Article 50 negotiations: Implications of 'no deal' Contents

Introduction

Background to the inquiry

1.Assuming successful passage of the European Union (Notification of Withdrawal) Bill 2016–17, the Government has stated its intention to trigger Article 50 of the Treaty on European Union (TEU) before the end of March 2017, launching the legal process that enables a state to withdraw from the European Union (see Box 1 below). The UK’s official notification to the EU of its intent to leave sets the clock ticking on a two-year negotiating period, at the end of which the UK automatically leaves the EU unless the UK and all 27 remaining EU states agree unanimously to extend the negotiations.

2.The UK’s withdrawal from the EU is without precedent. Until now, only Algeria (upon independence from France) and Greenland (which remained part of Denmark) have left the bloc. Both events took place long before the establishment of the Article 50 process, which was incorporated into the Treaties as part of the Treaty of Lisbon in 2008, nor were they of the same order as the departure of a large state such as the UK. It is therefore difficult to predict how the Article 50 process will progress. However, two years is a short period of time in which to complete such a challenging and complex task. As this Report outlines, there are many ways in which the talks could be stalled or derailed. It is therefore quite possible that the UK could reach the end of the negotiating period with no withdrawal agreement in place.

3.In November 2016, therefore, the Foreign Affairs Committee launched an inquiry on the implications for the UK if the two-year negotiating period mandated by Article 50 ends with no withdrawal agreement in place. We asked for evidence which addressed, in particular:–

Government refusal to submit evidence

4.We would normally expect the Government to submit evidence to all our inquiries. On 5 December 2016, the Rt Hon Sir Alan Duncan MP, Minister of State at the Foreign and Commonwealth Office with responsibility for Europe, wrote to the Committee to explain that the Government would not make a submission in this case. He said:

I can assure the Committee that the topic of this inquiry is of high importance to the Foreign and Commonwealth Office and colleagues across Government. HMG’s efforts will be focused on getting the best deal possible for the UK in the Article 50 negotiations with the EU. Since those negotiations are not yet underway, the Government is not currently in a position to provide written evidence to the Committee. I hope you appreciate our position and that this is not in any way meant to show any lack of respect for the Committee.1

5.The Committee responded to Sir Alan on 14 December, asking him to reconsider his stance in the light of the strong public interest in reducing uncertainty around the potential outcomes of the Article 50 negotiations.2 The same month, Sir Alan replied to the Committee with a short submission of evidence. He said:

I regret that my previous letter of 5 December was found unsatisfactory by the Committee. It was meant as an act of courtesy in response to the general invitation for evidence on your Committee’s website. I would like to reassure the Committee that, as I’m sure you’re aware, the Government takes the negotiations to leave the European Union very seriously and is preparing accordingly.

As you know, the Department for Exiting the European Union is the lead Department coordinating this work. As the Secretary of State for Exiting the EU explained to the Select Committee on Exiting the EU on 14 December, the Government is carrying out detailed analysis and a wide-ranging programme of engagement, allowing us to understand the concerns of organisations, institutions and companies across a variety of sectors, as well as to prepare to seize the opportunities that exiting the European Union might bring. The format and process for the coming negotiations are yet to be determined, but the Government will work to achieve a smooth and orderly withdrawal. The Prime Minister has been clear that we are committed to triggering Article 50 by the end of March next year, and we will set out our position in more detail ahead of negotiations. We are intent on getting the best possible deal for the UK, and our work to do so will involve a full range of scenario planning.3

Commissioned research

6.In January 2017, we invited the Bar Council and Professor Kenneth Armstrong of Cambridge University to provide evidence setting out the main legal and technical issues that would remain unresolved if the UK left the EU at the end of the Article 50 period with no deal in place. Our aim was to be able to explain what the impact of ‘no deal’ might be on day-to-day life, using hypothetical examples to illustrate the real-world implications of some of the potentially unresolved legal questions, including the possibility of sudden withdrawal from EU regulatory and other bodies.

7.Both the Bar Council and Professor Armstrong submitted drafts of their evidence to us in the week commencing 30 January. On that basis, we held an oral evidence session on 7 February in which we questioned Professor Armstrong and the authors of the Bar Council’s submission, Professor Derrick Wyatt QC and Hugo Leith, on their outline findings. Both parties submitted final versions of their evidence in the week following the evidence session.

8.We are very grateful to Professor Armstrong, Professor Wyatt and Mr Leith for the substantial pieces of work that they carried out at our request. Their evidence makes a significant contribution to the overall body of knowledge on the potential consequences of failing to agree a deal under Article 50. The two submissions are published in full as Appendices to this report. They are complementary: Professor Armstrong’s submission focuses in detail on the potential impact of sudden withdrawal from the EU’s regulatory and other bodies, and the Bar Council’s evidence is wide-ranging and extensive across a range of issues.

Work of other Committees

9.Several Committees in both Houses of Parliament have taken evidence or reported on aspects of the potential implications of failing to reach a deal under Article 50. We have referred to some of this evidence in this report, where possible. The Committee on Exiting the EU, the International Trade Committee, and the Treasury Committee have all taken evidence that is relevant to this question.4 The House of Lords European Union Committee and its various sub-committees have published a range of reports on issues including UK-Irish relations, trade, acquired rights, security and policing co-operation, and fisheries, many of which also include reference to the potential implications of ‘no deal’ in the relevant policy areas.5 This report, however, is the first Select Committee publication to focus specifically on the implications for Government and the country as a whole of ‘no deal’, with reference to a range of different sectors, policy areas and circumstances.


3 Rt Hon Sir Alan Duncan MP, Foreign and Commonwealth Office (REU0027) paras 2–3

4 Oral evidence taken before the Exiting the European Union Committee on 21 February 2017, HC (2016–17) 1072; Oral evidence taken before the International Trade Committee on 7 February 2017, HC (2016–17) 817-viii; Treasury Committee, UK’s future economic relationship with the EU inquiry, accessed 8 March 2017

5 Parliament, European Union Committee Publications, Session 2016–17, accessed 7 March 2017




10 March 2017