European Parliament toughens goals for UK to reach a trade agreement

Following the UK’s departure from the EU with effect from 1 February 2020, the European Parliament has now set out a tough position for the negotiations on the future relationship between the UK and EU.

MEPs have put the price of Prime Minister Johnson’s ‘ambitious free-trade deal’ such that the UK must follow EU policies in a host of areas. These range from chemicals regulation to climate change, food labelling and subsidies for companies. Further, there will need to be ‘dynamic alignment’ – with the UK adopting European rules as they are introduced.

The wide-ranging resolution also called for measures to ensure that Brexit does not cause gender discrimination, for a crackdown on all British overseas territories that may act as ‘tax havens’, and for a joint UK-EU position at the upcoming UN climate conference in Glasgow in November.

The European Parliament is establishing the mandate for the EU’s chief negotiator, Michel Barnier. They go further than Barnier’s own draft, published in early February, where there was no mention of alignment – and definitely not the automatic kind.

A first revision came from EU from national governments. It added a reference to the need for a ‘level playing field’ – commitments by the UK to fair economic competition to prevent European businesses being undercut by their British rivals. The goal of ‘building on’ existing access to British waters for European fishing boats was upgraded to ‘upholding’ it; and the UK’s participation in the Galileo satellite positioning system was downgraded from ‘should’ to ‘could.’

MEPs have now gone a step further. The European Parliament can be ‘bad cop’ – allowing Barnier to say he can’t agree certain things ‘because the Parliament won’t accept them.’

Whilst MEPs were not willing to oppose the divorce deal, they will be tougher on any trade agreement that touches on Europe’s values and social model.

European integration started in the 1950s as a way for Germany to atone for its own nationalist and belligerent past. Its citizens were eager to subsume part of their identity in a ‘post-nationalist, rules-based, non-militarist and largely mercantile entity’ – in return for being accepted again by their neighbours. Occupied at the time by three of the Allied Powers, they had surrendered national sovereignty – so did not worry about ceding more of it to Brussels.

Meanwhile, post-Brexit, the agreed ‘financial settlement’ – often labelled the ‘exit bill’ or ‘divorce bill’ – is has come into operation.  The settlement is part of the Withdrawal Agreement, which is the legally binding treaty setting out the negotiated terms of the UK’s departure from the EU.

It sets out how the UK and EU are settling their outstanding financial commitments to each other – which financial commitments will be covered, the methodology for calculating the UK’s share and the payment schedule.

There is no definitive cost to the settlement. The final cost to the UK will depend on future events such as future exchange rates and EU budgets. Present estimates suggest a net cost to the UK of around €33 billion (£30 billion).

Much of this cost will come in the early years of the settlement, but the Office for Budget Responsibility – the UK’s public finances watchdog – has forecast that relatively small payments will continue until the mid-2060s.

The UK and EU have formally agreed some principles for the settlement:

  • no EU Member State should pay more or receive less because of the UK’s withdrawal from the EU;
  • the UK should pay its share of the commitments taken during its membership; and
  • the UK should neither pay more nor earlier than if it had remained a Member State. This means that the UK will make payments based on the outturns of EU budget.

The settlement can be split broadly into three components:

  1. During the transition period, until the end of 2020, the UK will pay into the EU budget almost as if it were a Member State. The UK will also receive funding from EU programmes– such as structural funding – as if it were a Member State.
  2. EU annual budgets commit to some future spending without making payments to recipients at the time. The commitments will become payments in the future. The UK will contribute towards the EU’s outstanding commitments as at 31 December 2020. Recipients in the UK will also receive funding for outstanding commitments made to them.
  3. The UK will share the financing of some EU liabilities as at the end of 2020, and any materialising contingent liabilities, and will receive back a share of some assets. The pensions of EU staff are likely to be the most significant liabilities for the UK, while the most significant item being returned to the UK is the capital it paid into the European Investment Bank (EIB).

Beyond these three components the UK has, for instance, agreed to continue to contribute to the EU’s main overseas aid programme – the European Development Fund – until the current programme ends. This programme is funded directly by Member States, rather than through the EU budget. Any UK contribution made via the EU will count towards its commitment to spend 0.7% of national income on overseas aid.

The UK net payments to the EU are estimated by the OBR as totalling £30 billion between 2020 and 2064:

  • 2020: £8 billion
  • Between 2021 and 2028: a total of £20 billion
  • Between 2029 and 2064: a total of £2 billion

Sources include:

Government announces new restrictions in UK-EU trading rules to come into effect on 1 January 2021

The UK government has, this week, published formal notice that it plans to introduce import controls on EU goods at the border from 23:00 GMT on 31 December 2020 – the end of the ‘Brexit transition period’ set in the Withdrawal Act passed by Parliament in January.

The decision was confirmed in a speech given by Michael Gove, Chancellor of the Duchy of Lancaster, at a Border Delivery Group stakeholder event. In a significant chance to the Government’s previous stance – all UK exports AND imports will be treated equally. This means that everyone that trades between the EU and GB – and vice versa – will have to submit customs declarations and will be liable to goods’ checks.

Gove believes that there is sufficient time between now and the end of the year for businesses to prepare – and announced that the policy of ‘easements’ put in place as a contingency for a potential ‘no-deal’ exit will not be reintroduced.

“We are leaving the EU’s customs union and single market, taking back control of our borders, and beginning to strike trade deals around the world.”

The Government notice sets out a number of reasons for implementing import controls:

  • to keep UK borders safe and secure so that it knows who’s coming in and how often, what they are bringing in, and why
  • to ensure that the UK treats all partners equally as it begins to negotiate our own trading arrangements with countries around the world
  • to ensure collection of the correct sums of customs, VAT and excise duties
  • The UK will reciprocate and enforce its own rules for goods entering the UK since the EU has said that it will enforce checks on UK goods entering the Eurozone. Business must prepare for border controls by making sure they have an Economic Operator Registration and Identification (EORI) number. They should look into how they will be making declarations – and consider, for example, using a customs agent.

The Government will ensure that ‘facilitations currently available to rest of the world traders’ will also be open to those trading between GB and EU.

Gove said: “The UK will be outside the single market and outside the customs union, so we will have to be ready for the customs procedures and regulatory checks that will inevitably follow.

“As a result of that we will be in a stronger position, not just to make sure that our economy succeeds outside the European Union but that we are in a position to take advantage of new trading relationships with the rest of the world.”

Gove was speaking to representatives of lobby groups, including the Freight Transport Association and British International Freight Association, in London on Monday 10 February.

He warned the logistics industry to prepare for ‘strict border controls between Britain and the European Union’ after Brexit.

There was an immediate response from trade and professional associations raising a wide range of concerns that trade will be disrupted. This included doubts about the Government’s ability to have electronic customs declarations systems in place, physical infrastructure to undertake checks on goods without disruption to traffic flows; sufficient experienced and trained personnel in place – including customs officers, vets and officials able to scrutinise for regulatory compliance.

Elsewhere, the tough stance is now almost certain to mean extra costs and delays for companies importing goods into the U.K. from Europe. In the Midlands, car-makers and aerospace companies, which rely on just-in-time delivery of parts, have been preparing plans to address vulnerabilities including hold-ups to just-in-time components and assemblies.

Bloomberg reports Shane Brennan, chief executive of the Cold Chain Federation – which represents businesses operating frozen and chilled storage distribution vehicles – as saying that: “It is now becoming clear that the very real threat of disruption to food trade is present. A dawning realization has to spread quickly through industry and government agencies about how much has to be done to be ready.”

Gove also told the meeting there would be “light-touch administration” of trade between Great Britain and Northern Ireland in both directions, according to three people present at the meeting, who asked not to be identified.

We note that Prime Minister, Boris Johnson, had previously maintained that there will be no checks on such trade. We also note that this chance in the UK stance that has profound implications for trade was not announced to Parliament – but via a presentation by a Minister and sketchy press release from the Cabinet Office.

The EU publishes its ‘red-lines’ for future Brexit negotiations

The UK is no longer a member of the European Union.

From the outset of discussions in 2017, both sides agreed that it was wise to allow a ‘status quo’ period of time after the UK left to settle the future long-term relationship. Three years was offered by the EU – but the UK Government has since legislated to limit this ‘transition’ period to 11 months, ending at 23:00 GMT on 31 December 2020 – whether or not an agreement is reached.

From that moment, the UK will no longer be treated as an EU member with free movement of people, goods, capital and finance.

As soon as Brexit was enacted, the European Commission – the body responsible from the EU side of the negotiations – has issued a recommendation to the European Council (comprising the 27 Heads of EU States) that sets out the terms of reference allowing them to open negotiations with the UK.

The principles are governed by Article 218 of the Consolidated Treaty on the Functioning of the European Union. Contact us if you want full details on the scope and terms of reference for negotiating with a ‘third country’ – and the UK became a ‘third country’ on 1 February 2020.

The next step is for the European Council to formally adopt the draft negotiating directives. This will formally authorise the Commission to open the negotiations as Union negotiator. Watch out for the EU ‘red lines’ – already in conflict with the UK’s own ‘red lines’.

The Commission’s recommendation is based on the existing European Council guidelines and conclusions – but takes into account the ‘Political Declaration’ that was negotiated and agreed between the EU and the UK in October 2019.

It includes a comprehensive proposal for negotiating directives, defining the scope and terms of the future partnership that the European Union envisages with the United Kingdom. These directives cover all areas of interest for the negotiations, including trade and economic cooperation, law enforcement and judicial cooperation in criminal matters, foreign policy, security and defence, participation in Union programmes and other thematic areas of cooperation. A dedicated chapter on governance provides an outline for an overall governance framework covering all areas of economic and security cooperation.

Michel Barnier, the European Commission’s Chief Negotiator, said: “We will negotiate in good faith. The Commission will continue working very closely with the European Parliament and the Council. Our task will be to defend and advance the interests of our citizens and of our Union, while trying to find solutions that respect the UK’s choices.”

As the body delegated to be the EU negotiator, the European Commission intends to continue work in close coordination with the European Council and the European Parliament – as was the case during the negotiations for the Withdrawal Agreement.

President of the European Commission Ursula von der Leyen said: “It’s now time to get down to work. Time is short. We will negotiate in a fair and transparent manner, but we will defend EU interests, and the interests of our citizens, right until the end.”

This came as the European Commission on Monday, 3 February 2020 published a set of ‘Questions & Answers’ regarding the draft negotiating directives for a new partnership with the United Kingdom. For the avoidance of doubt, we publish them in full, below.

For insight and interpretation of these Q & As – and what it means for business, commerce and finance – please contact us for the implications on your sector and organisation.


What has the Commission adopted today?

The European Commission has today adopted a recommendation to the Council to authorise it to open negotiations for a new partnership with the United Kingdom of Great Britain and Northern Ireland, in accordance with Articles 218(3) and (4) TFEU and Article 101 EAEC.

This recommendation is based on existing European Council guidelines and conclusions, as well as the Political Declaration agreed between the EU and the United Kingdom in October 2019. It includes a comprehensive proposal for negotiating directives, defining the scope and terms of the future partnership that the European Union envisages with the United Kingdom.

What is the scope of these draft negotiating directives?

In line with the European Council guidelines of 23 March 2018 and the European Council conclusions of 13 December 2019, the directives cover all areas of interest for the negotiations, including trade and economic cooperation, law enforcement and judicial cooperation in criminal matters, foreign policy, security and defence, participation in Union programmes and other thematic areas of cooperation. A dedicated chapter on governance provides an outline for an overall governance framework covering all areas of economic and security cooperation.

Have you agreed with the United Kingdom yet about practical arrangements for the negotiations, such as language regime?

Practical issues, such as language regime and negotiation structure, will be agreed jointly between the EU and UK negotiators.

What are the next steps?

The recommendations are now with the Council for adoption. The General Affairs Council is scheduled to adopt the Decision authorising the opening of negotiationsand providing negotiating directives to the Commission on 25 February. Once this decision is adopted by the Council, the European Union will be ready to begin formal negotiations with the United Kingdom.

When will negotiations start?

The Commission is ready to begin negotiating once the Council authorises the opening of the negotiations. The first formal meeting between the EU and the UK negotiators is likely to take place at the beginning of March.


Can you really negotiate everything by the end of the year?

The Commission intends to achieve as much as possible during the transition period. We are ready to work 24/7 to make the best out of the negotiations. It is possible to extend the transition period by 1 to 2 years. This decision must be taken jointly by the EU and the UK before 1 July.

Extending the transition period: if no decision is taken by July 2020, surely there is an alternative mechanism, if needs be?

If no decision has been taken by the Joint Committee before July 2020, there is no other legal basis for extending the transition beyond 2020.

Is there still a risk of a “no-deal” scenario at the end of the year?

As in every negotiation, the risk of not reaching an agreement is there. Regardless of whether a future partnership will be in place, all businesses need to prepare now for the end of the transition period, as the UK will no longer be in the Single Market or the Customs Union.

Will all issues in the negotiating directives be negotiated in parallel?

We will work on all topics in parallel. We will be particularly vigilant to progress in areas where the risk of disruption at the end of the transition period is particularly high, in case no agreement has been reached.

Why was this legal basis chosen for the negotiations? Does that mean that the agreement does not need to be approved by national parliaments?

Given the scope of the envisaged partnership, at this stage, the choice of Article 217 of TFEU as a legal basis is the most natural since it is the widest legal basis possible. It is also suitable in order to provide for an overarching governance framework, which is one of the EU’s objectives. Obviously, the legal basis can only be final once we know the content of the final agreement. What is important is to ensure that the future agreement can enter into force on 1 January 2021.

Will there be one agreement or several agreements?

The aim is to negotiate an ambitious and comprehensive partnership with the United Kingdom that can enter into force by the end of the transition period. The Commission’s intention is to negotiate that partnership as a package that comprises three main components:

  • general arrangements (including provisions on basic values, essential principles and on governance);
  • economic arrangements (including provisions on trade, level playing field guarantees and fisheries); and
  • security arrangements (including provisions on law enforcement and judicial cooperation in criminal matters, as well as on foreign policy, security and defence).

Will the new partnership be an ‘association agreement’ and how will such an agreement be ratified?

‘Association agreement’ is the term used in Article 217 of the Treaty on the Functioning of the European Union for an agreement ‘establishing an association involving reciprocal rights and obligations, common action and special procedure’. Article 217 TFEU allows for the closest possible partnership with a country that is not an EU member. There are many different types of association agreement, but what they all have in common is their comprehensive nature and the fact that they establish a long-term institutional framework. An association agreement must be approved by unanimity in the Council and requires the consent of the European Parliament before it can enter into force. Whether the future partnership must be ratified by national parliaments depends on its final content and can only be determined at the end of the negotiations.

How will you ensure unity during these negotiations?

Just as with the Article 50 negotiations on the UK’s withdrawal from the EU, the Commission will conduct these negotiations in continuous coordination with the Council and its preparatory bodies. It will consult and report to the preparatory bodies of the Council in a timely manner, and will provide all the necessary information and documents relating to the negotiations. The Commission will also keep the European Parliament fully informed of the negotiations. For Common Foreign and Security Policy matters, the Commission will furthermore conduct negotiations in agreement with the High Representative of the Union for Foreign Affairs and Security Policy.

Will EU negotiating positions be made public?

Yes, the Commission’s aim will be to ensure full transparency. This is also why the Commission has made today’s recommendation public.

What is the purpose of the High-Level Conference between the EU and the UK in June 2020?

The High-Level Conference in June, as foreseen by the Withdrawal Agreement, aims to take stock of the progress in negotiations. The Commission will also use the Conference to take stock of the state of implementation of the Withdrawal Agreement, in particular when it comes to citizens’ rights and the Protocol on Ireland and Northern Ireland.

Will the future agreement supersede the Protocol on Ireland and Northern Ireland?

Unlike earlier versions, the Protocol on Ireland and Northern Ireland agreed in October 2019 and which is a part of the Withdrawal Agreement is not a “backstop”. It was conceived as a stable and lasting solution. The Protocol will apply alongside any agreement on the future relationship. Nevertheless, it is clear that the terms of the future trading relationship between the EU and the United Kingdom – in terms of the shared ambition to have zero customs duties and quotas between the EU and the United Kingdom – will have some bearing on the practical application of the Protocol.


How to ensure effective implementation of any future agreement?

For the agreement to be correctly implemented and applied, there must be effective governance arrangements with credible enforcement and compliance mechanisms, as of 1 January 2021. Where the future partnership relies on EU law, there must be a role for the European Court of Justice. Only the European Court of Justice can interpret EU law.

What would happen if the United Kingdom were to breach the future agreement?

Many international treaties have rules on how disputes between the parties must be resolved. The future agreement should also have such rules. The typical process is that the parties must first attempt to resolve their differences amicably through a process of ‘consultations’. If those attempts are unsuccessful, the dispute may be brought before an arbitration panel for a binding ruling. If a party continues to infringe the agreement, the other party can take action to safeguard its interests and to urge compliance. In certain situations, there should be a possibility for a party to act quickly to avoid irreparable harm. An important part of the negotiations with the United Kingdom will be about making sure that the rules governing disputes between the parties are clear and effective and that breaches can be remedied quickly.

What will be the role of the European Court of Justice?

The European Court of Justice is the final arbiter when it comes to the interpretation and application of rules of Union law. The future agreement must respect this by making sure that no other court, tribunal or arbitration panel set up by the parties may encroach upon the role of the Court of Justice. The precise role of the European Court of Justice under the future agreement will depend on the content of the future relationship with the United Kingdom.

Will there be sanctions if the UK does not play by the rules?

We are looking at the best possible safeguards to allow for a quick reaction and protection of the EU’s interests. The precise details and scope of the overall governance framework will depend on the content of the future relationship.


How does the European Commission envisage the future economic partnership?

The envisaged partnership should contain comprehensive arrangements including a free trade area, with customs and regulatory cooperation, underpinned by robust commitments ensuring a level playing field for open and fair competition, as well as by effective management and supervision, dispute settlement and enforcement arrangements, including appropriate remedies.

What kind of customs cooperation do you foresee?

Within the framework of the EU’s Customs Code, including customs checks and controls and all other controls such as systematic sanitary and phytosanitary controls at the border, the envisaged partnership should aim at facilitating legitimate trade by making use of available facilitative arrangements and technologies and, while ensuring proper implementation of the Union Customs Code, where justified.

Customs authorities must be able to take effective measures at the border to enforce legitimate public policies (protection of health and safety of consumers, protecting businesses, for example regarding enforcement of intellectual property rights) and protect financial interests. Therefore, the customs cooperation that we envisage is, as is the case with our existing free trade agreements, limited and in any event cannot be described as going in the direction of frictionless trade. Only membership of the Single Market and the Customs Union can ensure such frictionless trade.

Will a free trade agreement (FTA) allow goods to be exchanged between the UK and the EU as they are today?

Trading under FTA terms, even a so-called “best in class” FTA, will be of a very different nature compared to the frictionless trade enabled by the EU’s Customs Union and Single Market. In an FTA context, rules of origin and customs formalities will apply; all imports will need to comply with the rules of the importing party and will be subject to regulatory checks and controls for safety, health and other public policy purposes.

That being said, the proposal we are ready to table, as the Political Declaration already announced, will be of an unprecedented nature for an FTA: no tariffs and no quotas across all goods, including agricultural and fisheries products.

Because these conditions are exceptional, this is conditioned on the existence of robust provisions ensuring a level-playing field, guaranteeing competition between economic operators from both sides. In addition, these exceptional conditions of no tariffs and no quotas across all sectors can only be tabled if a fisheries agreement that includes provisions on access to waters is concluded.

Without an FTA in place by the end of transition, tariffs and quotas will apply to all trade in goods between the EU and the UK. In this scenario, we must apply what is known as “MFN tariffs” to the UK. Indeed, under the WTO Most Favoured Nation (MFN) principle, benefits given to one trading partner need to be extended also to others and only a trade agreement or Customs Union can be an exception to that rule. Therefore, without an FTA in place as of 1 January 2021, economic operators and consumers should not expect privileged treatment when dealing with the UK.

What does “level playing-field” mean?

The EU is ready to offer a high-ambition trade deal, with zero tariffs and zero quotas on all goods entering our single market of 450 million people. However, because of our high levels of economic inter-connectedness, the value of trade and geographical proximity, the draft negotiating directives also make clear that this exceptional offer is conditional on robust level playing field safeguards to avoid unfair competitive advantages the UK could derive from regulatory divergence (lowering of standards) or subsidisation of UK operators. In the Political Declaration, the EU and the UK already agreed that they would avoid unfair competitive advantages. We must now agree on effective assurances to guarantee high standards on social, environmental, tax and state aid matters.

What if the UK will not commit to any level playing field guarantees?

We agreed in the Political Declaration that the scope and depth of the future relationship will depend on the level playing field commitments that the UK is willing to undertake. The EU will not agree on an FTA without solid level playing field guarantees and an agreement on fisheries. Our geographic proximity and economic interconnectedness are such that it is in our mutual interest to agree on fair competition standards between us, as well as on their effective enforcement. Given the current very close integration of British companies with the Single Market and the UK’s desire for zero tariffs and zero quotas for goods, it is only fair that the EU requires commensurately strong level playing field guarantees. This will also be in the interest of British consumers and businesses. The EU is by far the greatest export market for UK businesses and most UK imports are from the EU.

Will sanitary and phytosanitary requirements (SPS) change?

There will be no changes to the Union’s food safety standards. Union law, including systematic controls, will fully apply to imported food, animals and plants without exceptions or equivalency. High-level SPS standards will be safeguarded. As in existing FTAs, relations will be built on and will go beyond existing multilateral instruments [World Trade Organization (WTO), Codex Alimentarius, International Plant Protection Convention (IPPO) and World Organisation for Animal Health (OIE)] recommendation and requirements. Co-operation should be ensured in combating antimicrobial resistance as well as protecting animal welfare and ensuring sustainable food systems.

Will the EU allow for mutual recognition of rules and standards?

By choosing to leave the Single Market, the UK has opted to have the status of a third country regarding EU law. The EU and UK will therefore form separate markets and distinct legal orders, after the end of the transition period. The future relationship will therefore result in a lower level of integration than is the case today. The future economic partnership on goods will seek to facilitate trade as far as possible but this cannot be expected to replicate the same frictionless conditions of trade that exist between EU Member States. Such conditions are based on adherence, by Member States, to a full ‘ecosystem’ of rules, including the Treaties, and their supervision and enforcement, including the jurisdictional system under the Court of Justice of the EU. Mutual recognition can only be granted between participants to that ecosystem.

What can be achieved on services in the context of an FTA?

We can aim at a level of liberalisation of trade in services beyond the baseline provided by our existing WTO GATS commitments, similarly to the approach in our most recent FTAs. As requested under GATS rules, the FTA would need to cover most services sectors, such as telecommunication services or business services to name a few. But, as in any FTA negotiated by the EU, there will be exceptions: for instance, the EU normally excludes audiovisual services from the provisions on liberalisation. Under its FTAs, the EU maintains its right to regulate its own markets and its full regulatory autonomy. We will be particularly attentive to include provisions that preserve the EU’s public services. This preservation of our right to regulate will be paramount in all sectors, and a good illustration is financial services. Indeed, in that area, the key instruments the EU and the UK will use in this area are their respective unilateral equivalence frameworks, as laid down in their legislation. The FTA will cover financial services, but it will not go beyond what the EU offers in its FTAs with other third countries. It will also contain the prudential carve-out.

Finally, it should be recalled that while free trade agreements’ provisions are important in the area of services, a number of other rules impact trade in services. Some of them imply unilateral decisions such as EU regimes on data protection and financial services regulation and supervision. The EU intends to assess the UK for adequacy on data protection and equivalence on financial services. That is what we have agreed in the Political Declaration. Decisions should be reciprocal. Services are also closely linked to the free movement of people (professionals such as lawyers, consultants, accountants etc.), which the UK explicitly intends to stop post-Brexit. Those elements should be taken into account too when assessing priorities for the coming negotiations.

Will audiovisual services and public services be covered?

The EU always excludes certain sectors (e.g. audiovisual, public services) from its FTAs and considers carefully any commitments made in the other sectors. The EU also needs to consider the Most Favoured Nation commitment it has taken that would extend the benefits of the agreement with the UK to other FTA partners such as Canada, Japan and Korea.

What about roaming?

The provisions on roaming-like-at-home will stop applying in respect of the UK. When traveling to the UK, the situation will be similar to that of travelling to Switzerland: roaming changes may apply. Telecoms operators have obligations to be transparent as to the tariffs they charge.

What do you foresee on digital trade?

The objective is to facilitate digital trade, such as e-commerce, while respecting consumer rights and personal data protection rights. This is something that the EU has been doing in its FTAs for long time.

Will financial services be covered by the FTA?

Yes, we usually cover financial services in EU FTAs. The standard approach is to have limited market access commitments, notably on cross-border supply of financial services. In addition, even where there is market access the EU will continue to apply its host state-rules to incoming providers. Finally, like in all FTAs we will have a prudential carve-out that allows to Union to adopt any measure for prudential reasons.

The EU’s equivalence regimes are the instruments that the EU will use to regulate interactions with the UK in the financial services area. The EU’s equivalence frameworks only provide for the possibility to give market access in a few cases (investment firms, trading venues, central clearing parties). They do not cover all financial services. The granting (or not granting) of equivalence is a unilateral measure by the EU. Equivalence can be withdrawn at any time. Decisions should be reciprocal.

What are you proposing on geographical indications, and how does that differ from the Withdrawal Agreement?

All EU geographical indications registered on 31.12.2020 (the “stock”) will be protected in the United Kingdom as a result of the Withdrawal Agreement. However, beyond this, the future FTA should provide a framework to ensure the protection of newly registered geographical indications at the same level as that guaranteed by the Withdrawal Agreement.

What are you proposing on public procurement?

We aim at securing procurement opportunities on top of those guaranteed by the UK’s accession to the WTO Government Procurement Agreement (the UK is in the process of acceding to that agreement).

Mobility: will EU and UK citizens still be able to move freely?

The UK has decided to end the free movement of persons and has limited ambition for specific arrangements with the EU on the mobility of persons.

This does not mean that mobility will stop. Today, citizens move from one country to another to live, work, study and carry out research. However, after the end of the transition period, mobility to and from the UK will be different and will happen under different rules than before when free movement rules applied. What exactly those rules will be depends on the outcome of the negotiations but our objective is to ensure reciprocity and no discrimination between EU nationals.

How about short-term trips by EU citizens to the UK and by UK nationals to the EU?

After the end of the transition period, the EU will not require visas for short stays (less than 90 days in 180 days) for UK nationals independently of the purpose of the trip (except in case of paid work), so short-term tourists, students, journalists, trainees, etc. from the UK will be able to come visa free.

This arrangement is dependent on the UK also granting full visa reciprocity to the nationals of all EU Member States travelling to the UK.

Will there be different entry checks on UK nationals when entering the EU?

Yes, UK nationals will be treated as third-country nationals as of the end of the transition period. There is no legal alternative under the Schengen acquis. This means that the entry conditions for third-country nationals and the procedures applicable to the crossing of the EU external borders will also apply to UK nationals.

Concretely, this means that: UK nationals will no longer be able to use the designated lanes at Border Crossing Points (EU, EEA, CH); their passports will be subject to stamping upon entry and exit from the Schengen Area; they will be subject to checks including checks against databases upon entry and exit; they will be subject to the EU’s Entry/Exit-System (EES) and the European Travel Information and Authorisation System (ETIAS) when these systems will be deployed in the future.

The entry checks on UK nationals will include verification of the possession of a valid travel document for crossing the border; the duration of the stay; the purpose (e.g. tourism or work) and the conditions of the intended stay (e.g. accommodation, internal travels); the existence of sufficient means of subsistence (i.e. having sufficient means to pay for the intended stay and return travel).

How about the possibility of EU citizens to move to the UK and UK nationals to the EU for longer terms (longer than 90 days)?

After the end of the transition period, mobility to and from the UK will be different and will happen under different rules than before when EU free movement rules applied. What exactly those rules will be depends on the outcome of the negotiations.

Nevertheless, even in the absence of specific provisions, the default rules of the EU and the UK would cover the entry and stay for different purposes. On the EU side, national rules and the EU’s legal migration acquis for long stays sets out the conditions of entry and stay in the EU for categories such as students, researchers, some types of workers, family members, long-term residents, au pairs, volunteers etc. These rules apply in the same way to citizens of all third countries, including the UK when it becomes a third country. For stays of less than 90 days in a 180-day period, the Schengen acquis applies. On the UK side, its national migration regime would apply.

What do you foresee on mobility of citizens within the FTA?

As regards mobility, FTAs only deal with the entry and temporary stay of natural persons for business purposes in defined areas. However, host State rules continue to apply as regards conditions for entry and stay, access to labour market and working conditions.

What do you foresee on social security coordination?

In order to facilitate the future mobility of persons, appropriate social security coordination will also need to be agreed. The scope of social security coordination rules in the future relations with the UK should take into account the extent of the specific mobility arrangements that will be agreed with the UK. These social security coordination arrangements should be based on non-discrimination between EU Member States and full reciprocity.

It is noted that one of the stated objectives of Brexit was to stop the free movement of citizens. This means that in any event, the situation on citizens’ mobility after 1 January 2021 will be very different compared to today.

Will smooth transport links still be ensured?

In the future relationship, the EU will aim to ensure a continued flow of goods and persons between the UK and the EU, but the UK, as a third country, does not have the same rights as a Member State.

The situation is very different depending on the mode of transport: Ensuring connectivity for air traffic and road haulage will require an agreement, e.g. on market access. Without an agreement, there is no fall-back to allow traffic to continue.

What kind of an air transport agreement do you foresee?

In terms of air transport, UK operators currently benefit from full market access in the EU: a UK airline can offer air services within the EU without restrictions. Without an EU-UK partnership in aviation, and in absence of unilateral contingency measures, no flight would take place between the UK and the EU as the WTO does not offer any fall-back for air services.

We are aiming for an aviation relationship that allows for continued connectivity and ensures a high level of aviation safety and security standards, air traffic management, and sector specific level playing field provisions to allow for open and fair competition, including appropriate and relevant consumer protection requirements and social standards.

What do you foresee on road transport?

In the area of road transport, we are aiming for a system of open market access allowing journeys between the UK and the EU, while preserving the integrity of the internal market for road haulage services. We also need to ensure sector specific level playing field provisions, in particular as regards the rules that affect our operators, our drivers and our vehicles.

Will you need an agreement on energy?

The negotiating directives foresee cooperation in the area of energy. An important pre-condition for cooperation in this area is to ensure we have robust level playing field requirements. In particular carbon pricing (Emission Trading System – ETS) and provisions on State aid are both a pre-condition for future cooperation on energy.

In the area of electricity and gas, there is no precedent for this type of arrangement.

As regards Euratom issues, the EU has experience regarding Nuclear Cooperation Agreements with other third countries.

What about climate change?

In the introductory paragraphs of the negotiating directives, five binding political clauses underpinning the all-encompassing relationships between the EU and third countries are highlighted, namely: the respect for and safeguarding of human rights, democracy and the rule of law; support for non-proliferation of weapons of mass destruction; the fight against terrorism; prosecution of those accused of the most serious crimes of concern to the international community; small arms and light weapons. The fight against climate change has been added as an essential element of the envisaged partnership.

Will the UK continue to participate in the ETS system?

In line with the Political Declaration, the negotiating directives foresee the possibility of a so-called linking agreement by which the EU and the UK could link their respective emission trading systems.

Will EU fishermen continue to have access to UK waters?

Access to each other’s waters will be negotiated as part of the provisions on fisheries, which should provide for continued reciprocal access, in line with the objectives set out in the March 2018 European Council Guidelines.

Will the EU impose tariffs on UK fisheries products?

The envisaged partnership should include, in its economic part, provisions on fisheries setting out a framework for the management of shared fish stocks, as well as the conditions on access to waters and resources. The intention is to have fully liberalised market access across all goods, which will be guided by the agreement on fisheries.

What happens if there is no agreement on fisheries by July 2020?

The Political Declaration includes a joint commitment on best endeavours to reach an agreement on fisheries by 1 July 2020. The time to negotiate such an agreement will be very short (four months), but it is in our mutual interest to conclude the fisheries agreement in due time, so it can be implemented as of 1 January 2021 in view of ensuring sustainable fisheries management.

Union programmes: will the UK still get grants and subsidies from the EU? Will they contribute to the EU budget?

As set out in the Withdrawal Agreement, UK beneficiaries will continue to benefit from programmes under the Multi-annual framework for 2014-2020, even where this continues after the end of the transition period.

The UK will be treated as a third country for the purposes of the next Multiannual Financial Framework (MFF) 2021-2027. If the UK requests participation in some areas, the EU could consider participation in accordance with the MFF rules for third country participation.

What about Erasmus?

Activities under the current Erasmus+ (2014-2020) programme are covered by the Withdrawal Agreement, and will continue without interruption until their closure. For the future Erasmus programme, under the next Multiannual Financial Framework (2021-2027) it will depend on the possible participation of the UK in Union programmes.

Will the United Kingdom be able to continue to participate in EU regulatory agencies as a third country?

No. These agencies have been set up to support the EU and its Member States to develop and implement EU rules. A third country leaving these rules, and their supervision, can no longer participate in these agencies..

Will our data still be safe if transferred to the UK and processed there?

In view of the importance of data flows, the envisaged partnership should be underpinned by a high level of personal data protection. The adoption by the Union of adequacy decisions, if the applicable conditions are met, should be an enabling factor for cooperation and personal data flow, in particular in the area of law enforcement and judicial cooperation in criminal matters. The Commission endeavours to adopt such decisions by the end of 2020, if applicable conditions are met.

Would the UK still be able to use the European Arrest Warrant? How would criminals be extradited between the EU and the UK?

The European Arrest Warrant is an internal EU instrument, used exclusively among Member States. Therefore, it will no longer be used with the UK.

The draft negotiating directives propose new and effective arrangements between the United Kingdom and EU Member States to render criminals swiftly to justice. This would be an ambitious scheme, based on streamlined procedures and strict deadlines, subject to judicial control. It would be conditional upon robust safeguards on fundamental rights and the role of Court of Justice.

At the same time, it will offer flexibility to each Member State and to the United Kingdom to decide how far they wish to go in common relations. It will help, for example, to address constitutional constraints related to extradition of own nationals in some Member States.

Why do you have reference to “UK continuous commitment” to the European Convention on Human Rights? Why would cooperation cease if the UK leaves the Convention?

The draft negotiating directives propose close relations with the UK on law enforcement and judicial cooperation in criminal matters. It would cover, amongst other things, ambitious extradition or exchange of sensitive information that may impact human lives or rights (e.g. deprivation of liberty). Such relations require a high degree of confidence that the human rights concerned will be upheld. We need a common understanding on how we protect those rights. Within the Union we have the Charter of Fundamental Rights. This is a part of our Treaties. With regard to the UK, the negotiating directives propose a strong commitment to respect the European Convention on Human Rights (ECHR), a common pan-European instrument applied for over 70 years by the United Kingdom and other countries across Europe. Commitment to ECHR is also set out in the Good Friday (Belfast) Agreement.

Will Passenger Name Records (PNR) continue to be exchanged to prevent, detect and investigate terrorism and other forms of serious crime?

The negotiating directives foresee that arrangements should be established for timely, effective, efficient and reciprocal exchanges of Passenger Name Records (PNR). This means that arrangements need to be made for two situations: first, for exchanges between EU27 Member States’ and UK Passenger Information Units and, second, for transfers of PNR data by air carriers to the UK authorities for flights between the United Kingdom and EU27 Member States. There are examples of cooperation with third countries on PNR transfers: the EU has PNR agreements with the USA and Australia; there is a draft negotiated text with Canada and a mandate for negotiations with Japan. An essential precondition for any such arrangements is that the UK applies data protection standards essentially equivalent to those set out in the EU’s standards, i.e. the GDPR and Law Enforcement Directives, and complies with specific additional data protection standards stemming from the CJEU opinion on EU-Canada PNR agreement (opinion 1/15).

Will DNA, fingerprints and vehicle registration data be exchanged between the UK and EU for law enforcement purposes? (Prüm)

The negotiating directives provide that arrangements should be established for timely, effective, efficient and reciprocal exchanges of data on DNA, fingerprints and vehicle registration (so- called ‘Prüm data’). However, there will be no direct access to such sensitive personal data but only through a decentralised system based on a “hit/no hit” model. After a “hit”, i.e. a confirmation that something is available, this needs to be followed up by a request to receive this data from the Member State concerned.

The EU currently has concluded Prüm-agreements with Schengen Associated Countries (Iceland, Norway, Switzerland and Liechtenstein), but the model is open to third countries outside Schengen.

Essential preconditions for any such arrangements are that the UK applies data protection standards essentially equivalent to those set out in the EU’s Law Enforcement Directive standards, and provides reciprocal access to EU Member States of data available at UK national level in the same way as EU27 Member States do.

Will the UK keep access to the Schengen Information System (SIS)?

Non-Schengen third countries do not have access to SIS. SIS is a measure that contributes to security within the EU, in which there are no internal borders. It is intrinsically linked to the free movement of persons. The Court of Justice has consistently defended the coherence of the Schengen acquis.

We need to set up new effective ways of data sharing on wanted and missing persons and objects, while taking into account the UK’s future status. This would be achieved via different complementary tools. These are: making full use of Interpol, the Europol access to SIS to verify links between data provided to Europol with SIS data. Finally, streamlined bilateral exchanges of information between law enforcement authorities, based on specific standard forms, strict deadlines and secure communication channels to facilitate and speed up cooperation.

What would the UK role in Europol be?

The negotiating directives provide for cooperation between Europol and the United Kingdom law enforcement authorities. This will be done in line with the rules for third countries established in EU legislation.

In practice, this means that the UK would be able to:

  • share any relevant data, initiate new cases, use common secure communication channel – as it is the case now;
  • participate in all Europol analysis projects where Europol, Member States and other partners cooperate on ongoing live-investigations, if Member States participating in such analysis projects agree; and
  • take part in common operations, get analytical support from Europol, keep its Liaison Officers at Europol and be informed about relevant data concerning the UK. However, it would not get access to the Europol Information System or have any role in governance of the EU agency.

The negotiating directives propose an ambitious law enforcement and judicial cooperation in criminal matters, guaranteeing at the same time security and fundamental rights of our citizens. Cooperation will, however, be different from what we have today. This is a logical consequence of the UK’s decision to withdraw from the EU. The UK will leave the common rules-based system underpinned by shared principles, common obligations and enforcement.

Will the EU and the UK continue to cooperate on sanctions?

EU sanctions will continue to be driven solely by EU interests. However, cooperation is important to maximise the impact of our sanctions. We should cooperate with the UK the same way we cooperate with other like-minded third countries.

Will UK participation in EU missions and operations have to stop?

The UK will be invited to participate by the Union in its missions and operations on a case-by-case basis (no standing invitation), following the existing rules and preserving the independence of the Union’s decision-making process.

Will you continue to cooperate in third countries on development cooperation?

The EU will maintain its autonomy and strategic programming of development priorities. The EU and the UK will continue to cooperate on the ground to maximise the impact of development cooperation. The UK will be able to make use of existing mechanisms for third countries’ participation, including with regard to any proposals for development cooperation instruments.

Brexit Phase 2 – the ‘transition’ begins

Following the Brexit referendum in June 2016, there was a nine-month pause for thought and a change of Prime Minister before, in March 2017, UK triggered the 2-year notice period for leaving the EU that is set out in Article 50 of the Treaty on European Union.

At 23:00 GMT on Friday 31 January, the Article 50 process was completed and the UK is no longer a member state of the EU – and the withdrawal process moved to a new constitutional phase – meaning that the new legal basis for our negotiations with the EU is “Article 218” of the EU treaties.  Expect to hear a lot more about Article 218 as it sets out the EU’s rules for conducting negotiations, in the coming months.

For the avoidance of doubt, Article 50 process is complete and final. It cannot be further extended, nor can it be reversed.

This brief insight on the transition period explains which elements of the UK’s membership of the EU remain the same during the transition period – which ends at 23:00 GMT on 31 December 2020.

A ‘transition’ – or ‘implementation’ – period was conceived to allow the UK and the EU negotiate a new relationship. It will last until the end of December 2020. Theresa May had originally agreed with the EU for the transition period to be extended for one or two years – but the Johnson Government has said it will not seek any such extension – and, in January 2020, legislated to prohibit itself from doing so.

From 1 February, the legal basis for negotiations between the UK and EU on the future relationship will be based on Article 218 of the Treaty on the Functioning of the EU – exactly the same procedures that apply to negotiations with other states that are ‘third countries’ to the EU.

During the transition period nearly all EU rules will continue to apply to the UK:

  • The UK will still be part of the EU single market and customs union;
  • Existing trade arrangements and rules for travelling within the EU will continue to apply;
  • The jurisdiction of the Court of Justice of the EU in relation to the application of EU law in the UK will continue as before until the end of the transition period;
  • The UK will continue to pay into the EU budget as part of the financial settlement that was set out in the in the Withdrawal Agreement.

The UK can no longer take part in EU decision-making:

  • The UK will no longer be represented in the EU institutions from 1 February – and will not participate in EU decision-making.
  • UK MEPs leave the European Parliament, and the UK loses its voting rights in the Council of the EU. It will be possible for UK representatives to participate in meetings of EU bodies where discussions are relevant to the UK. But the UK will not have voting rights in these meetings. The Withdrawal Agreement, for instance, identifies fisheries as a policy area where the UK will continue to be consulted.

Arrangements that have already ceased to apply include the following:

  • Citizens – whist some of the rights relating to EU citizenship will continue for UK citizens during the transition period – including the right to freedom of movement across the EU – other rights will end at the beginning of the transition period. For example, UK citizens resident in EU Member States will lose the right to vote and stand in local and European elections.
  • Justice – the UK will no longer have the right to opt into new justice and home affairs (JHA) co-operation measures. EU Member States may give notice that they will no longer surrender their citizens to the UK under the European Arrest Warrant (EAW). Thus far Germany, Austria and Slovenia have notified that they will not transfer their citizens to the UK under the EAW. They will still transfer other countries’ citizens. It is up to the UK to decide whether to reciprocate and say it will not transfer its citizens under the EAW to these countries.
  • Security – the EU can exclude the UK from EU activities where participation would grant the UK access to certain ‘security-related sensitive information’.
  • Foreign and Security Policy – the UK will not be considered as an EU Member State in relation to permanent structured co-operation – but may be invited to take part in EU initiatives. The UK will not be allowed to take various command roles within an EU governed force.
  • Common Agricultural Policy – the UK left the CAP on Brexit day. The WA means some CAP payment regulations do not apply for 2020. The Government has legislated to allow direct payments to UK farmers to be made this year and is introducing a new UK farm support policy through the Agriculture Bill.
  • The EU’s international agreements (including trade agreements) with 70 non-EU countries – apply to the UK until the end of the transition period. However, whilst the UK is bound by obligations stemming from the EU’s international agreements to observe the agreements until the end of the transition period – none of the 70 countries are themselves obliged to comply. The EU has notified these countries that the UK should be treated as an EU Member State for the purposes of these agreements – and the UK Government has published a list of countries that have ‘indicated’ they were looking to continue to treat the UK as an EU Member States for trade agreements during the transition period.  The UK is now permitted and free to negotiate and ratify new international agreements with non-EU countries – but these can only come into force at the end of the transition period. The UK has already opened negotiations with a number of non-EU countries on ‘continuity’ agreements that will replace the EU’s agreements on 1 January 2021.

We will report on the wider UK-EU negotiations and continue to focus on the significantly greater changes that are likely to come on 1 January 2021.

The nature of arrangements for other aspects of UK-EU relationship such as trade, travel, security collaboration and co-operation in other policy areas will depend on what is agreed during the transition period. Early indications in the opening positions of the parties gives little optimism for a comprehensive and binding agreement in time for ratification and implementation on 1 January 2021. In the next article, we will look at the legal frameworks under which the negotiations have to take place – and the constraints that these place on both the EU and the UK negotiating teams.