Brexit Negotiations Series: ‘Creating Value in the Brexit Negotiations’

Introduction

In this opinion piece, I argue that the Brexit negotiations need not be a zero or negative sum game, in which one side engages in claiming value to the detriment of the other. Instead, the negotiations can yield value if the parties remember where value is created: not at the level of the state, but at the level of the individuals affected.

Therefore, the negotiators should embrace the challenge to create a new legal framework that benefits the interests of the individuals concerned, whether they live in the UK or the EU. Where these interests differ, optional rules provide a way forward. Such optional rules would benefit those interested and would not create relevant negative consequences for those who are not. In addition, this new UK–EU framework could be the nucleus for a future success story. Once established, further countries could join – for example, those that are currently linked to the EU by association agreements.

Value Grabbing in Zero or Negative Sum Negotiations

A brief look at the news on any given day reveals that both the UK and the EU are involved in claiming value in a negotiation they consider to yield no value, or to even destroy value in aggregate. A recent instance is the disagreement on who has to pay how much in the ‘Brexit bill’. On 22 May 2017, the EU governments renewed their pledge not to open negotiations about a post-Brexit framework before the UK promises to settle its debt with the EU. Just one day before, Theresa May indicated that the EU had to settle its own debt for the UK’s share in valuable assets, such as the European Investment Bank. Relevant leading figures seem to believe that what lies ahead is even worse than grabbing as much of the cake as possible during the separation talks and shipping it back home. Comments such as the following from Donald Tusk, the President of the European Council, suggest that this is a negative sum negotiation: ‘The brutal truth is that Brexit will be a loss for all of us. There will be no cakes on the table. For anyone. There will be only salt and vinegar.’

Value and Brexit

Before going into the details of value creation in the Brexit negotiations, the parties need to assure themselves what value means for their constituencies. Here, political philosophy – which is much in line with everyday perception – can contribute. Political philosophers of the modern age disagree about many things, but almost all of them share the opinion that governments and parliaments should act in the interests of all those individuals who are affected by their decisions. If the UK were to send Jeremy Bentham to the negotiating table and the EU would send Jean-Jacques Rousseau, they would agree that what they should seek to achieve is the best outcome for all individuals in their respective countries. Bentham, using his words, would strive for the ‘greatest happiness of the greatest number’.[1] Rousseau would negotiate against the background that General Will, as the foundation of the state, is based on the consent of the individuals.[2] Hence, the UK negotiators create value by fulfilling the interests of everyone affected by Brexit in the UK: those voting for and those voting against Brexit; those living in the UK, but not voting or not being entitled to vote; those calling themselves English, Welsh, Scottish or Northern Irish; and those coming from the EU or the wider world but living in the UK. Combining the two key sentences of Theresa May’s premiership leads the way. If ‘Brexit means Brexit’, and if the aim is to make the UK ‘a country that works for everyone’, then ‘Brexit means Brexit that works for everyone’. Vice versa, the same is true for the remaining EU Member States. Good Brexit negotiations are in the interests of everyone affected in the other EU 27 countries, and that includes UK citizens living in other EU countries.

How to Create Value for Those Affected by Brexit?

At first sight, developing strategies for positive-sum Brexit negotiations may seem a daunting task. This is not, however, because it is any more difficult than devising value distributing strategies in a negative sum game. Rather, it is because hardly any of the lead negotiators has really started thinking and talking about creating value. Here is an invitation to follow a quick sketch of just one example for creating value in the negotiations. It rests on the insight that value creation is not about the position of the 28 Member States before and after the conclusion of the negotiations, but about the interests of the individuals in the Member States affected. Brexit is not about states, it is about those represented by states. The logic of this is to create a shared legal framework the people in the UK and the EU may opt into. This UK–EU framework operates under two conditions: (1) no-one who does not opt in is disproportionately affected in a negative way; (2) where either the UK or the EU believes that such opt-in comes at a cost for them, they will negotiate a price that those opting in will pay. The point is that opt-ins and prices are decided and paid at the level of the individuals, not at the level of the states.

Here is an example taken from company law. Let the founders of companies decide whether to opt into a UK–EU company law that is administered by a register and court system overseen by a new body established in the Brexit contract. As company law predominantly concerns the internal relationships of the company, those not opting in would not be affected negatively – at least not disproportionately. If the UK or the EU thinks that such a regime creates costs, these costs could be charged to the founders. Let them decide whether or not the rules opted into are worth the costs. The starting point for such a regime could be the EU company law already established. This seems to be acceptable, since the UK already signalled that it would accept EU law currently implemented in its legal system. These rules could certainly be developed and amended thereafter. This also seems to be a feasible approach since, once the necessary court and register are established, it would suffice to have a schedule to the Brexit contract listing all current EU instruments that are dealt with in this way. Another strong candidate is the European Insolvency Regulation (‘EIR’), in which the EU and the UK both have an interest. In particular, the UK actively opted into the application of the EIR, showing that there is value seen in a common framework. Modern developments in information technology, such as smart contracts, facilitate such an ‘individual approach’ to law-making.

Common values for the UK and EU post-Brexit

The new framework briefly sketched above promises a chance for value creation for both the UK and the EU beyond the mere Brexit theme. The new UK–EU international scheme could be opened to other countries with which closer ties are desirable. Currently, there are 23 EU association agreements in force – for example, with Georgia, Iceland, Norway, and South Africa. Further association agreements are under negotiation or ratification – for example, with San Marino and the Ukraine. Some of those countries could join the scheme and their interest would be a success story for the UK and the EU as a nucleus team. In fact, it would offer both the UK and the EU a common project after Brexit. In addition, the legal framework and opt-in possibilities could be extended after the deal is closed within the two-year negotiation period. It would not be a failure if, in the beginning, only some areas would be taken under the umbrella of the scheme. Others could easily be added later. In any case, adapting a well-known dictum of the legendary soccer coach S. Herberger (‘After the game is before the game’), with Brexit, after the negotiations is before the negotiations.

Conclusion

The core message is to move the focus from the position of the Member States before and after the UK leaves the EU towards the interests of the individuals affected by this event. Establishing a framework of choice at the level of the individuals affected is one example of a strategy promising value creation in the Brexit talks. This should also appeal to the political strategists in the negotiation teams. Instead of negotiating one solution for electorates with divided opinions, the negotiators could offer attractive rules for all concerned. The approach suggested would work even if the UK or the EU were to consider areas such as immigration or sovereignty to be off-limits. There are many more examples for an option approach than those sketched here. In any case, this is the discussion that should start now and replace the fight over a cake that might turn out to taste like vinegar.

Felix Steffek is a University Lecturer at the Faculty of Law of the University of Cambridge and a Senior Member of Newnham College.

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.