Brexit talks can now turn to trade, says government official

The day before British Prime Minister Theresa May and European Commission President Jean-Claude Juncker agreed a deal to complete the first phase of Brexit negotiations, a senior civil servant assured the nuclear industry that the British government aimed to achieve a smooth departure from the European Atomic Energy Community (Euratom). Meanwhile, European electricity association Eurelectric has outlined the objectives it says are needed for a "sound Brexit transition".

The British government announced it intends to leave Euratom when, in January, it published a bill authorising Brexit. The peaceful use of nuclear energy within the EU is governed by the 1957 Euratom Treaty. The Euratom Community is a separate legal entity from the EU, but it is governed by the bloc's institutions.

"There is political commitment right across the British government to ensure as much continuity as possible for the nuclear industry," David Wagstaff, deputy director of the Euratom exit at the Department for Business, Energy and Industrial Strategy (BEIS), told delegates at the UK Nuclear Industry Association's annual conference in London on 7 December. BEIS is working "very closely and collaboratively", he said, with the Department for Exiting the European Union (DExEU).

Talks with the EU have thus far been restricted to 'separation issues', he said, and trade would be part of the second stage of talks. For the Euratom exit, separation issues cover three areas: the future ownership of Euratom's inspectors and equipment in the UK; special fissile materials; and used fuel and radioactive waste. The government has not been able to make progress on the future framework of supply contracts, however, as this matter is to be covered in the second phase of talks - the UK's 'future relationship' with the EU, he said.

"It doesn't signal a huge falling out with the EU; it signals that in their view it is not a separation issue, but a future relationship issue, so they won't talk about it yet," Wagstaff said. But the government is keen to ensure supply contract arrangements will be "right at the top of the agenda" in the second phase of talks, he added.

Nuclear safeguards

As part of preparations for its exit from the EU, the government is establishing a domestic nuclear safeguards regime to ensure the UK continues to maintain its position as a responsible nuclear state, and that withdrawal from Euratom will not result in the weakening of its future safeguards standards and oversight in the country. The planned regime, announced on 14 September, will be managed by the UK's Office for Nuclear Regulation (ONR) and require new agreements with the International Atomic Energy Agency (IAEA).

Introduced to parliament by BEIS Secretary of State Greg Clark on 11 October, the Nuclear Safeguards Bill was considered in a Public Bill Committee and reported without amendment on 14 November. Members of Parliament will next consider the Bill at the Report Stage on a date to be announced.

The UK's nuclear safeguards regime is not reliant on its negotiations with the EU and is "essentially what we're doing ourselves", Wagstaff said, "putting in place primary and secondary legislation". The ONR already regulates nuclear safety and security, so it is "not an enormous leap of logic" for it to regulate nuclear safeguards as well, he said.

"We are very clear in our team that we have a crucial role in making sure that whatever happens in the EU negotiations we will still prosper and succeed in the nuclear sector … That is why our first priority, as soon as the decision to leave Euratom was announced, was to get the legislative powers in place; that's why it was one of the very first of the Brexit bills to come in front of the House [of Commons].

"Ministers have made a public commitment to build this regime up to a level which ensures it will be at the same standard as the current safeguards standard. It's important to emphasise that our legal commitment under the international agreements, is to fulfill safeguards standards for the UK as a weapons state. It's our view that we should go beyond that and maintain Euratom levels of standards, but what we need from day one is for all of you to continue to operate as part of the UK's responsible position as a civil nuclear power meeting these international standards."

The "parliamentary balance" on the Bill's passage through Parliament is "quite a delicate one at the moment", he said, "so we can't guarantee that the progress we have made will continue quite as serenely through the report stage." However, if all goes to plan, the Bill will receive Royal Assent early next year, he added.

"We are working to an assumption that even if we get nothing whatsoever out of any of the discussions in Brussels, we will still have the regulatory architecture in place from day one to avoid any problems of continuity," he said.

Asked how the nuclear safeguards regime will be paid for once the ONR, and not Euratom, has responsibility for them in the UK, Wagstaff said: "The ONR is an independent regulatory body. The set-up costs will be borne by us [BEIS], but I can't answer what the ongoing running costs would be and who would pay for them."

The ONR and BEIS are working "hand-in-hand" and this project is "going at pace", with recruitment and IT procurement in process.

Voluntary Offer Agreement

DExEU published a position paper on nuclear materials and safeguards issues on 13 July, which refers to the UK's role as a responsible nuclear weapons state and non-proliferation leader, and ensuring a UK nuclear safeguards regime is in place that is commensurate with its international obligations through the IAEA. To ensure this, it makes commitments that include agreeing a Voluntary Offer Agreement (VOA) with the Vienna-based agency that sets out the UK's primary safeguards arrangements in international law.

Asked for the end-date for nuclear safeguards before nuclear cooperation agreements (NCAs) with third party countries can be signed, Wagstaff said: "We don't have to run everything in a very strict sequence."

During NCA talks with governments in Australia, Canada, Japan and the USA, "we explain that we are in parallel discussions with the IAEA", he said.

Those countries "see exactly what we're trying to do and want to help us and therefore they are prepared to start their ratification processes on the basis that we are working towards a Voluntary Offer Agreement. The sooner we get that [VOA] the better, but should we fail to get it signed in March or April, and have to wait until June or July, that does not mean we've missed the boat with NCAs," he added.

BEIS has already been in talks with the IAEA to agree a new VOA, he said.

There is a "perfectly sound" VOA already in place, he said, but this is a trilateral UK-Euratom-IAEA agreement. This will be replaced by a bilateral UK-IAEA agreement.

"I'm not downplaying the amount of work we've got to do, but it's not a conceptually difficult thing we’re doing - we're replacing a trilateral agreement with a bilateral agreement," he said, adding that BEIS expects to put forward a new VOA, to be signed by IAEA Member States, early next year.

"That's our ambition," he said.

Third country agreements

Negotiations with third countries are "going steadily and well", he said.

"An important point to make here is that this is not a battle to try and get something out of some difficult negotiations. Both parties can see obvious benefits to agreeing new nuclear cooperation agreements to replace the existing ones, so we are not trying to do anything new or difficult here. It is a bureaucratic process, it involves long discussions, it involves ratification. We are not complacent about this, we know how long it takes and we have the timelines built into what we are doing. But the aim is a common mutual benefit to have cooperation agreements, so we do not foresee any great fallings out and we are confident these things can be delivered regardless of how the negotiations go in Brussels."

There are "plenty of perfectly workable" international agreements in place for nuclear trade to facilitate nuclear exchanges, he said.

"What we are doing there is replacing the existing Euratom-led, or trilateral, agreements with bilateral agreements, and again we are making very good progress with the countries which require such agreements by law. Those are the USA, Canada, Japan and Australia. Obviously, the EU negotiations themselves are going on in Brussels and so far we've had what are known as the 'separation discussions'; those are now coming to an end and we are very much looking forward to moving on to future discussions, which will cover the implementation period," he said.

May "talked about this" in her Florence speech, on 22 September, in which the prime minister set out how the UK will be the "strongest friend and partner" to the EU after it leaves the EU.

Wagstaff said the government would expect the "enduring future relationship" described in May's speech "to be formalised by some form of agreement with the EU side, but more than that we cannot say at this moment because we haven’t actually started having those discussions yet".

Research and development

Wagstaff referred to Horizon 2020 - the biggest EU research and innovation funding programme.

The "whole teams" in BEIS that are working on research and development are "looking across the piece at a much wider R&D picture that involves Horizon 2020 and all of the R&D budget lines that are intimately involved with the EU, and as part of that is the nuclear R&D", he said.

He also noted the government's commitment to underwrite UK funding of the Joint European Torus (JET) fusion project at Culham Laboratory, in Oxfordshire, until the end of 2020.

The department's announcement on 7 December of GBP86 million in funding for nuclear fusion is "very much an endorsement of what we've been saying all along", he said, "which is that we are very keen to continue to maintain the UK's leading role in nuclear research".

Other announcements on the government's policy on nuclear power that were made the same day included a position paper on the "wider innovations development ambitions of the country" as it leaves the EU, he said. "And, again, this is about continuity and having future cooperation. Through our close association with Euratom, we have precedents with other members of the EU and Euratom, and we are confident that it is in the interests of all parties for the UK to continue to be a significant contributor to EU and international R&D programmes and that includes Culham, where we have fusion technology."

He added: "I can't say more on the implementation period. We will of course be prioritising that for continuity, certainty and an ability to have a smooth transition to avoid that cliff-edge. Discussions have not yet started."

Another announcement was that the government will be holding "regular industry forums", the next of which will be in January, Wagstaff said. "Invitations for that will be going out soon."

Eurelectric's position

In a position paper Objectives for a Sound Brexit Transition, published this month, Eurelectric said it welcomed the agreement reached between the UK and the European Commission in the first phase of their negotiations.

"We are however of the view that there is insufficient time left between now and March 2019 to agree an energy trading arrangement, which addresses among other things the issues of the continuation of the single electricity market on the island of Ireland and provides time for its implementation," the organisation said. "Consequently, the EU electricity sector considers it imperative that a reasonable period of time for negotiations beyond this date is agreed by both parties. Businesses and citizens in both the UK and the EU would benefit from a transition period. This would help provide stability and maintain investors' confidence by adjusting smoothly and orderly to the new arrangements," it added.

The UK's "continued participation in or seamless linkage with" the internal energy market offers the "most rational outcome" post-Brexit, it said, since there is a strong mutual interest in maintaining cross-border collaboration. A transitional period, which seeks to provide certainty and stability to businesses and citizens can be achieved through, where possible, maintaining current arrangements, it added.

The process of negotiating an agreement should be handled, it said, in two distinct parts during the transition period - Part 1: finalise the energy trading arrangements to be put in place on withdrawal; and Part 2: work out the implementation process of the agreed relationship and the timeframe for amending any legal, regulatory and technical measures permitting the operation of the new arrangements with the aim of achieving an orderly change.

Objectives that should inform the negotiations, "with the goal that UK access to the EU internal electricity market will continue", it said, are:

• the transition period must be sufficient to allow that an energy trade agreement can be made;
• only those policy issues relating directly to the free and fair trading of energy should be the subject of such an energy trade agreement;
• legal clarity must be provided, with fair and equitable treatment of participants in both EU and UK markets regarding contracts established prior to 29 March 2017 and during the transition period;
• legal clarity must be provided regarding continuation of the single electricity market on the island of Ireland;
• clarity must be provided regarding governance during the transition period in the absence of a continued direct linkage to the internal energy market;
• unrestricted movement of skilled personnel to and from the EU and UK must be preserved for all sectors;
• clear principles must be provided for addressing the key separation issues relating to UK’s withdrawal from Euratom and commitment to a future regime that provides coverage equivalent to existing Euratom arrangements.

"The European electricity sector welcomes the acknowledgement by the UK and the EU of the desirability to have a more realistic period for negotiation and adjustment. We also urge parties to confirm the extension of this period by the end of 2017 to provide market stability and maintain investor confidence," it said.

Researched and written
by World Nuclear News