A transitional period would run from 29 March 2019, the date of the UK's formal exit from the EU, until 31 December 2020, according to an updated draft withdrawal agreement issued by the UK's David Davis and EU chief negotiator Michel Barnier. During this period, the UK would no longer participate in EU decision-making, but would "maintain ... all the advantages and benefits of the Single Market, the Customs Union and EU policies", Barnier said in a speech.
The latest version of the draft withdrawal agreement is colour-coded to reflect areas of formal agreement between the two parties, areas of political agreement on which "further clarifications" are needed, and areas of continuing "disagreements or divergences". Agreement has yet to be reached on topics including governance of the agreement, geographical indications for food products, data protection and automatic recognition of judgments.
The most significant issue yet to be resolved remains the land border between the UK and EU at the Irish border. While the UK has agreed to incorporate a "backstop solution", which would result in Northern Ireland retaining membership of the Single Market, into the legal text of the final withdrawal agreement, its intention is to come to an agreement "that is so close as to not require specific measures" while negotiations continue.
The draft withdrawal agreement has now been endorsed by the remaining 27 members of the European Council. However, its entry into force is dependent on full ratification by the UK and EU.
Public policy expert Richard Bull of Pinsent Masons, the law firm behind Out-Law.com, said that despite the outstanding issues, there was an "impressive amount of agreement" in the latest version of the draft withdrawal text.
"Of particular significance is the provision in the draft agreement asserting that the Court of Justice of the EU is to have jurisdiction of cases brought before it by the UK before the end of the transition period," he said.
"The government has made opposition to the continuing jurisdiction of the CJEU after exit day a blood red line. This principle is woven into clause 6 of the EU Withdrawal Bill, currently before the House of Lords. However, clause 6, which deals generally with the interpretation of EU retained law, is likely to be the subject of some government concessions. Giving way on this principle might just be one of them," he said.
The draft withdrawal agreement is based to a substantial extent on the joint progress announcement issued by the UK and the EU in December 2017. It now explicitly provides for the UK to be bound by the EU's international trade agreements during the transitional period, and makes provision for the UK to enter into new trade relationships of its own. These can then come into force once the transition period ends.
A joint committee made up of representatives from both the UK and the EU will be set up under the agreement, to ensure that it is "faithfully and fully implemented". This committee will be "underpinned by a clear commitment from both sides to act in good faith", and will assist in resolving disputes between the UK and EU during the transitional period as part of its role.
The agreement also includes "specific safeguards" on annual fishing negotiations during the transitional period. The EU has committed to "consult" the UK ahead of the 2019 negotiations for fishing opportunities in 2020, and the agreement also contains a commitment that the UK's share of the total catch "cannot be changed" for that year.
Brexit advisory expert Guy Lougher of Pinsent Masons said that the short timetable agreed for the transition period was an ambitious one for both the UK government and businesses, "given the scale of change that will be needed by some".