Posts

Brexit Transition in 6 Days: Overview of the ‘deal’ and immediate next steps in order to ratify it

The full text of the ‘UK-EU Trade and Co-operation Agreement’, announced yesterday – 24 December 2020 – will be published shortly.

UK ‘Service’ and ‘Finance’ industry sectors are outside the scope the agreement.

Summary information provided by the UK Government and European Commission:

  • The scope of the deal is a ‘free trade agreement ensuring no tariffs or quotas on trade in goods’.
  • Governance will be managed by a ‘UK-EU Partnership Council supported by other committees’.  This includes ‘binding enforcement and dispute settlement mechanisms covering the economic partnership’ – and ultimately an ‘independent arbitration tribunal’.
  • Either party can ‘engage in cross-sector retaliation in case of violations of the agreement’ – for example, by imposing tariffs on the other.  Cross-sector retaliation applies to ‘all areas of the economic partnership’.
  • ‘Level playing field provisions’ give both parties the right to take counter-measures – ‘subject to arbitration’ – where they believe competition is being distorted.
  • ‘25% of the EU’s current fisheries quota in UK waters will be transferred to the UK’ over ‘a period of five years’.  After this, there will be annual discussions on fisheries opportunities.  Compensation may be payable should one side decide not to grant access to its waters
  • A new ‘security partnership providing for data sharing and policing and judicial co-operation’ comes into effect.  This will be at a ‘reduced compared to previous levels of co-operation’.  The EU is empowered to suspend ‘security cooperation’ in the case that the UK ‘no longer adheres to the European Convention of Human Rights’ or its enforcement domestically.
  • UK will continue to participate in certain EU programmes: ‘Horizon Europe, Euratom Research and Training, and Copernicus’.  The UK will cease its participation in other EU programmes, such as Erasmus.

In order to ratify the Agreement such that it comes into effect at 23:00 GMT on 31 December 2020:

UK Parliament will be recalled on 30 December in order to approve the legislation.  There are legal and constitutional requirements to ratify international agreements – and they must be completed prior to its implementation. ‘Constitutional Reform and Governance Act (2010)’.

The law requires a minimum of 21 Parliament ‘sitting’ days in order to allow time for discussion and ‘scrutiny’ of the detail.  The Government will, therefore, have to find a ‘mechanism’ to bypass the law and complete the process in one day.

The EU will not be able to fully ratify the agreement by the end of the year.  The European Parliament is also required to ratify and pass legislation on international agreement – but is precluded from passing the necessary consent vote until the New Year.  It may be able to ‘provisionally’ apply the deal – provided it is agreed unanimously by each one of the 27 EU Member State governments.  This could be achieved by the 27 Heads of State meeting in a special session of the ‘Council of Europe’.

Christmas Day

EU chief negotiator Michel Barnier is updating diplomats on the agreement., reached after months of fraught talks on fishing rights and business rules.

Labour said it was a “thin agreement” – but they would back it as the only alternative to no deal, meaning it should win approval.

The agreement runs to a 1,246-page document – including about 800 pages of annexes and footnotes.

The UK Government has, today – Christmas Day – published a 34 page ‘summary’ document going into the next level of detail from the highlights, above.  Many of the topics were widely anticipated – such as visa requirements for UK wishing to visit, work, or study in the EU.  Other subjects – such as the future of Gibraltar – are flagged for further discussion.

Key topics needed for businesses and citizens to plan, work and travel from 1 January 2021 will be covered in postings coming shortly.

For those that want the facts in a concise form, our ‘e-booklet’ will be updated over the coming days.  Version 5 – correct up to 23 December – is available at: Guide to trading with the EU from 1 January 2021

Reference

The UK-EU trade and co-operation agreement: the path to the deal

TCA_SUMMARY_PDF.pdf (publishing.service.gov.uk)

Picture:  Getty

Brexit Transition in 7 Days: Boris decides that a “bad deal” is better than “no-deal” after all

The deal negotiated by the Government represents a humiliating defeat for the UK by the “Giant” that is, according to President Von der Leyen, the European Union.

In a significant defeat and ‘U-turn’ the UK Government has concluded a bad deal to end the Brexit transition period in 7 days’ time.  Worse than Norway, worse than Switzerland and Lichtenstein, worse than Turkey – and worse than Canada as far as trade in goods is concerned.

From the perspective of European Commission President, Ursula Von der Leyen: “We have finally found an agreement.  It was a long and winding road, but we have got a good deal to show for it.”  A good deal for Europe.

From the other side, here is the UK Government’s statement in full:

“Everything that the British public was promised during the 2016 referendum and in the general election last year is delivered by this deal.”

“We have taken back control of our money, borders, laws, trade and our fishing waters

“The deal is fantastic news for families and businesses in every part of the UK.

“We have signed the first free trade agreement based on zero tariffs and zero quotas that has ever been achieved with the EU.

“The deal is the biggest bilateral trade deal signed by either side, covering trade worth £668bn in 2019.

“The deal also guarantees that we are no longer in the lunar pull of the EU, we are not bound by EU rules, there is no role for the European Court of Justice and all of our key red lines about returning sovereignty have been achieved.

“It means that we will have full political and economic independence on 1st January 2021.”

“A points-based immigration system will put us in full control of who enters the UK and free movement will end.

“We have delivered this great deal for the entire United Kingdom in record time, and under extremely challenging conditions, which protects the integrity of our internal market and Northern Ireland’s place within it.

“We have got Brexit done and we can now take full advantage of the fantastic opportunities available to us as an independent trading nation, striking trade deals with other partners around the world.”

So much for the rhetoric.  Reality will prove whether the wide-eyed optimists in the Government are right.

One saving grace is that it keeps open some channels of communications and cooperation that would, indeed, have been lost in ‘no-deal’ – such as exchange of security and policing data.

Assuming that the queue of 6,000 or more trucks currently stacked in Kent and waiting to cross into Europe can be cleared – those crossing the border from 1 January will face major operational and reporting changes.  If there are any that delayed their trip to Europe – or if they end up at 23:00 GMT on 31 December stuck in a queue  system this side of the Channel – they will need to submit clearance documentation in addition to a ‘negative’ Covid test.  There is no provision in HMRC’s new regulations to avoid a fixed penalties of £300 – payable on the spot by the driver- for emergencies such as reduced capacity and increased handling times presently being experienced due to the pandemic.

In any event, HMRC has estimated the extra form filling and compliance will cost British business over £7bn – and an equal amount for those moving goods from Europe.  An additional 250,000 customs declarations will be needed in 2021.

At least a ‘zero tariff’ end to the transition avoids immediate imposition of duties up to 40% on goods moving between UK and Europe.  However, the decision of ‘if and when’ to apply tariffs in the future is for the EU to make alone.  The bloc retains the right to impose tariffs should they feel that the UK is in any way subsidising its businesses to the disadvantage of EU competitors – in other words, tilting ‘the level playing field’.

Northern Ireland, meanwhile, is confirmed as getting a new ‘customs’ border between the Province and the remainder of Great Britain.  The Withdrawal Agreement and Protocol (much of which was dedicated to maintaining a single borderless island of Ireland) agreed between Theresa May’s government and the EU stands.  The freedom for unfettered movement of people and goods between south and north Ireland has resulted in a new set of reporting and certification requirements between Ulster and Great Britain.

Brexit Transition in 8 days: Economy is forecast to weaken – ‘deal’ or ‘no-deal’

In its final briefing before the UK gives up its membership of the EU’s ‘single market’ and ‘customs union’, MP’s have been warned to prepare for weaker economic growth in both the ‘short’ and ‘long’ term.  Down by 2% in 2021 leaving with an agreement, and 4% in a no-deal scenario.

This will be further adversely affected by disruption to trade and smooth flow of goods due to the new requirements for border checks, product certification and customs formalities.  Note that the report, published on 18 December, pre-dates the cross-channel border closures due to the Covid-19.

The NAO report on the ‘lack of preparedness’ has been proven right – the Government has demonstrated lamentable understanding of and complete disregard for logistics businesses and the human costs to truckers on whom we all rely.

The Road Haulage Association describes today’s situation in Dover as “chaos”. Thousands of drivers are trapped on the M20 and Marston Airport.  They lack adequate information; food provision is “very inadequate”; and there are not enough toilet and washing facilities.  The same drivers face new requirements and personal fines of £300 – £1,000 for any missing information in the truck – or its load – documentation.  And the UK cannot feed the nation unless hauliers and drivers feel confident and welcome as they drive from across Europe.  Brexit has got off the worst possible start.

Brexit Transition in 9 Days: Parliament report ‘time to trigger final preparations’ – Europartnership

Parliamentary report on short term economic impacts from leaving the EU single market and customs union – ‘deal’ or ‘no-deal’

  • Potential border disruption – the degree of disruption will depend on how prepared businesses are, as well as the administrative and operational readiness of UK and EU authorities to ensure minimal disruption at the border;
  • New barriers to UK-EU trade – there will be additional costs to UK-EU trade.  This is likely to result in lower amounts of trade flowing between the UK and EU;
  • Uncertainty – with a week to go, the terms of UK-EU trade from 1 January 2021 remain unclear;
  • The value of sterling – the pound fell sharply following the EU referendum – and has never recovered its previous level.  This has resulted in higher import prices, rising inflation and lower real (inflation-adjusted) average household disposable incomes.  It is difficult to imagine a scenario that will halt the continual fall in the pound, exacerbating these impacts;
  • Interaction with coronavirus economic impact – the compound effects have yet to be modelled, but it is difficult to imagine a scenario where the impacts of Covid act to mitigate the impacts of leaving the EU.

Long-term economic impact

  • Trade – barriers between EU and UK will increase.  Most economic studies show overall UK trade with non-EU countries will not compensate – translating into a lower level of GDP compared with the UK staying in the EU;
  • Investment – as a member of the EU single market and customs union has provide the opportunity for firms to trade with the EU from a UK base with minimal trade barriers.  Without this access, firms may see the UK as a less attractive destination for investment – and domestic firms may shift some of its output to be based in the EU.  This may be somewhat offset as the UK has flexible labour markets, a language spoken widely around the World, an educated workforce and a strong rule of law – all of which are attractive for investors;
  • Regulation – the UK will have more control in setting regulations once it is no longer subject to EU laws.  However, most economic studies find only limited potential economic gains from such freedoms;
  • Immigration – by leaving the EU single market, freedom of movement ceases.   The impact of the pandemic on immigration is likely to outweigh benefits to the economy;
  • Public finances – as an EU member state, the UK had been a net contributor to the EU budget, paying in roughly 0.4% of annual GDP more than it received from EU programmes. However, this will be far outweighed by the forecast 2%-4% drop in GDP from the lower economic activity and consequential loss of tax revenues.

Economic impact assessments

There are four ‘authoritative’ assessments quoted in the Parliamentary report of 18 December –  The Government (Office for Budget Responsibility), Bank of England, Think-Tank ‘National Institute of Economic and Social Research’, and the ‘Institute for Fiscal Studies’.

All conclude that ‘no-deal’ – or ‘WTO’ – scenario has the most “negative impact on UK GDP”.  This is true even for the ‘long’ term of between 10 – 20 years, depending on the study.  The UK was warned to plan for a “smaller economy” – and that was before the devastating compound impact of Covid.

To date, there is little sign of acknowledgement or understanding of reality coming from Government – with the Chancellor of the Duchy of Lancaster, Michael Gove, telling MP’s that the UK’s future outside the EU is bright.  That is not what his own experts, business and commerce leaders have been telling him.

References

https://researchbriefings.files.parliament.uk/documents/CBP-9096/CBP-9096.pdf

Outside the EU, a bright future awaits Britain – GOV.UK (www.gov.uk)

Picture:  Marston Lorry Park 23 December 2020 (Getty)

Brexit Transition in 9 Days: Parliament report ‘time to trigger final preparations’

A week before the UK leaves the EU ‘single market’ and the EU ‘customs union’, it is still not clear if there will be a new UK-EU agreement at 23:00 GMT on 31 December.

There are thousands of changes whether or not there is a ‘deal’.  A Parliamentary briefing, published yesterday, sets out key changes and UK and EU preparations.

It builds on Prime Minister, Boris Johnson’s statement that there is a “strong possibility” that the UK and EU would not reach an agreement – and that it is time for the public and businesses to prepare for this scenario on 1 January 2021.

Without an agreement in place, UK-EU trade will revert to World Trade Organization (WTO) rules and current co-operation arrangements in several areas will cease.

Leaving the single market and the customs union

The UK is due to leave the single market and customs union at 23:00 GMT on 31 December 2020. This will be the case both under the UK Government’s stated objective of a free trade agreement with the EU, or if no agreement is reached.

The European Commission emphasises, “there will be broad and far-reaching consequences for public administrations, businesses and citizens as of 1 January 2021 – regardless of the outcome of negotiations.”

EU chief negotiator, Michel Barnier, explained that even with a “best-in-class” free trade agreement as long as the UK is outside the ‘single market’ and customs union, there will be “two separate markets”. He highlighted examples of things that would change, including the need for customs checks and rules of origin (to determine where a product or its components were made).  In addition, UK goods entering the EU would be subject to regulatory checks to ensure they comply with EU product standards.   UK financial services suppliers would also no longer have the passporting rights they previously had.

Cabinet Office Minister, Michael Gove, told the House of Commons that “leaving the single market and customs union will herald changes, and significant opportunities, for which we all need to prepare—Government, business and individual citizens.”

The end of free movement

Free movement for UK citizens travelling to the EU – or living and working in the EU – ends on 31 December, as it will for EU citizens in the UK.

UK citizens will not need visas to enter the EU for short trips.  The EU has said that UK citizens coming to most EU states for a short stay – 90 days cumulatively in any 180 day period – will be allowed visa-free travel.  For longer stays, Member States’ own rules are likely to apply.  The UK Government has said that EU citizens visiting the UK will be able to do so without visas for six-month periods.

Government guidance warns UK citizens they will need six months on their passports when travelling to the EU – and may no longer be able to use the border control lanes for EU citizens.  They may need additional documentation for other reasons: the EHIC health card providing cover for visits to the EU may no longer be valid, and an international driving permit may be needed for driving in the EU.

The existing pet passports scheme are no longer be valid.  Pet owners will need to get the appropriate vaccinations and certificate for them in advance of travel.

Replacing international agreements

The EU’s wide range of international agreements cease to apply to the UK at the end of the transition period.  The Government is trying to negotiate new or replacement trade agreements and 23 of 58 have been ‘rolled over’ on the same terms.  The Government has not provided a recent update on progress on these agreements.

UK preparations for end of transition

The Government will introduce import controls in three phases: in January, April and July 2021.  There are 80 new combinations of reporting to complete, depending on the nature of the goods.  There are dozens of new or upgraded IT systems to come on line – and thousands of new civil service posts in Border Control, veterinary and plant certification, and HMRC that take effect on 1 January.

Gove announced a new border operating model in October – and a public information campaign to help businesses and individuals to prepare for the seismic changes.

In a final review of preparations in November, the Government watchdog – the National Audit Office reported that the UK border and systems will not be for the change.  This, potentially, will lead to even more severe issues than have been witnessed this week resulting from the Covid-19 border closures – and no legal route to overcome them.

EU preparations for end of transition

The European Commission published a communication on “readiness at the end of the transition period” highlighting “changes happening in any scenario.”  Sectors covered included trade in goods and services, financial services, transport, recognition of professional qualifications, data protection, intellectual property, and the EU international agreements which no longer apply to the UK.  The Commission has published 89 “readiness notices” across a wide range of policy sectors and technical issues.  These advise administrations, businesses and citizens on what they have to do to prepare for the changes at the end of the year.

The bottom line is that none of these notices is new for EU businesses – they exist already for non-EU – or ‘third countries’.  The UK is simply added to this list on 1 January.

EU ‘no deal’ contingency plans

On 10 December, the European Commission published some temporary ‘no-deal’ mitigation  measures:

  • Basic air connectivity: to ensure the provision of certain air services between the UK and the EU for 6 months, provided the UK ensures the same.
  • Aviation safety: to ensure various safety certificates for products can continue to be used in EU aircraft without disruption.
  • Basic road connectivity: to allow for continuing road freight, and road passenger transport for 6 months, provided the UK assures the same to EU hauliers. This would be subject to the application by the UK of fair competition, social and technical rules equivalent to those of the EU.
  • Fisheries: providing a legal framework to agree reciprocal UK-EU fisheries access for 2021.

The Commission emphasised that contingency measures could not provide continuity or replicate the benefits of EU membership or of the transition period.

Gove said the UK would “look closely at the EU no-deal contingency plans” – but whilst aviation and road transport measures sounded positive, fisheries was “of greater contention“.

Background

Under the Withdrawal Agreement (WA) the UK and EU could have agreed an extension to this period – but a decision on this had to be made before 1 July 2020.   The idea of a new treaty providing for a short “standstill period”, which would enable some or all of the current arrangements to continue for a time limited period, has been revived by some political and business commentators.  This is viewed as a possible way of overcoming the difficulties presented by the very short period left before the end of December for both sides to conclude and ratify the deal.  Such an arrangement might be politically difficult to agree for both sides, and legally difficult for the EU.   There is no indication from the UK or EU that this has being seriously considered.

The European Parliament’s deadline for organising a consent vote on a UK-EU deal passed on 20 December.

On 21 December there were renewed calls for an extension of the transition, but the UK Government rejected the idea.

References

http://europartnership.com/brexit-transition-cross-party-end-of-term-report-critical-of-governments-lack-of-preparedness/

http://europartnership.com/post-brexit-products-sold-in-britain-need-a-new-uk-kitemark-as-ce-will-no-longer-be-recognised/

http://europartnership.com/post-brexit-uks-finance-industry-loses-out-as-chancellor-yields-to-eu-with-nothing-in-return/

http://europartnership.com/post-brexit-national-security-and-policing-concerns-raised-by-crime-fighting-agencies-to-parliament/

Brexit Transition in 10 days: European Parliament sets the scene for ‘no-deal’

In the final session of the year, the European Parliament resolved that:

  1. without a written proposal – and time to give it due consideration – they would be unable to ratify a Brexit deal; and
  2. temporary measures come into effect in order to keep Eurotunnel open for a short ‘grace’ period in the event of a no-deal end to the transition period.

European Commission lead negotiator, Michel Barnier, had earlier updated MEPs in an address to Parliament on the state of discussions on Thursday [17 December].

Negotiations continued between the UK and EU over the weekend up to the European Parliament’s deadline of Sunday evening when they broke up with significant differences remaining between the parties.

European Parliament press release on future EU-UK relationship

  • MEP’s acknowledged the enormous efforts of their team attempting to avoid a no deal scenario – and the huge negative impact it would have on citizens and businesses;
  • Emphasised their wish to avoid the disruptive impacts of a possible no-deal outcome;
  • Noted the UK Government’s “refusal to even consider extending the transition period”;
  • Endorsed four “targeted and time-limited contingency measures” to soften a no-deal cliff-edge;
  • Should an agreement be reached by negotiators before midnight on Sunday 20th December, “stands ready to organise an extraordinary plenary session towards the end of December” to allow the European Parliament to “debate the outcome of negotiations and consider granting its consent”;
  • “Insists that this is contingent on having access to the text of any agreement in advance of the formal referral being made, and in this respect urge the Commission to provide the Parliament with a provisional text as soon as possible”;
  • Endorses that ratification of any agreement is: “dependent on the full implementation by the UK government of all provisions of the Withdrawal Agreement, including the Protocol on Ireland/Northern Ireland.  The European Commission must provide Parliament with a full report on the implementation of the Protocol, in order to allow it to assess whether or not this condition has been met;
  • Precludes the European Commission from making a “provisional application of trade agreements.”  A deal can be implemented “only once the European Parliament has given its consent”;
  • Highlights the exceptional nature of these negotiations and stresses that in no way can this be seen to constitute a precedent for future trade agreements.  The usual format of cooperation and access to information must be fully guaranteed in line with EU Treaties – including “far-reaching sharing of all negotiating texts, regular dialogue, and sufficient time for formal EP scrutiny and debate of agreements”;
  • Noted its gratitude for the “dedicated and professional work of the EU’s Chief Negotiator, Michel Barnier, and the Commission ‘Taskforce’, who are “working tirelessly for a positive outcome” – and welcomed their extremely close and regular cooperation with the European Parliament.

European Parliament:  17 December 2020

MEPs adopted temporary measures to keep the tunnel railway connection between continental Europe and the UK running after the end of the transition period in the event of no-deal end to the Brexit transition.

France is empowered to negotiate a “new international agreement with the UK regarding the governance of the Channel Tunnel Fixed Link. The Intergovernmental Commission would remain the main safety authority for the tunnel.

“To avoid rail traffic being interrupted in the Channel Tunnel Fixed Link as of 1 January 2021, the European Parliament agreed to temporarily extend safety licences and certificates to allow France and the UK sufficient time to conclude a bilateral agreement.  The licence for the current tunnel infrastructure manager would remain valid for ‘two months’ after the end of the transition period. The safety certificates and licences issued under EU law to UK companies would be extended for nine months.

Four other contingency measures will be put to the vote on 18 December to provisionally maintain cross-border connectivity between the UK and the EU on roads and by air as of 1 January 2021.

Michel Barnier briefing to European Parliament

Speaking to the European Parliament, Michel Barnier said it was the “moment of truth” for the two sides coming to a Brexit agreement by the end of the year.

“We have very little time remaining, just a few hours to work through these negotiations in a useful fashion if we want this agreement to enter into force on the first of January…There is a chance of getting an agreement but the path to such an agreement is very narrow.”

Mr Barnier emphasised that the bloc would not sign a deal “at any price or any cost” – and concluded that he was unable “to say what will come during this last home straight of negotiations.”

References

https://ec.europa.eu/commission/presscorner/detail/en/speech_20_2499

https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2478

Photo:  AP.  Britain’s lead negotiator, Lord Frost, leaves Brexit negotiations in Brussels on Sunday evening, 20 December 2020 – having missed European Parliament’s deadline to table a proposal for ratification by the end of Brexit transition period.

Brexit Transition: Cross-party ‘end-of-term’ report critical of Government’s lack of preparedness

On Thursday, Parliament ended its last session before Great Britain leaves the EU ‘Single Market’ and ‘Customs Union’ at 23:00 GMT on 31 December.

The cross-party Parliamentary ‘Committee on the Future Relationship with the European Union’ completed its assessment of UK preparedness.  Published this morning, 19 December – and with 12 days until the end of the transition period – it unanimously paints a stark warning of: “a potentially challenging start to 2021 as businesses, traders and citizens adjust to life outside the EU.”

Committee chair, Hilary Benn MP, said:  “With just seven working days until the end of the transition period, significant concerns remain.  The Government still cannot provide businesses, traders and citizens with certainty about what will happen in all the areas affected by the negotiations, but as we leave the rules of the Single Market and the Customs Union, firms exporting to the EU will face more red tape, unfamiliar forms and extra costs from 1 January whatever happens.

Coinciding with the toughest trading conditions since records began – and with businesses focussed on surviving Covid-19:  Benn added: “At this late stage, the Government must be ready to implement contingency plans where necessary to mitigate the effects of any disruption.  Failure to do so would mean the worst possible start to the new year for many people and businesses who are already experiencing the toughest of times.”

The report’s key findings include:

  • “Given the overall state of preparedness, the Government must have robust contingency plans ready for 1 January.”  The report acknowledges the complexities of developing a brand-new Border Operating Model.  However, “key decisions have been taken very late – including the announcement of the outcome of bids to the Port Infrastructure Fund and the location of inland facilities to serve the ports of Holyhead and Cairnryan.”  This has affected overall readiness as the end of transition approaches.

It is critical that the Government has robust contingency plans in place to deal with any disruption from 1 January.

  • “Late delivery of IT leaves little time for users to adapt.”  The report notes that whilst the Government “appears to be on track to make the necessary changes to its own IT systems by 1 January – such as the HMRC’s Customs Declaration Service,” they are being rolled out with very little time remaining.  Many businesses and traders will be unable to update their own systems that now need to integrate with the HMRC.  Late delivery means that staff cannot be fully trained on the new software across the UK and in countries they are exporting to or importing from.

Training is vital if new arrangements are to function smoothly.  We have reported on the recent NAO report which found that systems, processes and resources have not been fully completed and tested.  The Government should therefore have a plan to swiftly address any problems that arise.

  • “The UK and EU should reciprocate on no-deal measures and phasing-in of goods controls.”   The Committee welcomed the European Commission’s ‘no-deal contingency measures’ for road freight and road passenger transport, published on 10 December, and recommends that the Government ensures they can be enacted, if required, by reciprocating in full.  We note that the European Parliament went further in recommending additional ‘grace’ periods to mitigate disruptions in their final session of the year on 18 December.

The report says that the Government decision to phase in controls on goods arriving from the EU over the first six months of 2021 was the right one.  But it warns that July is not far off and urges that all necessary systems and infrastructure are put in place, and businesses made aware of what changes they need to make, as soon as possible.  The report also calls on the EU to reciprocate the UK’s decision to phase in controls.

  • “Trained customs personnel must be in post, and business engagement ramped up.”  As well as IT systems and physical infrastructure, new trading arrangements will require trained customs agents if they are to run smoothly.  Businesses and traders will be reliant on these intermediaries for assistance with paperwork; and ensuring they comply with new requirements – for example on plant and animal health, and food and feed safety.  If the right people are not in the right place at the right time, businesses and traders will face an uphill task.  “The Government must therefore be ready to address any personnel shortages.”

The report welcomed the Government’s efforts to engage with businesses about the changes that are coming – but warned that with so little time remaining, continuing uncertainty about the future arrangements, unclear guidance and the additional complexities created by Covid-19 restrictions, businesses have been constrained in their preparations.

  • “The UK needs to ensure its border is safe and secure.”  The report says that whilst the precise nature of future co-operation with the EU on law enforcement remains unclear, “the UK’s safety and security must not be compromised.”  While UK law enforcement agencies are working hard to develop alternatives to EU databases – such as the Schengen Information System II – the fall-back systems for information sharing are likely to be slower and more cumbersome.

This was highlighted in Thursday’s Home Office Affairs Committee session into “UK-EU security co-operation”.  The police and crime fighting agencies will be disadvantaged once excluded from the shared EU intelligence.

The Brexit Committee noted that: “we still do not know if the UK will receive a data adequacy decision to enable data transfers from the EU to the UK, and a replacement for the European Arrest Warrant is unlikely to be in place by 1 January.”  They call on the Government to “closely monitor the speed and effectiveness of its fall-back systems.”  They added that the Government should explore all available opportunities for countering cross-border crime in Northern Ireland, including bilateral arrangements, that build on current co-operation between the Police Service of Northern Ireland and An Garda Siochána.

  • “The Ireland/Northern Ireland Protocol must remain a priority.”  The Brexit Committee welcomed the agreement between the UK and EU about how the Protocol will work in practice.  However, they noted the “likely negative consequences of the agreement being reached so late for citizens and businesses.” They warn that – even with an agreement – the early months of 2021 are “likely to be difficult” with some problems deferred rather than solved.  Northern Irish businesses and civil servants face challenges, and – if these are to be overcome – “all parties must show flexibility, creativity, and generosity of spirit.”

To ensure that the Protocol is applied consistently – and to avoid future disputes – HMRC should work closely with the Irish Revenue Commissioners and other relevant authorities.  The Government should also – together with its devolved counterparts – “put contingencies in place to minimise traffic disruption near affected ports.”

Comment

We can only agree with Mr Benn when he says that: “the government has left it very, very, late.”

References

Preparing for the end of the Transition Period – Committee on the Future Relationship with the European Union – House of Commons (parliament.uk)

Committees – UK Parliament

 

Post Brexit: Northern Ireland ‘grace periods’ aim to soften cliff-edge landing

The Government has published a series of measures to buy time for them to work out how to implement Brexit in Northern Ireland whilst reconciling the conflicting principles of: the ‘Withdrawal Agreement’ and its ‘Protocol’ signed in 2019; and the province remaining an integral part of the United Kingdom.

The Protocol protects the Belfast (Good Friday) Agreement in all its dimensions: maintaining peace, stability and prosperity on the island of Ireland. It is overseen by the ‘EU-UK Joint Committee’, co-chaired by European Commission Vice-President, Maroš Šefčovič, and the UK Chancellor of the Duchy of Lancaster, Michael Gove MP.

The UK Government introduced two Bills to Parliament:  The ‘UK Internal Market’ Bill and, last week, the ‘Taxation (Northern Ireland)’ Bill.  Each of these Bills included clauses that aimed to keep Northern Ireland a part of the UK – but at the cost of breaching the Withdrawal Agreement.  These Bills have faced opposition in Parliament – with the House of Lords voting strongly against them. More widely, the EU negotiations on a future trade deal were jeopardised, and President-elect, Joe Biden, stated that they would preclude a future trade deal between UK and USA.

Post Brexit: UK risks widening the gap as the post-transition negotiations go down to the wire – Europartnership

On Thursday, the UK Government decided not to proceed with the contentious clauses in the Bills and accepted as “essential” that the Withdrawal Agreement – in particular the Protocol on Ireland and Northern Ireland – should be “fully operational on 1 January 2021” – the end of the Brexit transition period.

The UK and EU reached an “agreement in principle” on: Border Control Posts/Entry Points – specifically for checks on animals, plants and derived products; export declarations; the supply of medicines; the supply of chilled meats and other food products to ‘supermarkets’; and a clarification on the application of State aid under the terms of the Protocol.

Since then a series of detailed guidelines on these temporary ‘easements’ and ‘grace periods’ have been published on the Gov.UK website.

The UK and EU also reached an “agreement in principle” with respect to the decisions the Joint Committee has to take before 1 January 2021.  In particular, this concerns the practical arrangements regarding the EU’s oversight of Northern Ireland remaining part of the EU ‘customs union’ as UK authorities: begin to implement checks and controls under the Protocol; determine criteria for goods to be considered “not at risk” of entering the EU when moving from GB to Northern Ireland; the exemption of agricultural and fish subsidies from State aid rules; and the finalisation of the list of chairpersons of the arbitration panel for the dispute settlement mechanism.

On 9 December, Michael Gove informed Parliament that the Government will withdraw clauses 44, 45 and 47 of the UK Internal Market Bill, and will not introduce any similar provisions in the Taxation Bill.

The moves come as the European Commission tiggered its ‘contingency plans for Brexit no-deal’ – warning that the risk of an agreement not being reached is now “significant”.

On 10 December, European Commission President, Ursula von der Leyen, offered an emergency package of measures designed to soften the landing from a cliff-edge no-deal end to Brexit.

Extracts from the European Commission statement:

“Readiness and preparedness for 1 January 2021 is now more important than ever.

Disruption will happen with or without an agreement between the EU and the UK on their future relationship.

This is the natural consequence of the United Kingdom’s decision to leave the Union and to no longer participate in the EU Single Market and Customs Union.

The Commission has always been very clear about this.”

While a ‘no-deal’ scenario will cause disruptions in many areas, some sectors would be disproportionately affected due to a lack of appropriate fall-back solutions and because in some sectors, stakeholders cannot themselves take mitigating measures.  The Commission is therefore putting forward today four contingency measures to mitigate some of the significant disruptions that will occur on 1 January in case a deal with the UK is not yet in place:

Basic air connectivity: A proposal for a Regulation to ensure the provision of certain air services between the UK and the EU for 6 months, provided the UK ensures the same.

Aviation safety: A proposal for a Regulation ensuring that various safety certificates for products can continue to be used in EU aircraft without disruption, thereby avoiding the grounding of EU aircraft.

Basic road connectivity: A proposal for a Regulation covering basic connectivity with regard to both road freight, and road passenger transport for 6 months, provided the UK assures the same to EU hauliers.

Fisheries: A proposal for a Regulation to create the appropriate legal framework until 31 December 2021, or until a fisheries agreement with the UK has been concluded – whichever date is earlier – for continued reciprocal access by EU and UK vessels to each other’s waters after 31 December 2020.  In order to guarantee the sustainability of fisheries and in light of the importance of fisheries for the economic livelihood of many communities, it is necessary to facilitate the procedures of authorisation of fishing vessels.

The Commission will work closely with the European Parliament and Council with a view to facilitate entry into application on 1 January 2021 of all four proposed Regulations.”

References

EU-UK Joint Committee statement on implementation of the Withdrawal Agreement – GOV.UK (www.gov.uk)

Commission proposes targeted contingency measures (europa.eu)

Post Brexit: UK risks widening the gap as the post-transition negotiations go down to the wire

Updated Tuesday 8 December 2020

Boris Johnson and European Commission President, Ursula von der Leyen, may have “welcomed the fact that progress has been achieved in many areas” in their weekend conference call.

Nevertheless, significant differences remain on three critical issues: ‘a level playing field’ when it comes to state aid; ‘governance’ and who will arbitrate future disputes between the EU and UK; and access to UK waters for EU fishing fleets.

Both sides acknowledged in a joint press statement that if these issues are not resolved, the UK is heading for the ‘no-deal’ scenario at the end of the Brexit ‘transition period’.

We dealt with ‘state aid’ in a previous post – highlighting the hardening of the UK ‘red line’ in recent weeks.  It is difficult to see how, having widened the gulf between the parties, the UK could compromise and accept the EU position without loss of face.

Johnson and von der Leyen spoke again yesterday evening” [7 December] – having instructed their chief negotiators to reconvene in Brussels.  In the hour immediately before the call the House of Commons voted to re-insert the controversial ‘Treaty breaking’ clauses in the ‘Internal Market Bill’ that had been removed last week by the House of Lords in an overwhelming cross-party vote.

Whist publicly stating that they want an agreement, the UK Government last week added a second piece of legislation that is likely to further increase the likelihood that one of one of the 27 EU member states using its veto – even if negotiators can find common ground, four-and-a-half years after the vote leave referendum.  One veto from a any member state, or the European Parliament, or the European Council, will be enough to stop a trade deal in its tracks – and Great Britain will leave the EU single market and customs with ‘no-deal’ on 31 December.

On Thursday 3 December, Jacob Rees-Mogg MP, Leader of the House of Commons, announced that the Government would be introducing the ‘Taxation (Post-Transition Period) Bill’.  To date, the Bill has not been published – yet is to be fast-tracked to a ‘second reading’ on 9 December 2020.

The Internal Market Bill has received widespread criticism around the across European and around the World.  President-elect Joe Biden has said that if passed, it will count against the UK in any future discussions about a trade agreement.  The House of Lords have formally ‘expressed regret’ that the part of the Bill which concerns the implementation of the Northern Ireland Protocol would: “undermine the rule of law and damage the reputation of the United Kingdom” as Parliament – “which is responsible for making the law and expecting people to obey the laws it makes – would be knowingly granting power to the Executive to break the law.”

The House of Lords resolved to remove clauses that would enable a breach of international law.  They also resolved to remove clauses “intended to give the UK Government the power to provide financial assistance to any part of the United Kingdom for a wide range of purposes.”  The main arguments against granting those powers were the effects on the devolution – with the potential to undermine the stability of the Union that is the United Kingdom. The cross-party majority was 433 to 165.

The Government has now reinstated the clauses.

In a related move, Michael Gove MP, Chancellor of the Duchy of Lancaster indicated in October that in the event of a no-deal end to Brexit transition, the Government would need to legislate “measures relating to tariffs on movements of goods between Great Britain and Northern Ireland” in the form of a ‘Finance Bill’.

In a highly unusual fast-track move, the provisional date has been set for Wednesday 9 December for Parliament to complete the ‘second reading’ and the ‘committee stage’ of the ‘Taxation (Post-Transition Period) Bill’.  MPs will have their first sight of the contents of the Bill on Tuesday 8 December as it is published on the Parliament website.  The Bill has the potential to further alienate all those who do not want the UK to break international law and treaty commitments to the Good Friday Agreement.

With EU and UK negotiations on a knife-edge and against the backdrop of either a very ‘thin’ deal, or no-deal, Peter Mandelson – former Cabinet Minister and EU Commissioner – has published an article in the Guardian looking at how the UK – having spent nearly half a century reshaping itself round the opportunities offered by European economic integration – now has to scope out the next chapter in its national story.

“In determining that Great Britain should not only leave the EU, but additionally languish outside Europe’s giant single market and its frictionless customs union, Boris Johnson is putting Britain at a massive and permanent disadvantage in relation to its biggest export market.  All the new benefits from every global trade deal that we could ever aspire to will not begin to equal the size of our present European trade.  This is the price we will pay for the triumph of hard-line Tory Brexiters over those with a stronger sense of national interest in their party.”

He argues that there were many other priorities into which we could have invested energy much more gainfully in order to build a “21st-century Britain – including a recasting of work and human rights, and updating the welfare system.

I’d like to add: leading the move to create a sustainable planet for future generations; levelling some of the global inequalities that presently create friction between factions and nations; and harnessing the burgeoning technological advances in artificial intelligence, communications, robotics, genetics, medicine and agriculture – for the greater good of mankind.

References

Joint Statement by EC President and PM Johnson (europa.eu)

Post Brexit: ‘State Aid’ remains a sticking point for EU-UK negotiations as UK ‘hardens’ its ‘red-line’

UK Internal Market Bill: House of Commons Library

Taxation (Post-Transition Period) Bill: House of Commons Library

Photo:  EP Research

 

 

Post Brexit: ‘State Aid’ remains a sticking point for EU-UK negotiations as UK ‘hardens’ its ‘red-line’

Neither the UK nor EU has been willing to compromise and yield ground on their ‘red-line’ on ‘state aid’ policy during negotiations on the future relationship between them.  The EU wants any ‘deal’ to include commitments on state aid as part of a set of ‘level playing field’ provisions.  This would ensure ‘fair competition’ between the UK and the remaining 27 EU member states who operate under a unified regime – the ‘single  market’.

The EU, therefore, has asked for full disclosure on the detail of the UK’s future domestic state aid policy.

The UK’s chief negotiator, Lord Frost, has indicated that the UK is willing to include some ‘high-level principles’ on state aid in any agreement.  However, the detailed design of the UK system has not yet been worked out.  That will come later – allowing time for wider consultation before setting the UK’s ‘long-term’ policy.

The UK Government position is that at the end of the transition period, the UK will have its own domestic subsidy control regime to replace EU law on state aid.  From 1 January 2021, the UK will – according to the Secretary of State for Business, Energy and Industrial Strategy, Alok Sharma MP – follow the World Trade Organisation (WTO) rules for subsidy control.

Sharma also said the Government would publish a consultation “in the coming months” on whether to go further than the WTO basic rules and related commitments as the UK enters into in free trade agreements.

The WTO regime is fundamentally different from the EU’s state aid rules.  For example, subsidies are allowed by default rather than being generally prohibited – and prior notification and approval is not required.

Far from looking to compromise and move closer to the EU in order to reach a ‘deal’ by 31 December, the UK Government is driving through legislation which would remove state aid provisions from the ‘retained EU’ law that will remain on the UK statute book after the transition period.  The House of Commons has approved the ‘State Aid (Revocations and Amendments) (EU Exit) Regulations 2020’ with the House of Lords scheduled to debate them on 2 December 2020.

Labour has tabled a ‘regret’ amendment to the motion and the House of Lords ‘Secondary Legislation Scrutiny Committee’ has drawn the instrument to the special attention of the House.

Special provisions on state aid apply to Northern Ireland.  Under the Northern Ireland Protocol, Northern Ireland remains part of the UK’s customs territory but will continue to apply the EU’s customs code, VAT rules and single market rules for goods.

Background

The EU defines state aid as “an advantage in any form whatsoever conferred on a selective basis to undertakings by national public authorities”.  This includes things like subsidies, grants, interest or tax reliefs, guarantees, the granting of preferential terms, and so on – where this is done selectively – for example, only to specific companies or industry sectors or regions.

EU law prohibits state aid where it would ‘distort or threaten to distort’ competition between member states.  State aid may be permitted in some circumstances – but before implementing state aid measures, EU member states must notify the European Commission.  The Commission is empowered to approve aid which helps achieve defined policy objectives such as ‘regional economic development’ or ‘better environmental protection’.  The Commission also has powers to recover state aid if it is incompatible with the EU rules.

Northern Ireland

The Withdrawal Treaty Protocol provides that EU law on state aid shall apply to the UK “in respect of measures which affect that trade between Northern Ireland and the EU which is subject to this protocol”.  Annex 5 lists the specific EU law state aid provisions that this covers.

United Kingdom ‘Internal Market’ Bill

The UK Government sought to address the issue of EU ‘reach-back’ by proposing the ‘United Kingdom Internal Market Bill’.  The bill contained a clause through which the Government sought to give itself the power to unilaterally determine the interpretation of ‘article 10 of the protocol’.

Controversially, clause 45 of the bill clause would, in the Governments own admission: “break international law in a very specific and limited way”.

The House of Lords voted at committee stage to remove a number of clauses, including clause 45.  The Government said immediately after committee stage that it would reintroduce the clauses the Lords removed when the bill returns to the Commons in December.

The bill also contained provisions to set out that only the UK Parliament, and not the devolved assemblies, could legislate to regulate subsidies.

United Kingdom ‘State Aid (EU Exit)’ Regulations

The Commons formally approved the regulations on 4 November 2020.

The House of Lords is due to debate the regulations on 2 December 2020.  Lord Stevenson of Balmacara, Shadow Spokesperson for Business, Energy and Industrial Strategy and International Trade, has tabled an amendment to add the following wording to the end of the motion to approve the regulations: “that this House regrets that the Regulations replace retained European Union State Aid rules with a yet to be defined new subsidy regime, and calls on Her Majesty’s Government to delay implementation of the regulations until (1) they have consulted widely on their proposals, (2) they have sought the agreement of the devolved administrations, and (3) the primary legislation detailing how the United Kingdom’s new subsidy regime will operate after the end of the transition period has received Royal Assent.

EU and state aid

EU law on state aid is set out across provisions in the ‘Treaty on the Functioning of the European Union’ – TFEU.   The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 would disapply EU law relating to state aid otherwise retained in domestic law by the European Union (Withdrawal) Act 2018.  They would do this by: ensuring directly effective TFEU provisions ceased to be recognised and available in domestic law; revoking directly applicable EU law provisions; amending retained EU law and relevant provisions of domestic law.

Commenting on the trade talks and the three ‘sticking points’ on 20 November 2020, the President of the European Commission, Ursula von der Leyen, said that the negotiations had: “made some headway on state aid”.

References

What is state aid? European Commission (europa.eu)

World Trade Organisation (WTO) rules for subsidy control

Draft State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 – House of Lords Library (parliament.uk)

Image: by Shutterbug75 on Pixabay

Post Brexit: Northern Ireland remains under EU regulations for prescription drugs – ‘GB’ medicines may not be dispensed

According to a Parliamentary briefing: “approximately 98% of the medicines used in Northern Ireland are imported either from or via Great Britain, often originating in the EU.”

From 1 January 2021, the EU laws and regulations regarding: ‘medicinal products’ – known as the ‘Falsified Medicines Directive’ will apply in Northern Ireland but not in Great Britain.   The directive aims to prevent counterfeit medicines entering the supply chain – and applies to the majority of prescription-only medicines.

The requirement to conform to EU regulations for a province of the UK after the end of the Brexit ‘transition period’ is creating: “uncertainty and worry for pharmaceutical companies about what rules will apply to medicines that are imported to Northern Ireland having been supplied directly from – or delivered via – Great Britain.

EU Environment Sub-Committee wrote earlier in 2020 expressing their concerns to Edward Argar MP,  Minister for Health.  The Department of Health and Social care formally replied on 10 November – informing the Committee that the European Commission: “has agreed to a 12 month grace period before the regulations have to be complied with, providing businesses with more time to prepare.”

In the meantime, the pharmaceutical industry from research to manufacturing to retail – in GB and NI – have raised practical concerns about the issues that they now face.  This has been widely reported elsewhere – some key links are included below.

For instance, at the time of writing, the EU has stated that will not recognise pharmaceuticals that carry only a ‘GB’ identification code.  Further, medicines must carry EU identification codes – and without this authentication, the Pharmacist is required to ‘quarantine’ all such packs.  Ultimately, this may mean new sources are required for drugs on the list of those presently dispensed in Northern Ireland.

Having considered the update concerning the grace period, Lord Teverson, Chair of the Committee, has written again on 25 November, saying that it welcomes the grace period, which relieves the immediate pressure and will allow businesses more time to prepare for any changes with regard to the supply of prescription medicines to NI consumers from 1 January.

However, the same uncertainties now apply from 2022, so the Committee urges progress in the coming months so that the grace period is not wasted – and has requested a response from the Minister within 10 days.

Background

The European Union Environment Sub-Committee examines EU policy on agriculture, energy, climate change, the environment, food, fisheries, biosecurity and public health. It also considers the environmental aspects of the UK-EU level playing field. This Committee is a Sub-Committee of the European Union Select Committee

On 11 November 2020 the Northern Ireland Affairs Committee heard from witnesses: Colette Goldrick, Executive Director, Strategy and Partnerships, Association of the British Pharmaceutical Industry; Dr Richard Greville, Director, Distribution & Supply and ABPI Cymru Wales, Association of the British Pharmaceutical Industry

At the time of writing – 1 December 2020 – the detailed guideline on the Gov.UK website reads: “Rules for importing medicines to Northern Ireland are different because of the Northern Ireland Protocol.  Further guidance will be published in due course.”

As part of the Brexit process, the European Medicines Agency – the licensing, approvals and regulatory authority for all medicines across the EU – was relocated with the loss of many specialist roles from London to Amsterdam in March 2019.

Reference

Supplying medicines to Northern Ireland from 1 January 2021 – GOV.UK (www.gov.uk)

Parliamentlive.tv – Northern Ireland Affairs Committee

https://committees.parliament.uk/publications/3693/documents/35937/default/

‘Another year needed’ to amend Northern Ireland medicines distribution post-Brexit – BelfastTelegraph.co.uk

Brexit: the United Kingdom’s withdrawal from the European Union | European Medicines Agency (europa.eu)