Amid the political sound and fury today, there are three key points to keep sight of:

  1. Mostly, the draft simply restates positions already agreed between the EU and UK on the first phase issues – the Irish Border, citizens’ rights and money. But the Commission has also suggested how the separation could work in areas not yet agreed with the UK, such as the ongoing role of the ECJ in overseeing application of the agreement. Some of this will be challenged by the UK in ongoing negotiations;
  2. Ireland is the biggest issue politically. Here, the Commission has simply put into legal drafting the ‘fallback’ political commitments made by the UK in December’s phase I agreement. In the absence of a comprehensive trade deal (option one) , or ‘specific solutions’ for Northern Ireland (option two), the UK would maintain enough “regulatory alignment” the EU’s rules on the Single Market and the Customs Union, “now and in the future” to prevent a hard border (the fallback).  It’s this third option which the Commission has worked up into legal text. Why not the other two? Because the UK has not yet put forward any proposals on either option. The optics are difficult for Theresa May domestically, however. The draft wording says that NI may be “considered part of the EU customs territory” (with joint UK-EU customs controls and monitoring), and describes the island of Ireland as a “common regulatory area…without internal barriers” – under the ultimate jurisdiction of the European Court of Justice (ECJ) for compliance with those rules. This is a reasonable, though maximalist, interpretation of the UK’s December commitments; avoiding customs checks, for example, will take a very close level of alignment North and South. But to the DUP, whose ten votes give Mrs May her Parliamentary majority, this looks like a path towards a united Ireland, and No10 have little choice domestically other than to reject the draft;
  3. Disagreement does not necessarily mean a crisis in the Brexit talks. The Commission’s publication of a draft treaty at this stage is partly just good bureaucratic preparedness, ahead of the March European Council meeting of EU leaders. But it is also a political play, designed to flush out UK thinking on issues such as the Irish border. This reflects EU concerns that the UK has done little since December to flesh out how it wants to resolve these problems, because the political weakness of Mrs May’s government makes it impossible for her make difficult choices. This is exactly what the EU fears, so they are taking a calculated risk that increasing the pressure on the UK will speed up the government’s decision-making, rather than collapse the talks. Friday’s planned speech by Mrs May should begin to give a sense of whether that gamble is paying off.

The draft treaty also sets out how the transition period would work in detail, with proposed rules on, for example, the regulation of customs, Intellectual Property rights and goods put on the market before the end of the transition period. Again, these are simply fleshing out legally what a standstill transition would look like, and what would be required of the UK in terms of ongoing protection of those rights, circulation of goods etc. The draft makes clear that the transition period ends on 31 December 2020 (the UK had asked for an open-ended transition period); if this text stands, any extension of the transition into 2021 (as business and officials on both sides agree will be needed) would require a new treaty, ratified by each EU Member State.

This process normally takes six months. A joint committee of EU and UK representatives will oversee implementation of the agreement, empowered to make decisions, but under the ultimate authority of the ECJ to settle disputes. The EU would have the right to suspend single market access if the UK were found (by the ECJ) to be in breach of the agreement during the transition. These enforcement processes will almost certainly be challenged by the UK, but the EU is likely to be firm on the ECJ’s role, and on its right to suspend market access.

Until now, we have only had skirmishing around the UK’s future relationship with the EU.  This is the start of the serious negotiation, which should kick off formally after the 22 March European Council. As in any negotiation, holding the pen increases your leverage. Because of political divisions through the Cabinet and Conservative party, the UK has not felt able to offer ideas on the future trading and wider relationship. But the pace will now pick up, with decision points coming thick and fast in March through to the June European Council, where the two sides must start to outline the future relationship.