Building the Brexit castle on a foundation of quicksand: 138th Brussels for Breakfast – CPD Notes

Highlights from the “Brussels for Breakfast” meeting

We are now down to 401 days until we go over the Brexit cliff and the UK feels no nearer to laying out the details of what it wants. Perhaps this week’s Cabinet away day will finally reach conclusions but speeches from the Foreign Secretary and DexEU minister provided little clarity – especially after 62 MPs wrote to the Prime Minister setting out their own red lines.

For the financial services industry, the deadline for action is drawing perilously near. But what action? The volume of calls from across the Channel to get on with applications for banking licences grows louder with comments that only a handful of licence have been issued. But it seems that many are under discussion and what about firms that simply want to extend their existing activities? Nonetheless, it was accepted that there would be capacity constraints among EU regulators if there is a last minute rush. [...]

Key items of the rest of the month:

The foundations for the second phase of the Brexit talks have proven not to be very solid. Inspired by UK’s Brexit Secretary David Davis’ motto that “nothing is agreed until everything is agreed”, the top EU Article 50 negotiator Michel Barnier warned British officials against their backtracking in “substantial” agreed principles and flagged the risk for the UK of crashing out of the EU without a transition period in case that the deals achieved weren’t rapidly transposed into law – a major concern for MEPs. The UK Prime Minister has found battle lines in all fronts, with MPs at home calling for more reforms to her Withdrawal Bill. Theresa May faces also distrust among business, with more than two-thirds of companies not confident in Government's ability to negotiate with the EU.  

Under the negotiating directives for transitional arrangements adopted in January’s Council meeting and published by the Commission, Britain will be bound by EU laws but have no say over them, a friction point that May’s administration has tried to fight and that could threaten transition talks. The EU’s stance in this regard might have activated the ‘hard Brexit’ option: senior officials told POLITICO that the British PM plans for an ‘immediate’ break with the EU in trade or financial services after withdrawal, which has raised the EU27’s fears of a ‘bonfire of regulations’ that could undermine the bloc’s economy after divorce and resulted in the publishing of a strategy paper that threatens with sanctions in case of a regulatory ‘race to the bottom.’ Dispute settlement remains a key sticking point for the future trade deal, a Commission’s internal document suggested: a feasible option could be ‘docking’ with the European Free Trade Association (EFTA) Court as a dispute resolution body, wrote POLITICO’s Georgina Wright. [...]

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