, but at least both sides agree on the desired end result. Haggling over money is likely to prove much more of a zero-sum game.
A worrying development from the British perspective is the EU is demanding it should cover “all legal and budgetary commitments as well as liabilities, including contingent liabilities”. Many of the spending commitments are far in the future and currently unfunded but, under this vision of Britain’s debt, the bill could get very high very quickly.
Britain could be forced to accept EU law, immigration controls and budget payments after it formally leaves the bloc in 2019 if it wants a transitional period to cushion the blow of Brexit, the EU’s draft negotiating guidelines suggest.
Published by the European council president, Donald Tusk, the guidelines contained a number of demands that could be difficult for Theresa May to sell to the public and the pro-Brexit element of her party, including an extended transitional deal that could spill into a 2020 general election.
They offered a softened proposal to allow talks on Britain’s future relationship with the EU to begin after “sufficient progress” has been made on negotiating a withdrawal agreement, which would include settling the UK’s bills and citizens’ rights.
But the EU also argued a trade deal could only be concluded once Britain had formally left and become a third country (a jurisdiction outside the European Economic Area), contradicting the prime minister’s claim to be confident it can be completed before “Brexit day” on 30 March 2019.
The guidelines make clear the bloc’s primary objective is to “preserve the integrity of the single market”, which “excludes participation based on a sector-by-sector approach”.
Two senior UK sources with knowledge of Whitehall and Brussels said the document clearly suggested the EU only believed there would be a “framework” for a future trade deal ready by March 2019, and the actual negotiations would take longer.
This could necessitate some kind of transitional arrangement during which the UK would remain subject to the jurisdiction of the EU, which would be difficult for Theresa May to sell to the right of the Conservative party and the electorate going into an election in 2020.
The draft text says: “To the extent necessary and legally possible, the negotiations may also seek to determine transitional arrangements which are in the interest of the union and, as appropriate, to provide for bridges towards the foreseeable framework for the future relationship.
“Any such transitional arrangements must be clearly defined, limited in time, and subject to effective enforcement mechanisms. Should a time-limited prolongation of union acquis be considered, this would require existing union regulatory, budgetary, supervisory and enforcement instruments and structures to apply.”
Rather than “transitional arrangements”, May and her Brexit secretary, David Davis, use the term “implementation phase” for a process which has been demanded by businesses to avoid taking the UK to an economic “cliff edge” on the day of departure. They would be likely to fight the idea of remaining under EU jurisdiction beyond the UK’s formal exit from the EU.
Speaking as the EU’s draft negotiating guidelines (pdf) were sent to national capitals on Friday, Tusk said the EU27 were united. Talks would be “difficult, complex and sometimes confrontational” but the bloc would not seek to punish Britain. “Brexit itself is already punitive enough,” he said.
The guidelines make clear it will be for the council to decide when “sufficient progress” has been made on the withdrawal deal, the priorities of which will include the rights of EU citizens in the UK and British citizens on the continent, and agreement on Britain’s legal and budgetary commitments and liabilities.
Tusk rejected the description of a “Brexit bill” and said it was simply a case of the UK having to pay for what successive British governments had signed up to fund. “It is only fair towards all those people, communities, scientists, farmers and so on to whom we, all the 28, promised and owe this money.”
The UK’s only land border with the EU, between Northern Ireland and the Republic, will also be a key priority in the withdrawal deal, with the EU calling for “flexible and imaginative solutions … with the aim of avoiding a hard border”.
Speaking alongside Tusk, Joseph Muscat, the prime minister of Malta, said the negotiations would undoubtedly be tough, “but it will not be a war” and the two sides needed to remain friends.
The draft guidelines may be revised over the next month, but are as likely to be strengthened as they are weakened. Tusk will chair a summit of EU27 leaders at the end of April to finalise the bloc’s negotiating position.
The European commission will then draft its more detailed negotiating directives, which are expected to be adopted at a meeting of European ministers on 22 May, after which formal talks between Davis and the EU’s chief negotiator, Michel Barnier, can begin.
The guidelines say the UK must accept EU rules such as the “four freedoms” (including free movement), continuing budget contributions, and the judicial oversight of the European court of justice during a transitional period likely to follow its departure in 2019 and before any free trade pact can be finalised.
May has said Britain aims to leave the single market and most of the customs union in favour of agreeing a bespoke free trade deal for individual industrial sectors, such as the automotive and pharmaceuticals industries.
But a non-member “cannot have the same rights and enjoy the same benefits as a member” and “there can be no ‘cherry picking’”, the guidelines say. Separate negotiations between individual EU states and the UK are also ruled out.
The guidelines specify that any trade deal must be on “a level playing field in terms of competition and state aid”, with safeguards against “unfair competitive advantages through … fiscal, social and environmental dumping”.
Downing Street sources said the the government was relatively relaxed about the guidelines, with one source saying there were “no surprises really”. A No 10 spokesman said: “These are draft guidelines and we look forward to beginning negotiations once they have been formally agreed by the 27 member states. “It is clear both sides wish to approach these talks constructively, and as the prime minister said this week, wish to ensure a deep and special partnership between the UK and the European Union.”
But Owen Smith, the former Labour leadership candidate, said Tusk’s statement showed how May’s “lofty rhetoric is colliding with hard reality”. The guidelines underlined the difficulty the government would have in keeping its Brexit promises, he said.
“Ministers and leave campaigners have presented Brexit as a cost-free option. It is not. There will be a cost to Brexit, we just do not know how deep it will be. It is time for the government to start levelling with the British people.”
Barnier has said he hopes the main outlines of the withdrawal agreement will be clear by autumn, enabling a broad agreement to be reached at a summit in December.
He has said he hopes to start talks with the UK on a future relationship in January 2018. But there are lingering fears the talks could collapse. The draft text says the EU wants an agreement, “but it will prepare itself to be able to handle the situation also if the negotiations were to fail”.
Noting that the UK was “four or five times” more dependent on exporting to the EU than the other way around, he said: “Threats are never a good instrument in a negotiation and empty threats are even poorer instruments in a negotiation.”
The official said that if the UK walked away without a deal, “it will be bad for the union, but I think it would be fair to say it would be very bad for the UK”.
On citizens’ rights, the commission said it was presumed that UK promises to protect the rights of EU nationals already in the country would include the right for those who have previously lived there to return, and for current and future spouses and dependents to join those already in the country.
Nicola Sturgeon has told Theresa May there is “no rational reason” to block the Scottish government’s request for a fresh independence referendum in her official letter to the prime minister.
In the message seeking powers to stage that vote, Sturgeon said agreeing a deal on a referendum should be “a relatively straightforward process” given both governments had already gone through it.
Citing a Scottish parliamentary vote on Tuesday to back her request for those powers, Sturgeon said she had a clear mandate to pursue a referendum based on long Scottish traditions of “popular sovereignty”.
Predicting May would again refuse to agree, Sturgeon warned she would set out a new strategy to secure that referendum after the Easter holidays – despite the UK government’s opposition.
“It is my firm view that the mandate of the Scottish parliament must be respected and progressed. The question is not if, but how,” Sturgeon wrote.
“I hope that will be by constructive discussion between our governments. However, if that is not yet possible, I will set out to the Scottish parliament the steps I intend to take to ensure that progress is made towards a referendum.”
In a short video posted on the Scottish government’s Twitter feed 25 minutes before her letter was published, the first minister took a conciliatory tone urging yes and no voters to back her case for a referendum.