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Draft Withdrawal Treaty Crosses UK Red Lines

  • United Kingdom
  • Brexit
  • Competition, EU and Trade - Brexit


On 28 February 2018, the EU published the first draft of a Brexit Withdrawal Treaty. The text largely reflects the terms agreed in December, as set out in the Joint Report on Phase 1 of the Brexit negotiations of 8 December 2017 (“Joint Report”) (see our briefing here). There were, however, a number of issues which were unresolved in December, most notably, the sensitive issue of avoiding a hard border between Northern Ireland and the Republic of Ireland, as well as the empowerment of the Court of Justice of the EU (“CJEU”) as the ultimate arbiter on the Treaty.

On Ireland, the draft Treaty reflects the Commission’s fall-back option of “a common regulatory area” comprising the EU and the UK, which will have no internal borders ensuring the free movement of goods between Northern Ireland and the Republic of Ireland, and the protection of the Good Friday Agreement.

In this briefing, we outline the areas of the draft Withdrawal Treaty which are likely to give rise to political issues in the UK.

Northern Ireland/Republic of Ireland border

Both the EU and the UK Government agree that the Good Friday Agreement must be protected to ensure peace and stability on the island of Ireland whilst, at the same time, preserving the integrity of the Single Market. At the end of the first phase of the negotiations, the UK Government offered a number of commitments to the Commission, which are reflected in the draft Withdrawal Treaty. These included: having no physical infrastructure or related checks and controls at the border; and protecting and supporting continued North-South and East-West cooperation across the full range of political, economic, security, societal and agricultural contexts and frameworks of cooperation, including the continued operation of the North-South implementation bodies.

Paragraph 49 of the Joint Report sets out three approaches relating to the Irish border issue, namely:

  1. to try and resolve it through the agreement on the future relationship between the UK and the EU;
  2. for the UK to propose specific solutions to address the unique circumstances of the island of Ireland; or
  3. to “maintain full alignment with those rules of the Single Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the Good Friday Agreement”.

As the UK Government has not yet fleshed out proposals to solve this issue, the Commission has drafted the Withdrawal Treaty on the basis of the third option, as set out in the Protocol on Ireland/Northern Ireland. This, however, is still subject to negotiation and the ball is very much in the UK’s court to suggest a viable alternative solution. The Prime Minister has already stated that keeping Northern Ireland in the Single Market and the Customs Union is not an option.

CJEU’s role as highest dispute resolution body

Title III of the draft Withdrawal Treaty sets out the Commission’s proposed dispute settlement mechanism. Disputes relating to “separation issues”, for example, ongoing customs procedures, ongoing value added tax and excise duty matters, and ongoing judicial cooperation in civil and commercial matters, as well as the financial settlement, will be under the CJEU’s jurisdiction.

Disputes relating to other matters in the Withdrawal Treaty may be brought before the new “Joint Committee”, which will be responsible for supervising and facilitating the implementation and application of the Withdrawal Treaty. It will comprise of EU and UK representatives, and co-chaired by the EU and the UK.

The Joint Committee may submit disputes to the CJEU for a ruling whose decisions will be binding on both the EU and the UK. Therefore, even after the UK has left the EU and any transitional period has ended, the CJEU could still have jurisdiction in the UK. This seems contrary to the UK Government’s Brexit strategy to “take back control”.

Sanctions for non-compliance

Article 163 of the draft Withdrawal Treaty sets out a mechanism pursuant to which the UK/EU may bring an action before the CJEU against the other party for non-compliance with a CJEU judgment relating to the Withdrawal Treaty. In such circumstances, the CJEU will be empowered to impose a lump sum or penalty payment on the infringing party. Again, this will be an area of controversy within the UK Government.


Article 3 of the draft Treaty outlines the territorial scope of the Withdrawal Treaty and, with respect to Gibraltar, refers back to the European Council’s Guidelines of 29 April 2017 which stated that “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”. This also applies to any transitional arrangement agreed between the UK and the EU. This will be another political issue for the UK Government.

Transitional arrangement

The draft Treaty includes provisions on a potential transitional arrangement, as such provisions will form part of the overall Withdrawal Treaty. These provisions currently reflect the European Council’s Guidelines of 15 December 2017 and the Council's Negotiating Directives of 29 January 2018.

As the negotiations on a transitional arrangement are currently ongoing, provisions relating to such an arrangement will be amended to reflect whatever agreement is reached between the UK and the EU. Both parties hope that such an agreement will be reached by March 2018.

Once again, the CJEU will continue to be the ultimate arbiter during the transitional arrangement. Article 126 of the draft Withdrawal Treaty provides that the CJEU will have full jurisdiction over the UK during this period, even though it will no longer by an EU Member State. Furthermore, if the UK does not respect certain rules of the Single Market, the Commission could launch a normal infringement procedure against the UK before the CJEU.

In addition, Article 165 of the draft Withdrawal Treaty provides that where the CJEU has already found that the UK has breached a rule or had issued an order, and the UK does not comply with the judgment/order and where the functioning of the Single Market, the Customs Union, the financial stability of the EU or the Member States would be jeopardised as a result, the EU may suspend certain benefits deriving from the UK’s participation in the Single Market. In such a scenario, the EU shall inform the UK of its intention to suspend certain benefits of the Single Market and allow the UK 20 days to remedy the situation. Any suspension will be proportionate to the breach of the obligation concerned, taking into account the gravity of the breach and the rights in question.

Next steps

The draft Withdrawal Treaty will be sent to the Council and the European Parliament's Brexit Steering Group for discussion, before being transmitted to the UK for negotiation.

The European Council has called on the UK Government to provide further clarity on its position on the framework for the future relationship prior to the European Council meeting on 22 and 23 March, where it is expected to adopt additional guidelines.

In accordance with Article 50 of the Treaty on European Union, the final text of the Withdrawal Treaty will need to be approved by the Council, the European Parliament, as well as the UK Parliament.


The draft text of the Withdrawal Treaty fleshes out the points that were agreed between the UK Government and the EU in the Joint Report, and sets out the Commission’s starting point for those areas which have not yet been agreed. These should not be a major surprise, as they reflect the many position papers published by the Commission during the first phase of the negotiations.