UK and EU announce 'agreement in principle' on first phase of Brexit negotiations

A joint statement commits the UK to "full alignment" with EU customs rules in Northern Ireland and "no new regulatory barriers" between Northern Ireland and the rest of the UK. Negotiators have also reached agreement on how best to protect the rights of EU citizens in the UK and UK citizens in the EU after Brexit, and on the terms of the UK's financial settlement with the EU.

The final decision on whether sufficient progress has been made to allow negotiations to proceed to the next phase rests with the European Council, which will meet on 15 December 2017 to consider the UK and Commission's report. Once that decision has been made, negotiators will draft the UK withdrawal agreement and begin discussing possible transitional arrangements and the terms of the UK's future relationship with the EU.

Michel Barnier, the European Commission's chief negotiator, said that there had been "real, genuine progress" in each of the three priority negotiation areas.

"By agreeing on these issues, and settling the past, we can now move forward and discuss our future relationship on the basis of trust and confidence," he said.

The Commission intends for negotiations to be complete by autumn 2018, to allow sufficient time for approval before the UK's planned exit date of 29 March 2019.

The joint statement refers to "reciprocal protection" for the rights of EU citizens living in the UK and UK citizens living in the EU on the date of the UK's withdrawal from the EU, as well as their family members. Family members would also be able to join the protected individual at a later date, in line with existing EU law. Both the UK and EU will be permitted to develop administrative procedures for those protected individuals, such as the 'settled status' already proposed by the UK, provided that the administrative procedures are "transparent, smooth and streamlined" and any administrative requirements are proportionate.

The UK has announced that those wishing to apply for the new settled status will have two years from the date of withdrawal in order to do so. This is also reflected in the joint statement. Decisions on the new status will be made in accordance with the objective criteria established in the withdrawal agreement, and there will be a right of appeal. Those who meet the residence requirements at the date of withdrawal will be entitled to the new status automatically, subject only to identity, criminality and security checks and confirmation of ongoing residence.

The EU and UK will conduct further discussions on the "unique circumstances" of the border between the UK and the Republic of Ireland, according to the statement. The UK has, however, committed to maintaining "full alignment" with relevant EU internal market and customs rules in Northern Ireland "in the absence of agreed solutions". At the same time, it will ensure that "no new regulatory barriers develop" between Northern Ireland and the rest of the UK, preserving Northern Ireland's position within the UK's own internal market.

Both the UK and EU have agreed a "methodology" for the final financial settlement according to the joint statement, although no explicit figures are mentioned. This methodology consists of a list of components, a set of principles for calculating the value of the financial settlement and how this will be paid, and arrangements for the UK's continued participation in certain EU financial programmes. The UK will be required to contribute more if the transitional period runs beyond 31 December 2020, when the current seven-year EU budget ends.

The statement also confirms the status of the Court of Justice of the European Union (CJEU) as the "ultimate arbiter of the interpretation of Union law". The UK courts will no longer fall under the jurisdiction of the CJEU after Brexit, but they will be required to "have due regard to relevant decisions" where these relate to the application or interpretation of rights granted under EU law.

Commercial law expert Clare Francis of Pinsent Masons, the law firm behind Out-law.com, said that while businesses would be relived that progress had been made, the agreement "doesn't actually provide us with much more certainty".

"The progress is all on the exit process," she said.

"What businesses really want to know is will there be a transition period and for how long for. That question is closely followed by what will the long term future arrangements for trade look like. These burning questions remain. But what we have seen today is that with the will and the right focus good progress can be made. Businesses will take confidence from this as talks on the future of our relationship with the EU continue in the New Year," she said.