Britain faces millions of pounds in fines if it begins trade talks with other countries before leaving the European Union, ministers have been warned.
Legal advice given to Liam Fox, the international trade secretary, suggests that there is a high risk of the European Commission beginning legal proceedings if the British government opens talks with countries already negotiating trade arrangements with the EU.
Under the terms of Britain’s EU membership, the government cannot sign individual trade deals with other countries until it has formally exited the block. The leaked document, seen by The Sunday Times, says that the EU could impose fines on the UK if it began trade talks with other countries while negotiating Brexit.
The advice warns that if the UK went ahead with trade negotiations the result could be “infraction proceedings brought by the European Commission” and “infringement actions by member states”, adding that “the legal consequences would be that the UK would be required to pay a fine”.
In practice, the EU’s position means that Britain would have temporarily to abandon any pursuit of a free trade deal with the United States, which is negotiating the Transatlantic Trade and Investment Partnership with Brussels. Other countries in negotiations with the EU include Canada, Japan and Brazil.
A spokeswoman for the Department for International Trade declined to confirm whether the legal advice received by Dr Fox was an official government document. She said: “We are not going to provide a running commentary on leaving the EU. The role of the department is to explore trading opportunities following Brexit and we will get the best possible deal for the whole of the UK as we forge a new global role for ourselves in the world. As we have said, we will fully comply with our responsibilities and exercise our rights as a member of the EU.”
In a development that could help in Brexit negotiations, four countries are demanding the same deal offered to Britain as part of David Cameron’s European renegotiation in February.
Germany, Austria, Denmark and the Netherlands want an emergency brake on welfare payments and restrictions on child benefit for EU migrant workers. Senior diplomatic sources told The Times that western European countries with a high level of EU migration wanted to resurrect the agreement for their own countries after it was withdrawn when Britain voted to leave.
East European countries that were hostile to the restrictions before the referendum are now ready for a “trade off” and a “semi-compromise” to preserve free movement in the longer term. Edgars Rinkevics, the Latvian foreign minister, said that restrictions on access to social benefits based on time limits were likely to be agreed by the EU, possibly contributing to a “very difficult” Brexit agreement.
He suggested that such restrictions, rather than work permits or points-based migration controls, could be the basis for an agreement allowing Britain to access the EU’s single market.
A new campaign group, Leave Means Leave, wants Mrs May to take the UK out of the single market and end freedom of movement. The group is backed by Owen Paterson, former environment secretary, Dominic Raab, former justice minister, and Sir Gerald Howarth, former defence minister. It is chaired by the property developer Richard Tice and advised by John Mills, the Eurosceptic Labour donor.
The City of London will lose its automatic right to conduct business across the EU unless Britain accepts that it cannot fully control immigration, the president of the Bundesbank has warned. “Passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area,” Jens Weidmann, head of Germany’s central bank, told The Guardian.
Henry Zeffman | Bruno Waterfield, Bratislava, 19th September 2016, The Times Online