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Brexit – The Art of the Deal?

2 February 2017

Jurisdictions: United Kingdom

By Peter Watts

Today's White Paper sets out a bold aspiration. The UK as a global pivot. A Strategic Partnership with the EU; a Special Relationship with the US.

Political and diplomatic challenges are clear. Remaining open whilst controlling immigration? Preserving close cooperation whilst ensuring sovereignty? Determining disagreements whilst ending the role of European law?

A "win-win"? The EU and UK reaping the benefits: of being the best and most cooperative of neighbours; of each being free to run its own affairs strengthening the respective individual unions.

A "lose-lose"? A revolt: in the EU against the UK "having its cake and eating it"; in the UK against cooperation "so close we're still in really".

Yet there is another challenge. 30 years of advising on strategic partnership tells me this second challenge is just as important even if not always so obvious.

Joining a club is easy. There are known legal structures and processes. Agreeing to go ahead, and paying the price, might be difficult. Maybe you can negotiate a few special terms. But fundamentally you take it (or leave it) pretty much as you find it.

Contrast creating a Strategic Partnership. Rather than simply signing up to a known set of rules and structures, you have to agree a relationship issue by issue. My number one piece of advice to clients? Strategic partnerships sound great because the participants don't have to give up their independence yet benefit from close cooperation. But, in practice, they are amongst the most complex and difficult of all deals to deliver.

Sound familiar?

Of course, membership of the EU has its difficulties but at least the mechanics are fairly clear. There are rules and structures and, subject to some special terms, the UK has worked within them and accepted the trade-offs they impose.

Creating a Strategic Partnership means we start with no rules, no structures and no inevitability to the trade-offs. We start with a plain piece of paper. The White Paper, and other recent Government statements, start to show us how some things could be made to work. Equivalence, cooperation and disputes determined inter-governmentally between the UK and the EU, not by a European court with direct jurisdiction in the UK.

It can be done, and could deliver that "win-win". But the lesson of business is that, in terms of scale and complexity, the challenge is likely to be greater than that of joining the EU in the first place.