Brexit Negotiations Series: ‘How To Negotiate A Successful Brexit’

Prime Minister Theresa May has promised to make Brexit a success.  This will be difficult: the European Union (‘EU’) has brought the United Kingdom (‘UK’) significant economic benefits and prosperity.  How can the UK be better off with Brexit?  Everything depends on which factors are part of the equation and how they are ranked – Brexit will of course enhance the UK’s political autonomy.  But much more is at stake: security, the stability of the UK, (distributive) justice (‘A Country That Works For Everyone’), etc.  How precisely shall we assess success or failure?

Even if the goal were clear, the road to a successful Brexit is unknown.  Quite possibly, no such road exists.  Literally thousands of negotiations with a multiplicity of counterparties will have to be conducted.  Most important will be the negotiations on a withdrawal agreement with the EU in accordance with Article 50 TFEU.  How shall all these negotiations be approached?  What might be a successful negotiation strategy?

In this short article, I discuss a couple of guideposts for those who are charged with negotiating (a successful) Brexit.  I derive these from applied game and negotiation theory,[1] my own experience as a negotiator and mediator and (casual) observations of the first moves and developments in the ‘Brexit Negotiation Games’ since the referendum in 2016.

1. Focus on interests instead of positions

In her speech at Lancaster House on 17 January 2017, Theresa May laid out her plan for a ‘Global Britain’. In this speech, the phrase ‘I want...’ figures prominently: it is repeated 12 times.  In the jargon of negotiation theory, Mrs May talked a lot about positions (and demands), much less about interests.  However, interests are key.  They motivate or drive bargaining positions.  Often, an interest can be satisfied by very different positions.  For example, compensation for harm can come in the form of money, goods or gifts, and/or an apology.  This opens up the potential for value creation – or at least preservation – in negotiations: instead of compromising positions, you are looking for deals or deal elements that (best) satisfy interests. 

To do this well, interests must be ranked or prioritised: each side ‘compromises’ less highly-valued interests to obtain something with respect to more highly-valued interests in return (‘logrolling’).  A clear focus on interests also shows in your communication style. Instead of ‘I want...’, you (should) say ‘It is (very) important for us...’ or ‘We (urgently) need...’, etc.

2. Put yourself in their shoes

It takes two to tango: to get a good or even excellent deal, something must be put on the table that is good or even excellent for the other side as well.  To do this (well), you have to think hard about their interests and priorities: What do they need?  How important is this to them, and why? 

Good negotiators put themselves into the shoes of their negotiation partner by, for example, engaging in role reversal exercises when preparing for a negotiation, or by asking good (open-ended) questions when negotiating, and by listening actively.  They think hard about deal-sweeteners for the other side and build them a golden bridge to saying yes.  They might even help write the victory speech of their opponent.[2]

Theresa May’s Lancaster House speech is not only replete with bargaining positions.  It is also full of what she wants or hopes to get (for Britain): ‘I want...’, ‘I will...’.  Of course, this was primarily a political speech directed towards a domestic audience, calibrated to demonstrate leadership.  However, when it comes to striking a bargain with Mr Barnier, Mrs May and her aides will be well advised to think hard about his (not her) political victory speech (and that of Mr Macron and Mrs Merkel).

3. Look out for ways to create value

Real-life negotiations are about creating and claiming value – they are usually positive-sum rather than zero-sum or even negative-sum games.  Even the Brexit negotiations hold the potential for value creation, or at least value preservation.  However, they have been approached by all parties so far as if they were purely distributive in nature: red lines have been drawn (eg, no cherry-picking with respect to the fundamental freedoms, no jurisdiction of the ECJ), and threats have been issued (eg, the UK as a tax heaven, less cooperation on security issues if there is no trade deal).

It pays to think hard about potential value-creating moves.  As in many commercial negotiations, the key to finding such moves often lies in (little) differences between the parties: differences with respect to interests, forecasts, risk attitudes, capabilities, etc.  If parties entertain different views as to future contingencies, contingent contracts that build on these contingencies can be drawn in ways that create value.  Might it be possible, for example, to tie the UK’s Brexit bill to contingencies such as currency exchange rates, GDP developments in the UK or the Eurozone, etc?

4. Make small trust-enhancing moves

When thinking about what to do, negotiators often find themselves in a dilemma that is similarly structured to the famous prisoners’ dilemma: the negotiators’ dilemma.  It appears to be a dominant strategy to claim value – either to protect yourself against being exploited or to exploit the other side.  Hence, all parties apply value-claiming tactics, missing opportunities for value creation.

As with the prisoners’ dilemma, a tested way out of the dilemma is playing ‘tit for tat’: start out with a small cooperative move – don’t risk too much – and then mirror the tactic of your opponent in all subsequent negotiating rounds.[3]  By starting out cooperatively, you build trust and signal your readiness to bargain for a mutually beneficial outcome.  You don’t stand to lose much if you anticipate that there is a high likelihood that your move will be reciprocated.

An excellent opportunity to make a small trust-enhancing move exists with respect to the residency status of (continental) Europeans living and working in the UK and Britons living and working in (continental) Europe.  It seems highly likely that, eventually, reciprocal residency rights will be agreed upon in the negotiations.  If so, why does one side not move in this direction right now?  Trust and political goodwill could and would be created.  Unfortunately, neither side has seized this opportunity so far, instead using people as bargaining chips – neither very smart, nor very human.  The UK still has a lot to gain by doing the right thing first.

5. Improve (the perception of) your ‘BATNA’

Whether Brexit can be made a success of course not only depends on how much value can be created at the bargaining table; it also depends on what will happen if the negotiations on a withdrawal agreement fail, ie if there is a ‘Sharp Brexit’.  The quality of the UK’s ‘Best Alternative to a Negotiated Agreement’ (‘BATNA’) relative to that of the EU determines what kind of deal the UK will be able to negotiate.  More specifically, it is the perception of this quality by the respective other side that is crucial.

Hence, it was an effective move to claim value when the House of Lords European Union Committee concluded in its report of 4 March 2017 that ‘...if agreement is not reached,...the UK would be subject to no enforceable obligation to make any financial contribution [to the EU budget] at all.’ It was much less effective when Theresa May threatened in her 29 March 2017 withdrawal letter that ‘[i]n security terms a failure to reach agreement would mean our cooperation in the fight against crime and terrorism would be weakened.’  While the UK can credibly threaten to litigate the issue of a potential Brexit bill and its size, weakening cooperation in the fight against crime and terrorism is not in the UK’s self-interest.  Hence, this is an empty threat.

Further, the UK can and should emphasise that trading on WTO terms – if the negotiations on a withdrawal agreement fail – would not be in the interest of other key Member States such as Germany with its significant levels of exports.  Germany has a crucial interest in negotiating a ‘new deep and special partnership’ as envisaged by Mrs May.

6. Be attentive to process issues

Any negotiation is a process in which people try to resolve a problem. These are three different layers, and whatever happens in a negotiation happens on one or more of these layers.  Earlier approaches to negotiation management focused on the problem and the people layers of negotiations, and neglected the process layer.  That was a significant deficiency.  Proactively designing an efficient negotiation process can be most conducive to building a good people relationship and to amicably solving difficult negotiation problems.  Conversely, a disorganised process will make it unlikely that negotiations concerning the problem move forward constructively, or that the negotiators are able to establish good rapport with each other.

Both analytically and in communications, negotiators should keep these three layers separate.  Hence, it was unfortunate that the UK’s Article 50 notification letter mixed everything together: a legal declaration, process proposals, bargaining positions, threats, interests, and plans for a ‘deep and special partnership’.

When the negotiations start in June, the UK should suggest having a discussion about process – and only process – first: who shall negotiate with whom over what and when in the two years to come?  Devising a comprehensive and detailed negotiation plan should be the key task for the first meetings. 

A crucial issue here will be sequencing: the UK wishes to negotiate the terms of withdrawal alongside those of a new partnership, whereas the Union insists on settling the terms of Brexit first (see, in particular, the ‘European Council (Art 50) guidelines for Brexit negotiations’ and the ‘Directives for the negotiation of an agreement with the United Kingdom of Great Britain and Northern Ireland setting out the arrangements for its withdrawal from the European Union’). There are good reasons for the Union’s position: it disentangles claiming value (Brexit bill) and creating value (new partnership), breaking up the negotiators’ dilemma, and it corresponds to common sense – get a divorce before you remarry.  Further, settling the Brexit bill might even allow for some value creation (see supra at 3), and the UK has nothing to lose: the Union itself subscribes to the ‘...principle that nothing is agreed until everything is agreed...’. Hence, the UK has another opportunity to make a small trust-enhancing move – on the process level.

7. Think strategically

Negotiations are a form of strategic interaction: you devise and attempt to implement a plan; how well you do also depends on the plan and the moves of your negotiation partner.  Strategic (inter)action takes place on the process level, such as with the sequencing issue just discussed.  It also takes place at the problem level: binding commitments, for example, are a high-risk but also potentially highly effective form of claiming value.

As is obvious, the interests of the remaining Member States in the withdrawal negotiations are not homogenous.  Is this a strategic weakness that could be exploited by the UK?  The Union itself appears to think so: ‘So as not to undercut the position of the Union, there will be no separate negotiations between individual Member States and the United Kingdom on matters pertaining to the withdrawal of the United Kingdom from the Union.’ However, while large Member States such as Germany and France acting together with Italy, Spain or Poland can block any withdrawal agreement in the Council, passing any such agreement requires the consent of 19 or more of the remaining Member States.

Hence, there is probably little for the UK to gain by attempting to undercut the agency relationship between the Member States and the European Commission in the Brexit negotiations.  Rather, the British government is well advised to take the mandate of the European Commission seriously and work with its ‘Taskforce on Article 50 negotiations’ constructively – provided that the Commission faithfully acts as the agent of the Member States and does not pursue a hidden agenda of fostering its own interests.

The UK’s negotiators will face challenging strategic issues in particular with respect to the trade deals with third countries that it needs to negotiate.  If the EU has a trade deal in place, the easiest ‘solution’ is probably to maintain this agreement for the UK after Brexit.  While this might be the legal outcome in some cases anyway – depending on intricate questions of public international law and the precise wording of the agreement –, legal certainty will be fostered if affected parties confirm this position.  Where no agreements exist, the UK will probably attempt to focus first on the partners that are the most important (in trade terms) and promise a fast and, hopefully, attractive deal that establishes a reference point for future negotiations.

8. Consider mediation

Brexit will be implemented by thousands of extremely complex negotiations: these involve a multiplicity of parties with heterogeneous interests and multiple difficult issues and problems.  The challenges for an effective process management are enormous.  No neutral third party is involved so far.  To date, the negotiation dynamic has been characterised by positional bargaining and value-claiming.  The risk of a lose/lose outcome is real and severe.  At the same time, the potential for creating or at least preserving value exists as well.

In this situation, especially highly skilled negotiators would consider mediation.[4]  Experience tells us that creating or at least preserving value in extremely complex multi-party negotiations will be much more likely if mediators guide the parties’ negotiations.  This holds true for purely commercial negotiations, as well as for negotiations with a (strong) political or public element.

Brexit can be mediated.  A potential ‘Brexit Mediation Model’ could involve monthly ‘High-Level Talks’, mediated by a team of three mediators (from the UK, the EU, and a third country) and geared towards identifying and agreeing upon the key elements of a withdrawal agreement, a transition agreement, and the principles underlying the new relationship between the EU and the UK.

Brexit might not be mediated: overconfidence of the parties and negotiators, an underestimation of the benefits of mediation, or fear of lack of control, for example, might prevent the use of mediation to resolve Brexit.  As all seasoned dispute resolution practitioners know, these obstacles can be overcome.  In the interest of the UK, the future of Europe, and indeed, the world as a whole, Brexit should be mediated – now.

Horst Eidenmüller is the Freshfields Professor of Commercial Law at the University of Oxford.

This post is part of the ‘Brexit Negotiations Series’, a series of posts based on contributions at the ‘Negotiating Brexit’ conference that took place in Oxford on 17 March 2017.

[1] See, for example, Avinash Dixit and Barry J Nalebuff, The Art of Strategy (NY: Norton 2008); Roger Fisher, William Ury and Bruce Patton, Getting to Yes: Negotiating Agreement Without Giving In (3^rd edn, London: Penguin 2011); Deepak Malhotra and Max Bazerman, Negotiation Genius (NY: Bantam 2007); Christian Bühring-Uhle, Horst Eidenmüller and Andreas Nelle, Verhandlungsmanagement (2^nd edn, München: Beck 2017).

[2] See William Ury, Getting Past No: Negotiating Your Way from Confrontation to Cooperation (NY: Bantam Books 1993) 122-124.