This could be the last time? Clocks go back in the UK. Brexit Update (5).

 

On September 12, 2018, the European Commission issued a draft directive which proposes the abolition of seasonal clock changes in the European Union. Each Member State would have to decide whether they want to stay on summer time or not, and then stick to it. If the directive is approved the last clock change in the EU will be on Sunday, March 31, 2019, two days after ‘exit day’. Will this affect the UK? That depends on whether there is a hard Brexit or not.

 

The UK and the EU are currently negotiating a treaty of withdrawal to cover the period after ‘exit day’ during which the future relationship between the parties will be negotiated.  During this period, which is scheduled to end at the end of 2020 (although it now seems possible there may be a further extension to this time) the UK would remain subject to EU law, including new legislation coming into effect in the transition period, but would not participate in the EU institutions. The UK would continue to benefit from the free trade agreements negotiated by the EU with third party states but would be free to start negotiating its own such agreements, although these could not come into effect until the end of the transition period. At this stage a new agreement should come into effect between the UK and the EU – or maybe not. Politically it is highly uncertain whether a withdrawal agreement will be capable of conclusion in which case the UK will leave the EU on ‘exit day’ in a ‘cliff-edge’ deal.

 

Prime Minister Theresa May has stated that the agreement is 95% concluded – but it is the 5% that is the sticking point. That is the ‘Irish Question’ which did for Gladstone. The question now is how to avoid a hard border between Northern Ireland, which as part of the UK will no longer be in the EU, and the Republic of Ireland, a member state of the EU. An open border is a fundamental part of the 1998 Good Friday Agreement which brought an end to the troubles. The UK and the EU have very different views on the meaning of article 49 of which states.

The United Kingdom remains committed to protecting North-South cooperation and to its guarantee of avoiding a hard border. Any future arrangements must be compatible with these overarching requirements. The United Kingdom’s intention is to achieve these objectives through the overall EU-UK relationship. Should this not be possible, the United Kingdom will propose specific solutions to address the unique circumstances of the island of Ireland. In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all island economy and the protection of the 1998 Agreement.”

This is the so-called ‘backstop’ which the EU would want to be permanent, and the UK would wish to be limited in time. The EU contemplates a customs union applying within Northern Ireland which would be politically unacceptable to the Democratic Unionist Party, on whose support Theresa May’s is dependent – the metaphorical border in the Irish Sea. Accordingly, the prospects of a cliff-edge Brexit look increasingly likely.[1]

However, an abrupt exit would not have to lead to a hard border on the island of Ireland. The EU will insist that the Republic erects such a border but that would be politically impossible for the Republic. Chancellor Philip Hammond has said that the UK would be required under WTO Rules to erect such a border. Up to a point, Chancellor. There is no WTO institution policing compliance with its rules. It is up to individual members to bring proceedings for violation of WTO rules. In the case of border between the North and the South that would lead to potential suits by non-EU states for violation of the principle of ‘most favoured nation’. However, the UK would be able to raise as a defence the security principle in Art. XXI of GATT, recently invoked by President Trump to justify imposed tariffs on imported steel and aluminum and threatened ones on imported cars. In any event it could just decide not to comply with any WTO award against it – as the EU has done for 20 years in relation to its ban on the import of hormone treated beef from Canada, the US– and take the consequences of trade sanctions from the other party.

For Banks and Insurers a cliff-edge Brexit would mean the immediate loss of ‘passporting’ rights – hence the rush of P&I Clubs setting up subsidiaries in EU states, such as Ireland, the Netherlands, Cyprus. There is even talk that national regulators in EU states may feel required to prevent payments being made out under policies with UK insurers that were written before ‘exit day’ although this would very probably constitute a breach of art 1, Protocol 1 of the ECHR as amounting to an expropriation of contractual rights which constitute ‘possessions’. [2]

 

[1] As of 26 October 2018 a leading bookmaker is offering odds of 8/11 that the withdrawal agreement will be approved by the Council of the EU and the UK Parliament before ‘exit day’ and evens that it won’t. Odd of 4/11 for Theresa May still to be PM on 1 April 2019, 5/6 for the UK to rejoin the EU by 2027, 15/8 for a second referendum to be held by the end of 2019 in the UK.

 

[2] This provides that “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.”

 

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