Five flashpoints during round two of Brexit negotiations

Peter Foster
David Davis and Michael Barnier meet in Brussels: both sides have called for 'constructive' talks

David Davis, the Brexit secretary and Michel Barnier, the EU’s chief Brexit negotiator, meet in Brussels today for the first of four days of talks on Britain’s withdrawal from the European Union.

These are the first substantive round of negotiations between the two sides, although information has been exchanged between officials in the interim

The aim is to ensure that “sufficient progress” is made between the two parties by October for talks on trading terms and the UK-EU future relationship to begin. As Mr Barnier has said: "the clock is ticking".

Both sides have called for “constructive” talks, but tension is never far from the surface with private frustrations audible on both sides.

Here, we look at five possible flash-points in this week's negotiation.

1. A scrap over the cash

As in most divorces, it is money and the division of assets that risks blowing up all those good intentions to be ‘constructive’ for the sake of kids - or in this case the public on both sides of the Channel who stand to lose from a Brexit bust-up.

Britain’s departure leaves a €10bn euro-per-year ‘black hole’ in the EU’s budget which makes money a top issue for all the 27 remaining EU member states.

Mr Barnier voiced his growing irritation last week with the UK attitude towards the gross €100bn euro financial settlement that the EU is demanding, saying that this was not a ‘ransom’ demand, or even a ‘bill’ but a merely “settling accounts”.

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The British side does not see it this way and has refused to submit even a so-called Position Paper on the financial settlement, with negotiators telling The Telegraph they “simply do not recognise” the legal basis for many of the EU’s demands.

For example, the EU wants Britain to pay up front to cover the risk of default on EU loans to Ukraine and Ireland; for continued farm subsidies after the UK leaves in March 2019 and for longer term EU budget commitments (the so called Reste a Liquider) much of which - history shows - will never get spent.

Downing Street advisers have already quietly been advising City bosses to brace for a potential walkout over the money question in September, though negotiators say that is not a pre-ordained plan.

“If we’re being legalistic, that’s because the EU side is being legalistic,” said a senior UK negotiating source, “If they admit that many of their claims are basically political, then maybe we can do business. Not until.”

2. Citizens’ Rights round one - the family reunion question

The ‘children’ in the EU-UK divorce are the approximately 3m EU citizens living in the UK at the time of Brexit and the million or more Brits working and living on the EU side of the Channel. The status of these Citizens after Brexit is another major source of tension.

Britain has offered, on a reciprocal basis, to guarantee the rights of the 3m EU citizens by offering them ‘settled status’ in the UK, with the same rights to benefits and healthcare as UK citizens.

The EU is not happy with this offer, since it will reduce the rights EU citizens currently enjoy, including for example removing their rights to bring non-EU spouses and children to come and live with them.

Currently a Frenchman living in the UK can much more easily bring his, say, Indian or Malaysian, wife to live with him than a British citizen can - a situation the UK argues cannot, in equity, persist after Brexit.

The EU disagrees, arguing that citizens who arrived in the UK on the understanding they would have those rights, should keep them. Britain argues that 'times change' - and with them laws and statutory rights too.

“They EU needs to explain why EU people in the UK should have better rights than UK citizens,” says a British negotiator working on this file, “These are not fundamental human rights, which we accept cannot be changed, they are legal rights, which always evolve and vary country to country.”

3. Citizens’ Rights round two - the referee question

The first stage of the negotiations concerned the fate of European expatriates in the UK and Britons settled in Europe, the question of the Irish border and the 'financial regulation' between the UK and Europe

David Davis has already made clear that the EU cannot choose the referee for the Withdrawal Agreement- which the EU side has said must be the European Court of Justice, since the rights being protected are founded in Union law.

The British disagree. They argue that the EU citizens’ rights as agreed in the Withdrawal Agreement must be transposed into UK law and then the entire Agreement be policed by a mutually agreed dispute resolution mechanism.

To give reassurance to the EU side, the UK has said that the Agreement will also be “binding in international law” and argued this should be sufficient for the EU side. The EU disagree, pointing out that such an arrangement will not enable EU citizens to take cases individually to court if they feel their rights under the Agreement are being infringed at a later date.

UK negotiators acknowledge there is a major “trust deficit” between both sides on the question of the enforcement of the agreement - hence the need for legal certainty. If the money question is the most combustible area, this question of jurisdiction remains the knottiest legal issue in the talks.

4. The long arm of the EU law…

Theresa May has been clear that 'Brexit means Brexit'

Theresa May has always been clear that “Brexit means Brexit”and that specifically includes removing the UK from the jurisdiction of the ECJ.

Europe, however, seems to want to cling on to its powers long after Britain formally departs the Union in March 2019, arguing that the ECJ should be able to rule on any infringement of EU law if the facts of the case that took place before Brexit.

In practice that means the ECJ could be handing down rulings and fines on the UK years after Britain’s departure date - a position the UK side has formally opposed, arguing that only the handful of cases already pending in front of the court on Brexit day should be resolved by the ECJ.

British negotiators say they cannot budge easily on this question because of the practical effect of see EU judges ruling long after Brexit, but the EU has an expansive approach to its top court’s jurisdiction. In this lies the root of a significant potential dispute.

Seven kinds of Brexit

5. Cabinet chaos and the French connection

The final issue in the Brexit tinderbox is not a concrete negotiating point, but a general irritation and suspicion that has built up between the two sides after more than a year of so-called ‘phoney war’.

The sight of Philip Hammond openly bickering with more pro-Brexit ministers over the shape of Brexit has not inspired confidence on the EU side, and Mr Barnier has made little effort to disguise his irritation at the shortage of serious paperwork emanating from London.

Throw into this already tetchy mix the ultra-aggressive approach of the French towards the negotiations - Jeremy Browne, the City’s envoy to Brussels noted in a leaked memo this weekend that France is seeking to “actively disrupt and destroy” British finance - and you have a potentially explosive cocktail. “France sees Britain and the City of London as adversaries, not partners,” he observed.

The French attitude points to the reality that, for all the diplomatic flim-flam, these talks are taking place in an increasingly febrile atmosphere - with the UK now viewed as a potential EU adversary, rather than truculent or tolerated friend of the past.

“I hope we can keep a lid on the temperature of the talks,” said one senior EU diplomat attending the French Bastille Day celebrations in London last week, “but there are certainly days when I am not optimistic.”

Timeline of exit talks: Round two | What happens next in Britain's exit from the EU?

 

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