The first full round of Brexit negotiations has drawn to a close more or less as expected after four days of talks in Brussels. The focus of this round of talks, as Michel Barnier put it, was “to identify the points where we agreed and the points where we disagree”, while David Davis said he was “encouraged by the progress we have made on understanding each other’s position”. The scope of this phase of the negotiations is limited to citizens’ rights, a financial settlement and arrangements for the Irish border, although the EU did reportedly back down on its position that trade would not be discussed at all at this stage, with discussions of import quotas taking placing on the sidelines of the negotiations. Nonetheless, despite these rather narrow ambitions, more has certainly been achieved behind the scenes than the press conference gave the impression of publicly. On citizens’ rights, as was clear from both sides’ negotiating position papers published before the talks, there was already broad conceptual agreement on a wide range of areas, with notable exceptions in others, the most salient disagreement being over whether governance of the agreement should involve the Court of Justice of the European Union. Barnier said that the two sides were “now moving in a common direction” while stressing that there “remains a fundamental divergence on how to guarantee those rights, and on several other points, such as the rights of future members of the family or the export of certain social benefits”. Other potential faultlines have the potential to emerge over the EU watering down its position on preserving the rights of UK citizens in the EU, with the EU now proposing that UK citizens will only have the right to remain settled in the one EU country where they are already living, and rejecting the UK’s offer of continued participation in the European Health Insurance Card scheme, although it is worth noting that the UK has already pledged to unilaterally continue paying for expats’ healthcare abroad should no agreement be reached, while financially speaking the scheme already works out overwhelmingly in the EU’s favour to the tune of over £600m a year, according to 2016 figures. The EU is reportedly also unhappy over the UK’s intention to carry out criminal records checks on every EU citizen seeking settled status post Brexit. Nonetheless, these are all issues that can ultimately be resolved with a sensible degree of give and take from both sides. The joint technical note published by both sides after the press conference already marks 22 of the 44 areas as green (agreed), with 14 red (disagreement) and 8 amber (further discussion) issues still to resolve. That level of progress bodes well in a round of talks which was primarily focused on understanding the two sides’ respective positions rather than the actual business of negotiation. However, it does not make sense to look at the “fundamental divergence” over the legal governance of the agreement in isolation, without considering the other substantive issue being addressed in this phase – the UK’s anticipated financial settlement with the EU, i.e. the ‘Brexit bill’. Fundamentally, this is the EU’s Achilles heel in the negotiations and they are well aware of it – a looming €12bn fiscal black hole is a major problem for a union which relies on the cross-continental redistribution of wealth for a substantial part of its political support. The tactical astuteness of the UK’s decision not to publish a position paper on the Brexit bill but instead to simply turn up and critique the EU’s proposal was underlined by the degree of consternation it appears to have caused on the EU side, with Barnier repeatedly going out of his way to insist on how important it was for the UK to formally set out its position on it. The UK has rightly recognised that this is the area of the negotiations in which it holds the most cards – strategic deployment of financial concessions will be a better way of extracting concessions in other areas from the EU than the UK laying all its cards on the table at once. Barnier has insisted that the EU’s stance, both on the Brexit bill and on the ECJ, is legal, not political, although it would have been surprising to hear him say anything else. There may be a basic legal element to both, but in reality, the EU is as aware as the UK is that a major amount of political discretion has been utilised in reaching its actual negotiating positions. The EU’s demands for the UK to settle its outstanding obligations under the Multiannual Financial Framework (i.e. the EU budget) are probably justifiable in a relatively tight legal sense, but the legal situation is obviously less clear cut when it comes to the EU’s desire for the UK to pay upfront to cover contingent liabilities for Eurozone loans, the mysterious absence of Britain’s share of EU assets from the calculations, or the demand that Britain continues to pay for English teachers in Brussels schools until the end of 2021. No-one on either side of the negotiations is naïve enough to think that there have been no political considerations factored in to the EU’s calculations, at least in private. With citizens’ rights, the main issue appears to be trust, superficially at least, exacerbated by some degree of confusion about Britain’s legal system. The UK, along with other EU member states including Ireland and the Scandinavian countries, has a dualist system of applying international law, whereby a separate piece of domestic legislation must be passed to give effect to international law commitments. This is opposed to the monist system where international law automatically has direct effect in domestic law once ratified, such as in the Netherlands, France or Germany, while the EU’s legal structure itself effectively imposes the monist system on all its member states in areas of EU law. However, this distinction does not make any international agreement any less binding, as appears to be the EU’s concern in the case of citizens’ rights after Brexit – something which the UK has attempted to address in this technical note published last week. If the UK reneged on the EU citizens’ agreement by altering domestic legislation a few years down the line, it would still be liable to any infringement proceedings set out in the agreement under international law in the same way as a monist state which had chosen to disregard or disapply parts of the agreement. In any case, the EU’s suspicions that the UK, a member state which has after all applied EU law with almost excessive rigour over the last few decades, gold-plating thousands of EU directives, would suddenly abandon its centuries’-long respect for the rule of law, are clearly unwarranted. Four months into the negotiations and a full nine months after the UK declared ending the jurisdiction of the ECJ to be a red line, there is no chance that Barnier and his colleagues are not aware that their stance on the ECJ is a dealbreaker as it currently stands. It would be an unprecedented and unjustifiable legal arrangement for modern times, with former ECJ judge Franklin Dehousse comparing it to colonial treaties foisted on China by Britain in the 19th Century. Barnier himself was stumped when challenged today by the Telegraph‘s Peter Foster to name a single example of a country which currently accepted the direct jurisdiction of a foreign court over its citizens in this way, giving a long-winded, rambling answer, which unexpectedly ended in a reference to how the EEA agreement dovetails with the ECJ, despite being outside its direct jurisdiction. While the EEA/EFTA would not represent the optimum model for the UK’s future relationship with the EU, Barnier’s reference to its distinct legal status certainly opens the door to a future compromise along the lines of the joint UK-EU arbitration court which the UK has been arguing for. So, if Barnier is ultimately prepared to compromise on the ECJ, as he knows he eventually must to avoid the negotiations collapsing, why is he still talking about “fundamental divergence” on the issue? Well, largely for the same reason that Britain is still holding out over the Brexit bill. Britain’s ECJ red line is an entirely necessary consequence of Brexit, but it is consequently the central fulcrum in the negotiations. Barnier knows that he can use the ECJ to extract concessions from the UK in the same way that the UK can use the Brexit bill to extract concessions from the EU. For that reason, they are likely to be the last things agreed on by either side in this phase of the negotiations – there is no reason why either side would want to give up their most valuable negotiating weapon until they have used it to extract the maximum possible from the other side. While progress may appear to be slow on the big issues, the technical discussions are progressing apace, with the UK negotiating team clearly far more prepared than its detractors in the UK, and indeed the EU, have given it credit for, while the seeds of compromise on the major political battles have been planted, even if it may well take several more rounds of negotiations before they ultimately come to fruition. There may not have been the major breakthrough just yet, but given how far apart the two sides appeared after the referendum last June, this round of talks has given every indication that the Brexit negotiations are firmly on track towards a positive outcome for both sides.