

EU diplomats have warned the Foreign Office that the UK will not be able to leave the jurisdiction of the European court of justice (ECJ) if there is to be a transition period while details of Brexit are negotiated.

The proposed transition period, much sought by UK businesses in order to retain continuity in access to the single market, could last as long as five years after the completion of the first phase of withdrawal in 2019.

Retention of ECJ influence in the interim is politically explosive since it would make it hard for Theresa May to claim before the 2020 general election that the UK is truly sovereign and has left the EU, one of her key political aims.

European diplomats have been called in by the Foreign Office to exchange views after the prime minister’s Lancaster House speech. The issue of the role of the ECJ in a transition has emerged as one of the most politically fraught issues facing the two sides, according to diplomats involved in the conversations with the Foreign Office. The UK-based diplomats are being used as an informal sounding board to test ideas.

Diplomats in London, on the basis of press briefings, had expected May would use her Lancaster House speech to assert the UK would be sovereign and free of ECJ control even during a transition period, but instead she was silent on the issue. The Brexit white paper published on Thursday was equally evasive, but for the first time discussed the form of international arbitration courts that might operate when the UK strikes free trade agreements with the EU.

Leading City and business figures have called for a minimum three- to five-year standstill between negotiating exit in principle, and full exit. The same demand is being made by European businesses, most recently by the Belgian industry federation this week.

Some UK-based EU diplomats said they had even been briefed by senior officials from David Davis’s Department for Exiting the European Union that a special joint court might be needed to adjudicate on disputes during a transition, but other ministers insist the UK supreme court must be sovereign.

The former UK ambassador to the EU Sir Ivan Rogers acknowledged this week that “a big political debate lay ahead” on the form of an interim deal. He said he did not think the EU would accept a bespoke interim deal, or legally binding sector by sector deals on different timescales. He said the EU would instead demand an off-the-shelf model.

Joseph Muscat, the prime minister of Malta, whose country recently took over the EU’s rotating presidency, has already warned that the UK must be subject to EU law during any transition, saying the writ of the ECJ was an essential part of any deal to smooth the path to Brexit. He said: “It is not a transition period where British institutions take over, but it is a transition period where the European court of justice is still in charge of dishing out judgments and points of view.”

As a result the ECJ would be responsible for overseeing how UK business retained access to the single market.

Rogers floated the possibility of the UK joining the European Economic Area/European Free Trade Association court as an antechamber to a full exit, along the lines of Norway, pointing out that the option had been proposed by both remainers and leavers.

But speaking on Thursday, Davis appeared to rule out EFTA membership, saying it “would put us within the reach of European regulations and the European courts”.

Eurosceptics want May simply either to go without a transition period, or assert the UK supreme court will be responsible for any disputes between the EU and Britain.