Finally, it should be noted that there is the voluntary or forced (in case the two-year time limit has elapsed or the EU and the UK cannot reach an agreement) option for the EU and the UK to proceed without any transition agreement or transition arrangements in place. This would mean that from the day of withdrawal the UK loses its access to the Single Market and the related free movement of goods, services, capital, and people. From that moment trade will be done based on the WTO rules until the moment a new agreement will be agreed upon and enters into force.
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✗ A cliff-edge Brexit in case the future relationship agreement does not enter into force on the day the UK withdraws from the EU
3.3. Conclusion
Although the EU and the UK both have mentioned the possibility to agree on transition arrangements, at this moment there are too many uncertainties to set out the whole procedure for realizing such agreement. It is unclear whether transition arrangements will be concluded based on Article 50 TEU or on the normal EU procedures for concluding international agreements.
It has been suggested that the transition arrangements should be included within the withdrawal agreement and thus are a part of the withdrawal agreement. This will prevent a cliff-edge Brexit since the withdrawal agreement would enter into force on the day of withdrawal and the included transition arrangements would function as a safety net to keep Brexit from disrupting the economy and the lives of EU and UK citizens. However, it is uncertain whether this is legally possible since Article 50 TEU does not make any reference to transition measures. Furthermore, including transition arrangements within the withdrawal agreement would most likely mean that ratification by the EU-27 is necessary since it would be classified as a mixed agreement.
Another option that has been suggested is laying down the transition arrangements in a separate agreement. Although this is legally speaking a safer option, it also raises several problems. The normal EU procedures are for concluding international agreements with third countries, until the day of withdrawal the UK is still an EU Member State and not a third country. Furthermore, realizing such agreement is a cumbersome process and it possibly needs ratification by the EU-27. Therefore, it is highly unlikely that such an agreement can be concluded before the UK withdraws from the EU.
Other options that have been suggested are creating a second tier EU membership, temporary EEA membership, and a parallel sources agreement. These options are theoretically possible but in practice, they are not likely to happen since there is not the political will and time for such cumbersome constructions.
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4. The Future Relationship Agreement
The fourth chapter will focus on the process of the realization of the future relationship agreement. This process differs slightly from the in Chapter 2 analysed process of realizing the withdrawal agreement. Although Article 50 TEU has been the red line throughout the earlier chapters, the relevant Articles for negotiating and concluding the future relationship agreement are Article 207 TFEU and Article 218 TFEU which can be found in Appendix 1. First, the legal basis of the future relationship agreement will be analysed. Second, the EU procedure for negotiating and concluding international agreements with third countries will be described. This includes all the different steps that have to be taken.
4.1. The Legal Basis
Article 50 TEU only mentions that an agreement setting out the arrangements for withdrawal should be negotiated which ‘takes account of the framework for its future relationship with the Union’. It does not set out any rules for the negotiations and the concluding of the final agreement. Therefore, the regular procedures for negotiating and concluding international agreements with third countries as set out in the Treaties have to be followed.
The EU manages its trade relations with third countries through its trade policy. Trade policy is an exclusive competence of the EU as Article 3 TFEU states that common commercial policy (CCP) is an exclusive EU competence. The scope of the CCP is set out in Article 207 TFEU and stipulates that the CCP is not only limited to trade in goods but also encompasses trade in services, trade-related aspects of intellectual property and foreign direct investment. If the future relationship agreement would only address trade relations and thus falls within the scope of the CCP, the legal basis for the agreement would be Article 207 TFEU. However, if the agreement entails more than just trade relations, Article 218 TFEU would be the legal basis. Article 218 TFEU sets out the rules for the negotiation and conclusion of international agreements by the EU. It is most likely that Article 218 TFEU would be the legal basis for the future relationship agreement since the agreement is likely to go beyond trade relations. The recent FTA’s between the EU and Canada and the EU and Singapore were also negotiated on the basis of Article 218 TFEU (Institute for Government, 2017a).
In addition, Article 216 TFEU provides the situations in which the EU can conclude agreements with third countries. The EU may act in the following four cases: ‘’where the Treaties so
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provide or where the conclusion of an agreement is necessary in order to achieve, within the framework of the EU's policies, one of the objectives referred to in the Treaties, or is provided for in a legally binding Union act or is likely to affect common rules or alter their scope.’’ This provides the following possibilities for the post-Brexit agreement: an agreement based on Article 207 TEU or Article 218 TFEU, an AA based on Article 217 TFEU and a special relationship based on the neighbourhood competence under Article 8 TEU (Kreilinger, Becker, & Wolfstädter, 2017).