(Bloomberg) -- Another round of Brexit talks failed to yield a breakthrough, as the EU and the British government remain at loggerheads over the U.K's financial obligations, the enforcement of citizens' rights and even the sequencing of talks.
At the heart of the dispute are fundamental differences of priorities: while the U.K. seeks “creative” bespoke arrangements for the future, the EU says any deal would depend on whether Theresa May's government is willing to fully comply with the bloc's existing legal order.
While Brexit Secretary David Davis said his approach is “more flexible and pragmatic than that of the EU,” Barnier characterized it as asking for the impossible: “The single market, the EU's capacity to regulate, to supervise, to enforce our laws, must not and will not be undermined by Brexit.”
Exit Bill
This is the thorniest issue that needs to be resolved before the 27 EU leaders agree to discuss a trade deal and transitional arrangements with the U.K. The EU says the U.K. is liable for payments extending into the future, well past the exit date of 2019, a claim Britain disputes.
Barnier cited commitments to support Ukraine, Africa and the Caribbean, as well as projects included in the EU's current multi-annual budget that extends to 2020 as examples of post-Brexit liabilities that the U.K. must pay. May's government doesn't accept it's legally obliged to pay anything to the EU budget after its departure, and even though Davis signaled a willingness to acknowledge a “moral obligation” for continuing payments, he tied the financial settlement to “the spirit of the UK's continuing partnership with the EU.”
Enforcement
The EU has maintained that the withdrawal agreement is a “union act” and therefore falls under the broad jurisdiction of the European Court of Justice. It wants the ECJ to be the ultimate guarantor of citizens' rights, and of any transitional arrangements that give access to the single market. The bloc also says that access to the single market presupposes acceptance of EU laws, regulations and standards.
May has pledged to leave the jurisdiction of the European court. A concession this month by her government that it's only trying to escape the “direct” jurisdiction of the ECJ has done little to advance the debate. Davis referred to “creative solutions” to bypass the problem of rights enforcement, and proposes “alignment” between EU and U.K regulations instead of British compliance.
This is what the EU calls cherry-picking. “The U.K wants to take back control, it wants to adopt its own standards and regulations,” Barnier said. “This is simply impossible.”
Topic | Michel Barnier | David Davis |
State of Play | “No decisive progress made on the main issues” | “Talks have been productive and are an important stepping stone” |
Ireland | “Real progress made on the question of the Common Travel Area” | “There is a high degree of convergence” on key issues |
Single Market Access | What the U.K. asks for “is simply impossible” | “The U.K.'s approach is substantially more flexible and pragmatic than that of the EU” |
Citizens' Rights | Rights must be “directly enforceable in front of national jurisdictions, under the control of the European Court of justice” | “We have shown a willingness to discuss creative solutions” on the governance of the citizens' rights agreement |
Financial Settlement | The U.K. “has obligations beyond the Brexit date” | “Settlement should be in accordance with law and in the spirit of the U.K.'s continuing partnership with the EU” |
Ireland
Though both sides said there's real progress towards a deal that would minimize disruption along the Irish border, EU officials warn that there are still many issues that need to be resolved, especially when it comes to preserving the Good Friday agreement that brought peace to the island.
According to this pact, British nationals living there are also entitled to Irish (and by extension EU) citizenship -- even if they've never set foot south of the border. While unusual, it was straightforward enough when both countries were in the EU. Now it opens up a legal and political minefield.
EU citizens have recourse to the ECJ (see above). So what if, after the U.K.'s withdrawal in March 2019, you're a citizen of Northern Ireland, and therefore live in the U.K., but have European rights associated with your Irish citizenship and want to take a case to the ECJ?
Now What?
Negotiations will continue in September, though registering enough progress to start trade negotiations by October looks increasingly remote. “We have always believed a deal will take a long time coming, if it comes at all, and all the recent developments support that,” said John Wraith, head of U.K. Rates Strategy at UBS.
The reasons for the delay, according to Wraith, are the distant starting positions of the two sides, the complexity of the issues that need to be resolved, and EU's negotiating tactics, as the bloc wants to increase its leverage and secure the relocation of London-based businesses before it agrees on a deal. “We think a deal will be struck, but not until very late in the two-year process,” he said.
--With assistance from Viktoria Dendrinou
To contact the reporters on this story: Nikos Chrysoloras in Brussels at nchrysoloras@bloomberg.net, Ian Wishart in Brussels at iwishart@bloomberg.net.
To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.net, Emma Ross-Thomas
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
