Brexit Transition in 5 Days: With only hours remaining – focus on high impact changes

 

The changes for ‘businesses and citizens’ resulting from leaving the EU ‘single market’ and ‘customs union’ are unparalleled.  No country has ever left the EU before.  New rules apply to the relationship between Great Britain and the 27 EU states from 1 January.  The rules and penalties will be strictly applied across Europe – and there will be, according to the UK Government, “friction” in many aspects of life and work.

The relationship will be governed by an Agreement that will – if and when it is ratified – be the basis for an International ‘Treaty’.  The new regime is forecast to last for “decades”.

The UK negotiators wanted individual agreements on the many aspects of the separation, allowing areas to be ‘tuned’ in the light of experience.  They have had to settle for a comprehensive multi-provision agreement – the EU simply wanting to settle the terms of the split and move on to focus on its own agenda and priorities.

The UK has chosen to become a ‘third country’ – and the EU will want to divert as little attention as possible on a nation that has – according to the Prime Minister’s foreword in the 34 page summary of the ‘UK-EU Trade and Cooperation Agreement’: has implemented “the instruction of the British people – expressed in the referendum of 2016 and the general election last year – to take back control of our laws, borders, money, trade and fisheries.”

The full details of the Agreement – which we are told will run to 1200 pages – will be structured into 7 ‘Parts’.  My intention in this summary post is to allow business to home in on the areas that will impact them for further study and rapid response.

1. common and institutional provisions in the Agreement;
2. trade and some specific aspects of the relationship such as aviation, energy, road transport, and social security;
3. cooperation on law enforcement and criminal justice;
4. “thematic” issues, notably health collaboration;
5. participation in EU Programmes, principally scientific collaboration through Horizon;
6. dispute settlement; and
7. final provisions.

In parallel, there is a separate ‘Nuclear Cooperation Agreement; and an agreement on ‘Security Procedures for Exchanging and Protecting Classified Information’.

Details

Part 1 – Institution

The relationship between the UK and the EU will be based on in ‘international law’ and not ‘EU law’.  A joint ‘Partnership Council’ will ‘supervise’ the Agreement.

Part 2 – Trade

• The Agreement establishes ‘zero tariffs or quotas’ on trade between the UK and the EU where ‘goods meet the relevant rules of origin’.
• The EU may apply ‘preferential tariff rates’ e.g. non-UK components in UK manufactured products such as electric cars that support a move towards a carbon ‘Net Zero’ future.
• ‘EU inputs and processing’ may be counted as ‘UK input’ in UK products exported to the EU – and vice versa under ‘Rules of Origin’.
• The Agreement ‘envisages’ arrangements to share information on dangerous and non-compliant products on the UK and EU markets.
• There are Annexes detailing specific arrangements for: medicinal products; motor vehicles, equipment and parts; ‘organic’ products; wine; and chemicals.
• Provision is made for ‘rapid notification and emergency measures’ to ‘protect consumers, animals and plants during disease and pest outbreaks’ and ‘food and feed safety incidents’.
• The Agreement ‘ensures that the customs authorities of both Parties remain able to protect their respective regulatory, security and financial interests’.  There will, however, be ‘mutual recognition’ through ‘trusted trader’ schemes – aiming to support: efficient documentary clearance, transparency, advance rulings and non-discrimination. There may be measures in the longer term to promote ‘cooperation at roll-on roll-off ports like Dover and Holyhead’ aimed at reducing administrative burdens on business – such as sharing import and export declaration data.
• An Annex provides for the mutual recognition of the Parties’ respective ‘Authorised Economic Operator’ – AEO – security and safety schemes.  AEOs will face ‘fewer’ controls relating to safety and security when moving their goods between the UK and the EU.
• The EU and UK will both comply with existing international agreements such as the OECD ‘Convention on Mutual Administrative Assistance in Tax Matters’. UK and EU authorities will cooperate and exchange information relating to VAT for the purpose of combating VAT fraud.  Either Party may request the other to recover unpaid customs duties, excise or VAT on its behalf.

The Agreement on Trade also includes:

• provisions on ‘cross-border trade in services and investment’ that will secure continued market access across a broad range of sectors, including professional and business services, financial services and transport services – and will support new and continued foreign direct investment;
• a framework for ‘the recognition of professional qualifications between the Parties’ – based on the EU’s recent FTA agreements;
• provisions on authorisations, access to and use of telecoms networks, interconnection, fair and transparent regulation and the allocation of scarce resources;
• provisions on ‘authorisations, access to and use of telecoms networks, interconnection, fair and transparent regulation and the allocation of scarce resources’;
• promotion of trade in ‘postal and delivery services’;
• commitments on non-discriminatory access to ports; use of port infrastructure; use of maritime auxiliary services such as storage and warehousing; customs facilities; and the assignment of berths and facilities for loading and unloading;
• protections to ensure ‘regulatory and supervisory authorities will be able to act to ensure financial stability, market integrity and protect investors and consumers’;
• UK solicitors, barristers and advocates having the right to advise their clients across the EU on UK and public international law;
• cooperation on ‘digital trade issues’, including emerging technologies;
• commitments on the ‘free flow of capital and payments for goods and services in order to facilitate trade and investment’;
• mechanisms for ‘cooperation and exchange of information’ on Intellectual Property issues;
• requires both sides to be transparent about the subsidies they grant.  Either side may ‘take rapid action where a subsidy granted by the other Party is causing – or is at serious risk of causing – significant harm to its industries’;
• commitment of both Parties to ‘uphold global standards on tax transparency and fighting tax avoidance’;
• reciprocal commitments ‘not to reduce the level of protection for workers or fail to enforce employment rights in a manner that has an effect on trade’;
• reciprocal commitments ‘not to reduce the level of environmental or climate protection’ – this includes meeting ‘cross-economy greenhouse gas emission reduction targets’.

Aviation

• Majority owned and controlled UK airlines as at the end of December 2020 may continue to operate air transport services between the UK and the EU.  Majority owned and controlled EU/EEA/EFTA airlines may continue to operate air transport services between the UK and the EU.
• There is a framework for future ‘cooperation on aviation safety’.  These will be detailed in a series of Annexes on such matters as airworthiness certification.

Road Transport

• Operators will continue to be able ‘to move goods to, from and through each other’s territories with no permit requirements, and make additional movements within each other’s territories’.
• Standards apply to international journeys – including ‘restrictions on driver hours, requirements about professional qualifications and tachographs and vehicle weight and dimension limits’.
• Passenger transport operators continue to be covered by the multilateral ‘Interbus Agreement’ – and will be able to run ‘occasional services to, from and through each other’s territories’.
• Passenger transport services on the island of Ireland will be able to pick up and set down passengers in both Ireland and Northern Ireland – enabling ‘cross-border services to continue with no restrictions’.

The following Parts of the Agreement will be dealt with in our next post:

Part 2 – Trade

Social Security Coordination and Visas for Short-term Visits;

Fisheries

Part 3 – Law Enforcement and Judicial Cooperation in Criminal Matters

Part 4 – Cooperation

Cooperation on cybercrime;

Cooperation on Health

Part 5 – UK participation in EU programmes such as Space exploration and Nuclear Energy

Part 6 – Disputes Resolution

Part 7 – Territorial Scope of the Agreement

Great Britain, Northern Ireland, Gibraltar, and the 50 Worldwide ‘UK Overseas Territories and Crown Dependencies’

Contact me by Email or LinkedIn for further detailed insight or potential mitigation action.