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Note: This is a summary of the phase one agreement. The Joint Report (Annex 1) and supporting technical note (Annex 2) are the definitive texts.

The issues

  1. At the European Council Summit in December 2017, the EU 27 concluded that sufficient progress had been made on phase one of the withdrawal negotiations and agreement was given to move to the second phase of negotiations on the transition period and the future relationship.
  2. The phase one agreement as set out in the Joint Report issued by the UK government and the European Commission on 8 December [at Annex 1] covered the rights of citizens, set out a methodology for financial settlement and established principles aiming to ensure no hard border between Northern Ireland and the Republic of Ireland.
  3. The European Council also adopted guidelines which set out a clear intended direction of travel for the negotiations from the perspective of the EU27, opening the second phase of discussions on the transition period and exploratory talks about a close EU-UK partnership on trade, cooperation on terrorism, international crime, security, defence and foreign policy. Article 50 of the Treaty on European Union (TEU) states that the EU must negotiate ‘in the light of’ these guidelines.

Phase One Deal

  1. The Joint Report will form the basis of the Withdrawal Agreement under article 50 under the caveat that nothing is agreed until everything is agreed.
  2. It covers agreement in principle across the three main areas under consideration during the first phase of the negotiations, namely:
    1. Protecting the rights of Union citizens in the UK and UK citizens in the Union
    2. The framework for addressing the unique circumstances in Northern Ireland
    3. The financial settlement.

Citizens’ Rights

  1. The agreement covers EU Citizens and their families who are legally resident in the UK at a ‘specified date’, which could be the date of withdrawal (29 March 2019) but could be at the end of any agreed transitional period (the UK government and the EU27 appear to have different views on this).
  2. Family reunification, future family members and partners EU citizens residing in the UK will retain their family reunification rights, allowing them to bring family members or partners to the UK without being subject to minimum income requirements or English language tests (as relatives of UK citizens are).
  3. Application for new status The agreement will allow the UK and EU Member States to require persons to obtain a status conferring the rights of residence given by the Withdrawal Agreement. In the UK, the Government has separately signalled it will introduce a new streamlined system, which will reduce the burden of proof on applicants and offer them an opportunity to provide supplementary evidence.
  4. Existing permanent residence holders The UK government has separately set out that all permanent residence holders will need to apply for the new settled status, but the process will be a more straightforward swap.
  5. Professional qualifications Citizens will continue to have their professional qualifications recognised.
  6. Legislative implementation of the withdrawal agreement The UK government has already confirmed that the withdrawal agreement will be incorporated into UK domestic law in an Act of Parliament.
  7. Role of the CJEU The UK Courts will need to take into account CJEU judgments promulgated after Brexit, if they concern citizens’ rights in respect of EU citizens resident before the specified date: there is no time limit to this requirement. If UK courts want clarity or advice on matters of EU law, they will be able to ask the CJEU questions of interpretation.
  8. Interpretation of law As an EU member state, the UK can currently intervene before the CJEU, even where it is not directly involved in the underlying legal case (for example, where questions have been referred from another Member State court, or the Commission infracts another Member State). This agreement preserves that right for matters relevant to citizens’ rights. It also suggests that the European Commission should be given a right to intervene in UK cases.
  9. The Commission will monitor the implementation and application of the agreement by EU27 states for UK citizens living in the EU, as it does now with EU law in the UK.
  10. The Joint report does not cover those who move between the UK and the EU after the specified date nor does it address the question of whether or not their qualifications will be recognised in the other states after Brexit.
  11. It also does not address onward movement – rights for UK citizens already resident in one EU Member State to take up residence in another.
  12. The Joint Report does however require that the UK will accept that EU citizens who are legally resident at the specified date can live outside the UK for a continuous period of up to 5 years without losing their right to reside in the UK: this compares with a period of 2 years at present.

Republic of Ireland and Northern Ireland

  1. In the Joint Report both parties reaffirm the paramount importance of the peace process and agree that the Good Friday Agreement must be protected. The UK commits to the protection of North-South cooperation and avoidance of a hard border including physical infrastructure, checks and controls.
  2. The Joint Report also accepts the continuation of the Common Travel Area which means that citizens can travel between the island of Ireland and Great Britain without clearing immigration (which effectively means Ireland will remain outside the Schengen area).
  3. The Joint Report also agrees to uphold the ‘principle of consent’ in the Good Friday Agreement (i.e. the people of Northern Ireland would have to vote in favour of unification with Ireland for this to take place), and supports Northern Ireland remaining part of the UK in the absence of such consent. The UK respects both the Republic of Ireland’s clear choice to remain part of the EU internal market and customs union and the importance of Northern Ireland continuing to have unrestricted access to the UK’s internal market. It is acknowledged that this may be hard to reconcile with both the UK’s stated decision to leave the internal market and the Customs Union and avoiding a hard border on the island of Ireland.
  4. The agreement outlines 3 possible routes by which the UK can achieve these objectives:
    1. Through the overall EU-UK relationship, in other words by the future relationship between the EU and UK not requiring any form of border checks on goods. This is the preferred stated option for the UK government
    2. Should the first option not be possible the UK will propose specific solutions to address the unique circumstances of the island of Ireland (presumably along the lines put forward in the UK government’s muchcriticised position paper “Northern Ireland and Ireland” in August 2017) but the Report acknowledges these must be acceptable to the EU27, or
    3. If these are not agreed, the UK will maintain continued full alignment with those rules of the Internal Market and Customs Union ‘which, now or in the future, support North-South co-operation, the all island economy and the protection of the 1998 agreement’. This option would be the preferred option for the Welsh Government, as, in our view, it would require the closest possible relationship between the whole of the UK and the Single Market and Customs Union.
  5. The UK government also commits in the agreement to not introduce any new regulatory barriers between Northern Ireland and the rest of the UK unless the Northern Ireland Assembly and Executive consents to this.

Financial settlement

  1. The Joint Report does not specify a sum of money which the UK commits to paying the EU but agrees a methodology for its calculation which contains four elements: a list of components as to what is owed; principles for calculating the value of the settlement; arrangements for the UK to continue to participate in programmes of the current financial framework (until its end in 2020); and arrangements for Union bodies and funds related to EU policies.
  2. Components The UK will contribute to and participates in the implementation of the annual budgets in 2019 and 2020 despite leaving in March 2019. Amendments adopted after the date of withdrawal which impact on the UK’s financial obligation will not apply (which will protect against changes to the UK’s rebate or having to pay a share of any increased EU spending). Critically, the UK agrees to pay its share of all budget commitments still outstanding at the end of 2020 (RAL): many of these commitments e.g. to Structural Fund projects, infrastructure projects, or pensions of EU staff, will only fall due several years (and in some cases, decades) into the future. The agreement includes detail on the calculation of liabilities, contingent liabilities and corresponding assets.
  3. Principles for calculating the value of the settlement The agreement details the methodology for calculating the UK’s share of the EU’s spend which will be paid in Euros - a disadvantage for the UK following the fall in sterling since the referendum.
  4. Participation in programmes of the Multiannual Financial Framework (MFF) 2014-2020 The UK remains eligible to participate in programmes as part of the current funding cycle, with a requirement to respect relevant EU legal provisions. The UK states it may wish to participate in some EU programmes post 2020 as a non-Member state.
  5. Other EU bodies and funds The joint statement includes guarantees, liabilities and rights covering the European Investment Bank (EIB), European Central Bank, Facility for Refugees in Turkey and the European Emergency Trust Funds and the European Development Fund.
  6. In relation to the EIB, the UK will provide a guarantee for an amount equal to its callable capital on the day of withdrawal, to be decreased in line with the amortisation of the stock of European Investment Bank operations. The UK share of paid-in capital will be reimbursed in twelve annual instalments, beginning 2019 (11 instalments of EUR 300 million and one of just under EUR 200 million). The Report states that “the UK considers that there would be mutual benefit from a continuing arrangement between the UK and the EIB. The UK wishes to explore these possible arrangements in the second phase of negotiations”, though there is no indication of the EU’s position on this. UK projects will not be eligible for new operations from the EIB reserved for Member States.

Other separation issues

  1. The Joint report also outlines further areas of divergence and convergence on reaching agreement in a number of areas. These include: separation issues on the UK’s withdrawal from Euratom, continuity in availability of goods placed on the market before withdrawal, cooperation in civil and commercial matters, policy and judicial cooperation in criminal matters, ongoing judicial procedures (i.e. ongoing CJEU competence for procedures registered prior to withdrawal), ongoing administrative procedures and issues related to the functioning of EU institutions, agencies and bodies.

Mapping Phase One Deal against Welsh Government priorities

  1. The Joint Report involves some compromise by the UK government and shows a significant movement from the position which the Prime Minister first outlined in the Lancaster House speech in January 2017 and to some extent from the Florence speech in September last year. There is a prevailing view amongst independent commentators, and certainly within the EU27, that the Phase 1 agreement has revealed the weak negotiating hand of the UK government and the lack of realism in the ‘red lines’ set out at Lancaster House.
  2. Though the Joint Report is silent on some WG priority issues, the shift in position is a further genuine movement towards the WG position taken in the plan for the negotiations which we set out in the White Paper Securing Wales’ Future a year ago.
  3. From the outset the WG has been clear that full and unfettered access to the Single Market to support businesses, and secure jobs and the future prosperity of Wales is paramount. Though the Joint Report reaffirms the UK’s intention to leave the Single Market and the Customs Union, the UK’s position has moved close to that by subsequently calling for “freest and most frictionless trade possible” with the EU. The UK’s stated position of supporting the Republic of Ireland’s participation in the Single Market and Customs Union, but also Northern Ireland remaining within the UK’s internal market without a hard border, checks and controls will be very complicated to achieve, particularly without the closest possible relationship with the single market and regulatory alignment which underlines it.
  4. The WG has also made a priority of valuing the huge contribution that people from other countries make to the economy and public services in Wales, alongside responding to concerns about aspects of inward migration through a pragmatic and principled future migration policy linked to employment and avoiding exploitation of workers. The Phase One Agreement on Citizens rights for EU citizens living and working in Wales, and elsewhere across the UK provides greater clarity about their future status when the UK leaves the EU, which we have consistently called for.
  5. In particular, the WG welcomes the safeguards of the phase one citizens rights deal in terms of: limiting the grounds on which permanent residence will be rejected (this can only happen if the application is ineligible or if the applicant has a serious criminal record or on security grounds); ensuring a straightforward process for swapping permanent right to remain for the new status; and the increased period EU citizens can be away from the UK without surrendering their right to residence. These are all important safeguards likely to be positive for many EU citizens living in Wales and UK residents living in Europe finding some reassurance in the phase one agreement. While campaigning groups remain critical about some aspects of the agreement (e.g. the position of future spouses; or the rights of UK citizens resident in one EU member-state to move freely to another post-Brexit), the agreement addresses the most important concerns, certainly of EU citizens resident in the UK.
  6. The WG has consistently made the case for the importance of Wales not losing a penny of the finance and investment that it has received as a result of leaving the EU and though the UK government has given assurances to us on the funding that would have beenreceived as part of this EU programme period, the Joint Report ensures the UK’s participation in the current programmes. WG will continue to receive the CAP and structural funds for which it is eligible until 2020 (with spending under the Structural Fund Programmes being able to continue to 2023). The Joint Report also formally records the UK’s position that it may wish to participate in certain programmes post 2020 as a non-Member state which we have pressed for consistently and is welcome.
  7. The WG position on the need to maintain the social and environmental protections and values in Wales, in particular workers’ rights, once these are no longer guaranteed through the UK’s membership of the EU has been consistent from the outset. There have been some UK government commitments towards maintaining these protections.
  8. The WG has clearly and consistently called for transitional arrangements to be secured as part of the EU withdrawal process to minimise disruption and uncertainty for businesses. On that basis, to avoid negative economic consequences, the WG has welcomed the UK government’s movement in position to support this approach (“implementation period”). The guidelines adopted by the EU27 in December give agreement to negotiate a transition period “covering the whole of the EU acquis”. This appears to represent a significant shift in the UK government’s position. During this period the UK will no longer participate in EU institutions, nor the decision-making of the Union bodies, offices and agencies. We will continue to participate in the Customs Union and the Single Market (with all four freedoms) during the transition. The Commission has also proposed that the withdrawal agreement should, during the transition period, “preserve the competences of the Union institutions (in particular the full jurisdiction of the Court of Justice of theEuropean Union), bodies, offices and agencies in relation to the United Kingdom and to United Kingdom natural or legal persons” and that the transition period should not run beyond the end of 2020.
  9. The withdrawal from the EU will mean the need for a fundamentally different constitutional relationship between the devolved administrations and the UK government. As we move to phase two of the negotiations, it is clear that the vast majority of issues that will need to be negotiated between the UK and the EU will touch on devolved matters, and we are pressing strongly for involvement and participation in these negotiations. The WG is pressing the UK government for agreement on an approach which builds on the well established co-operation that exists in preparing business for the EU Council of Ministers.

Implications for Wales

  1. The time taken to reach the agreement on the first phase has significantly reduced the time remaining to reach a deal on Phase two on the long-term relationship with the EU. The WG has made clear to the UK government that these discussions need to progress rapidly and that as they will involve matters at the heart of devolution, they must be with the full involvement of the devolved administrations.
  2. It should however be noted that many points on issues related to phase one of the negotiations still need to be agreed and there are on-going discussions on some significant issues. The Joint Report makes clear that nothing is agreed until everything is agreed and the drafting of legally-enforceable Treaty text to reflect the political agreement may well prove problematic.
  3. As outlined above, the issues related to Ireland and Northern Ireland in particular need significant clarification and remain particularly problematic. Some aspects are concerning for Wales. Given the commitments in the Joint Report, it is difficult to envisage what specific solutions the UK can offer which will ensure a soft border while maintaining separate customs and regulatory regimes in Northern Ireland to the EU without compromising the integrity of the Single Market. Given they have explicitly ruled out a hard border, the UK government would either need to find a solution in which it makes concessions accepting the Common External Tariff and full regulatory alignment, or accept an all-island solution with a maritime border with the rest of the UK. As noted, Annex 1 examines this issue further.From our perspective the best and most rational outcome will be for the whole of the UK to remain fully aligned to the Single Market and Customs Union. This is vital to protect the interests of the Welsh Ports and their commercial relationship with Ireland and supports our long-held priorities for our future relationship with the EU.

Next steps

  1. The agreement reached on phase one of the negotiations has necessitated compromise from the UK. This has set the tone for a changed dynamic leading into the second phase (described by Donald Tusk, President of the European Council, as “renewed trust…with the perspective of renewed friendship”). The next phase will be faster moving, broader and deeper in scope and negotiations will have to increase in pace.
  2. In line with the guidelines adopted by the EU27 in December, and the subsequent negotiating directives (Annexes 3a and 3b) proposed in draft by the Commission and to be confirmed by the Council in due course, negotiations on transition arrangements will progress and any agreement will be incorporated into the withdrawal agreement under Article 50 TEU. The EU has noted that the all negotiations should be completed by Autumn 2018 to allow adequate time for the EU’s approval processes and implementation.
  3. On the future relationship, the EU has agreed to commence ‘exploratory discussions’ and the Council propose adopting guidelines on these issues in March 2018. Official level discussions with the UK government have begun on enabling substantive Devolved Administration involvement in the formulation of negotiation positions for the future relationship.
  4. The WG has set out to the UK government that the model for the approach taken for the Phase two negotiations should follow the structure by which the UK coordinates how it conducts current EU business. It should build on the well-established co-operation that has existed between successive UK governments and the devolved administrations in preparing EU Council of Ministers’ business over the last 18 years, as set out in the relevant Memorandum of Understanding (and the associated Concordat on Coordination of European Union Policy Issues) between the four administrations. The principle that has successfully underpinned this co-operation is that the UK Government will involve the devolved administrations as fully as possible in developing UK policy positions on EU issues which touch on devolved matters. This is complemented by a presumption that the devolved administrations should have a role to play in meetings where matters likely to have a significant impact on their devolved responsibilities are expected to be discussed.
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