Brexit: the EU and UK reached a compromise on the draft EU Withdrawal Agreement

Prime Minister Theresa May was able to reach an agreement with the EU after the Cabinet endorsement, in a political battle inside her party that saw the former Brexit secretary Dominic Raab resign from his post.

But the Brexit saga is far from over. The Withdrawal Agreement must be debated and voted first by the House of Commons (the British Parliament) on 12th December. If the text passes the vote of the House of Commons, the Withdrawal Agreement will have to be approved by European Parliament, European Council and national Parliaments of all EU member states.

An unprecedented challenge is ahead for Ms May as her text has a considerable number of opponents in the UK. A number of brexiteers and the Northern Irish Unionists believe that this agreement is worse than remaining in the EU as it would bind the UK to the EU without taking part to the political decisions. Labor and other opposition parties have declared that they will vote against it. The text needs 320 votes to pass and Ms May cannot count on this number yet.

It is hard to say what will happen if the text is rejected by the Commons. The worst option is to leave the EU without a deal on the “Brexit Day”, 30th March 2019. Ms May, facing strong opposition from a wing of her party, could be dismissed after a confidence vote. She may be replaced by a new Prime Minister who will negotiate a more advantageous deal for the UK with the EU. If this happens the two-year period of negotiation set out by art. 50 should be extended, obviously with the agreement of the EU. Other options, such as a new referendum or a general election, will require the approval from the BritishParliament.

The Withdrawal Agreement in detail

The Withdrawal Agreement stipulates the transposition of directly-applicable already-existing EU law into UK law, so as to provide legal continuity with the current legislation and consequently to avoid disruption for business. It foresees a transitional period until 31th December 2020 – which can be extended with a common agreement. During this period, the UK will remain in the EU customs union and the EU Single Market and the UK will keep applying EU law. This transitional period should give time to the UK and the EU to negotiate a new comprehensive free trade agreement which is expected to solve the thorniest issue of the Northern Irish border.

If an agreement on the new trade relations cannot be reached within the transition period, the "Protocol on Ireland/Northern Ireland" ("the Protocol") foresees the creation of a "single customs territory" between the EU and the UK (the “backstop solution”): the UK can sign Free trade agreements (FTA) with third countries but cannot apply a tariff which is lower than the EU's Common Customs Tariff and does not apply or grant in its customs territory any quotas, tariff-rate quotas or duty suspensions without prior agreement of the EU.

If the EU and UK cannot agree detailed provisions relating to their bilateral goods trade by 1 July 2020, Annex 3 to the Protocol will introduces a "A.UK. Movement Certificate" to demonstrate that the EU's tariffs and commercial policy measures have been applied by the exporting part of the single customs territory before the goods are shipped to the other part of the single customs territory. In other words, UK exporters wishing to export to the EU27 would have to request this Certificate from the UK authorities to demonstrate that their goods (or goods produced in the UK but incorporating materials imported from third countries) have been subject to the EU's tariffs and commercial policy measures, and vice versa.

With respect to regulatory requirements for products, Northern Ireland will have to continue to apply EU rules, with which the UK authorities will have to ensure compliance. Special checks and procedures will apply to ensure that goods from Mainland UK entering the EU27 via Northern Ireland comply with EU rules.