March Madness – Brexit Edition

The countdown to Brexit on March 29 brings new twists and turns every day. On Wednesday, the UK’s House of Commons voted on amendments to the Brexit process, establishing a March timetable for decisions on whether to seek a deal, no deal, or delay, while dangling the possibility of a second referendum. In light of these developments, and with apologies to U.S. college basketball’s championship tournament, here is a brief guide to the “Final Four” Brexit options.

A Brexit Deal: The only Brexit deal on the table is a UK-EU negotiated Withdrawal Agreement and Political Declaration, which proposes an orderly withdrawal by the UK from the EU during a transitional period.[1] This deal was soundly rejected by Parliament in January 2019 and continues to lack any significant support. Prime Minister Theresa May has since sought to renegotiate provisions relating to the Irish backstop proposal to address concerns from pro-Brexit MPs in her party that the backstop could lead to an indefinite customs union with the EU.[2] The Brexit deal will be put to a vote again in Parliament by March 12.

No Deal: The default position upon rejection of the Brexit deal had been a “no deal” Brexit, where the UK would officially leave the EU on March 29 with no transitional arrangements. Only a small number of Conservative Brexiteers actively support a no deal Brexit, arguing it could force the EU to make concessions and give the UK a stronger negotiating hand. The (seemingly) majority view instead argues strongly against the prospect of no deal, which risks plunging the country into political, economic, and social uncertainty.[3]. MPs will be asked to vote on leaving the EU with no deal on March 13 (should the March 12 vote go against a Brexit deal).

Delay: In response to a cross-party proposal by Labour MP Yvette Cooper and Conservative MP Oliver Letwin for a Brexit delay to avoid a no deal scenario, May promised earlier this week to hold a vote to extend Brexit beyond the March 29 deadline, should the Brexit deal fail. On Wednesday, the Cooper Amendment (reinforcing May’s promise to delay Brexit upon failure of a deal) was passed by a large majority. MPs will be asked to vote on a Brexit delay on March 14 (in the event the deal and no deal options fail to win approval on March 12 and March 13, respectively).

Second Referendum: The Labour proposal for a “soft” Brexit, which would retain close ties and a permanent customs union with the EU, was rejected on Wednesday, resulting in the leader of the Labour Party, Jeremy Corbyn, announcing his support for a second referendum. A second referendum is highly unlikely – it could only be called in a long-delay scenario and, realistically, after a general election. This proposal has not been officially tabled as an amendment to the Brexit process and thus is not yet subject to an official House of Commons vote, but that vote could happen around the March 12 vote.

Who Has the Votes?: As the clock continues to tick, political allegiances in Parliament are shifting. It is difficult to predict whether May has the votes to carry a Brexit deal, as the Conservative Party remains divided between Pro-Brexit and Remainer MPs and is reliant on Northern Ireland’s Democratic Unionist Party (DUP) support to carry a majority in Parliament. However, the Labour option of a second referendum and threat of delay could unite the Conservative Party and prompt it to vote in favor of a deal – which, from a Brexiteer perspective, is preferable to no Brexit.

If a Brexit deal fails, Wednesday’s vote suggests there is sufficient cross-bench support between Remainer Conservative and Pro-EU Labour MPs in favor of a delay rather than no deal. However, the Cooper Amendment was passed by a Labour majority, with 100 Conservative MPs either abstaining from voting or actively voting against delay, pointing towards a lack of consensus amongst the Conservatives on whether a deal or delay is preferable.[4]

While the Conservatives are divided on deal or delay, the Labour Party is split on the possibility of a second referendum. The proposal by Corbyn was most likely designed in part to prevent further defections after eight Labour MPs formed a new Independent Group. Corbyn himself has admitted he would “continue to push for other options” in addition to a second referendum[5]. Meanwhile, there are other Labour MPs who have publicly stated their opposition to a second referendum. The details and support for a second referendum remain hazy at best, but it continues to muddy the Brexit options.

Some Additional Wrinkles: There are still open issues on a Brexit deal – namely, whether the Irish backstop can be changed, whether the EU/Republic of Ireland would agree to any changes, and whether Pro-Brexit and DUP MPs would be satisfied with proposed changes to the Irish backstop (or forced into conceding the current backstop proposal). Even if the Brexit deal is approved, it kicks off a two-year negotiation period for trade and UK/EU relations. In this respect, references to a Brexit deal are slightly misleading – a final Brexit deal will only really unfold over the next two years.

If the Brexit deal is rejected and Brexit delay approved, the duration and scope of delay is unclear. May favors a short delay; the EU appears to be open to the possibility but is rumored to insist on a delay of up to two years.[6] Unless clear parameters for a delay are established – and agreed to with the EU – it could increase the likelihood of a general election or second referendum, which would further postpone (or could potentially reverse) Brexit.

A Brexit Showdown: The options may be clearer, but the outcomes are not. Votes in favor of a deal are possible, but not certain. No deal seems unpalatable to most but technically remains a possibility. A cross-party preference has emerged for delay, but it is unclear what this would achieve other than avoiding a chaotic no deal on March 29. A second referendum is not even officially in the game but is still being bandied about. “March Madness” continues as things are shaping up for a showdown between a Brexit deal or delay.

ENDNOTES

[1] The Withdrawal Agreement provides for a two-year transition period, a financial settlement between the UK and EU, and an Irish backstop and triggers the commencement of negotiations on the trade deal and UK/EU relations. The Political Declaration provides a set of agreed UK/EU objectives for future negotiations.
[2] The Irish backstop is a safety net arrangement between the UK and EU to avoid a hard border between the Republic of Ireland and Northern Ireland. If there is no agreement on trade talks between the UK and EU by the end of the two-year transition period, the UK will essentially remain in the EU customs union until a trade deal has been reached.  
[3] See Sir Ivan Rogers’ lecture “Where did Brexit come from and where is it going to take the UK” Lecture at UCL European Institute, January, 29, 2019, https://www.ucl.ac.uk/european-institute/sites/european-institute/files/sir_ivan_rogers_lecture_ucl_22012019.pdf for an overview of the arguments against a “no deal” Brexit.
[4] Kuenssberg, Laura. “Brexit: Numbers lesson for May and Corbyn”. BBC, February 27, 2019. https://www.bbc.com/news/uk-politics-47396530.
[5] Mance, H. “Labour party formally backs new referendum on Brexit.” FT.com, February 27, 2019. https://www.ft.com/content/9ddb7796-3ac6-11e9-b856-5404d3811663.
[6] Boffey, D., O’Carroll, L. and Stewart, H. “Brexit could be delayed until 2021, EU sources reveal,” The Guardian, February 24, 2019. See https://www.theguardian.com/politics/2019/feb/24/brexit-could-be-delayed-until-2021-eu-sources-reveal. Also, Murphy, J. and Cecil, N. “Brussels ‘will insist on delay of up to two years if UK fails to agree deal’.” Evening Standard, February 28, 2019. See https://www.standard.co.uk/news/politics/brexit-news-latest-brussels-will-insist-on-delay-of-up-to-two-years-if-uk-fails-to-agree-deal-a4077851.html.

This post comes to us from Amy Hutchings, an English solicitor and LL.M. candidate at Columbia Law School. She previously worked as a mergers and acquisitions associate at Slaughter and May in London and as a foreign legal consultant in the M&A group at White & Case in New York.

1 Comment

  1. Wood Chop Samurai

    Nice article! Seems like a lot of plumbing needs to be unclogged in London and Brussels. How do the bookies have it?

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