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Britains Prime Minister Theresa May is welcomed by European Commission President Jean-Claude Junck
Image: Britains Prime Minister Theresa May is welcomed by European Commission President Jean-Claude Junck. REUTERS/Yves Herman

U.K. and E.U. Reach First Agreement on Brexit Divorce Terms

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Image: Britains Prime Minister Theresa May is welcomed by European Commission President Jean-Claude Junck. REUTERS/Yves Herman

The first Brexit deal’s achievement at the close of last week will allow the U.K. to depart from the European Union in a “smooth and orderly way,” said British Prime Minister Theresa May.

Three Main Brexit Points

Following nine months of negotiations, the first deal was established, resulting in a fifteen page joint report between the U.K. and the E.U. Among the pages, there were three main points of consideration for the divorce agreement.

Following this deal, the European Commission made a recommendation to the E.U. leaders that they should agree that there has been “sufficient progress” within this first Brexit negotiation phase. This would allow the negotiators to begin their discussions for the next phase.

Irish Border Decision

After already having fumbled this issue at the start of December, P.M. May has now arrived at a decision with the E.U.

The Republic of Ireland sought guarantees that they would not face a hard border with Northern Ireland following Brexit. The goal was to avoid a new ignition of the sectarian conflict in the region. They stated that this could be achieved only if either the U.K. or, at a bare minimum, Northern Ireland’s regulations continue to closely reflect the European Union’s.

That said, May risked conflict with some of the supporters she needs for a majority if she were to avoid the hard border, since the Democratic Unionist party and the P.M.’s allies in Northern Ireland were protesting additional U.K. divisions. Moreover, Scotland and Wales are also calling for exceptions should this be the case for Northern Ireland.

Negotiators could not simultaneously maintain a soft border after having exited the E.U. market and customs union while still leaving regulatory divergence options open. Therefore, they decided to make their final decision on the issue at some point in the future. While it is more than likely that the border will harden when compared to where it is right now, the U.K. intends to propose “specific solutions to address the unique circumstances of the island of Ireland,” at some point later on, said the report.

The Divorce Bill

For the majority of the negotiations, the money issue was among the biggest sticking points. By the close of the negotiations for the first phase, the U.K. agreed to pay for everything to which May has made commitments. The U.K. will also pay its current E.U. budget share, which expires in 2020. That said, there will also be a requirement for the U.K. to make some of the payments following that time due to the way the budget works with the European Union and because the United Kingdom had previously signed up for certain agreements extending beyond that date.

In order to come up with that tally, the E.U. will take a snapshot of the U.K.’s remaining debt following 2020 and will calculate the country’s percentage based on the average contributions it had already made from 2014 through 2020.

The U.K. will make its payments only as they become due and not in advance. The reason is that there are certain specific payments – such as pensions – which may continue for a substantial amount of time. Equally, the United Kingdom will receive a reimbursement for amounts paid to the European Investment Bank and to the European Central Bank.

According to the U.K.’s estimates regarding the Brexit divorce bill, the budget contribution will be for around €17 to 18 billion, the outstanding commitments total will be around €21 to 23 billion and the liabilities minus the bank reimbursements will be around €2 to 4 billion. The grand total should fall somewhere between €40 and 45 billion.

Citizens’ Rights Protocols

For U.K. citizens living in the E.U. and vice versa, there had been considerable uncertainty regarding whether or not the current rights would be maintained. The primary challenge has to do with the role of the European Court of Justice (ECJ). Both the E.U. and the U.K. compromised on this issue.

The E.U. will maintain an indirect influence by way of the ECJ. The United Kingdom agreed that the ECJ’s case law will be taken into account within its own courts. Moreover, for the next eight years, the UK’s courts will be able to consult with the ECJ in Luxembourg should they need assistance with citizens’ rights interpretation. Should such a request be made, the EJC’s ruling must be followed, though such a consultation is not a requirement.

Citizens’ rights will be monitored by an independent U.K. national authority as well as the E.U. Commission. E.U. citizens will be required to complete a “short, simple, user friendly” application form in order to register themselves in the United Kingdom. They will have two years in which to take this step. Family reunification and certain welfare benefit exports have been secured in the deal.

Those from E.U. countries who have been absent from the U.K. (and vice versa) for over half a decade will no longer have a residency right. U.K. citizens in one E.U. country will be able to maintain their rights but they will not be able to automatically carry them over into another E.U. country following Brexit.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.