Attorney General: UK still at risk of being stuck in backstop

General Cox's legal opinion sent the pound sliding lower late on Tuesday morning, falling 0.9% against the dollar to 1.3002 and down 1% versus the euro to 1.1579.

After a late-night trip to meet European Commission president Jean Claude Juncker in Strasbourg, May said she has secured “legally binding” changes to the deal via a joint instrument, which will ensure that the Irish backstop protocol cannot become permanent.

The backstop is an insurance policy designed to prevent a hard border in Ireland, but some politicians are concerned there is no obvious way out of it. In November, Attorney General Cox conceded the backstop could “endure indefinitely” but believed it a calculated risk and that it was in no one’s interest to allow that to happen.

He was asked to reassess the deal following last night’s changes, however, and published his advice Tuesday morning.

In his written advice to the PM, Cox said: “I now consider that the legally binding provisions of the joint instrument and the content of the unilateral declaration reduce the risk that the United Kingdom could be indefinitely and involuntarily detained within the protocol’s provision, at least in so far as that situation had been brought about by the bad faith or want of best endeavours of the EU.”

But crucially, he also warned that “the legal risk remains unchanged” and that in the event of “intractable differences” the UK would have “no internationally lawful means of exiting the protocol’s arrangements”.

COX REBUTS

Earlier, there had been speculation that Cox had initially declared that the deal could not be validated but was coming under pressure to change his opinion.

Broadcaster Jon Snow tweeted: “A lawyer contact tells me that the legal world is aware that the Attorney General said NO last night to the validity of Mrs’s May’s new EU deal…he’s been told to go away and find a way to say YES. A cohort of lawyers has been summoned.”

Cox, however, tweeted an emphatic one-word rebuttal: “Boll**ks.”

May, who has spent the morning meeting with Conservative MPs, needs to secure the backing of the DUP and hard-line Conservative Brexiteers if her deal is to get through Parliament. Both have long baulked at the risk of the backstop enduring.

The Labour Party has said nothing new has been secured and has told its MPs not to back the tweaked deal.

Last time the withdrawal agreement went before parliament, the government lost the vote by a margin of 230. MPs will vote again at around 1900 GMT on Tuesday evening.

Bookmakers made another defeat for May the most likely outcome, with Ladbrokes offering 1/4 that the second meaningful vote will not be approved by parliament, with 11/4 odds that the deal wins the backing of MPs.

Meanwhile, Paddy Power offered 11/2 on May's deal winning. "Not saying no chance - it’s certainly had less chance previously - but we make it 1/18 not to go through," said spokesman Lee Price. "So success today is about as likely as Theresa May releasing a dance video."

"All signs point towards the meaningful vote not being approved by Parliament," said Alex Apati of Ladbrokes, adding that there were odds of 5/2 that another EU referendum would be held before the year is out.

COX DISAPPOINTS

City analysts said Cox's advice was not what sterling bulls wanted to hear.

Connor Campbell, market analyst at Spreadex, said: "Cox was the one to lay the smacketh down on sterling’s fragile hopes, sending the currency spiralling."

He added: "It is what many suspected after looking over May’s ‘legally binding’ alterations, and exactly what the pound (and the PM) didn’t want to hear given how poorly it’ll sit with the DUP and ERG. Having rocketed as much as 0.7% higher after the bell, sterling found itself down 1% against both the dollar and the euro, completely erasing the gains the currency had managed pre- and post-May’s trip to Strasbourg."

Naeem Ahmed, market analyst at Think Markets UK, said traders had been eyeing Cox's opinion and "now that he has made it clear that the recent deal has no weight, the door is wide open for the sterling to move lower against the dollar. Another historic defeat is strongly on the cards for Mrs. May and all options are on the table with respect to another election or no Brexit at all."