January 9, 2018 / 11:21 AM / 4 months ago

British Brexit minister complains about EU's planning for no-deal

LONDON (Reuters) - Brexit minister David Davis has complained in a letter to the prime minister that Brussels is damaging British interests by talking up the threat to companies if the UK leaves the European Union without a deal.

FILE PHOTO: Britain's Secretary of State for Exiting the European Union David Davis arrives in Downing Street, London, Britain, December 18, 2017. REUTERS/Toby Melville

The letter showed that Davis had sought legal advice over whether Brussels was breaching Britain’s rights as a member state by advising companies of the risk to trading in the event of a “no deal”. It was first published by the Financial Times and confirmed as genuine by an aide from Davis’s department.

“The EU has adopted a number of measures that put agreements or contracts at risk of being terminated in the event of a ‘no deal’ scenario and/or would require UK companies to relocate to another Member State,” the letter said.

Davis heads the Department for Exiting the EU, set up to implement Britain’s 2016 vote to leave the bloc.

“It’s clear there have been a number of instances where the (European Commission), by treating the UK differently despite still being a member of the EU, have not acted in good faith,” an aide in the department said, confirming the letter.

“It should be no surprise that if the Commission attempt to stoke fears about worst-case scenarios we will correct them and reassure our firms.”

The European Commission rejected suggestions there was any breach of EU law in its approach.

Citing May’s statements last year that Britain would prefer “no deal” to a “bad deal”, the Commission’s chief spokesman Margaritis Schinas told reporters: “We are somehow surprised that the United Kingdom is surprised that we are preparing for a scenario announced by the UK government itself.

“We take these words by the prime minister very seriously. It is therefore only natural that in this house we also prepare for every eventuality.”

Examples given by Davis included EU agencies advising business that the UK would become a third country when it leaves the EU in March 2019 without referring to Britain’s aim to agree a transition period and future trading deal first.

The advice, Davis said, also implied companies would need to be based in the EU or European Economic Area in order to maintain compliance with regulatory rules.

Britain and the EU struck a divorce deal in December that paved the way for talks on the future trade ties.

May’s government has said it is preparing for any outcome, including the chance that Britain could crash out of the bloc without a deal, and has set aside an extra 3 billion pounds ($4.1 billion) to prepare for all eventualities.

Europe’s Brexit negotiator Michel Barnier has repeatedly warned that a no-deal scenario would have a damaging impact on people, companies and trade.

Davis said in the letter that legal and policy advice suggested the chances of a successful legal challenge were slim. He said he had instructed his department to increase its engagement with the Commission - the EU’s executive — and companies to reassure them.

British opposition politicians ridiculed Davis for appearing to attack the EU for preparing for an outcome that Britain itself says is possible.

“David Davis laments that the EU are preparing for No Deal Brexit and the damage it would do to British business, when we are spending 3 billion pounds doing the same thing,” tweeted opposition Labour lawmaker Chuku Umunna. “If it is damaging to British business, why are the government even contemplating it?”

Nicola Sturgeon, leader of the Scottish National Party, called the government’s position “unbelievable”.

The European Parliament’s Brexit coordinator, Guy Verhofstadt, echoed that sentiment, saying on Twitter: “Business uncertainty has been created because of the UK government’s decision to leave the single market, not because of EU contingency planning.”

Reporting by Kate Holton in London and Alastair Macdonald in Brussels; Editing by Catherine Evans and Peter Graff

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