Dispute resolution lessons to be learnt from Brexit negotiations

As the Prime Minister and her negotiating team prepare themselves for another tense round of negotiations in Brussels, Lee Fisher, a partner in Blake Morgan’s Dispute Management team and  accredited mediator, considers what lessons may be learnt from the negotiations to date.

On 29^th March 2017 Theresa May penned a detailed letter to EU Council President Donald Tusk, which provided formal notice to the European Union of the withdrawal of the United Kingdom from the EU. The letter, which set out in some detail the Government’s vision for an ongoing relationship with the EU and the negotiation process it wished to follow, was part of a policy  intended to unite the country behind Brexit and provide certainty that the UK would not only leave the EU, but also the date on which it would do so, 29^th March 2019. However, that notice may have unwittingly tied one, if not both, of the hands of the UK government in the negotiations which have followed over the nature of such withdrawal.

A fundamental piece of preparation for any negotiation is a party’s understanding of its Best Alternative to a Negotiated Agreement (BATNA), i.e. in the absence of any settlement or agreement what is the best possible result that party can achieve. Once a party has evaluated its BATNA it follows as a matter of logic that any negotiated solution which achieves a better result is preferable to that BATNA, and should ultimately be accepted. The withdrawal notice having been served, the UK’s BATNA was dictated by the terms of Article 50(3) of the EU Treaty:

“The Treaties shall cease to apply to the States in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification [of withdrawal]..”

Since 29^th March 2017, the choice faced by the UK government has been abundantly clear: negotiate a deal which is acceptable to the European Union or leave the European Union with no deal. This  situation has been as apparent, throughout negotiations, to those negotiating on behalf of the EU, as it is to those negotiating on behalf of the UK. The EU negotiators can, and undoubtedly have, therefore approached the negotiations on the basis that ultimately, and assuming the UK acts rationally, it will accept whatever deal is offered to it, provided it is better for the UK than leaving with no deal. The corollary is, of course, also true: that the EU should agree to a deal which is better for them than the UK leaving without a deal. However, all but the hardest of Brexiters accept that no deal is significantly less damaging to the EU to the UK, and therefore presents a risk that the EU may well be willing to take.

This imbalance of power has not come about by chance. It is the result of a strategy carefully conceived by the EU at an early stage following the 2016 Brexit referendum. When the government sought to open talks with the EU, the EU refused until the Article 50 notice had been served. Following the snap general election of 2017 Theresa May used her party conference speech to set out the ‘Brexit means Brexit‘ vision and placate the Eurosceptics. That speech was met with a simple, yet effective message from the EU: “When it comes to article 50 we will work constructively on the basis of a notification, not on the basis of a speech. And until this letter of notification arrives, there will be no negotiations. Once it arrives we are prepared to engage constructively and in good faith.”[1]

By complying with the EU’s requests and time-limiting the negotiations between the parties, where at the end of the time limit, the result of no agreement would be far more damaging to the UK than the EU, the tone of the negotiations and the balance of power was clearly established. Whilst time-limiting a negotiation is an often used tool to focus parties’ minds it should be avoided, if at all possible, by a party if the “no agreement” outcome has significantly more impact on it than the other party. As the clock ticks on, and one party clamours to reach a deal, the concessions made by that party become more evident pushing what it will accept closer and closer to its BATNA. In the context of Brexit this  may have been most appropriately summarised by Conservative MP, Sir Oliver Letwin, during Monday’s parliamentary debate, when he stated “I have actually got to the point where I am past caring what the deal is we have – I will vote for it to get a smooth exit.”

In light of the power balance between the parties, which existed from the outcome of the negotiations, many observers have been puzzled by the apparent ‘hard bargaining’ strategy adopted by the UK. The UK’s approach to date has shown all the hallmarks of a party which is confident in its position, or at least seeking to give the impression that it is, including its apparent unwillingness to compromise (Theresa May’s ‘red lines’), unrealistic expectations (the same ‘red lines’), regular threats of a no deal, a lack of justification or evidence-based arguments, and a reluctance to explain the position to the EU, the UK public or even the UK parliament.

Whilst the adoption of such a stance could have been tested at the outset, once it became apparent that it was unlikely to yield results, the adoption of softer bargaining strategies based around constructive discussion, co-operation and concession were likely to have yielded better results through a willingness from the stronger party, the EU, to move some of its “red lines” on the basis that the UK was willing to do likewise. In any negotiation taking a position which is untenable, and steadfastly sticking to it is more likely to polarise the parties’ respective positions, and entrench them, making it less likely to move at a later date, as opposed to more likely.

The EU’s negotiating stance has, in contrast, been calculated, measured and consistent. Their adoption of a firm negotiating position is backed up not only by the strength of its position, both in terms of comparative strengths and resources as a collective of 27 member states, but also because its BATNA is significantly less damaging to it than the UK’s. The public messages, consistent with the early messages sent publicly to the UK government, have been polite but firm and repeated consistently by negotiators and representatives of member states alike. If differences exist between member states and negotiators, as they undoubtedly do, those debates are taking place behind closed doors, not in parliament or being leaked to the media. The public face of the EU team is one which is measured, clear in its objectives, and firm in its resolve to achieve them.

The strength of the European Union, and its predecessors, has always  rested in its collective bargaining power. Any suggestion that the EU may abandon that position, and individual members states such as Ireland, at such a crucial juncture appears, at best, a long shot.

So with less than two months to go the negotiations are rapidly approaching an endgame with little sign of the impasse breaking. It is unsurprising that, having initially entered a time-limited negotiating process with an unpalatable backstop, the UK parliament has no desire to make the same mistake again.

The difficulty for the UK is that it simply does not have the time, or apparently the inclination, to adopt a softer bargaining strategy which may see a movement of some of the red lines on both sides.  For now the UK strategy appears clear. It is to adopt that of the stubborn irrational client (in this case parliament), and one which is the last resort of many a negotiator: “I hear what you say and accept the logic of it but my client simply will not accept that.” On occasion where there is a small gap between the parties it can achieve results. With such a fundamental matter of principle dividing the UK and the EU the chances of its success here appear extremely limited.

Therefore with the prospect of “no deal” firmly on the table it is probable that in private, if not in public, the government is revisiting its BATNA and whether other viable alternatives exist. One is the olive branch being offered by the EU of an extension. This process is built in to Article 50 but only with the unanimous agreement of the European Council, something which indications from the EU suggest can be obtained although the price for this in terms of the ‘red lines’ is yet to be discussed. Ironically the second, and indeed simplest, option is one which has emerged in spite of the government efforts to suppress it. It arises from the work of concerned individuals such as Jolyon Maugham QC who spent time, and considerable money, fighting the government before it was successfully declared that the UK could unilaterally, and without EU consent, withdraw its notification of withdrawal. In many eyes that represents the UK’s true BATNA, politically however is a bridge that few in the houses of parliament seem willing to cross.