Prime Minister Theresa May conceded that European Union law will influence the UK long after Brexit, a climbdown aimed at accelerating divorce talks that seemed to be initially accepted by euroskeptics in her Conservative Party.
The pound dropped to the lowest in almost two months versus the dollar amid news the UK was compromising its stance to hasten divorce talks with the European Union.
Sterling touched its lowest since June 28 on Wednesday and held near a 10-month low against the euro.
The pound was down 0.1 percent at 1.2806 against the US dollar, having earlier touched 1.2799, its lowest since June 28.
Seven months after May declared the UK would “take back control of our laws and bring an end to the jurisdiction” of the European Court of Justice, her government will say in a position paper on Wednesday that it’s now seeking to bypass just the body’s “direct jurisdiction.”
The diluting of a onetime “red line” paves the way to EU judges having some say in the UK following Brexit, though perhaps not in a binding way. The test will be if EU officials accept the shift as enough to speed up sluggish negotiations resuming next week.
“Talk of the ECJ having no direct jurisdiction suggests that the government recognizes that if we are to have a close working relationship with the EU immediately after Brexit and into the future, then European judges will continue to play an important role in determining the shape of the laws that could affect us,” said Andrew Hood, a trade lawyer at Dechert LLP and former U.K. government official.
In the most closely watched of a series of papers, the UK will argue it would be unprecedented for the Luxembourg-based court to have direct jurisdiction over a non-member state, according to a statement released before the publication. It will instead list alternative ways to enforce rights and obligations once Britain departs in March 2019.
Justice Minister Dominic Raab told the BBC the government’s preferred option was an arbitration system. He said that the government had “absolutely not” backed down, and that instead of the ECJ having jurisdiction over the UK, there would be a situation where the UK keep “half an eye on the case law of the EU.”
“It is about having a balanced process where both sides could have confidence,” Raab said. “It is not about one side imposing its will on the other.”
The new approach suggests May realizes the EU is unwilling to sign a deal that would leave the bloc’s judges with no long-term sway in the UK The EU has already said the court should have “full jurisdiction” of the rights of its citizens living in Britain. It will want a way to oversee a future trade accord, too.
Failure to find an agreement would erode the time available for the UK and the EU to craft a long-term trade accord—and that is where the bloc holds the upper hand. A prolonged fight over the law would also complicate Britain’s ability to win the post-Brexit transition it now admits it needs and wants.