Brace! Brace! Britain is Exiting the Single Market

The year began with the outgoing UK Ambassador to the UK complaining that we didn’t yet know the UK Government’s negotiating objectives for Brexit. In her speech at Lancaster House in London on 17th January, the British Prime Minister Theresa May has given some stronger indications of her government’s direction of travel for the UK’s future relationship with the European Union. The headline political message is that the UK will be outside the Single Market.

In more formal legal terms, what this means is that the UK will not seek any type of association agreement with the EU. This will disappoint those, like Andrew Duff, for whom such an arrangement offered the softest of Brexit landings. Association agreements can be concluded between the EU and a non-Member State or an international organisation. The EU has a large number of these agreements including with countries in the EU’s Mediterranean near-neighbourhood like Israel, Morocco and Tunisia. In June 2014, the EU agreed an association agreement with Ukraine, including an extensive free trade agreement together with structures for policy and political cooperation beyond trade.

The difficulty with association agreements is that they require the unanimous consent of all EU Member States’ governments for signature, and can only formally enter into force once ratified in all Member States according to their own constitutional requirements. In the Netherlands, a citizen-initiated referendum – a result of the Dutch Advisory Referendum Act 2015 – put to voters the question of whether they were for, or against, the adoption of the Approval Act that would ratify the Ukraine agreement. On 6 April 2016, the electorate rejected the deal (albeit on a low turnout). This was only the second referendum to be held in the Netherlands on EU issues and, like the first – the referendum on the Constitutional Treaty held in June 2005 – it saw the rejection of what was on offer. So from a legal point of view, embarking on an association agreement would entail certain risks of delay or even failure and so create the kind of uncertainty that the Prime Minister made clear – as one of her twelve objectives for Brexit – had to be avoided.

The other obvious association agreement model is that which the European Free Trade Association has with the EU in the form of the European Economic Area agreement (Switzerland does not participate but has its own series of bilateral agreements with the EU). It became clear following the referendum that the EEA model – sometimes known rather reductively as the ‘Norway’ model was a potentially attractive option, whether as the end result or even as a transitional step to allow the UK to weather the ‘Brexit Storm’.

The EEA agreement entails the four freedoms that underpin the Single Market, but does not include a Customs Union – so EFTA states are free to pursue other trade agreements (EFTA currently has 27 free trade agreements). Participating EFTA states also have access to the EU’s research programmes like Horizon 2020 that allows for pan-European research collaboration and researcher mobility. But this level of engagement requires contributions to be paid with Norway making annual contributions of over €800 million.  The combination of free movement of workers and contributions to the EU effectively ruled this option out for the UK government. After all – and a point repeated by Donald Tusk in a tweet response to the PM’s speech – the Single Market was regarded by EU leaders as ‘indivisible’ such that the UK could not cherry-pick which bits it did or did not want.

Instead what is on the cards is a comprehensive free trade agreement. And despite the much-repeated phrase of a ‘Bespoke Brexit’ it is much more likely to be a Canada Copy. The Canada-EU agreement (CETA) is a very extensive free trade agreement. So extensive it was treated as a ‘mixed’ agreement because it was considered to stray beyond matters within the exclusive competence of the EU under the Common Commercial Policy (CCP). The precise scope of the CCP has been a matter of legal debate. But rightly or wrongly as a matter of political practice it was conceded by the European Commission that CETA was a mixed agreement and so required not just signature by Member State governments but also domestic ratification (much like association agreements). It will be recalled that there was a hiatus when the Belgian Walloon Parliament initially withheld its consent, raising concerns about the protection of labour and environmental standards as well as the novel dispute-resolution mechanism contained in the agreement. Legal challenges were also brought before the German Constitutional Court in a failed bit to halt German approval of the provisional application of the CETA agreement.

In an Opinion given in late December 2016, Advocate General Sharpston offered the European Court of Justice her view of the scope of the EU’s exclusive competence under the Common Commercial Policy. If accepted, it will give a relatively wide scope to that exclusive competence – trade in goods, trade and investment in renewable energy, trade in services and government procurement (excluding certain transport services), foreign direct investment, commercial aspects of intellectual property rights, competition law, trade in road and rail transport services to name some of the key areas. This would give Theresa May’s government a useful template as to how ambitious a free trade agreement could be and still fall within the scope of the EU’s exclusive commercial policy competence and so avoid some of the pitfalls and risks of domestic ratification.

None of which, of course, resolves the fundamental issue of whether the free trade agreement can be negotiated in parallel with the withdrawal agreement or whether it necessarily has to follow Brexit, when the UK will become a non-Member State. There will not, in my view, be a single Brexit agreement but rather a bundle of agreements and the next stage of clarification that is required is around the structure and sequencing of that bundle of agreements.

But if the approach which the British Prime Minister has set out is guided by certain legal considerations, it is at heart an attempt to translate the reasons behind the referendum result into a political programme for Brexit.

The referendum was not a general election. It did not elect a political party into power to deliver Brexit based on an election manifesto. UKIP wasn’t even directly linked to the lead campaign for Leave but was instead linked to other organisations including Leave.EU. The lead campaign was run by an organisation, Vote Leave. While some of the politicians associated with that campaign are now in government, Vote Leave has absolutely no responsibility for what will now happen. Indeed, one of the more dubious responses to the referendum result has been the Vote Leave Watch campaign which attempts to hold Vote Leave to account for promises made during the campaign. It is the government that needs to be held to account. The normal way in which a government is held to account is through the election process and through parliamentary oversight.

Although parties are not bound by their election manifestos in any legal sense, they are judged on them politically. David Cameron won the 2015 general election with a Conservative Manifesto that promised to ‘safeguard British interests in the Single Market’ and to ‘extend the Single Market to new areas like digital’, concluding that ‘we say: Yes to the Single Market’. A Conservative government under a new leader – and without a general election – is now saying ‘No’ to the Single Market.

The UK government’s direction of travel will also put the UK and Scottish Governments on a collision course. On 20 December 2016, the Scottish Government published its plans for ‘Scotland’s Place in Europe’. Its priorities are continuing UK participation in the Single Market – through the EEA – and the Customs Union. If that objective could not be obtained for the UK, then it proposed that a deal should be sought that would allow Scotland to participate in the EEA (it being accepted that the whole of the UK had to be either in or out of the Customs Union).

Not only did Theresa May make clear that the UK was leaving the Single Market and the Customs Union, she also wants to ‘Strengthen the Union’ with a plea ‘to face the future together’ and, more pointedly, the demand that ‘no new barriers to living and doing business within our own Union are created’. The Scottish Government’s plan is being discussed at the Joint Ministerial Committee (EU Negotiations) – the forum being used by the UK Government for formal talks with the devolved administrations – on 19th January but it is difficult to imagine circumstances in which Theresa May’s government will seek to carve out a special deal for Scotland. The Prime Minister’s speech is a way of backing the Scottish First Minister Nicola Sturgeon into a corner to either back down on her bid for a differentiated Brexit or to come out fighting for an independent Scotland.

As for parliamentary oversight, the key point in the Prime Minister’s speech is that the final agreement with the EU will be put to a vote in both House of Parliament. This is consistent with the view – and one put forward by the House of Lords EU Committee in its report on parliamentary scrutiny of Brexit – that the provisions of the Constitutional Reform and Governance Act 2010 would be triggered by a withdrawal agreement. But aside from the legalities, there are good reasons for the Government to engage with Parliament.

In the judgment to be delivered by the Supreme Court on 24th January, we will learn whether Parliament needs to give statutory authorization for Article 50 to be triggered. While much attention will be paid to the Supreme Court’s reasoning, in the end, the outcome is binary: either a statute is needed or it is not. If it is required, then Parliament will need to legislate to begin the withdrawal process. The political parties appear to accept that they do not have a mandate to block the legislation. The Liberal Democrats, however, may attempt to tag on a requirement for a second referendum before withdrawal takes place and any new agreement replaces the UK’s existing membership of the EU. To do so would be a mistake. It would suggest that Theresa May’s Brexit Government can only act on a direct mandate from the people through a referendum rather than being – like any government – primarily accountable to Parliament. If it is necessary to go back to the people it should be through a general election. If the Supreme Court decides that Parliament is not required to give statutory authorization, the arguments for parliamentary oversight of the Brexit negotiationsremain unchanged.

Of course – and as the Prime Minister herself made clear – the UK may end up with no deal at all if something acceptable to both sides cannot be agreed. That won’t be a hard landing. It will be a crash landing. Brace, brace.






One thought on “Brace! Brace! Britain is Exiting the Single Market

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  1. Absolutely agree with your metaphor of a plane crash here. I have been struck recently by the paucity of the “divorce” metaphor. That normalises Brexit – everyone knows someone who has been divorced, nearly half of all marriages in the UK end in divorce. And it also makes it sound as if it is something that could actually make you happier (if not wealthier), and that it might be as easy to fix any unhappiness as finding someone else to marry is.


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