Murphy’s Law Inside the EU

One of the longer running themes of newsletter writing is to stand up for the downtrodden. The meek and weak. The people who newspapers and politicians don’t take sides with.

It’s gotten us into plenty of trouble in the past. But always makes for good reading. Like when our founder Bill Bonner mentioned the wrong side won the American civil war…

Well Britain’s Brexit negotiator David Davis has copped it badly recently. And he must be mystified over why. I certainly am. He’s only complied with the EU’s negotiating rules. And they are skewering him for it.

The accusation made by all sides is that Davis is backtracking on the deal covering the Irish border and the divorce bill. The EU, the media, and politicians in Ireland are in uproar. The tweets, statements, comments, blogs, columns and articles were fired in from every angle. You’d think he’s Donald Trump the way they lambasted him.

First, here’s what Davis actually said about the celebrated deal between the EU and UK. He told BBC1’s The Andrew Marr Show: “This was a statement of intent more than anything else. Much more a statement of intent than it was a legally enforceable thing.”

When the furore over his comments reached fever pitch, Davis made the very mistake that Trump never would. He backtracked and said it was “more than legally enforceable.”

Funnily enough, later the same day, the European Commission explained the deal was “formally speaking not legally binding.” Instead, the spokesman said, it was a deal “between gentlemen.”

Deal between nincompoops, as far as I can tell. Davis was vindicated by his critics right after admitting his “mistake”.

Realising the furore was nonsense and incorrect, while Davis had originally been entirely correct, the MEP group leader Guy Verhofstadt demanded the deal be updated to hold legal validity. He wants to corner Davis over his imagined betrayal.

The thing is, Davis’s comments are correct to a greater extent than he realised. The deal cannot be made legally valid. His accusers are completely wrong about their own positions on the deal. It cannot be updated to be legally valid without updating the EU’s entire position on the Brexit negotiations, which are set in law.

What Davis tried to explain is the EU’s own position on the negotiations, not some sort of British belligerence about the deal. His comments are all in line with the EU requirement that “nothing is agreed until everything is agreed”.

Gaby Hinsliff at The Guardian calls this “the latest meaningless mantra.” But it’s not. It’s firm EU policy for the Brexit negotiations. And always has been.

In fact, it’s the law. The European Council (Article 50) guidelines for Brexit negotiations are clear:

Negotiations under Article 50 TEU will be conducted in transparency and as a single package. In accordance with the principle that nothing is agreed until everything is agreed, individual items cannot be settled separately.

So Davis’s comments are correct, the criticism of them is wrong and the EU is in breach of its own guidelines if it tries to enforce the agreement so far.

A confidential EU source is simply wrong when he or she tells The Telegraph: “There is no question of our commitment to the text of the joint report.” And, “Ministers, the Irish government, and the European Commission all agree that it is the withdrawal agreement itself which has status in law.”

It does not have status in law according to the law about Article 50 negotiations. Which governs the agreements reached under those negotiations.

Ireland has been busy breaching the second part of the EU guidelines paragraph quoted above too:

The Union will approach the negotiations with unified positions, and will engage with the United Kingdom exclusively through the channels set out in these guidelines and in the negotiating directives. 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.

The last sentence was supposed to corner the UK. But it’s cornered the Republic of Ireland instead. The Irish have been working with the UK and Northern Irish government, dramatically complicating negotiations with the EU. And they will continue to do so, they claim on RTÉ: “We will as a government, a sovereign government in Ireland, be holding the United Kingdom to account, as will the European Union,” said Irish government chief whip Joe McHugh about the agreement on the border. But he isn’t allowed to under EU law. He has to go through the EU.

Besides, the Irish government is clearly missing the entire point of Brexit: if you could operate as a “sovereign government” from inside the EU, the UK wouldn’t be trying for Brexit in the first place!

Britain follows the “bizarre” EU’s rules

McHugh went on to display his ignorance even further:

“My question to anybody within the British government would be: why would there be an agreement, a set of principled agreements, in order to get to phase two, if they weren’t going to be held up? That just sounds bizarre to me. This, as far as we’re concerned, is a binding agreement, an agreement in principle.”

The position is very clear under EU law. Nothing is agreed until everything is agreed. I think it’s a stupid requirement on many counts too. But playing games with when it’s true and when not is wrong. McHugh should ask the EU, not Britain, that question.

Thanks to the agenda set by the EU, the British position, which is based on EU law, is not bizarre at all. If only half of the agreement is being negotiated first – the half detailing what Britain gives up – then of course it’s not binding until Britain finds out what it gets in return in terms of a trade deal. Otherwise a hard Brexit is a given. Nobody agrees to give up money without knowing the full deal. You don’t agree on price before you know what you’re buying.

If phase one of the negotiations was a give and take about various issues, then it would make sense to make that binding. For example, cooperation on security.

Get the easy stuff done

But you can’t settle a deal on the Irish border without having a deal for the border between the rest of the EU and the UK. It’s the EU politicians, not the British ones who argued this originally. They claimed the Brits were seeking a back door into the EU by keeping an open Irish border. It’s the EU that’s preventing it from remaining open.

So the rules for negotiations say that Davis is right about the agreement’s enforceability and legality. But it goes further. The treaty on the divorce bill and Irish border, that could be binding if the EU were willing to breach its own rules, can only be written once the EU27 have agreed that there is “sufficient progress” in the negotiation. In other words, it is the very people criticising Davis for holding up the agreement who are holding up the agreement.

If you’re confused, that’s the point. The whole thing makes no sense. The EU staked out its rules and positions, only to claim that British adherence to them is some sort of outrageous breach of trust. Davis is a scapegoat for the EU’s nincompoopery.

The question is, will Davis and Prime Minister Theresa May cave once again, or will they take advantage of the EU’s blunders?

Your stocks run on bitcoin?

Would you trust the technology behind bitcoin to run the stockmarket? Imagine owning and trading your shares under the same operating system that cryptocurrencies run on. It’s called blockchain and distributed ledger technology.

The idea of stock exchanges operating like bitcoin sounds absurd. But it’s set to become a reality… in Australia.

On 7 December, the Australian Securities Exchange (ASX) issued a much anticipated media release. The announcement confirmed the company will use distributed ledger technology (DLT) to replace its age-old Clearing House Electronic Subregister System (CHESS).

With its partner firm Digital Asset, the ASX has developed and tested the new system over two years. The tests were verified independently and confirmed the ability of the new system to accomplish clearing and settlement functions for shares. In other words, it works.

The new system will be faster, far cheaper, more flexible, more secure and a pioneer of its kind. At the end of March 2018, the launch date of the new system will be announced.

The question is how much cheaper and faster it really is. Could the ASX’s costs implode? Will it pass this on to customers? Or will ASX shareholders reap the benefits? I couldn’t find anything to give you answers on those questions.

Stock trading has existed for a very long time. But technology like this could utterly revolutionise entire industries. DLT is the perfect operating platform for personalised medicine’s data requirements, for example. (Pun intended.)

Picking stocks based on their ability to take advantage of blockchain technology might seem arduous. Luckily, someone has done it for you.

Until next time,

Nick Hubble
Capital & Conflict

Category: Brexit

Murphy’s EU law