March 01, 2019
Stars seem to align in favour of the Brexit deal
There are two Brexit developments we would like to draw to your attention this morning - each interesting in their own right, but more so when taken together. The first is a legal opinion of the German Bundestag, according to which Art. 50 cannot be extended beyond May 23-26 unless the UK hold European elections. The second is that the Labour leadership is fast-tracking the so-called Kyle amendment, which would commit the party to abstain in the meaningful vote in exchange for a referendum. Both of these developments together raise the odds that the deal passes, either this month or after a very short extension.
The Bundestag's legal opinion is based on the fundamental rights of EU citizens, enshrined in EU law, to elect MEPs and to stand for election. If the UK fails to hold European elections while still being a member of the EU, the rights of UK citizens - but perhaps more importantly of EU citizens in the UK - would be violated. The ECJ could get involved, either through an infringement procedure brought by the European Commission directly, or - in our view, more likely - through a national court case that would be referred upwards. The ECJ could pass a preliminary ruling.
The legal uncertainty is unlikely to be cleared up by the time the European Council takes a decision on extending Art. 50. We would assume that both the UK government and the Council would want to avoid the risk of a court case that could compel the UK to hold European elections. A problem arises for the EU in this case, as the chaos of a hard Brexit could overshadow the elections. Both sides thus have a very strong incentive to get this over and done with. We would urge the European Council to make it clear right now that there can only be a single extension - and only for the purpose of ratification of an agreed deal - thus confronting the UK with a take-it-or-leave-it choice right now.
The second story - of Labour endorsing a revised version of the Kyle amendment - also plays in favour of the deal passing. The amendment vote would be held immediately before the meaningful vote. It would say that Labour is withholding support on the withdrawal agreement until it is ratified by a second referendum. A previous version compelled the party to accept the deal, subject to a referendum.
We believe that the number of Labour MPs who will reject this amendment will surpass the number of Tory MPs who will accept it. It is also not clear to us whether this has the universal support of all other opposition MPs. Some of the more extreme second-referendum supporters baulk at the idea of supporting an amendment that in their view is purely designed to minimise conflict within the Labour Party. More importantly, they fear than this amendment could kill off the second referendum for good. Their preferred strategy had been to wait until the very end of the process, and to pitch the second referendum against a no-deal Brexit.
The Guardian quotes a Labour MPs as saying that at most 10 Tories would support the amendment, which is not enough given the known Labour opponents to a second referendum. The MP, who is said to be in favour of a second referendum, said he doubted whether the leadership is really serious about winning, or whether Corbyn was just going through the motions. A Labour MP from a strong leave-voting constituency said the number of MPs who oppose a second referendum was far greater than previously thought. Even some of the previously-committed members of the so-called people’s vote campaign were saying privately they would vote against it.
The government's strategy continues to be unaltered - run down the clock until the choice reduces to deal vs. no-deal, in which the case the deal would pass. With the legal uncertainty over the timing of the extension, the pressure for an early deal is rising.