Brexit and the Withdrawal Agreement: The more it changes, the more it stays the same…..(?)

Introduction

Three and a half years after voting to leave the European Union, the UK finally left the bloc at 11pm on 31 January.  In the three years leading to this point, the sands have constantly been shifting as have the expectations of what the post-Brexit period would look like, what it means for citizens and business have been subject to change. 

Central to these issues has been the question of whether or not the UK would conclude a Withdrawal Agreement with the European Union before leaving.  So often during the tumultuous period after the UK had triggered Article 50 TFEU, it seemed likely that the UK would leave with no deal.   

The possibility of an abrupt, clean break caused distinct unease, given that it would leave the UK without a legal framework for seamless trade with its most important external market.  The “no deal” scenario has been averted, a withdrawal agreement was agreed in principle[1] in November 2019 and passed by the UK[2] and EU Parliament[3] and Council[4] in January 2020.

So where does this leave us?  What will change now that the Withdrawal Agreement has been concluded?  This note covers a how the Withdrawal Agreement governs a number of important areas, some of which I have chosen because they have been of interest and relevance to a number of clients. 

Steady as you go – the transition period

A central aspect of the Withdrawal Agreement is the “transition” or “implementation period” (both terms are used interchangeably in the Withdrawal Agreement)[5].  This runs from the point of leaving, 31 January, until 31 December 2020.  The purpose is to provide a period of stability and continuity until the two parties to negotiate a free trade agreement to govern relations going forward.

Free movement of goods and customs

Within the transition period, EU Law continues to apply to matters of trade between the bloc and the UK.  The UK effectively remains a part of the EU single market and customs union.  To all intents and purposes, free movement of goods will continue where placed on the single market[6] during the transition period.  There are no tariffs to be paid on goods crossing the UK-EU frontier and the UK continues to levy the EU’s external tariff on imports from outside of the EU. 

Interim membership of the EU customs union means the UK continues to enjoy trade agreements between the EU and third countries such as Canada, Japan and the countries of MERCOSUR[7].  While the UK cannot enter into trade agreements with third states, it is free to negotiate these in principle and bring them into force after the expiry of the interim period. 

The free movement of capital and services will also continue.  Mutual recognition of professionals’ qualifications extends into the implementation period.  UK registered lawyers will be permitted to represent their clients before the Courts of the European Union. 

The UK ceases to participate in the institutions of the European Union

30 January saw the last session in the European Parliament in which there was participation from British MEPs.  The Union Jack was, for the final time on the evening of 31 January, lowered in front of the Parliament building Brussels.

Now that Brexit has occurred, the United Kingdom will no longer send commissioners to the EU Commission, nor participate in European summits, send judges to the EU Courts (the Court of Justice of the European Union, the General Court and the Court of Auditors) or participate.

The Withdrawal Agreement creates a new forum for co-operation between the EU and UK: the Joint EU-UK Committee.  This will be the body through which decisions are made or concerns are raised regarding the way in which the principles of the Withdrawal Agreement are being implemented between the parties.  As highlighted elsewhere in this article, however, the EU Courts and EU Commission will retain supervisory jurisdiction over the UK in several areas. 

Jurisdiction of the Courts and EU Commission

Whilst, as noted above, there will be no British judges in the EU Courts, the UK will still be subject to the jurisdiction of those courts during the implementation period.  The EU Commission will also continue to exercise supervisory role over certain matters within the UK (see for example, section on competition law below).

Unimplemented EU Law

Much of EU Law takes the form of Directives, which will only take legal effect once enacted into domestic law by the legislature of EU member states[8].  Directives will set a date by which this implementation must take place.

Having now left, the UK will no longer be required to transpose new Directives whose deadline for implementation has not yet passed.  On 24 January 2020, the UK announced it would not transpose the controversial EU Copyright Directive[9].  Article 13 of that Directive aims to protect the rights of copyright holders from the unauthorised uploading of their proprietary material onto the internet[10].  It has been criticised as threatening freedom of expression online, in particular the creation of memes and GIFs. 

Citizens’ rights and free movement

During the referendum campaign, immigration was a key issue.  Many supporters of Brexit were concerned that the UK’s controls on immigration were inadequate and that communities had become vulnerable to excessive free movement of citizens from other member states.

During the implementation period, the right of free movement of workers between the UK and the EU27 will continue[11].  Moreover, where citizens have exercised their right of free movement prior to the end of the transition period, the citizen will have the right to remain within the host state beyond the end of the transition period.  As is currently the case, these rights will also generally extend to members of the immediate family of the worker(s). A right of permanent residence can arise where the individuals concerned spend a continuous period of five consecutive years in the host state[12].  

In order to safeguard their right to remain within the UK, EU citizens living here are still well advised to apply for settled status with the Home Office[13].  Concerns abound that thousands have not done so.

General Data Protection Regulation (“GDPR”)

Article 70 of the Withdrawal Agreement provides for the continuation of EU data protection law in the UK during the transition period. The GDPR[14] generally prohibits the transfer of personal data outside the European Economic Area, save in a number of explicitly prescribed circumstances (such as where the data subject has provided her express consent to the transfer or there are contractual safeguards in place)[15].  The prospect of the UK becoming an external country risked disruption in data flows, potentially frustrating the performance of contractual duties or internal business functions.  During the transition period, the transfer of personal data may generally continue freely between the UK and the EEA[16].  In order to ensure the free data flow continues beyond the transition period, it is likely that the UK will submit to the EU for an “adequacy assessment” of its domestic data protection regime[17].   

Competition Law and State aid

EU Competition Law prohibits anti-competitive agreements (Article 101 TFEU) and abuse of dominant position (Article 102 TFEU) with an actual or potential cross-border impact.  These provisions are currently effective in the UK and are capable of being enforced directly before the national courts in the UK.  English courts have become a forum of choice for follow-on cartel actions, victims of cartels suing participants for conduct which has infringed Article 101 TFEU.  Pursuant to the Withdrawal Agreement, EU Competition Law will continue to form part of UK law, until the end of the transition period and will be enforceable in the Courts. 

With regard to merger control law, it is currently the case that the EU Commission has exclusive jurisdiction to review concentrations with a community dimension.  This exclusive jurisdiction will continue throughout the implementation period. 

Article 107 TFEU controls the ability of public bodies to grant of aid to undertakings in the form of subsidies or deals which are not concluded on arm’s length terms The Commission also has jurisdiction to review applications for clearance of State aid pursuant to Article 108 TFEU.  

Public Procurement Law

The EU rules on public and utilities procurement mandate that certain contracts, above a certain value, must be subject to a tender process publicised in the Official Journal of the European Union and following a number of detailed legal and procedural requirements.

As with other areas highlighted above, the UK has agreed that the EU rules will continue to apply during the transition period[18].  This means that UK and EU businesses will be able to compete for public contracts as freely as before. 

In 2019, the UK acceded to the WTO’s Government Procurement Agreement as a member in its own right.  The GPA is a plurilateral agreement whose adherents provide reciprocal access to each other’s procurement markets.  Like the EU’s procurement directives, the GPA requires certain minimum standards to open government contracts to the private sector on an international basis.  The GPA, however, offers more flexibility than the EU rules.  As a result, the UK is understood to be considering new domestic procurement rules which are less prescriptive than is currently the case. 

One proponent of a radical departure from the rules is Government advisor Dominic Cummings, who has called for an extensive streamlining of procurement law. He has called for the public buying regime to become more outcome than process focus and for a curtailment of the grounds for legal challenges to procurement decisions.  Under the heading of “procurement”, Mr Cummings recently posted a blog encouraging applications into Government positions from “data scientists, project managers, policy experts, assorted weirdos[19] and misfits.”[20]  How the new intake will assist in shaping procurement law and policy is less than clear, as is the question whether this unusual entry was simply misposted into the incorrect section of the site.

More orthodox and coherent proposals for reform have been put forward to the Cabinet Office by Professor Sue Arrowsmith QC, a world expert on government purchasing and procurement law[21].  She has encouraged the UK to continue to base its procurement laws on the EU model (partly to embrace the legal certainty that comes from familiar legal concepts), while taking the opportunity to consolidate provisions into a single legal instrument and to slim down the current rulebook (for example, by removing statutory provisions that merely codify previous legal judgments).  Professor Arrowsmith advocates a continuation of a remedies system, the introduction of special recourse measures for SMEs (for whom the current court based remedies system is often too expensive).

Beyond the transition phase – what can we expect?

Whilst the implementation period offers a period of stability and continuity, it will draw to a close by the end of 2020.  Thereafter, the relationship between the UK and EU will by and large be governed by the provisions of whatever bilateral trade and co-operation agreement can be negotiated.  The conclusion of such an agreement is far from a foregone conclusion, particularly given the Government’s declared opposition to extending the transition phase[22]. 

To some extent, work had already begun on the agreement before Brexit.  Alongside the Withdrawal Agreement, the UK and EU also agreed a document termed the “Political Declaration”[23], a non-binding ‘heads of terms’ document which maps out the contours and underlying principles of a possible future deal.  One such principle is the maintenance of a “level playing field” which would ensure that on both sides of the Channel broadly similar regulatory standards are maintained in key areas (such as competition policy and subsidy control) so that neither UK nor EU businesses are given an advantage in the form of more lax requirements to comply with. 

Prior to the conclusion of the Withdrawal Agreement and its ratification by the EU and UK, there were times where the two parties seemed destined for a “no deal” scenario.  The implementation phase has headed off this prospect for now, but it may only be a short matter of time before the unsettling prospect of no deal returns. 

To illustrate this point, a number of representatives of the EU have voiced scepticism that a free trade agreement can be concluded by the end of the transition period[24].  Recent statements from UK government ministers have suggested that this scepticism is well founded.  Foreign secretary Dominic Raab has said that the UK will not align completely with EU Laws as this would defeat the purpose of Brexit[25].  That position would, of course, draw the UK away from the principle of maintaining a regulatory level playing field, a red-line for the EU and a central principle of the Political Declaration[26].  A further complication is the possibility of the UK negotiating a bilateral trade agreement with the USA by November.  The USA is rumoured to have encouraged the UK to abandon EU regulatory standards in areas such as the environment[27] and food hygiene, potentially as an expensive quid pro quo to any agreement[28]. 

Fears for the prospect of a trade deal with the EU are perhaps overblown.  In other statements, UK senior Ministers have emphasised that concluding an agreement with the 27 state trade bloc are a priority[29].  To illustrate the residual uncertainty (perhaps deliberate as part of a UK negotiating posture), the Prime Minister had last year dismissed suggestions of any lowering of UK food standards[30].  On 4 February 2020, he hinted that the UK may move to allow the imports of GM foods from the US, potentially liberalising food standards in a way that would run directly contrary to the principle of a level playing field.   

Conclusion – where does this leave us?

The entry into force of the Withdrawal Agreement has secured the short term objective of creating stability and allowing (some) breathing space for the negotiation of future EU-UK relations.  This period of calm will be relatively short-lived and what comes after is the subject of significant uncertainty.  We are beginning to see a clash of visions, ambitions and ideas for the UK’s future, emerging from actors within and outside the country. 

For business, the good news is that little has changed on a day-to-day level for the time being but that extensive changes to the trading environment could be in store.  Business therefore needs to remain in touch with potentially fast moving developments and to be prepared to adjust to potentially drastic changes in the trading environment that could result from a divergence of rules.  In other words, although Brexit has finally happened businesses find themselves almost precisely where they were 18 months ago….facing further possible and unquantifiable uncertainty and being told to plan but not sure which scenario to plan for.  In that respect at least, plus ca change, plus c’est la meme chose….