Brexit negotiations

David Davis

Michel Barnier

Lead negotiators for the UK and for the EU.

The Brexit negotiations are the negotiations between the United Kingdom and the European Union, in the aftermath of the United Kingdom European Union membership referendum in June 2016.

The Brexit negotiating period began on 29 March 2017 when the United Kingdom served the withdrawal notice under Article 50 of the Treaty on European Union. The period for negotiation stated in Article 50 is two years from notification, unless an extension is agreed.

Negotiations officially began on 19 June 2017 when British Secretary of State for Exiting the European Union, David Davis, arrived in Brussels to negotiate the Brexit terms with European Chief Negotiator for the United Kingdom Exiting the European Union, Michel Barnier.

Preparatory work, and intentions

According to the European parliament, "For the moment, it appears that the two sides have different views on the sequencing and scope of the negotiations, and notably the cross-over between the withdrawal agreement and the structure of future relations, and this divergence itself may be one of the first major challenges to overcome."

UK negotiation

• David Davis, Secretary of State for Exiting the European Union.
• Sir Tim Barrow, UK Permanent Representative to the EU

• Theresa May, Prime Minister of the United Kingdom

The Department for Exiting the European Union is responsible for overseeing the negotiations to leave the EU and for establishing the future relationship between the UK and EU.

The proposed principles were set out in the Article 50 notification:

• Constructive discussions
• Citizens first
• Comprehensive agreement
• Minimise disruption

• Ireland/Northern Ireland position
• Technical talks on detailed policy
• Work together on European values

The Prime Minister's formal letter of notification was delivered in Brussels on 29 March 2017. It included withdrawal from the European Atomic Energy Community. The letter recognized that consequences for the UK of leaving the EU included loss of influence over the rules that affect the European economy, and UK companies trading within the EU aligning with rules agreed by institutions of which the UK would no longer be part. It proposed agreeing to seven principles for the conduct of the withdrawal negotiation. These are for:

i. engaging with one another constructively and respectfully, in a spirit of sincere cooperation.

ii. aiming to strike an early agreement about the rights of the many EU citizens living in the United Kingdom, and UK citizens living elsewhere in the European Union.

iii. working towards securing a comprehensive agreement, taking in both economic and security cooperation, and agreeing the terms of our future partnership alongside those of our withdrawal from the EU.

iv. working together to minimise disruption and giving as much certainty as possible, letting people and businesses in the UK and the EU benefit from implementation periods to adjust in an orderly way to new arrangements.

v. in particular, paying attention to the UK’s unique relationship with the Republic of Ireland and the importance of the peace process in Northern Ireland.

vi. beginning technical talks on detailed policy areas as soon as possible, including a Free Trade Agreement covering sectors crucial to our linked economies such as financial services and network industries.

vii. continuing to work together to advance and protect our shared liberal, democratic values of Europe, to ensure that Europe remains able to lead in the world, projecting its values and defending itself from security threats.

Role of the countries of the United Kingdom

Further information: Countries of the United Kingdom

The constitutional lawyer and retired German Supreme Court judge Udo Di Fabio has stated that separate negotiations of the EU institutions with Scotland or Northern Ireland would constitute a violation of the Lisbon Treaty, according to which the integrity of a member country is explicitly put under protection.

UK general election

The start of negotiations was delayed until after the United Kingdom general election, which took place on 8 June 2017. Antonio Tajani, speaking on 20 April said that the early election should bring stability to the UK, which would have been good for negotiations. In the event, the election led to a hung parliament which is expected to increase instability.

EU27 negotiation

See also: European Union negotiating directives for Brexit

• Michel Barnier, European Commission chief negotiator
• Jean-Claude Juncker, President of the European Commission
• Donald Tusk, President of the European Council

• Guy Verhofstadt, lead negotiator for the European Parliament
• Antonio Tajani, President of the European Parliament

Following the United Kingdom's notification under Article 50, draft guidelines for the negotiations were sent to EU delegations of the 27 other member states (the EU27). The draft, prepared by the President of the European Council, states that the guidelines define the framework for negotiations under Article 50 and set out the overall positions and principles that the Union will pursue throughout the negotiation. It states that in the negotiations the Union's overall objective will be to preserve its interests, those of its Member States, its citizens and its businesses, and that, in the best interest of both sides, the Union will be constructive throughout and strive to find an agreement. The draft sets out two Core Principles:

"1. The European Council will continue to base itself on the principles set out in the statement of Heads of State or Government and of the Presidents of the European Council and the European Commission on 29 June 2016. It reiterates its wish to have the United Kingdom as a close partner in the future. It further reiterates that any agreement with the United Kingdom will have to be based on a balance of rights and obligations, and ensure a level-playing field. Preserving the integrity of the European Single Market excludes participation based on a sector-by-sector approach. A non-member of the Union, that does not live up to the same obligations as a member, cannot have the same rights and enjoy the same benefits as a member. In this context, the European Council welcomes the recognition by the British Government that the four freedoms of the Single Market are indivisible and that there can be no "cherry picking". "

"2. Negotiations under Article 50 TEU (Treaty on European Union) will be conducted as a single package. In accordance with the principle that nothing is agreed until everything is agreed, individual items cannot be settled separately. The Union will approach the negotiations with unified positions, and will engage with the United Kingdom exclusively through the channels set out in these guidelines and in the negotiating directives. So as not to undercut the position of the Union, there will be no separate negotiations between individual Member States and the United Kingdom on matters pertaining to the withdrawal of the United Kingdom from the Union."

According to the European Parliament, the withdrawal agreement and any possible transitional arrangement(s) should enter into force "well before the elections to the European Parliament of May 2019", and the negotiations should focus on:

• The legal status of European Union citizens living or having lived in the United Kingdom and of United Kingdom citizens living or having lived in other Member States, as well as other provisions concerning their rights;
• The settlement of financial obligations between the United Kingdom and the European Union;
• The European Union's external border;
• The clarification of the status of the United Kingdom's international commitments taken as a Member of the European Union, given that the European Union of 27 Member States will be the legal successor of the European Union of 28 Member States;
• Legal certainty for legal entities, including companies;
• The designation of the Court of Justice of the European Union as the competent authority for the interpretation and enforcement of the withdrawal agreement.

On 18 April 2017, a spokesman for Donald Tusk said "We expect to have the Brexit guidelines adopted by the European Council on 29 April and, following that, the Brexit negotiating directives ready on 22 May". On 29 April the EU27 unanimously endorsed the draft guidelines with no debate.

In a speech to a plenary session of the European Committee of the Regions in Brussels on 22 March 2017, Barnier, as EU Chief Negotiator for the Preparation and Conduct of the Negotiations, said that the EU wanted to succeed by reaching a deal with the British, not against them.

On 22 May the European Commission Council, following the approval of negotiating directives which had been adopted by strong qualified majority (72% of the 27 Member States, i.e. 20 Member States representing 65% of the population of the EU27), authorised the opening of Article 50 discussions with the Commission appointed as the negotiator. It further confirmed that all agendas, EU position papers, Non-papers and EU text proposals will be released to the public and published on line.

Phases

EU27 guidelines include:

• Agreement on the so-called "divorce bill"
• Agreement on rights of EU citizens living in the UK
• Agreement on the border between Northern Ireland and the Republic

within the withdrawal phase.

The second phase, covering the post-Brexit relationship between the EU27 and the UK, will begin "as soon as the European Council decides that sufficient progress has been made in the first phase towards reaching a satisfactory agreement on the arrangements for an orderly withdrawal". The earliest opportunity for this decision is expected to be 19 October 2017, at a summit of EU leaders.

Negotiation policy

"We recognise how important it is to provide business, the public sector and the public with as much certainty as possible. So ahead of, and throughout the negotiations, we will provide certainty wherever we can. We will provide as much information as we can without undermining the national interest."

Government white paper The United Kingdom’s exit from and new partnership with the European Union, February 2017, p.9 [8]

Some effects of the UK withdrawal could emerge before the UK and the EU27 conclude the Article 50 negotiation, as a result of policies existing when the negotiation begins, or some change of policy later. At the outset policy provisions binding on the EU include principles, aspirations and objectives set out in the TEU (Treaty on European Union) Preamble and Articles, of which

Article 3 mentions the promotion of "scientific and technological advance" in a context governed by "The Union's aim is to promote peace, its values and the well-being of its peoples", the Union's internal market, "work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress", and the requirement that "The Union shall pursue its objectives by appropriate means commensurate with the competences which are conferred upon it in the Treaties",

and

Article 4 mentions "competences not conferred upon the Union in the Treaties remain with the Member States".

Policies mentioned in the Preamble include:

– Achieve the strengthening and convergence of Member States' economies and establish an economic and monetary union including a single and stable currency,

– Promote economic and social progress for their peoples, taking into account the principle of sustainable development and within the context of the accomplishment of the internal market and of reinforced cohesion and environmental protection, and implement policies ensuring that advances in economic integration are accompanied by parallel progress in other fields,

– Establish a citizenship common to nationals of their countries,

– Implement a common foreign and security policy including the progressive framing of a common defence policy, thereby reinforcing the European identity and its independence in order to promote peace, security and progress in Europe and in the world,

– Facilitate the free movement of persons, while ensuring the safety and security of their peoples, by establishing an area of freedom, security and justice.

– Continue the process of creating an ever-closer union among the peoples of Europe, in which decisions are taken as closely as possible to the citizen in accordance with the principle of subsidiarity.

UK policy was stated in a white paper published in February 2017: The United Kingdom’s exit from and new partnership with the European Union. In the white paper, UK negotiating policy was set out as twelve guiding principles:

1 Providing certainty and clarity, including a "Great Repeal Bill" to remove the European Communities Act 1972 from the statute book and convert existing EU law into domestic law.

2 Taking control of the UK statute book and ending the jurisdiction of the Court of Justice of the European Union in the UK.

3 Strengthening the Union of all parts of the Kingdom, and remaining fully committed to the Belfast Agreement and its successors.

4 Working to deliver a practical solution that allows for the maintenance of the Common Travel Area whilst protecting the integrity of the UK immigration system, and which protects the strong ties with Ireland.

5 Controlling the number of EU nationals coming to the UK.

6 Securing the status of EU citizens who are already living in the UK, and that of UK nationals in other Member States.

7 Protecting and enhancing existing workers’ rights.

8 Forging a new partnership with the EU, including a wide reaching free trade agreement, and seeking a mutually beneficial new customs agreement with the EU.

9 Forging free trade relationships across the world.

10 Remaining at the vanguard of science and innovation and seeking continued close collaboration with the UK's European partners.

11 Continuing to work with the EU to preserve European security, to fight terrorism, and to uphold justice across Europe.

12 Seeking a phased process of implementation, in which both the UK and the EU institutions and the remaining EU Member States prepare for the new arrangements.

Pre–negotiation meetings

A meeting at 10 Downing Street took place on 6 April 2017 between Theresa May and Donald Tusk to discuss "the way ahead on Brexit". Another meeting took place in London on 20 April 2017, this time between Theresa May and Antonio Tajani to discuss the rights of EU citizens. After the 20 April meeting, Antonio Tajani said that the UK and EU27 timetables fitted well together, with a two-year exit deal negotiation followed by a three-year transition phase. A 10 Downing Street meeting between Theresa May, Michel Barnier and Jean-Claude Juncker took place on 26 April to discuss the withdrawal process. May reiterated the UK's aim for a "deep and special partnership" after Brexit.

At a meeting on 29 April 2017 the EU27 unanimously endorsed the draft guidelines with no debate. A meeting took place between Michel Barnier and both houses of the Irish parliament on 11 May, where Barnier assured members of Dáil Éireann and Seanad Éireann that Europe would "work with you to avoid a hard border". Barnier went on to say that "the Irish border issue would be one of his three priorities in the negotiations," and that "there is always an answer".

The UK retains its full EU rights until Brexit, and the EU is seeking to increase their budget, leading to the possibility that Britain may veto EU budget increases, which in the immediate term amount to 4 billion euros. A continued British veto would have far-reaching consequences and "will hurt us" according to German MEP Jens Geier.

Negotiations

2017

June

On 19 June 2017, David Davis arrived in Brussels to start negotiations with Michel Barnier. Terms of reference were agreed, and dates were set for four-week cycles, to culminate in a fifth round of negotiations in the week commencing 9 October. Negotiating groups were established for three topics: citizens' rights, the financial settlement and "other separation issues", with a separate dialogue on Ireland / Northern Ireland to be led by Barnier and Davis.

July

Four days of talks, largely between officials, were held in Brussels on July 17–20. Progress was made in understanding each other's positions.

On citizens' rights, a joint paper compared the positions of the two parties in tabular form. On Irish border issues, both parties stated that they remained committed to the Good Friday Agreement. Michel Barnier called for clarification from the UK in the August round on the financial settlement, citizens’ rights and Ireland, including on how the UK intends to maintain the Common Travel Area.

August

Talks were held in Brussels on August 28–31. Agreement was reached on points including protecting the rights of frontier workers (those living in one country and working in another); recognition by the UK of social security contributions made both before and after exit; and continuation of healthcare reimbursement for UK citizens who are in the EU27 on exit day and vice versa. The joint paper comparing the two parties' positions was updated.

Speaking at the conclusion of the talks, Michel Barnier highlighted two areas of disagreement: the role of the European Court of Justice in enforcing citizens' rights, and the extent of the UK's financial obligations. He stated "Time is passing quickly ... At the current speed, we are far from being able to recommend to the European Council that there has been sufficient progress in order to start discussions on the future relationship".

September

The fourth round of talks began on 25 September, having been delayed by one week as Theresa May was due to deliver a speech in Florence on the 22nd. She proposed a transitional "implementation period" of "around two years" and said that the UK "will honour commitments" so as to not make other EU countries pay more or receive less during the current EU budget period.

The programme for the round of talks arranged for meetings between the "Principals" and for three negotiating groups covering citizens’ rights, financial settlement and other separation issues, while Northern Ireland issues would be addressed by the "Coordinators", and governance of the withdrawal agreement was also for discussion at technical level.

David Davis repeated Theresa May's request for a time-limited implementation period. The UK offered to incorporate the Withdrawal Agreement into UK law and ensure the UK courts can refer directly to it, but there was no agreement on the role of the European Court of Justice and the standing of future ECJ case law.

Mr Barnier welcomed the UK's commitment regarding payments into the current EU budget plan, but expressed reservations about obligations beyond 2020. Mr Davis said the UK was not yet in a position to quantify its commitments.

There were constructive discussions on the Irish border, but no substantive progress.

The UK accepted the EU's definition of 'citizens lawfully resident before the cut off date', although that date was not agreed. There was agreement on the definitions of permanent and temporary residence. The UK offered a more generous "right of return" (after absence for longer than two consecutive years) than the minimum rights under current EU law. Rights of future family members remains a point of disagreement. The joint paper comparing the two parties' positions was again updated.

October

The fifth round of negotiations was held on 9, 10 and 12 October. There was technical progress on citizens' rights, although divergences remained on aspects of family reunion and the export from the UK of social security benefits. The UK stated an intention to offer a simple process for registration of EU citizens. On the Irish border, work continued to map out current areas of cooperation and build a picture of the future challenges.

On the financial settlement, Michel Barnier welcomed the commitment made by Theresa May in her Florence speech, but no negotiations took place because the UK was not ready to give details of what it would pay. Barnier said this issue had reached an impasse.

This round of talks completed the timetable agreed in June, with no further rounds scheduled.

Detailed history of negotiations

On 28 June 2016, five days after the referendum, Chancellor of Germany Angela Merkel announced to the German parliament the forthcoming EU negotiation position: the UK could only remain in the European Single Market (ESM) if the UK accepted EU migrants. There would be no cherrypicking (Rosinenpicken – raisin picking) of the ESM's four conditions (free movement of goods, capital, services and labour). While she expected the UK to remain an important NATO partner, the EU's priority was unity and self-preservation. She warned the UK not to delude itself. The next day, Tusk confirmed that the UK would not be allowed access to the ESM unless they accepted its four freedoms of movement for goods, capital, services, and people.

In contrast, at her October 2016 party conference, Prime Minister Theresa May emphasised that ending the jurisdiction of EU law and free movement from Europe were priorities. She wished "to give British companies the maximum freedom to trade with and operate in the Single Market – and let European businesses do the same here", but not at the expense of losing sovereignty.

In November 2016, May proposed that Britain and the other EU countries mutually guarantee the residency rights of the 3.3 million EU immigrants in Britain and those of the 1.2 million British citizens living on the Continent, in order to exclude their fates being bargained during Brexit negotiations. Despite initial approval from a majority of EU states, May's proposal was blocked by European Council President Tusk and German Chancellor Merkel.

In January 2017, the Prime Minister presented 12 negotiating objectives and confirmed that the UK government would not seek permanent single market membership. The European Parliament's lead negotiator Guy Verhofstadt responded that there could be no "cherry-picking" by the UK in the talks.

The statutory period for negotiation began on 29 March 2017, when the letter notifying withdrawal, signed by the British Prime Minister, was handed to the president of the European Council. The letter called for a "deep and special relationship" between the UK and the EU, and warned that failure to reach an agreement would result in EU-UK trade under World Trade Organisation terms, and a weakening of the UK's cooperation in the fight against crime and terrorism. The letter suggested prioritising an early deal on the rights of EU citizens in the UK and vice-versa. In the letter, the Prime Minister reasoned that, as the EU leaders did not wish "cherry picking" of the ESM, the UK would not seek to remain within the ESM. Instead, the UK would seek a free trade agreement with the EU. In response, Merkel insisted that the EU would not discuss future cooperation without first settling the divorce, Verhofstadt referred to the letter as "blackmail" with regard to the point on security and terrorism, and EU Commission president Jean-Claude Juncker said the UK's decision to quit the block was a "choice they will regret one day".

On 29 April 2017, immediately after the first round of French presidential elections, the EU27 heads of state accepted, without discussion, negotiating guidelines prepared by the President of the European Council. The guidelines take the view that Article 50 permits a two-phased negotiation, whereby the UK first needs to agree to a financial commitment and to lifelong benefits for EU citizens in Britain, before the EU27 will entertain negotiations on a future relationship. In the requested first phase of the withdrawal negotiation, the EU27 negotiators demand the UK pay a "divorce bill", initially estimated as amounting up to £52bn and then, after additional financial demands from Germany, France, and Poland, amounting to £92bn. Nevertheless, a report of the European Union Committee of the House of Lords published on 4 March 2017 states that if there is no post-Brexit deal at the end of the two-year negotiating period, the UK could withdraw without payment. Similarly, the Prime Minister insisted to EU Commission President Juncker that talks about the future UK-EU relationship should start early and that Britain did not owe any money to the EU under the current treaties.

On the EU27 side, unflattering details of a four-way meeting between Prime Minister Theresa May, Brexit Minister David Davis, EU Commission President Juncker and his chief-of-staff Martin Selmayr were leaked to the German newspaper Frankfurter Allgemeine Sonntagszeitung, presumably by Martin Selmayr. According to the leaked description, Juncker claimed that Theresa May was "living in another galaxy" when suggesting that British and EU migrant rights could be rapidly negotiated and agreed in the course of June 2017. German Chancellor Angela Merkel concurred the next day by stating that there were "illusions" on the British side. A few days later, Juncker disclaimed responsibility and called the leak a mistake, Der Spiegel magazine reported that Angela Merkel was annoyed with Juncker for the leak, while European Council President Tusk admonished participants to use discretion during the negotiations. The background for German nervousness allegedly is the possibility that Britain may veto EU budget increases, which for example in the immediate term amount to 4 billion euros. A continued British veto would have far-reaching consequences and "will hurt us" according to German MEP Jens Geier.

On 22 May 2017, the European Council authorised its negotiators to start the Brexit talks and it adopted its negotiating directives. The first day of talks took place on 19 June, where Davis and Barnier agreed to prioritise the question of residency rights, while Davis conceded that a discussion of the Northern Irish border would have to await future trade agreements.

On 22 June 2017, Prime Minister May guaranteed, at a European Council meeting in Brussels, that no EU citizen living legally in the UK would be forced to leave, and she offered that any EU citizen living in the UK for more than 5 years until an unspecified deadline between March 2017 and March 2019 would enjoy the same rights as a UK citizen, conditional on the EU providing the same offer to British expatriates living in the EU. The EU leaders did not immediately reciprocate the offer, with Council President Tusk objecting that the European Council is not a forum for the Brexit negotiations, and Commission president Juncker stating "I’m not negotiating here."

The Prime Minister detailed her residency proposals in the House of Commons on 26 June 2017, but drew no concessions from EU negotiators, who had declined to expedite agreement on expatriates by the end of June 2017, and who are hoping for European courts to continue to have jurisdiction in the UK with regards to EU citizens, according to their negotiation aims published in May 2017.

The second round of negotiations began in Brussels in mid-July 2017. It is considered the beginning of substantial negotiations, with 98 UK negotiators and 45 EU27 negotiators. Progress is being made on the Northern Irish border question, whereas UK negotiators have requested a detailed breakdown of the "divorce bill" demand estimated at 65 billion euros, while the EU negotiators criticise the UK's citizenship rights offer. At the concluding press conference, David Davis did not commit to a net payment by the UK to the EU with regards to the requested divorce bill, while Michel Barnier explained that he would not compromise on his demand for the European Court of Justice to have continuing jurisdiction over the rights of EU citizens living in the UK after Brexit, rejecting the compromise proposal of a new international body made up of British and EU judges.

On 16 August 2017, the British government disclosed the first of several papers detailing British ambitions following Brexit, discussing trade and customs arrangements. On 23 August 2017, Prime Minister Theresa May announced that Britain will leave the EU Court of Justice's direct jurisdiction when the Brexit transition period that is planned after March 2019 ends, but that both the British courts and the EU Court of Justice will also keep "half an eye" on each other's rulings afterwards as well. One of the UK government's position papers published in August called for no additional restrictions for goods already on the market in the UK and EU.

The third round of negotiations began in Brussels on 28 August 2017. The European Commission president Juncker criticised the UK's Brexit negotiations, saying none of the papers provided so far were satisfactory and that there would be no trade negotiations between the EU and UK until the divorce bill was settled. He had previously claimed that the UK's Brexit bill could be £55bn (which Theresa May's government ministers consider unacceptable) and EU Budget Commissioner Günther Oettinger voiced the view that the UK should make payments until 2023. The Irish Times explained the disagreement as follows: British negotiators referred to the seven-year Multiannual Financial Framework (MFF or Maff) for the period 2014-2020 agreed by member states and the EU parliament as a "planning tool" for the next period rather than a legally-binding financial obligation on member states. The British case is that the MFF sets ceilings on spending under various headings and is later radically revised during the annual budget process when real legal obligations on each state arises. This contrasts with the EU Commission's methodology for calculating the UK Brexit bill which involves dividing the MFF into the shares historically agreed by each member state. On the Irish border question there was a "breakthrough", with the British side guaranteeing free movement of EU citizens within the Common travel area constituting Ireland and the United Kingdom. The BBC's Europe correspondent commented "the British perception of the talks is more positive than the EU's".

The Ambrosetti Forum is held annually in the Villa d'Este on the shores of Lake Como in Italy.

At the elite European Ambrosetti Forum on 2 September 2017, Michel Barnier explained his negotiation aims, in that he would "teach the British people and others what leaving the EU means". Although this remark caused controversy in the UK, BBC correspondent Mark Mardell interpreted it in the context of French and Dutch euroscepticism, of the forthcoming German, Austrian and Italian elections, and of the eurosceptic Polish and Hungarian governments.

In a statement to Parliament on 5 September 2017, David Davis said that "concrete progress" had been made over the summer in areas such as protecting the rights of British expats in the EU to access healthcare and over the future of the Irish border, while significant differences over the "divorce bill" remain. He expected that "the money argument will go on for the full duration of the negotiation. The famous European “nothing is agreed until everything is agreed” will apply here absolutely, as anywhere else".

On 6 September 2017, Prime Minister May announced that new immigration controls will be placed on EU nationals when Brexit concludes.

On 9 September 2017, the EU Commission published several negotiating papers, including "Guiding Principles on the Dialogue for Ireland/Northern Ireland". In it, the EU concedes/declares that it is the responsibility of the UK to propose solutions for the post-Brexit Irish border. The paper envisages that a "unique" solution would be permissible here; in other words, any such exceptional Irish solution should not be seen as a template for post-Brexit relationships with the other EU members on border and customs control matters, for example ETIAS.

At the forthcoming European Council meeting on 19/20 October 2017, the 27 leaders of the EU states will decide whether or not to start trade negotiations with the UK. However, David Davis has conceded that so soon after the German elections on 24 September, a German coalition government may not be in place in time for making this decision in October, delaying any European Council decision until their December meeting.

On 21 September, 2017, Prime Minister May, along with her Cabinet, agreed to a transition deal which would inject 20bn euros to the EU budget over a two year period. A cabinet source confirmed to the BBC that May's Cabinet was in fact unity around the Prime Minister's two year transition deal.

On 22 September 2017, May announced the details of her Brexit proposal during a speech in Florence, Italy. In addition to offering 20 billion euros over a two-year transition period and continued acceptance of European immigrants, she also offered a "bold new security relationship" with the EU which would be "unprecedented in its depth" and to continue to make "an ongoing contribution" to projects considered greatly to the EU and UK's advantage, such as science and security projects. She also confirmed that the UK would not "stand in the way" of Juncker's proposals for further EU integration. The European Union's Brexit negotiator Michel Barnier welcomed May's proposal as "constructive," but that it also "must be translated into negotiating positions to make meaningful progress;" Similarly, President of France Emmanuel Macron was adamant that the EU would not begin negotiations on future EU-UK relationships until "the regulation of European citizens, the financial terms of the exit, and the questions of Ireland" were "clarified" by the UK, though he also acknowledged that May did give openings in her speech on two of these three points. Ireland Taoiseach Leo Varadkar gave May's proposal a "cautious welcome," saying that while it was good of May to reference the Common Travel Area, the Northern Ireland peace process and that both sides in the negotiations do not want any physical structures at the border, more negotiations were needed for clarification. EU Parliamentary negotiator Guy Verhofstadt responded that "a new registration mechanism for EU citizens going to live and/or work in the UK is out of the question".

EU negotiators have stated that an agreement must be reached between Britain and the EU by October 2018 in order to leave time for national parliaments to endorse Brexit.

On the domestic front, Labour Party MP and Shadow Home Secretary Diane Abbott announced she would back May's proposed negotiation for the Brexit timetable.

The programme for the fourth round of talks beginning on 25 September arranged for meetings between the "Principals" and for three negotiating groups covering citizens’ rights, financial settlement and other separation issues, while Northern Ireland issues would be addressed by the "Coordinators", and governance of the withdrawal agreement would be discussed at technical level.

On October 16, May and European Commission President Jean-Claude Juncker issued a joint statement agreeing Brexit talks should "accelerate over the months to come" following a dinner meeting in Brussels, Belgium which both described as "constructive and friendly." However, as at a similar dinner earlier in 2017, an unflattering "impressionistic" account of this meeting (between Prime Minister Theresa May, her chief Brexit adviser Olly Robbins, Brexit Minister David Davis, EU Commission President Juncker and the EU’s chief negotiator, Michel Barnier) was published in the same German newspaper Frankfurter Allgemeine Sonntagszeitung. Again, Juncker's chief-of-staff Martin Selmayr was accused as the source of the publication and of trying to undermine the negotiations. This time however Selmayr denied the accusation, and Chancellor Merkel reportedly denied her involvement.

On October 17, Brexit Secretary David Davis insisted that there will be no deal for a transition phase without EU cooperation and that Brexit will happen regardless, even if there is what one Conservative MP described as "a bridge to nowhere."

On October 19, the first day of the two-day European Council meeting in Brussels, Belgium May issued a direct message to approximately three million EU citizens living in Britain, promising she will make it as easy as possible for them to stay after Brexit. On October 20, Tusk described media reports of the deadlock in Brexit talks as "exaggerated."

On October 23, May announced to the House of Commons that Brexit talks underwent "important progress" during her recent meeting with the European Council and that Britain was now "in touching distance" of a trade deal with EU countries, while also reiterating that no transition phase will take place following the conclusion of Brexit without a trade deal as well. The same day, Juncker denied reports by the German media that May had "begged for help" during their recent dinner meeting.

Legality of and payments by the UK to the EU

Two different but incompatible legal approaches would be considered for the Brexit. The EU approach is top down while the British approach is bottom-up. this difference of approach raises a serious problem of confidence. From Michel Barnier point of view, what was decided by 28 member states, has to be paid by 28 member states till the end.

The issue of payments by the UK to the EU as part of the exit agreement is subject to much conjecture and has been divided into two broad questions. Firstly, whether a leaving state is legally obligated to contribute to the EU budget beyond its membership period or compensate for any financial losses that EU may suffer on account of withdrawal, given that Article 50 does not concern itself with financial ramifications of a withdrawal; and secondly – if the United Kingdom is legally obligated to pay – what should be the due amount.

The leaders of France and Germany have both stated that the UK would need to agree terms regarding the departure before discussing future relationships. This has been reinforced by EU27 guidelines issued to the remaining 27 countries. The UK has signalled that it may consider paying the EU to attain preferential access to the economic Single Market and may offer to pay liabilities, even if not legally obligated, on a moral and co-operative basis to secure a preferential working relationship with the EU.

The highest reported claim by the EU is around €60 billion (£50 billion). In March 2017 the Bruegel think tank estimated that the UK would need to pay at least €25.4 billion, but the method of calculation is debatable and their calculations using seven different methods produced estimates between €30 and €45 billion. However this £50 billion bill includes the United Kingdom's annual EU contribution (approximately £13 billion annually) for the two years from 2020 and 2021 as agreed in the Multiannual Financial Framework (MFF). The United Kingdom, in accordance with Article 50 and unless otherwise extended, will cease to be a member of the EU from 29 March 2019 and the MFF does have a provision for "unforeseen circumstances".

EU27 is expected to ask the UK to pay its liabilities in euros, including the relocation costs associated with the two EU bodies currently based in London.

Speaking on 20 April, Antonio Tajani said that it was too early to quantify the amount the UK would need to pay and that it was not a bill to leave the EU, it was money needed for farmers and small businesses.

House of Lords report

"27. It may seem intuitive that when the UK leaves the EU, it leaves behind both the responsibilities and benefits of membership. However, this does not take account of the complexity of the UK’s participation in the EU, nor of the procedures for agreeing current and future budgets, which involve mutual commitments projected many years into the future. ...33. The range of values in circulation for the UK’s potential ‘exit bill’ indicates that the absolute sum of any posited settlement is hugely speculative. Almost every element is subject to interpretation."

HL Paper 125, 4 March 2017, European Union Committee15th sessional report, Brexit and the EU budget , Chapter 3, Potential demands.[9]

A March 2017 House of Lords report acknowledges that the EU may claim for (1) part of the current budget (which runs from 2014 to 2020) post March 2019, because it was approved by the UK (2) part of the EU future commitments which amount to €200 billion and (3) a contribution if the UK is to continue with access to some EU programmes. The report concluded that the UK had no legal obligation to make "exit" payments to the EU if there was no post Brexit deal.

Discussing financial and legal complexities involved in negotiating withdrawal, including settlement of outstanding financial liabilities and division of assets, the report mentions (paragraph 15) that the EU budget is funded by revenue drawn from various sources, governed by the EU’s Own Resources Decision (ORD), which was made part of UK law by the European Union (Finance) Act 2015. The revenue includes contributions from import duties and VAT collected by member states. The report also mentions the EU Multiannual Financial Framework for controlling the annual expenditure.

Assets and liabilities

The EU has considerable assets including buildings, equipment and financial instruments, and there is a potential claim by the UK for a portion of these assets. Boris Johnson, the UK's Foreign Secretary, commenting on the Brexit "divorce bill" in May 2017 stated that the valuable EU assets the UK has paid for over the years should be properly valued, and that there were good arguments for including them in the negotiations.

The Bank of England (BoE) has invested in the European Central Bank (ECB) amounting to 13.6743%, representing paid up capital of €55.5million. The BoE does not participate in any profits (or losses) of the ECB. The BoE has also made loans to the ECB. The ECB set up the European Financial Stability Facility in 2010, which has a borrowing facility of €440bn and in addition used a guarantee from the European Commission and the Budget of the European Union as collateral to borrow a further €60bn. The UK withdrawal will affect the ECB.

The EU has a pension liability of €64 billion.

The UK benefits from a rebate which reduces its contribution to the EU budget. The rebate is paid a year in arrears, accordingly the 2019 rebate would be payable in 2020.

Policy paper

Some EU institution drafted a 10-page position document regarding the single bill. This position does not define the final cost of the divorce, but provide some elements such as the name of first identified EU bodies which might be concerned by the single bill. Those bodies includes around 40 agencies, eight joint projects on new technologies and a panoply of funds agreed by all countries, including aid for refugees in Turkey to supporting peace in Colombia. As an EU member, Britain is also involved in the funding of teachers for the elite European schools that educate EU civil servants’ children. this document should be discussed on Tuesday and Thursday by the side wher (Great-)Britain is not. The EU has promised to publish key Brexit documents, a decision that is both transparency pledge and negotiating tactic.

UK citizens in Europe and European citizens in the UK

Concerns have been raised by UK citizens who live in other EU countries, and by citizens from those countries who live in the UK. In May 2017, Michel Barnier stated: "Currently around 3.2 million EU citizens work and live in the UK, and 1.2 million British citizens work and live in the EU."

Issues include rights of movement, citizenship, abode, education, social support and medical treatment, and the payment of pensions; and the extent to which these rights apply to family members. Considerations for UK citizens resident in an EU27 country include their rights to work or live in a different EU27 country. Beyond the 27 EU countries, workers have certain freedom of movement rights to/from Norway, Iceland, Liechtenstein and Switzerland.

"Associate citizenship", suggested by EU27 negotiator Guy Verhofstadt, would allow UK nationals to volunteer individually for EU citizenship, enabling them to continue to work and live on the continent. Jean-Claude Juncker, president of the European Commission, is not opposed to the idea.

Antonio Tajani spoke after a meeting with Theresa May on 20 April, saying "the issue of reciprocal EU citizen rights should be negotiated 'immediately' with a view to getting an agreement by the end of the year." The European Commission published a position paper on "Essential Principles on Citizens' Rights" on 12 June, proposing that current and future family members of European nationals in the UK would keep their rights to settle in their residence country at any time after Britain's withdrawal. Speaking in advance of publication of the paper, David Davis described the demands as "ridiculously high". The UK government published their policy paper "Safeguarding the position of EU citizens in the UK and UK nationals in the EU" on 26 June. The policy paper proposed that EU citizens living in Britain will be required to apply for inclusion on a “settled status” register if they wish to remain in the country after Brexit.

At end of September progress have been made on several of the 60 points which became green. In the same time there around 13 out of the 60 points which remain red. Three points (points #14, #15, and #16 related to monitoring and CJEU) have to be addressed at governance level. Few points remains to clarify (that is yellow). On this basis European parliament will have to assess if sufficient progress have been made.

Implications

The general rule for losing EU citizenship is that European citizenship is lost if member state nationality is lost, but the automatic loss of EU citizenship as a result of a member state withdrawing from the EU is the subject of debate. The situation of a person acquiring EU citizenship when the UK joined the EU in 1973 compared to a person born in the UK after 1973 and was therefore born into EU citizenship may differ. It may be necessary for the European Court of Justice to rule on these issues.

A 2017 decision of the European Court of Human Rights has ruled that where a child is born in the EU, the parent/s, even if they are both non EU citizens, are entitled to rights of residence. This could have consequential effects for UK residents who have young children and wish to live in the EU27 territory post Brexit.

Immigration and mobility

Until the UK effectively withdraws from the EU in 2019 or at another agreed date, the current system of free movement of labour between the EU27 and the UK remains in place.

The report of the House of Commons Exiting the European Union Committee on The Government's negotiating objectives, published in April 2017, proposed (paragraphs 20 and 123) that the future system for EU migration should meet the needs of different sectors of the UK economy, including those employing scientists, bankers, vets, care workers, health service professionals and seasonal agriculture workers.

Theresa May, answering press questions on 5 April 2017, commented that the free movement of labour would not end in March 2019; an implementation period of possibly five years would give business and government time to adjust.

The UK currently charges an annual levy of up to £1,000 for each non-EU citizen employed within the UK. Proposals are under consideration to increase this 'immigration skills charge' to £2,000 p.a. and to implement a similar levy on EU citizens employed in the UK.

According to an unconfirmed newspaper report, a leaked Home Office paper has a proposal that the UK will end the free movement of labour of low-skilled workers immediately after Brexit, focusing on highly skilled EU workers instead. The proposal would limit lower-skilled EU migrants' residency permits to a maximum of two years, and the implementation of a new immigration system ending the right to settle in Britain for most European migrants while placing tough restrictions on their rights to bring over family members. Those in “high-skilled occupations” could be given permission to work in the UK for a period of three to five years.

Immigration

Immigration is one topic requiring partnership between EU and UK, as according to Theresa May, «Mass migration and terrorism are but two examples of the challenges to our shared European interests and values that we can only solve in partnership.».

European Court of Justice

The concept of European Court of Justice competence creates complications. Some pro-Brexiteers believe the Court of Justice might be completely removed from the UK landscape. Various other opinions consider that the Court of Justice or some equivalent should be able to rule on remaining issues after Brexit (for instance between a European and a British stakeholder), at least in respect of the TEU (Treaty on European Union), European Union citizens, or access to the European Single Market.

Sectoral issues

Brexit might have impact in various sectors.

Trade

Without a trade agreement in place, the World Trade Organization rules would apply to trade between the UK and the EU. This would lead to common tariffs being imposed by the EU27 upon the UK's access to the European Single Market, because the Market is also a customs union. However, the UK would then have an opportunity to control immigration as well as develop its own trade regulations.

The UK is not permitted to hold trade talks until after Brexit is concluded, however the UK can do preparatory work with other countries regarding the UK's future trading relationships; this is not to the liking of some EU27 countries.

Only the EU can act in areas where it has exclusive competence, such as the customs union and common commercial policy. In those areas Member States may not act independently. The UK can still negotiate its own bilateral investment protection treaties subject to Commission authorization.

Strategic controls on military goods are primarily a Member State competence. As a result, Member States themselves negotiate multilateral or bilateral agreements on the strategic aspects of trade in defense goods.

The EU27 wish to exclude the UK from sitting in on trade negotiations held by the EU during the period ending March 2019, seeing the UK as a competitor. Theresa May rejected this idea, saying "While we're members of the European Union we would expect our obligations but also our rights to be honored in full."

Regional foods

Further information: List of United Kingdom food and drink products with protected status

The Geographical indications and traditional specialties in the European Union, known as protected designation of origin (PDO) is applied internationally via bilateral agreements. Without an agreement with the EU27, UK producers of products such as the Cornish pasty, Scotch whisky and Jersey Royal potatoes are at risk of being copied.

Fisheries

The EU27 have stated that UK fish supplies could lose tariff-free access to the continent unless EU countries have continued access to UK waters after Brexit.

Financial services

Banks

Investment banks may want to have new or expanded offices up and running inside the EU27 bloc before the UK's departure in March 2019, with Frankfurt and Dublin the possible favourites. Ireland's investment arm, IDA Ireland, witnessed an increase in inquiries from London-based financial groups considering to open up on an office in Dublin by the end of 2016, mostly coming from North American companies. In May 2017, JP Morgan became the first major bank to officially choose Dublin to transfer some of its personnel and operations from its London office.

Insurance

Lloyd's of London have confirmed that they will open a subsidiary in Brussels, hoping to ensure continuation of their continental business which generates 11% of its premiums.

Asset management companies

The situation may be different when it comes to the fund management industry, as British asset owners, notably UK pension funds, often constitute an incommensurate share of total turnover for German, French, Dutch and other Continental European asset managers.

This imbalance could potentially give Britain some negotiating leverage e.g. power of retorsion in case the EU attempts to impose an abrupt cancellation of the mutually-binding obligations and advantages pertaining to the Markets in Financial Instruments Directive 2004 ("fund passporting"). Research conducted by the World Pensions Council (WPC) shows that

“Assets owned by UK pension funds are more than 11 times bigger than those of all German and French pension funds put together […] If need be, at the first hint of threat to the City of London, Her Majesty’s Government should be in a position to respond very forcefully.”

Stock exchanges

The London Stock Exchange issued a warning over a proposal by the EU, to allow euro-denominated transactions to be cleared only within the EU eurozone, claiming it would increase business costs by €100bn over 5 years and isolate the euro capital market.

Security

The letter of 29 March 2017 giving the UK's notice of intention to withdraw from the EU stated "In security terms a failure to reach agreement would mean our cooperation in the fight against crime and terrorism would be weakened." This was seen by some as a threat. On 31 March, Boris Johnson, the UK Foreign Secretary, confirmed that the "UK commitment to EU security is unconditional".

The call by the United States to other members of NATO to increase their defence expenditure to the 2% of GDP level coincides in timing with Brexit. The UK is the second largest contributor to NATO defence, one of only five to meet the 2% level and one of only two EU members who have nuclear weapons. The possibility of a new Franco-German partnership to fill the vacuum left by Britain has been raised as a possibility and post Brexit an EU military headquarters, previously vetoed by the UK, may be created. The UK is fully committed to NATO.

Academic research

Main article: Brexit and arrangements for science and technology

The UK government's negotiating policy when the negotiating period started on 29 March 2017 included remaining at the vanguard of science and innovation, and seeking continued close collaboration with the UK's European partners.

British Overseas Territories and Crown dependencies

In the Great Repeal Bill white paper published on 30 March 2017, the UK government stated "The Government is committed to engaging with the Crown Dependencies, Gibraltar and the other Overseas Territories as we leave the EU."

Overseas territories

Robin Walker MP, a junior minister at the Department for Exiting the European Union, is responsible for managing the relationship between the overseas territories and Parliament in their discussion with the EU27.

Gibraltar

Main article: Gibraltar after Brexit

Brexit raised issues around sovereignty for Gibraltar, the only British Overseas Territory in the EU. Gibraltarians voted to stay in the European Union by 96%. Spain claims sovereignty over Gibraltar; however, in 2002 Gibraltarians voted 99% to keep British sovereignty.

The EU27 draft guidelines allow Spain a veto over any effect that the Brexit agreement has as regards Gibraltar. The guidelines state: "After the United Kingdom leaves the Union, no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom."

Crown dependencies

The Crown dependencies are neither part of the EU nor of the UK. They have a unique constitutional relationship both with the UK and, as encapsulated in Protocol 3 to the UK’s Treaty of Accession, with the EU. They have no voting rights in EU or UK referenda or elections and no international voice, the UK government having the responsibility to act for the dependencies on foreign matters. Oliver Heald QC MP is responsible for managing the relationship between the Islands and Parliament in their discussion with the EU27.

The "no deal" scenario

If no withdrawal agreement is in place by the end of the two year period under Article 50, the EU Treaties will cease to apply to the UK. This has been described as "falling over the cliff-edge".

A Parliamentary inquiry has concluded that "the possibility of 'no deal' is real enough to justify planning for it. The Government has produced no evidence, either to this inquiry or in its White Paper, to indicate that it is giving the possibility of 'no deal' the level of consideration that it deserves, or is contemplating any serious contingency planning. This is all the more urgent if the Government is serious in its assertion that it will walk away from a 'bad' deal."

The UK government has consistently said that it will aim for the "best possible deal" but that "no deal is better than a bad deal". This position was restated in the Conservative Party manifesto for the 2017 general election. In July, Michel Barnier said that "a fair deal is better than no deal", because "In the case of Brexit, 'no deal' is a return to a distant past".

Aviation would be particularly affected if the European Common Aviation Area and EU–US Open Skies Agreement no longer applied to the UK after a "no-deal" Brexit, since World Trade Organisation rules do not cover that sector, implying that the following day a British plane could not land at an EU airport.

In September 2017 the BBC reported that there was little evidence of UK government preparations for a "No Deal" scenario: "our government is not behaving like it is really preparing for No Deal – and the EU27 can surely see it."

In her 4 October 2017 speech at the Conservative Party Conference, UK Prime Minister Theresa May repeated her position that "no deal is better than a bad deal" and emphasized that "It is our responsibility as a government to prepare for every eventuality. And let me reassure everyone in this hall – that is exactly what we are doing."

In her 9 October 2017 statement in the House of Commons, May warned that Britain could operate as an "independent trading nation" after Brexit if no trade deal is reached with the EU.

The question of no deal makes some civil servant — Sir Martin Donnelly — not sure to understand what no deal means:While no deal makes trade only dependant on World Trade Organisation terms which do not include services — 80% of the British economy —, he believes that No deal “could mean an awful lot of legal uncertainty and that’s very bad for businesses, for jobs, for investment in Britain”.

According to some people, the delivery of a no deal Brexit could raise support for a second independence referendum in Scotland. Such hypothesis is provided by the Scottish Centre on European Relations in its paper: «Brexit Uncertainty, Scotland and the UK in 2018».

Nonetheless, according to John McDonnell — Shadow Chancellor — there are enough people in the House of Commons to prevent some no-agreement exit.

According to Dominic Cummings — Vote Leave — "If there’s no deal, there will be significant problems that were completely avoidable".

The deep & special relationship scenario

The UK side has emmited the idea of a deep & special relationship between UK and EU ·  ·

Possibility of an extended transitional period

According to Michel Barnier, the EU might have to define the conditions for a transitional period, if the UK request one. Such a transition period would begin on 30 March 2019 (European time, as Brexit occurs at midnight the day before).

According to Michel Barnier, the transition period is submitted to a withdrawal agreement, by law written in Article 50.

Future trade deal between UK and EU

While negotiations between the United Kingdom and the European Union were in progress, Barnier, as the EU's chief negotiator, speaking in Rome to Committees of the Italian Parliament on 21 September 2017, stated that a future trade deal with the United Kingdom is the trade deal which will be negotiated after sufficient progress has been done on the withdrawal deal. Barnier commented that the EU will want to negotiate a future trade deal with the United Kingdom, because trade with the United Kingdom will continue. At the same time Barnier said "the future trade deal with the United Kingdom will be particular, as it will be less about building convergence, and more about controlling future divergence. This is key to establishing fair competition."

The United Kingdom's prime minister, in a speech at the Santa Maria Novella church in Florence on 22 September 2017, proposed an economic partnership between the UK and the EU which respects both the freedoms and principles of the EU, and the wishes of the British people. At the same time she re-affirmed that after the UK leaves the EU a period of implementation would be in their mutual interest, to be agreed under Article 50 for a strictly time-limited period.

See also

• The European Atomic Energy Community (Euratom) – legally distinct from the EU but having the same membership, from which the United Kingdom is also withdrawing
• Template:Books-inline (includes articles on UK and EU treaties, policies, institutions, law and justice, and EU history)

External links

• UK Parliament – Brexit News
• Gov.UK – Department for Exiting the European Union
• UK Government – "Plan for Britain" website
• Europa (EU official website) – UK – Brexit – overview
• European Commission – Brexit negotiations website
• European Commission – list of published negotiating documents
• Resource page and commentary by David Allen Green