UK Parliament Asserts Control Over the Government
December 7, 2018

The political situation in the UK remains very uncertain this week and it currently looks like there is not a majority for any option when it comes to how to progress Brexit.  The key vote will be this Tuesday, 11 December.  However, the Prime Minister is in a very weak position following several defeats in Parliament this week in respect of the publication of the Attorney General’s advice the cabinet (which can be found here) as well as a procedural amendment that was put to the House of Commons by Dominic Grieve, a former Attorney General. It looks almost certain that Tuesday’s vote will go against the Prime Minister.

What happens next is complete speculation. One possible outcome is that the House of Commons proposes a solution that is effectively Brexit in name only.  Another that some MPs are suggesting is a motion that would rule out a no-deal Brexit – although it is hard to see how that would work procedurally given that there is a hard date set for the UK’s exit on 29 March.  Another possible outcome is that a heavy defeat of the draft Withdrawal Agreement, which the Prime Minister is closely associated with, could lead to her being removed as Prime Minister (either voluntarily or otherwise).  Other options include the possibility of obtaining a new deal from the EU or a second referendum as well as the possibility of no Brexit at all, particularly after an opinion of the Advocate General of the European Court of Justice that said this was possible on a unilateral basis (see here), but these further possibilities look remote given the divisions in Parliament.

Even with a change of leadership, it is hard to see how any new Prime Minister could do better given that the EU has made it abundantly clear that it will not make any concessions. The EU has a history of being true to its word and we only have to look back at former Prime Minister David Cameron’s attempt to renegotiate the UK’s EU membership and the EU’s treatment of Greece in 2015 where in both cases the EU did not make any material concessions.

I have long been of the view (since shortly after the 2016 referendum) that the UK will need to exit from the EU with no deal in order to be in a position to negotiate a balanced deal.  There is a lot of discussion about what is “Plan B” and whether that should be Norway style arrangement or something based on the recent Canada Free Trade Agreement.   Given that the majority of UK businesses operate domestically, there is an opportunity to create a framework whereby only those British businesses that wish to access the EU market need to comply with relevant EU rules and regulations and that such compliance can be certified by a UK body which would then be recognised by the EU.   A similar approach can be found in the Channel Islands. Both Jersey and Guernsey have a regime under which you can establish a fund that is already certified as complying with the EU’s Alternative Investment Fund Managers Directive.  The fund still needs to apply or notify each EU Member State that it wishes to market into, but that process is streamlined because of the local certification obtained.  Something along these lines could possibly work for many businesses in the UK leaving the UK with full flexibility to adjust and adapt its own internal regulations and laws.

The central issue is that the UK always wanted a deal on the future arrangement with the EU, which has only be dealt with by a non-binding political declaration.  If the Prime Minister had binding commitments on the future relationship, next week’s vote may very well have gone her way.

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