European Economic Area: UK Membership

Edward Leigh Excerpts

Monday 6th November 2017 Commons Chamber

[Stephen Kinnock (Aberavon) (Lab)]

I beg to move,

That this House believes that for the UK to withdraw from the European Economic Area (EEA) it will have to trigger Article 127 of the EEA Agreement; calls on the Government to provide time for a debate and decision on a substantive motion on the UK’s continued membership of the EEA; and further calls on the Government to undertake to abide by the outcome of that decision.

I thank the Backbench Business Committee for granting today’s debate, and I thank right hon. and hon. Members on both sides of the House for supporting the application for it. In particular, I thank my hon. Friend the Member for Lewisham East (Heidi Alexander) and the right hon. Member for Broxtowe (Anna Soubry) for co-sponsoring the motion.

If the referendum result was indeed a vote to take back control, this House must surely have its say on that critical issue. I rise to commend the motion to the House, because all options both for the transition and for the comprehensive trade and partnership deals must be on the table. I first want to set the debate in context by outlining what the European economic area is and what it is not. I will then explain how EEA membership can square the circle between market access, sovereignty and control. I will also illustrate how EEA membership offers a sensible and workable transition out of the European Union—a bridge, rather than the potentially catastrophic cliff edge of exiting on World Trade Organisation terms.

First, what is the EEA? Simply put, it is an internal market between the EU28 and Norway, Iceland and Liechtenstein. It was set up in 1993 to allow the participation of non-EU states in the single market. However, the EEA internal market excludes single market features such as fisheries and agriculture, and it does not entail membership of the customs union. That means that EEA members are able to negotiate trade deals with third countries, either bilaterally or through the European Free Trade Association. That is how Iceland became the first European country to strike a bilateral trade deal with China in 2011.

It is through EFTA membership, in conjunction with the EEA, that unfettered trade in goods is achieved. EEA-EFTA membership could therefore provide a solid basis on which to sustain frictionless trade between the UK and the Republic of Ireland post-Brexit.

[Sir Edward Leigh (Gainsborough) (Con)]

The hon. Gentleman just talked about a “catastrophic cliff edge”. Clearly, it is in the interests of our country that we have a free trade deal, but will he put that in context? Exports in 2016 accounted for 28% of our GDP and EU exports for 12.6%. Last month, the World Bank published a study showing that in the event of no deal and WTO rules, British trade with the EU might fall by 2%. That is 2% of 12.6%, or a quarter of 1% of our overall GDP. Therefore, when he talks about a catastrophic cliff edge, let him put it in context.

[Stephen Kinnock]

I thank the hon. Gentleman for his intervention. May I suggest that he takes a trip to the port of Dover? The Brexit Select Committee, of which I have the honour of being a member, visited it recently and we were told that an additional two minutes of processing time on the 10,000 heavy goods vehicles that go through the port would result in a 13 mile tailback. A WTO Brexit, we were told, would add a lot more than two minutes. We therefore have to look at this debate in the context of the institutional capacity of our country to cope with a WTO Brexit, which is critical.

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[Mr David Jones (Clwyd West) (Con)]

It is a great pleasure to follow the hon. Member for Aberavon (Stephen Kinnock), who has raised some important and interesting constitutional issues.

The motion before the House today asks us to conclude that

“for the UK to withdraw from the European Economic Area (EEA) it will have to trigger Article 127 of the EEA Agreement”.

It is certainly the case that article 127 provides that every contracting party to the agreement may withdraw from it, provided that it gives at least 12 months’ notice in writing to the other contracting parties. The question is whether that formality actually needs to be adopted. The EEA agreement is an arrangement that has been concluded among the member states of the European Union, the European Union itself and three of the four European Free Trade Association states—namely, Iceland, Norway and Liechtenstein. There is no doubt, as the hon. Gentleman has said, that the United Kingdom is a contracting party to that agreement in its own right. Indeed, it has no option but to be so, because article 128 of the EEA agreement provides that every European state must, on applying to become a member of the EU, apply for EEA membership. In other words, Britain’s membership of the EEA is a consequence of its membership of the European Union.

The UK has given notice of its intention to withdraw from the European Union, and by application of the provisions of article 50 that notice will become effective no later than midnight on 30 March 2019, at which point the EU treaties will cease to apply to the United Kingdom. The UK’s departure from the European Union will indeed have an impact on its membership of the EEA. Article 126 of the EEA agreement provides that it shall apply to the territories to which the treaty establishing the European Economic Community, now the European Union, is applied, as well as to the three signatory EFTA member states. Given that the EU treaties will no longer apply to the UK at the moment of its departure, pursuant to article 50, and that the UK is not one of the three EFTA signatories, it necessarily follows that at that moment, on the stroke of midnight on 30 March 2019, it will also cease to be subject to the provisions of the EEA agreement. In other words, for all practical purposes, British membership of the EEA will fall at that point. It will remain a contracting party to the agreement, but under the terms of the EEA agreement, the agreement will cease to apply to it.

There has been a great deal of academic discussion as to whether that is indeed the case, but a view supporting the proposition that Britain will effectively cease to be a member of the EEA on leaving the EU has been given by no less a figure than Professor Baudenbacher, to whom the hon. Gentleman has referred. The professor has said:

“A state can only be an EEA Contracting Party either qua EU membership or qua EFTA membership. That follows from the two pillar structure of the EEA agreement. You are either in the EU pillar or in the EFTA pillar but you cannot be floating around freely.”

The hon. Gentleman has mentioned the desirability of the United Kingdom becoming a member of EFTA. It may or may not be desirable—I personally would oppose it—but it has to be recognised that if we are not a member of either EFTA or of the EU, we cannot be a member of the EEA.

[Sir Edward Leigh]

My right hon. Friend is giving a most learned disquisition. Will he tell us what the practical effects would be if it were legally possible to become a member of the EEA? For instance, would it be possible to control our own borders? It seems to me that the reason so many people voted to leave was that they wanted to control their own borders.

[Mr Jones]

My hon. Friend makes an excellent point. The fact is that we would be left with EU-lite. We would still be subject to the four freedoms, including the freedom of movement of persons. That would mean we would not be able to control our own borders, despite the Liechtenstein precedent.

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[John Stevenson (Carlisle) (Con)]

First, I congratulate the hon. Member for Aberavon (Stephen Kinnock) on securing this important and much needed debate. It is important because it is very relevant to our relationship with the EU. We see a lot of discussion going on in the media about the remain and leave debate, and the vote we had. In my view, that is over: the referendum decided that we should leave the EU, and that should now be a given—we have just to get on and accept it.

However, the referendum did not decide our future relationship between the UK and the EU. That is for the Government and Parliament to determine. It is our responsibility to achieve the best possible arrangement for the UK in our relationships with the EU. When we are doing that, we must recognise the views of both the 52% and the 48% from the referendum. It is important that we get the arrangement right and that it balances the different views in the best possible way, acknowledging that that will be difficult and we will have to compromise—that is a very important word.

I accept that there are two clear and different views: the “WTO view” and the “hardly any change at all” view. All of us would agree that in a perfect world there would be a perfect free trade agreement, but we need to have a reality check. At the moment there is a huge amount of uncertainty, which affects Parliament, Government activity, individuals and, most importantly, industry and commerce, where it is leading to decisions about investment not being taken or being postponed. To some extent, damage is already happening and it will continue to happen. For example, in my constituency a tyre factory was going to go ahead prior to the vote, but this has now been postponed and may never happen, so we are seeing the loss of £155 million of investment.

Two key decisions have been made. The first is that we are leaving the EU in March 2019. Secondly, there is a general acceptance that there has to be a transitional arrangement until 2021. I have watched the debate so far, and my conclusions are simple. We are leaving, as that was the decision of the people in the referendum. We all accept that there is a need for a transition, and we must also recognise the huge amount of uncertainty and the need to minimise it as soon as possible. We should look for the most practical, sensible and easy option to deal with that uncertainty—one that is easy to understand and well established. We do not need to invent the wheel once more. That solution is simply that we base our future on rejoining EFTA, thereby retaining membership of the EEA.

The advantages of such an approach have already been set out: we would leave the EU, as set out in the referendum; we would be out of the ECJ; agricultural and fisheries policies would be returned to us; we would have our own trade agreement opportunities; and, most importantly, we are talking about something that is established and understood by all concerned, and is a compromise.

[Sir Edward Leigh]

When my hon. Friend’s constituents voted to leave the EU, did they really vote to ensure that our borders remained open for ever more through European immigration? That would be the consequence of his proposal that we stay in the EEA.

[John Stevenson]

I am going on to talk about that very issue. I fully accept that my constituency voted to leave, and I totally respect that. I also understand that many of the reasons revolved around immigration.

By rejoining EFTA, we would eliminate a huge amount of the uncertainty almost immediately and we could very well turbo-charge EFTA in the future; a country of 65 million people would be coming in to support and help improve the prospects of additional agreements with other countries. But we have to acknowledge that there are certain compromises involved in our rejoining EFTA: free movement would continue—although, as the hon. Member for Aberavon has pointed out, there is article 112. We must also remember that we will need some sort of free movement if we are to make sure that we have people coming into this country with the right skills to support our industries.

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[Sir Edward Leigh]

The whole point of this exercise is that we want to have a system by which we let into this country people who will contribute to this country, so of course we are not going to go from full-scale migration from the EU to no migration. That is an absurd reduction of our argument.

[James Cartlidge]

I put that point as a question because the official leave campaign line was that it would end unskilled migration to this country. That is not realistic.

My second question is controversial, but it is incredibly important. It is currently illegal for an unskilled migrant to enter this country from outside the EU. We legally discriminate because we are members of the EU. We allow unskilled migration only from within the EU; we do not allow access through tier 3 visas, which would allow unskilled migration from outside the EU. The latest figures from Migration Watch show that net migration from outside the EU was 50,000 more than from inside it.

If we go for this so-called global Brexit and open up unskilled migration through an equalised immigration system, we will simply have, at best, a reduction in EU migration and a significant rise in non-EU migration. If the country voted on immigration terms, it did not vote for that. That is why I say we should not underestimate the level of control the country would have over migration through being in some form of the EEA or EFTA.

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[Mike Gapes (Ilford South) (Lab/Co-op)]

It is a real pleasure to follow the hon. Member for South Suffolk (James Cartlidge). He has made an excellent speech, and I want to hear more from him in the future.

I begin by taking on the claim that was made by some on the Government Benches that, somehow, a decision was taken in June 2016 to leave the European economic area. If that is the case, I have to ask why, in their submission in December 2016, the Government’s lawyers said:

“No decision has been taken either to serve or not to serve a notice under article 127 of the agreement. Consequently, there is no decision which is amenable to judicial review.”

No decision was taken because that decision has to be taken by the Government; it was not automatic. Therefore, this Parliament must have the final say about that matter.

I am not an advocate in any strong way of the proposal of my hon. Friend the Member for Aberavon (Stephen Kinnock). I am an unreconstructed remainer. I remain so, and I will fight to stay in the European Union. We have not left yet, but if—if—we leave, I will fight to get the best possible deal for our country.

There are problems with EFTA and the EEA: the arrangements do not cover agriculture or fisheries. Potentially, that is a massive problem for Northern Ireland, and it needs to be taken into consideration. As we have heard, the arrangements do not cover the financial sector and they do not deal with many problematic issues that we will have to confront if we leave the customs union. We need to have an EEA-plus arrangement rather than just an EEA one, as that will need other agreements alongside it. It may take time to negotiate those, and in the meantime, let us not go on a Gadarene rush over the cliff.

[Sir Edward Leigh]

I am amused by the hon. Gentleman’s proposal to have an EEA-plus. Presumably, he can now tell us what will be the difference between being a member of the EU and being a member of the EEA-plus?

[Mike Gapes]

EEA-plus would relate to issues such as having an agreement on a common foreign and security policy, and an agreement on those matters that do not affect some of the EFTA or EEA countries because the UK is not Liechtenstein, Norway, or Iceland. We must have the closest possible relationships with our EU neighbours and partners on many issues to do with policing, security and defence. Having said that, the essence, which is the economic relationship, is fundamental, and a transition is better than a disaster. The disastrous crashing out of the single market with no deal, or a very costly bad deal, is not in our interests. As Michel Barnier, the EU’s negotiator, has said:

“We don’t have time to invent a new model.”

Why reinvent something when it is already there and when it can be taken up and built on to establish the security and the certainty that our businesses need in this transition period?

Interestingly, there is support for that view in an article by Wolfgang Münchau in the Financial Times today. He said:

“Once the reality of a limited trade deal sinks in, we are left with only two logical strategies: either join the EEA, or go for a minimalist agreement and focus on making that work.”

That seems to be the choice, and there are some on the Government Benches who, for ideological reasons, want a minimalist agreement. That is because they are not Brexiteers, but wrexiteers and they are prepared to bring down our economy and slash our public sector and our national health service. It will cost our public services billions if our economic growth is reduced and our economy is reduced. We will then suffer the consequences. We will also suffer the consequences of unpicked fruit and difficulties in the agricultural sector. All the major financial services companies, banks and American banks are already planning to move their headquarters from London to Dublin and their personnel from London to Frankfurt and Paris. Those things are happening even now before the decision is finally taken. Let us stop this insanity, act now and, at least, stay in the EEA.

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[Sir Edward Leigh (Gainsborough) (Con)]

Well, I am not sure that it is ever very wise to live in a shed, but we will leave that to one side.

The hon. Member for Aberavon (Stephen Kinnock) gave a characteristically intelligent speech, raising some important questions. Speaking personally, my main motivation for supporting the leave campaign was parliamentary democracy: I wanted to reassert the control of Parliament over our affairs. I have always been influenced by the debate, starting in 1992 with many great speeches from both sides of the House, which questioned our entry into an entirely new treaty set-up, whereby our own laws were no longer sovereign.

The hon. Gentleman is right to raise his question and I would also like to question the Minister. It is my belief and hope that we are committed to having full parliamentary approval of this process. As I understand it, the Government are attempting to make a deal, which will then be put to the House of Commons before we actually leave the EU at the end of March 2019. The House of Commons can then presumably approve or reject that deal. But we are now in the article 50 process, which is irreversible. Therefore, as I understand it, if the deal was rejected, it would not happen and we would exit without a deal. I put that point to the Minister; I am sure that he can resolve these matters easily.

Now, of course, it would be possible for Members of Parliament—particularly the Opposition, if they could garner a majority—to engineer a vote on whether we stay in the EEA. Of course, for that to happen, we would want to have some idea of the policy of Her Majesty’s Opposition, but that is currently somewhat unclear. We do know that they are committed to leaving the EU, but they have been quite careful—I quite understand, as they are in opposition and their job is to cause as much trouble as possible for the Government—and remarkably unclear about their official position with regard to accepting staying in the single market. The reason for this is that the six most leave-voting constituencies were Labour constituencies and the six most remain-voting constituencies were Labour constituencies. To be fair to the Labour party, it has to face both ways and that is what it is doing.

[Mike Gapes]

The hon. Gentleman initially said that he voted the way he did because he wanted parliamentary control. Why, then, is he so reluctant to allow this House to make a decision about whether we should leave the EU or leave the EEA?

[Sir Edward Leigh]

Actually, I said precisely the opposite, if the hon. Gentleman had been listening. I have made it absolutely clear that I am a committed parliamentarian, and I am absolutely committed to a vote.

[Wera Hobhouse (Bath) (LD)]

Is it not true that this House is here to debate, and is it not proper that, as we debate, we come to new conclusions and new ways of looking at things? It is perfectly legitimate for people to start thinking about different outcomes from the ones they were thinking about at the beginning, because more things are coming to light.

[Sir Edward Leigh]

That is a very fair point, and I entirely accept it.

[Heidi Alexander]

rose—

[Sir Edward Leigh]

I have very little time now, so may I just finish my remarks? [Interruption.] I have plenty of time? Well, I have to give way to the hon. Lady.

[Heidi Alexander]

I am grateful to the hon. Gentleman for giving way. Given what he said in response to my hon. Friend the Member for Ilford South (Mike Gapes) about supporting a vote on whether we leave the European economic area, would he be willing to sign my new clause 22 to the European Union (Withdrawal) Bill, which would put that into statute?

[Sir Edward Leigh]

I am grateful to the hon. Lady for making that kind offer, but my problem is that, in these terms, I am a Government loyalist, and I want to help the Government to get this Bill through. That is most important, because if we do not get the Bill through, we will be in a kind of limbo—I apologise for using the expression “a kind of limbo”. All that the Bill does is transfer all the EU laws into our law. I am anxious that we get a generous free trade deal. I am also anxious that we pass all the EU laws into our law, particularly because I do not want us to create a bargain-basement economy—I want us to preserve workers’ rights and to be a gold-class economy. All that the Bill does is transfer all those protections for workers, and many other useful things, into our law, so I will be supporting the Government—

[Sir William Cash]

rose—

[Sir Edward Leigh]

And so, I hope, will my hon. Friend.

[Sir William Cash]

May I refer my hon. Friend to the remark he made about the Labour party looking at this issue both ways? The Labour party did, in fact, vote against the principle of the Bill, which includes the repeal of the European Communities Act 1972, by virtue of which all the legislation and the jurisdiction of the Court of Justice come into effect.

[Sir Edward Leigh]

Of course I note that point, but I must now proceed to the end of my remarks.

I have said what I want to say about parliamentary procedure, and I now want to say a bit—

[Anna Soubry]

rose—

[Sir Edward Leigh]

Well, I have to be polite to my right hon. Friend.

[Anna Soubry]

I am extremely grateful. May I be clear about the wise words from my hon. Friend? Setting aside the withdrawal Bill—he makes a good point about the Bill, and I think we all agree on it—if there were some other mechanism by which it was guaranteed that this place had a say on our membership of the EEA, is he saying we should have a vote? We could take it away from the withdrawal Bill and put it somewhere else, but is he saying that this place should make that decision?

[Sir Edward Leigh]

In fairness, I think it will be virtually impossible to avoid such a vote. If the Opposition—once their position becomes clear, and it is not—want to have a vote, I am not sure it would be possible for the Government to avoid such a vote. However, I go back to my very first remarks: as I understand it, we will be voting on the deal, and if the Government are defeated, we will go back to article 50 and exit without a deal.

In the very last minute I have, may I say a bit about the EEA, because people have to be entirely honest about it, and particularly about the Norwegian experience? The whole point of Norway’s membership of the EEA was that it was supposed to be a waiting room for the EU; it was actually to prepare Norway for EU membership. That is why Norway has adopted the overwhelming majority of EU laws in the intervening years.

I understand why some people here who voted remain in the referendum want to stay in the EEA, but I urge them to be honest about it—let us have an honest debate. Once we stay in the EEA, we basically sign up to the four freedoms, to losing parliamentary control over many of our own laws and to unrestricted immigration from the EU. People may think that that is a good idea, but they have to at least be honest about it. If both sides of this debate are honest with each other, we will perhaps get a fair conclusion.

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[Stephen Gethins (North East Fife) (SNP)]

I thank the hon. Member for Aberavon (Stephen Kinnock) for securing the debate. He knows that I do not agree with absolutely everything that he said in his speech, but he has provided Parliament with a valuable service, and we should be grateful to him and to the other Members who secured the debate. I believe that we should stay in the customs union and the single market, although I know that the hon. Gentleman and I do not entirely agree on that. None of us has all the answers in this debate, least of all the Government. In fact, it would be nice if the Government had the odd answer, but they do not. It is almost inevitable, in a Parliament of minorities, that we will have to compromise, and so today’s debate has been useful.

The hon. Member for Aberavon made particularly good points about the ambiguity and indecision at the heart of Government. The hon. Member for Strangford (Jim Shannon) said, quite rightly, that he voted to leave, and we respect his decision to do so. But a consistent thread throughout the debate has been the fact that we do not know what leaving the European Union will mean. Not only was yesterday Guy Fawkes day—someone else who was perhaps a little bit disappointed in this place—but it marked 500 days since the EU referendum. In those 500 days, we have received very few answers indeed.

The Minister has had longer than 500 days to think about what leaving the European Union means, because he, like many of his colleagues, was a member of Vote Leave and campaigned to leave. Some Conservative Members have spent decades planning to leave the European Union. One would have thought that having spent not just 500 days, but decades planning to leave the European Union, they might have the odd answer about what doing so would mean. Alas, no. As our contribution to the debate, the Scottish National party have put forward a compromise—drawing, on a cross-party basis, on expertise from those who know the European Union best—which is that we should remain part of the single market and the customs union.

In Scotland, we know the importance of the single market. The Fraser of Allander Institute, which was not scared to publish its report about the impact of leaving the European Union, estimates that leaving the single market could cost Scotland alone 80,000 jobs and £30 billion, never mind the impact on our friends and partners elsewhere in the United Kingdom. In view of that known impact, it is little wonder that the Government are terrified about releasing their impact assessments.

[Sir Edward Leigh]

rose—

[Stephen Gethins]

On that point, I will gladly give way to the hon. Gentleman.

[Sir Edward Leigh]

Is the hon. Gentleman such an enthusiast for remaining in the European single market that he is totally committed to remaining in the United Kingdom single market?

[Stephen Gethins]

This is the astonishing thing. All of a sudden, Members have invented this idea of remaining part of the United Kingdom single market. The European Union is a club for independent sovereign states in a way that the UK is not. The thing that the hon. Gentleman has missed, throughout our membership of the EU, is that the UK remains sovereign and independent in a way that Scotland is not. Trying to compare the UK single market with the European single market is pretty desperate stuff, and Members do not have to believe in independence to recognise that.

I want to highlight the importance of freedom of movement, which is another area on which I may disagree with the hon. Member for Aberavon. Freedom of movement is something from which I have personally benefited as a UK citizen, and I want young people to have the same opportunities as I had. Freedom of movement makes our country a richer place to live, and all parts of the United Kingdom benefit from it. It enriches us financially and, critically, as a society, making this country a more diverse and tolerant place to live. Seasonal workers are especially important to our industries, and freedom of movement particularly benefits us at certain times of year. It is also important to our universities and other industries.

I would like to put on record the fact that I am astonished by what I am hearing about the European Court of Justice. The European Union has been a success for many reasons, one of which is that the European Court of Justice sits at its heart and arbitrates on behalf of 28 member states. Something else that has been missed is the fact that we will need an arbiter in whatever comes about after we leave.

We also face the danger of no deal—something that has been openly touted, quite irresponsibly, by Conservative Members. We noted from the press that there was a Halloween presentation to the UK Cabinet on no deal. That is a spooky thing for us all, given its impact. As I did on 1 November, when Parliament voted to see the impact assessments—we are still not going to get them—I wonder what the Government are trying to hide from us. What was the Cabinet told? What do they know? The House deserves to know, and that is why the House voted to know what is in those impact assessments.

A no deal scenario will hit hard the big cities in Scotland and, I am sure, elsewhere in the UK, with Aberdeen being particularly badly hit.

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[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to wind up this debate, and I commend my hon. Friend the Member for Aberavon (Stephen Kinnock) and his co-sponsors, my hon. Friend the Member for Lewisham East (Heidi Alexander) and the right hon. Member for Broxtowe (Anna Soubry), for securing it. Each of them made forceful and thought-provoking contributions, and I thank the many other Members who have made excellent speeches.

The Opposition have consistently called for the maximum parliamentary transparency and accountability compatible with conducting the Brexit negotiations, and for Parliament to have more of a grip on the process. That is why we welcome the fact that this debate is taking place, and support the efforts of hon. Members from both sides of the House who have sought to secure greater clarity and certainty about what steps, if any, would be required for the UK to withdraw from the European economic area as a matter of international law. As always in these Brexit debates, we have covered a wide range of issues, but the motion refers specifically to continued membership of the EEA and to whether article 127 of the EEA agreement needs to be formally triggered. It is on that that I want to focus my remarks.

As several hon. Members have said, the EEA is an arrangement that enables three non-EU countries—Iceland, Liechtenstein and Norway—to participate in the EU internal market and allows the 28 EU member states to benefit, as Britain undoubtedly has, from preferential access to their markets as part of that agreement. Formally, the contracting parties to the EEA agreement are the 31 individual counties, although the EU itself was also added as a contracting party in 2004, because the EEA has a mixed agreement. As such, like other EU member states, the UK is a signatory to the agreement.

Article 127 of that agreement, which is the focus of the motion, sets out a basic rule for withdrawing from it. The article requires a contracting party wishing to leave the EEA to provide 12 months’ notification of withdrawal to the other contracting parties to give them time to modify the agreement. Taken at face value, article 127 suggests that the UK will have to give formal notification of withdrawal from the agreement to the other 30 contracting parties if it intends to leave the EEA. As several Members have suggested, the implication is that unless such formal notification is given, the UK will remain a contracting party to the agreement and a participant in the EEA after it has exited the EU.

It is worth briefly considering the implications of that argument, because there are reasons to believe it would not be the quick fix that many assume it to be. At a minimum, if the UK were able to remain a participant in the EEA after it had exited the EU, simply by means of failing to provide formal notification under article 127, it is likely that formal modification of the EEA agreement would still be required. As I sure the House is aware, it would involve an onerous, time-consuming and uncertain process of treaty change and ratification. That is because some parts of the EEA agreement refer to the contracting parties, which could be any of the EEA states, but other parts refer specifically to EU and/or EFTA states.

The situation could not therefore apply to the UK after Brexit unless it joined EFTA, which, as several hon. Members, including my hon. Friend the Member for Ilford South (Mike Gapes) and my right hon. Friend the Member for East Ham (Stephen Timms) have said, would not resolve crucial issues such as the customs union or the Northern Ireland border, and it would not be a straightforward process. I note the comments of the Norwegian Prime Minister in August that joining EFTA, even for a temporary period, would, in her words, be a “challenging and costly” undertaking.

To illustrate the problem that would be created if we attempted to remain part of the EEA simply by letting this lapse, rather than by providing formal notification, it is worth examining article 36 of the agreement. The article makes it clear that the beneficiaries of the right to the freedom to provide services are EU nationals and EFTA state nationals. Hypothetically, if the UK attempted to remain in the EEA as a third type of contracting party, it would therefore be subject to the rules of the EEA agreement, but its citizens and businesses would not benefit, which I do not think anyone in the House would countenance. The EFTA option is therefore the only viable one in the majority legal opinion, but as several hon. Members have said, that is not as straightforward as some would like to suggest.

However, taking a step back, it is not even clear whether the requirements of article 127 apply to a contracting party that has decided to end its membership of one of the two bodies—the EU and EFTA—that enable a state to be party to the agreement in the first place. It is not clear because it has never been tested. It is true that there is no provision in the EEA agreement requiring a contracting party to leave the EEA if it ceases to be a member of the EU or EFTA, but the wording and spirit of the agreement clearly appears to rest on the assumption that only EU or EFTA states can be party to it.

[Sir Edward Leigh]

This is all very interesting as a legal lecture, but is the Labour party in favour of staying in the EEA?

[Matthew Pennycook]

The Labour party’s position is very clear: we want to seek a deal that retains the benefits of the single market and the customs union. We think we should be a member of the single market for the transitional period. Whether the EEA option is the only viable one for doing so during the transition is a question for another day. The wording of the motion on article 127 and continued membership of the EEA is very specific.

In short, the situation is entirely unclear. In the opinion of the House of Commons Library, the majority legal view is that under the present wording of the EEA agreement, it is impossible to be a party to that agreement without being a member of the EU or EFTA. That view has been put forward by a number of experts, including, most prominently, Professor Baudenbacher, the President of the EFTA court. He has argued that there is no scope within the EEA agreement for a third type of a contracting party that is neither an EU nor an EFTA member. The argument has not yet been tested in court.