26 June 2017

Despite this aspiration which is shared by the EU, the UK government has also warned it is prepared to walk away, stating explicitly that 'no deal for Britain is better than a bad deal for Britain'. While it is difficult to distinguish genuine policy positions from political posturing it is clear that the mutual commercial interests of the UK and the EU in securing a phased and orderly withdrawal of the UK from Euratom could be overtaken by politics surrounding the wider Brexit process.

The possible terms of the UK's exit from Euratom and the EU remain subject to negotiation but a number of options are worth considering in terms of their likely impact on the UK nuclear sector both domestically and on the international stage.

Hard Brexit

If the UK has failed to agree a deal with the EU by 29 March 2019 and no extension has been agreed, the UK will automatically leave the European Union and the Euratom Community with the EU treaties (including the Euratom Treaty) ceasing to have legal effect.

In the absence of any long term free trade deal or transitional arrangements, the UK’s relationship with the EU (and the rest of the world), would be governed by existing bilateral and multi-lateral arrangements including those applicable to members of the World Trade Organisation (WTO). Although WTO rules would act to cushion certain shocks triggered by the UK’s withdrawal from the nuclear common market, for example by limiting tariffs that can be imposed on nuclear goods and services, the issue of nuclear safeguards and international nuclear trade / collaboration are more problematic.

Associate membership

A number of commentators have suggested that the UK could pursue ‘associate membership’ of Euratom following its withdrawal from the EU based on the model adopted by Switzerland. Although Switzerland has been able to agree 'associate member’ status it has only done so in relation to the Euratom’s R&D programme which includes participation in the ITER project but does not extend to the wider benefits of Euratom membership.

It is also interesting to note that despite the limited nature of Switzerland’s status it has still been required to accept freedom of movement of people from the EU. With the UK seeking even closer integration with the Euratom Community, its refusal to accept freedom of movement of people and the EU’s reluctance to allow the UK to ‘cherry pick’ benefits of EU membership would suggest this option might be challenging to pursue.

Transitional arrangements and a long term free trade arrangement

The UK’s preferred option is to agree temporary arrangements in order to facilitate the transition of the UK’s relationship with the EU to a long term free trade agreement. The terms of any temporary arrangements or long term free trade deal are obviously subject to negotiation during the Article 50 process and have been the subject of a great deal of speculation to date.

In its Brexit negotiating guidelines the EU has confirmed its support for the agreement of transitional arrangements '… to the extent they are necessary and legally possible’ as long as such arrangements are "… clearly defined, limited in time, and subject to effective enforcement mechanisms."'

With the legal form of such arrangements clearly important to both parties one key question that arises is the extent to which any proposed transitional arrangements will be subject to qualified majority voting or unanimous approval of all 27 remaining EU states. If it is the later there must be genuine concern as to whether such an agreement will be concluded by 29 March 2019.

Perhaps the simplest model is for the UK to remain a full member of the EU and Euratom during any transitional period. In its negotiating guidelines the EU has suggested that any such time-limited prolongation of the Union acquis would require the full application of existing EU '... regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures'.

The viability of this option therefore may well depend on the path the UK government is willing and able to tread between prolonging existing arrangements to avoid cliff edge effects on the one hand and honouring its pledge to extricate the UK from the purview of EU control on the other. The answer of course will depend on the length of the transitional period that the EU is prepared to agree.

For more information on this topic, please contact Ian Salter or Ian Truman

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Ian Salter

Ian Salter Partner

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