Brexit deal in real world = No FTA’s

If the Government’s objective is to set the UK free to trade on terms to be agreed with the rest of the world (including those states with whom the EU has agreed free trade agreements which will no longer apply to the UK when the UK ceases to be a member of the EU), then the Brexit deal it is self-defeating, because throughout the duration of the transition period and operation of the back-stop, the UK is constrained both legally, and practically, from concluding FTA’s with non-EU states. On its face, it therefore represents a complete failure of economic diplomacy by the UK. So, economically, what is the point of Brexit?

On 6 February 2018 Rob Merrick, Deputy Political Editor of the Independent reported, ‘Giving evidence to the Commons Foreign Affairs Committee, [Sir Simon Fraser – Former head of the UK Diplomatic Service] warned: “Our leverage in international institutions is going to be weaker once we are outside the European Union.” Other countries believe Britain has “lost the plot” by pursuing Brexit because it will reduce the country’s “international influence”. Sir Simon Fraser also accused Theresa May of “mushy thinking” over her promise to achieve a new “Global Britain” outside the EU – branding it just a “slogan”. Calling Brexit a “strategic error”, Sir Simon ridiculed No 10’s vow that leaving the EU would see Britain “strike out in the world”, telling a Parliamentary inquiry: “I don’t know what that means.”
And he warned: “To be frank with you, a lot of countries think, for the time being, that we have slightly lost the plot in terms of where we intend to go.”
The European Commission Press Release states,
‘The EU and the UK negotiators have agreed on how to avoid a hard border between Ireland and Northern Ireland. Both will use their best endeavours to have – by 1 July 2020 – a future agreement concluded before the end of the transition period. Should this not be the case, the EU and the UK could jointly extend the transition period. Alternatively, as of January 2021, the backstop solution for Ireland and Northern Ireland would apply, subject to a joint review mechanism.
That backstop solution means that a single EU-UK customs territory will be established, which will apply from the end of the transition period until such a time as a subsequent agreement becomes applicable. Northern Ireland will therefore remain part of the same customs territory as the rest of the UK. The single customs territory covers all goods with the exception of fishery and aquaculture products.
The creation of the single customs territory includes the corresponding level playing field commitments and appropriate enforcement mechanisms to ensure fair competition between the EU27 and the UK.
The outline of the political declaration published today records the progress in reaching an overall understanding on the framework for the future EU-UK relationship. The EU and UK negotiators will continue their work based on the outline. [I.e it is an ‘outline’ road-map].
Nothing is agreed until everything is agreed. The present Withdrawal Agreement – including the transition period – must take into account the framework of the future relationship. The political declaration must therefore be further developed and agreed in its final form…
The EU and UK negotiators will continue their work on the political declaration on the framework for the future relationship based on the outline published today. It is up to the President of the European Council to decide whether and when to convene a meeting of the 27 Heads of State or Government. It will be up to the European Council (Article 50) to endorse the Withdrawal Agreement and the joint political declaration on the framework of the future relationship.
Once the Withdrawal Agreement is endorsed by the European Council (Article 50), and before it can enter into force, it needs to be ratified by the EU and the UK. For the EU, the Council of the European Union must authorise the signature of the Withdrawal Agreement, before sending it to the European Parliament for its consent. The United Kingdom must ratify the agreement according to its own constitutional arrangements.
Prime Minister Theresa May triggered Article 50 of the Treaty on European Union on 29 March 2017… Her letter to Donald Tusk, the President of the European Council, formally began the process of UK’s withdrawal from the EU. Negotiations on the terms of the UK’s withdrawal formally began on 19 June 2017, following the UK’s general election. On 8 December 2017, the EU and the UK published a Joint Report, setting out the areas of agreement between both sides on withdrawal issues. This was accompanied by a Communication by the European Commission. In March 2018, the European Commission and the United Kingdom published a draft Withdrawal Agreement. This document highlighted areas of agreement and disagreement using a green, yellow and white colour-coding. The future relationship between the EU and the UK will be outlined in a political declaration and will only be negotiated once the UK becomes a third country, i.e. outside of the EU, after 29 March 2019.’
In project management terms, the text agreed at negotiator level is therefore a level 1 ‘framework’ agreement and not a fully worked out and worked through, level 5 ‘detailed’ agreement that is capable of practical implementation because it does not fully define the extent to which the UK remains integrated within and aligned with the EU and ‘Union Law’ (as defined), which is uncertain and a moving target. Because the Brexit deal commits the UK to enter into a parallel EU universe where international trade vis-à-vis the EU is governed by Union Law, it curtails the ability of the UK to enter into more preferential trading arrangements (through the agreement of FTA’s) with non-EU states. Because ‘Nothing is agreed until everything is agreed’ business cannot actually know the extent of the UK’s legal obligations to comply with Union Law until it ceases to apply. As for the exit mechanism, see the commentary on the applicable provisions of the Vienna Convention below, and for more detail please visit www.diplomaticlawguide.com. Whoever authorised this agreement was clearly not an international lawyer and appears to have had no grasp of the default provisions which apply that are far from satisfactory.
What does the text of the agreement state?
Article 184 (Negotiations on the future relationship) states,
‘The Union and the United Kingdom shall use their best endeavours, in good faith and in full respect of their respective legal orders, to take the necessary steps to negotiate expeditiously the agreements governing their future relationship referred to in the political declaration of [DD/MM/2018] and to conduct the relevant procedures for the ratification or conclusion of those agreements, with a view to ensuring that those agreements apply, to the extent possible, as from the end of the transition period.’
Article 2 (Definitions) states,
‘For the purposes of this Agreement, the following definitions shall apply:
(a) “Union law” means:
(i) the Treaty on European Union (“TEU”), the Treaty on the Functioning of the European Union (“TFEU”) and the Treaty establishing the European Atomic Energy Community (“Euratom Treaty”), as amended or supplemented, as well as the Treaties of Accession and the Charter of Fundamental Rights of the European Union, together referred to as “the Treaties”;
(ii) the general principles of the Union’s law;
(iii) the acts adopted by the institutions, bodies, offices or agencies of the Union;
(iv) the international agreements to which the Union is party and the international agreements concluded by the Member States acting on behalf of the Union;
(v) the agreements between Member States entered into in their capacity as Member States of the Union;
(vi) acts of the Representatives of the Governments of the Member States meeting within the European Council or the Council of the European Union (“Council”);
(vii) the declarations made in the context of intergovernmental conferences which adopted the Treaties;’
Article 6 (References to Union law) states,
‘1. With the exception of Parts Four and Five, unless otherwise provided in this Agreement all references in this Agreement to Union law shall be understood as references to Union law, including as amended or replaced, as applicable on the last day of the transition period.
2. Where in this Agreement reference is made to Union acts or provisions thereof, such reference shall, where relevant, be understood to include a reference to Union law or provisions thereof that, although replaced or superseded by the act referred to, continue to apply in accordance with that act.
3. For the purposes of this Agreement, references to provisions of Union law made applicable by this Agreement shall be understood to include references to the relevant Union acts supplementing or implementing those provisions.’
Article 6 of the Protocol (Single customs territory, movement of goods) provides,
‘1. Until the future relationship becomes applicable, a single customs territory between the Union and the United Kingdom shall be established (“the single customs territory”). Accordingly, Northern Ireland is in the same customs territory as Great Britain.
The single customs territory shall comprise:
(a) the customs territory of the Union defined in Article 4 of Regulation (EU) No 952/2013; and
(b) the customs territory of the United Kingdom.
The rules set out in Annex 2 to this Protocol shall apply in respect of all trade in goods between the territories referred to in the second subparagraph, as well as, where so provided, between the single customs territory and third countries. With a view to ensuring the maintenance of the level playing field conditions required for the proper functioning of this paragraph, the provisions set out in Annex 4 to this Protocol shall apply. Where appropriate, the Joint Committee may modify Annex 4 in order to lay down higher standards for these level playing field conditions.
The Joint Committee shall adopt before 1 July 2020 the detailed rules relating to trade in goods between the two parts of the single customs territory for the implementation of this paragraph. In the absence of such a decision adopted before 1 July 2020, Annex 3 shall apply.’
Article 3 (Territorial scope) provides,
‘1. Unless otherwise provided in this Agreement or in Union law made applicable by this Agreement, any reference in this Agreement to the United Kingdom or its territory shall be understood as referring to:
(a) the United Kingdom;
(b) Gibraltar, to the extent that Union law was applicable to it before the date of entry into force of this Agreement;
(c) the Channel Islands and the Isle of Man, to the extent that Union law was applicable to them before the date of entry into force of this Agreement;
(d) the Sovereign Base Areas of Akrotiri and Dhekelia in Cyprus, to the extent necessary to ensure the implementation of the arrangements set out in the Protocol on the Sovereign Base Areas of the United Kingdom of Great Britain and Northern Ireland in Cyprus annexed to the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic to the European Union;
(e) the overseas countries and territories listed in Annex II to the TFEU [the Treaty on the Functioning of the European Union] having special relations with the United Kingdom1, where the provisions of this Agreement relate to the special arrangements for the association of the overseas countries and territories with the Union.[I.E. Anguilla, Bermuda, British Antarctic Territory, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Montserrat, Pitcairn, Saint Helena, Ascension and Tristan da Cunha, South Georgia and the South Sandwich Islands, and Turks and Caicos Islands].’
Article 1 of Annex 2 provides,
‘Scope
1. Subject to the conditions laid down in Article 6(1) of the Protocol, this Annex shall apply to all goods:
(a) produced in the customs territory of the Union or the United Kingdom customs territory, including those wholly or partially obtained or produced from products coming from third countries which are in free circulation in the customs territory of the Union or the United Kingdom customs territory; or
(b) coming from third countries and in free circulation in the customs territory of the Union or the United Kingdom customs territory;
(c) obtained or produced in the customs territory of the Union or the United Kingdom customs territory, in the manufacture of which products coming from third countries and not in free circulation either in the customs territory of the Union or the United Kingdom customs territory were used, under the condition that the import formalities have been complied with and any customs duties or charges having an equivalent effect which are payable on those goods or on the third-country products used in their manufacture have been levied in the exporting part of the single customs territory.
The term “wholly obtained” in point (a) shall have the same meaning in the United Kingdom customs territory as it does in the customs territory of the Union.
2. Goods from third countries shall be considered to be in free circulation in the customs territory of the Union or the United Kingdom customs territory if the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied by the Union or by the United Kingdom in their respective part of the single customs territory, and if they have not benefitted from a total or partial reimbursement of such duties or charges.
3. As regards goods obtained or produced in the customs territory of the Union or the United Kingdom customs territory, in the manufacture of which products coming from third countries and not in free circulation either in the customs territory of the Union or the United Kingdom customs territory were used, but which are not covered by point (c) of paragraph 1, the importing part of the single customs territory shall apply the customs legislation applying to goods from third countries.’
Article 3 (Customs Tariff applicable to trade with third countries) states,
‘1. The United Kingdom shall align the tariffs and rules applicable in its customs territory with:
(a) the Union’s Common Customs Tariff, as set out in Article 56(2) of Regulation (EU) 952/2013;
(b) the Union’s rules on the origin of goods, as set out in Chapter 2 of Title II of Regulation (EU) 952/2013; and
(c) the Union’s rules on the value of goods for customs purposes, as set out in Chapter 3 of Title II of Regulation (EU) 952/2013.
2. Under no circumstances may the United Kingdom:
(a) apply to its customs territory a customs tariff which is lower than the Common Customs Tariff for any good or import from any third country; or
(b) apply or grant in its customs territory tariff preferences to any good on the basis of rules of origin that are different from those governing the granting of such preferences to the same good by the Union in its customs territory.
3. The United Kingdom may not, without prior agreement in the Joint Committee, apply or grant in its customs territory any quotas, tariff-rate quotas or duty suspensions.
4. The United Kingdom shall be informed of any decision taken by the Union to amend the Common Customs Tariff, to suspend or reintroduce duties and any decision concerning quotas, tariff-rate quotas or duty suspensions in sufficient time for it to align itself with that decision. If necessary, consultations may be held in the Joint Committee.’
Article 4 (Commercial policy) states,
‘1. The single customs territory shall comply with the relevant provisions of Article XXIV of the GATT 1994. To this end, the United Kingdom shall harmonise the commercial policy applicable to its customs territory with the common commercial policy of the Union to the extent necessary to give effect to Article 6(1) of the Protocol and Article 3 of this Annex, and by applying regulations of commerce other than duties, in particular measures falling under Article XI:1 of the GATT 1994, which are substantially the same as those of the Union.
2. The United Kingdom shall ensure that, for the products covered by Article 6(1) of the Protocol, its Schedules of Concessions referred to in Article II of the GATT 1994 are fully aligned with those of the Union, and commitments on tariff-rate quotas are compatible with those of the Union and comply with the provisions of Article 3 of this Annex. The Union and the United Kingdom agree to cooperate on WTO matters on the apportionment of WTO tariff-rate quotas and to the extent necessary for the functioning of the single customs territory.
3. The Union’s trade defence regime, as well as the Union’s Generalised Scheme of Preferences (“GSP”), shall cover both parts of the single customs territory. The Union shall consult the United Kingdom on any trade defence measures or actions under the GSP regime which it considers taking. At least 6 months before the end of the transition period, the Joint Committee shall set up the procedures for the application of this paragraph.’
Article 174 (Disputes raising questions of Union Law) states,
‘1. Where a dispute submitted to arbitration in accordance with this Title raises a question of interpretation of a concept of Union law, a question of interpretation of a provision of Union law referred to in this Agreement or a question of whether the United Kingdom has complied with its obligations under Article 89(2), the arbitration panel shall not decide on any such question. In such case, it shall request the Court of Justice of the European Union to give a ruling on the question. The Court of Justice of the European Union shall have jurisdiction to give such a ruling which shall be binding on the arbitration panel.’
Article 160 (Jurisdiction of the Court of the European Union concerning certain provisions of Part Five) states,
‘Without prejudice to Article 87 of this Agreement, Articles 258, 260, and 267 TFEU shall apply in respect of the interpretation and application of applicable Union law referred to in Article 136 and Article 138(1) or (2) of this Agreement. To this effect, any reference made in Articles 258, 260, and 267 TFEU to a Member State shall be understood as including the United Kingdom.’
In the event of no deal the UK has no FTA with any other state and loses access to those agreed by the EU on behalf of member states with non-EU countries. The UK’s WTO scheduled commitments also need to be regularised (by approval) with the membership of WTO. It only takes 1 out of 148 to block. This could take years. I am not sure that MP’s have fully grasped the time-line (see the commentary about the WTO below). The Civil Service has, and many senior official are members of my LinkedIn network, as well as representatives of various countries at the WTO, and senior trade officials in Canada, the US, Australia and New Zealand, as are many international trade law and economic diplomacy academics around the world. Nothing in this post is intended in any way to be a criticism of their skill expertise and professionalism. It is their political masters I blame.
‘In the event of a ‘no deal’, EU trade agreements will cease to apply to the UK when we leave the EU. Our intention is that the effects of new bilateral agreements will be identical to, or substantially the same as, the EU agreements they replace. However, users of current EU free trade agreements should be aware that, in contrast to the current situation and during any Implementation Period, there may be practical changes to how they make use of preferences under these new agreements. For example, UK and EU content will be considered distinct, and each new agreement will individually specify what origin designations may be used to qualify for preferences. We will aim to limit these changes as far as possible, but the final form of new agreements and any resulting changes will depend on ongoing discussions with our trading partners. The Trade Bill contains a reporting requirement stating that the government will publish a report before these new free trade agreements are ratified on any significant changes to the new trade-related provisions. Where arrangements to maintain particular preferences in a no-deal scenario are not in place by exit day, trade would take place on WTO terms. Under such terms, traders would pay the applied MFN tariff. This is the tariff applied equally to all countries in the absence of preferential arrangements. In the event of no-deal, the government will determine and publish a new UK MFN tariff schedule before we leave the EU. Information on the current tariff rates are freely available to view in the UK’s applied goods schedule and can be found on the UK Government’s Tariff Look Up tool. Further practical information on arrangements for the border and relevant contact information for guidance can be found in:
· Classifying your goods in the UK Trade Tariff if there’s no Brexit deal
· Trading with the EU if there’s no Brexit deal
The specific commitments for services trade that WTO members apply to trading partners, independently of any preferential arrangements, are set out in each Member’s schedule of commitments under the General Agreement on Trade in Services. Some countries have liberalised beyond these specific commitments.
For more information on the WTO, visit the WTO website.
This notice is meant for guidance only. You should consider whether you need separate professional advice before making specific preparations.
It is part of the government’s ongoing programme of planning for all possible outcomes. We expect to negotiate a successful deal with the EU.
Norway, Iceland and Liechtenstein are party to the Agreement on the European Economic Area and participate in other EU arrangements. As such, in many areas, these countries adopt EU rules. Where this is the case, these technical notices may also apply to them, and EEA businesses and citizens should consider whether they need to take any steps to prepare for a ‘no deal’ scenario.’ UK Government Guidance (12 October 2018): https://www.gov.uk/government/publications/existing-free-trade-agreements-if-theres-no-brexit-deal/existing-free-trade-agreements-if-theres-no-brexit-deal
I have not heard a single MP mention that on 29 March, even if there is a deal, the UK will have tied its hands in concluding an FTA with any non-EU state until possibly 2030 (see below) because:
(i) the UK does not have an FTA with any other state (except through membership of the EU); and
(iii) with the exception of any state whose executive decisions are made by a dictator, in the real world no state will constrain its options by doing a deal with the UK until it has received comprehensive legal advice about the extent to which the UK remains integrated and aligned with the EU.
In other words, countries with whom the EU does not have a FTA like the US, New Zealand and China will simply not want to negotiate an FTA with the UK until they know what Britain’s relationship with the EU actually is. Which bits of the single market, if any, is the UK in? Which parts of EU competition law apply to the UK? Once Britain has left the EU’s customs union, what ‘rules of origin’ will Brussels apply, so that other countries cannot use the UK as a way of circumventing EU restrictions on their exports? Does regulatory harmonisation between the EU and the UK make convergence between the UK and their country impractical or a legal impossibility?
The practical binary choice the Brexit deal offers is, ‘trade with us [i.e. the EU] and benefit from a level playing field, or go off on your own and trade with the rest of the world on terms to be agreed – if there is no practical solution to the Irish border issue by the end of the extended transition period, you remain aligned – possibly indefinitely (see the exit mechanism below).’
Because an FTA with the EU may take between 4-7 years to agree, the transition period may not end until 2025.
If at the end of that period the technology does not exist to avoid a hard border on the island of Ireland , then the UK will remain substantially, if not 100% aligned with the EU for international trade.
Therefore our hands are tied in negotiating more preferential terms with non-EU states.
Meanwhile the EU is currently negotiating trade agreements with over 72 other countries. Post-Brexit, the UK will therefore need to re-negotiate or start new bilateral negotiations on over 125 trade agreements, i.e. to replace the agreements that have already been negotiated by the EU that will no longer apply to the UK when Britain leaves the EU, and to keep pace with the EU on the world stage.
Until a bespoke trade agreement has been concluded between the UK and the EU, no state with whom the UK wishes to negotiate a FTA can properly formulate a position upon the scope and terms of a future bilateral agreement, because the extent of the UK’s freedom to agree the scope and terms of a FTA will be curtailed by the terms of a bespoke UK-EU trade agreement. In other words, the UK’s negotiating counter-parties cannot know the extent to which the UK’s hands will be tied by the EU when the UK is free, post Brexit, to enter into a legally binding FTA. Therefore the practical result of the Brexit deal is that until a comprehensive FTA has been agreed with the EU no state worth its salt with conclude a binding FTA with the UK.
How long will it then take to conclude an FTA with a non-EU state?
The Peterson Institute for International Economics who analysed how long it took the US to agree 20 bilateral trade deals concluded: (i) one and a half years, on average, and (ii) more than three and a half years to get to the implementation stage. https://www.weforum.org/agenda/2016/07/how-long-do-trade-deals-take-after-brexit/
= 5 years.
It is therefore not inconceivable that the first trade agreement with a non-EU state will not be concluded and implemented until 2030.
What is the status quo in relation to regularisation of the UK’s schedules of tariffs with the WTO?
‘Resistance to a joint UK-EU proposal to the World Trade Organization on trade after Brexit – which was once celebrated by the trade secretary, Liam Fox, as “real progress” – has triggered a break down in unity, with London and Brussels divided on a way forward.
Fox had described the plan on how much meat, butter and wheat the rest of the world could export to the UK and the 27 member states on low or zero tariffs as a sign of the country “forging ahead”, and boasted: “It’s a sign we can make progress when both sides choose to do so.”
Yet, in recent months the united EU and UK front has splintered in the face of a strident rejection of their proposals from the US, Australia and New Zealand, among others, the Guardian understands.
Brussels has proposed another way forward. But London has yet to agree and has left open the prospect that the UK could go its own way in talks with the world’s biggest trading powers.
To add to the tensions, the UK is also seeking to speak during the 21-month transition period after Brexit with an independent voice at the WTO, where large multilateral trade deals are negotiated, something the European commission is resisting.
Until Brexit, the EU has a schedule spelling out how much of each agricultural product from each country that can be imported into the bloc without attracting high tariffs.
After Brexit, the plan had been for the UK and EU, as independent WTO members, to divide the current quotas between the two according to historical flows of trade in each product. This plan was described as a “technical rectification”.
However, EU sources said an initial objection from the US, Argentina, Brazil and New Zealand over the joint plan, hammered home in a fiery letter last October, had not gone away, proving Brussels’ initial belief that the plan would “not fly”.
Brussels is now pushing for a new tactic under which they would go through the more arduous procedure of a full renegotiation with WTO members over key agriculture products, offering compensation where necessary, via what is called an article 28 procedure.
The UK is insisting that the EU sticks with the original plan. British negotiators working in the WTO in Geneva believe that for 95% of the schedules there is no need for negotiation.
The UK also insists it could unilaterally liberalise its tariff regime from Australia and elsewhere, in a move that could be damaging to EU trade flows, but would receive immediate agreement from those countries resisting the original joint plan.
The EU’s chief negotiator, Michel Barnier, is understood to have told MEPs during a recent private meeting that “unsurprisingly a number of [WTO] members do not agree” with the plan, adding: “They are reluctant to discuss and are reserving their position in Geneva.”
A senior EU official told the Guardian: “We think we will we have to go through a more difficult procedure. The UK wants to go for the simplest way we are saying we are not against it but politically it will not fly at all and we will have to do it the other way and even then it will be contested.
“I think some have a case. With New Zealand and their lamb, they might say that we send our meat via Rotterdam or elsewhere to Britain, and you are making our trade arrangements more rigid.
“For the first plan to work, the changes have to be perceived as technical adjustments for which there are no political issues. The other is a real correction, a real adjustment when you go through an approval process. And they take their time.”
Alan Matthews, a professor of agricultural policy at Trinity College Dublin, said: “Rectification was always a crazy idea which would never be accepted as clearly what the UK and EU propose goes way behind what is covered by rectification.”
The Department for International Trade, which Fox heads, said: “As we leave the EU we need to create a new UK goods schedule at the WTO, covering tariffs on our imports from other WTO members. We have engaged all 164 WTO members, and they understand our intention to establish our goods schedule by rectification.
“As a part of the process, we also agreed an approach with the EU to apportion tariff rate quotas covering certain imported goods, based on historic trade flows, and wrote to WTO members on this last year. We are continuing to speak to them about next steps to secure an outcome with is fair and avoids disruption to existing trade.”’ Resistance to joint proposal to WTO leaves UK and EU divided
Show of unity breaks down after US, Australia and others reject post-Brexit trade plans by Daniel Boffey, the Guardian, 25 April 2018.
It only tales 1 member out of 164 in the WTO to block any attempt by Britain to regularise its schedules.
The economic diplomacy underlying this dance will make Brexit look like a children’s parlour game, and has not even begun.
How do we get out of this political mess?
What is the treaty exit mechanism?
Part V of the Vienna Convention on the Law of Treaties (the ‘Convention’) sets out the various circumstances in which a treaty can be denounced, terminated or its operation suspended, other than on grounds of invalidity.
‘Denunciation and withdrawal are used interchangeably to refer to a unilateral act by which a nation that is currently a party to a treaty ends its membership in that treaty. In the case of multilateral agreements, denunciation or withdrawal generally does not affect the treaty’s continuation in force for the remaining parties. For bilateral agreements, in contrast, denunciation or withdrawal by either party results in termination of the treaty for both parties. The termination of a multilateral agreement occurs when the treaty ceases to exist for all States parties.’ (Hollis), page 635.
‘To be effective, denunciation, termination or suspension may take place only as a result of the application of the provisions of the treaty itself or Article 42(2) [of the Convention]. These days, most treaties contain provisions on duration and termination, often in the same article. But when there are none, one must consider not only the relevant article in Part V [of the Convention], but other articles in that Part which govern the conditions for applying the article, such as Articles 65-68 concerning the procedure to be followed. Certain other articles of the Convention may also be relevant…’ (Aust), page 245.
Article 42(2) provides, ‘The termination of a treaty, its denunciation or the withdrawal of a party, may take place only as a result of the application of the provisions of the treaty or of the present Convention. The same rule applies to suspension of the operation of a treaty.’
The design and operation of treaty exit clauses is governed by the foundational principle of State consent.
Article 54 of the Convention provides,
‘The termination of a treaty or the withdrawal of a party may take place:
(a) In conformity with the provisions of the treaty; or
(b) At any time by consent of all the parties after consultation with the other contracting States’.
‘At the negotiation stage, State representatives have free rein to choose the substantive and procedural rules that will govern the future cessation of their relationship. Once those rules have been adopted as part of a final text, however, a State that ratifies or accedes to the treaty also accepts any conditions or restrictions on termination, withdrawal or denunciation that the treaty contains. Unilateral exit attempts that do not comply with these conditions or restrictions are ineffective. A state that ceases performance after such an attempt remains a party to the treaty, albeit one that may be in breach of its obligations. However, the treaty parties may waive these conditions or restrictions and permit unilateral withdrawal, or terminate the treaty, “at any time by consent of all the parties after consultation with the other contracting states.”… States are the undisputed masters of treaty exit rules… But what if a treaty omits such clauses entirely? In such a situation the VCLT provides default rules to govern the end of the parties’ relationship.’ (Hollis), page 636.
Article 56 provides,
‘1. A treaty which contains no provision regarding its termination and which does not provide for denunciation or withdrawal is not subject to denunciation or withdrawal unless:
(a) it is established that the parties intended to admit the possibility of denunciation or withdrawal; or
(b) a right of denunciation or withdrawal may be implied by the nature of the treaty.
2. A party shall give not less than twelve months’ notice of its intention to denounce or withdraw from a treaty under paragraph 1.’
Whilst the commercial character of a treaty is not determinative, in principle, a trade agreement is likely to fall within the Article 56(1)(b) exception.
Article 70 further provides,
‘1. Unless the treaty otherwise provides or the parties otherwise agree, the termination of a treaty under its provisions or in accordance with the present Convention:
(a) releases the parties from any obligation further to perform the treaty;
(b) does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination.
2. If a State denounces or withdraws from a multilateral treaty, paragraph 1 applies in the relations between that State and each of the other parties to the treaty from the date when such denunciation or withdrawal takes effect.’
‘Taken together, these provisions restrict States from using exit to avoid accountability for past violations of international law. They also discourage the precipitous and opportunistic withdrawals in which a State seeks to exit and then immediately violate a rule that it previously accepted as binding.’ (Hollis), page 641.
Article 43 also provides, ‘The invalidity, termination or denunciation of a treaty, the withdrawal of a party from it, or the suspension of its operation, as a result of the application of the present Convention or of the provisions of the treaty, shall not in any way impair the duty of any State to fulfil any obligation embodied in the treaty to which it would be subject under international law independently of the treaty.’
Treaty exit clauses operate in tandem with other flexibility devices including: reservations; amendment rules; escape clauses; and renegotiation provisions, that treaty makers use to manage risk.
Please see, the ‘Brexit’ and ‘Bilateral and Regional Trade Agreements’ pages at www.diplomaticlawguide.com