September 09, 2020
Breaching the law, but only a little
We might have been a tad too dismissive yesterday about legislation that caused much uproar in the relationship between the EU and the UK. Depending on some details of this legislation and on how the EU reacts, it could well unleash a sequence of events with a negative dynamic.
Our twitter feed exploded yesterday after the UK's Northern Ireland Secretary admitted that the no-deal legislation constituted a breach of international law, in a very specific and limited way, as the minister put it. The anticipated breach of law relates to Northern Ireland: Under the withdrawal agreement, the region would continue to have custom-free links to the Republic, while new customs borders would have to be erected along the Irish Sea. The legislation seeks to nullify this arrangement in the event of no deal. Readers may recall this was the single biggest controversy in the withdrawal agreement negotiations.
Depending on how the legislation is drafted, that is, whether the breach of law is real or potential, it could make it impossible for the EU to continue negotiations. This is indeed a risk we do not believe the UK government has considered in careful detail. Politically, the UK is now using Northern Ireland as a bargaining chip in the talks. The political purpose of this no-deal legislation is to gain the upper hand in negotiations by signalling to the EU that the UK is really serious about no deal, and that this could endanger the peace in Ireland.
As we noted there has been virtually no serious debate on the continent about the wider impact of a no-deal Brexit, on European companies, EU residents in the UK, security, foreign policy or Ireland. The European Council can only deal with one crisis at the time. Within member states the debate has not happened because the probability of no deal was widely underestimated.
It is worth reflecting on how we got to this point. The moment the EU tried to make a power grab for UK state-aid policy, the negotiation turned into an ugly battle of egos. We heard a lot of tough-luck arguments. The EU is the bigger of the two sides, and can impose its will, for example by anchoring the level-playing-field to its own conditions. This was a short-sighted argument. As we learned ourselves, there are no obstacles in UK domestic law to stop the government legislating breaches of international law. The International Court of Justice in the Hague may well end up ruling against the UK. But, first, this won’t happen before the end of the year. And, second, the ICJ has no enforcement powers. If you start playing the relationship talks in the spirit of a geopolitical power game, don’t be surprised when the other side plays in the same spirit.
While perceptions of a no-deal outcome have clearly shifted, we don't think that the reality has. The outcome is still wide open. We don't like to give percentages chances because they are usually numerical extensions of gut feelings. What determines whether there will be a deal or not is the readiness of the EU to accept a compromise on state aid. If it does, then there will be a deal. If not, there won't.