We look at the government’s recently published position papers on aspects of Brexit impacting on the technology sector. Do they give businesses the clarity they need?
What’s the issue?
The Brexit negotiations appear, at least from the outside, to be making little headway in resolving the issues the EU wants to make significant progress on before moving on to trade negotiations. The UK, the EC and the European Parliament are, however, beginning to set out their stalls on a variety of issues which are fundamental to the future of the UK’s commercial relationship with the EU.
What’s the development?
The UK government has published its latest series of position papers on Brexit and post-Brexit arrangements. They are intended to provide clarity on possible avenues the UK intends to pursue across a variety of areas which impact on businesses with cross-border activities. The EC has responded in kind, publishing its own position papers on similar issues.
What does this mean for you?
While businesses (and their lawyers) are scanning the position papers for clues as to how easy it will be for them to carry on uninterrupted by Brexit, on the whole, the UK papers do not present much new information. They have been criticised both in the UK and the EU for lacking detail and realism. The EU’s regular accusation of ‘cherry picking’ has been levelled at the UK in some areas although on others, such as cross-border civil judicial co-operation, the players seem to be closer to agreeing the rules of the game. Of course, these papers are opening negotiating gambits or wish lists but they are worth noting, at least as a possible starting position from the UK. The gulf between the parties is illustrated by the corresponding EC position papers which focus much more the withdrawal agreement and measures around exit than on the ongoing relationship between the UK and the EU.
The government continues to maintain that the UK will be outside the jurisdiction of the CJEU post Brexit. It recognises that the best way to achieve continuity and legal certainty is for the UK and the EU to agree on an arrangement which reflects the existing EU framework for cross-border civil judicial co-operation although there are no details as to how this might be achieved. The intention to incorporate Rome I and II into UK law is also confirmed as is the intention to continue to participate in the Hague and Lugano Conventions.
The government sets out its intentions in the event that no such agreement is reached. It intends to agree high-level principles to ensure legal certainty, particularly with respect to commercial and family law cases and ongoing proceedings at the time of exit. The government appears to be in broad agreement with the EC on this issue (as set out by the EC in its own position paper).
In recognising that there should be mutual recognition and enforcement of decisions of EU Member State courts for proceedings begun before Brexit takes place, the government opens the door to decisions in those cases being influenced by the CJEU, despite assertions made by David Davis that the influence of the CJEU will end on exit and a new solution will need to be found to deal with existing proceedings. Possibly the government envisages some sort of EFTA arrangement.
The government aims to:
- ensure certainty for individuals and businesses;
- have effective and timely enforcement mechanisms;
- maintain respect for the EU’s legal system while taking control of UK law and ending direct influence of the CJEU; and
- continue to respect its international obligations.
The government does not see that the CJEU should be given power to enforce and interpret agreements between the EU and third parties but suggests an alternative means of dispute resolution be used such as binding arbitration. It sets out a number of possible models including the arbitration models in CETA, the EUSFTA and EUVFTA trade agreements. Other elements include introducing reporting and monitoring requirements and reference to pre-existing CJEU decisions or, potentially voluntary consideration of post-Brexit CJEU decisions.
UK government policy is that the UK will leave the customs agreement with the EU. In its position paper, the government sets out the following objectives:
- UK-EU trade arrangements should remain as frictionless as possible;
- A ‘hard border’ between Northern Ireland and the Republic of Ireland should be avoided;
- The UK should be free to establish an international trade policy.
- A highly streamlined customs arrangement which would set up trade facilitation with the EU and improve the UK’s domestic regime. The EU and UK would trade with each other as third countries but with an efficient process which would need to be reciprocal. Suggestions include:
- reducing the need for time-sensitive administration for UK-EU trade;
- facilitating faster clearance of goods through mutual recognition of authorised economic operators and using advanced technologies;
- mutual customs co-operation including data sharing;
- self-assessment of customs duty and aggregation of customs declarations along with faster authorisation processes, increased automation and better use of data;
- reducing compliance and simplifying procedures.
The government recognises this would still be more cumbersome than current procedures.
- A new customs partnership with the EU. This would involve the UK aligning its import regime with the EU’s external customs border for goods crossing into the EU. Goods would be treated in the same way as they are now but the UK would still be able to apply its own tariffs and trade policy to UK exports and imports from other countries that are to be consumed in the UK provided that there is a system to ensure such goods did not enter the EU market.
The government also proposes an interim agreement which would continue the customs union but this would be time-limited. This would enable the UK to negotiate preferential trade agreements with other countries which could only be implemented after finally leaving the EU customs union. The EU is likely to resist the government’s preferred approach as it leaves the UK with the benefits of the customs union without having to participate in it. In its own position paper, it focuses mostly on what should happen to goods which are already in transit at the time of withdrawal, suggesting that rules which apply at the start of an operation should continue to apply until its end.
The position paper sets out four principles it would like to form the basis of an agreement on goods:
- Goods placed on the single market before exit should continue to be able to circulate freely without additional requirements or restrictions;
- Where businesses have undertaken pre-exit compliance activities before exit, these should not have to be duplicated post exit. This includes certificates and registrations issued pre exit.
- Goods should continue to comply with relevant product legislation and the agreement should facilitate the continued oversight of goods by market surveillance authorities to enforce compliance;
- Where goods are supplied with services, there should be no restriction to the provision of those services that could undermine the agreement on goods.
The government aims to provide legal certainty and avoid disruption to businesses and consumers with regard to availability of goods.
The UK sets out the following principles:
- The UK should continue to respect obligations of confidentiality and protect information exchanged while in the EU.
- Arrangements should be reciprocal and equivalent levels of protection to those under existing regimes should continue after exit.
Agreement also needs to be reached on how access to documents will work after exit and the government aims for the UK and EU to have equivalent levels of protection and obligation in relation to documents received before withdrawal. This should also apply to classified information.
The government urges the early agreement of a mutual recognition of data protection frameworks to ensure the continued free flow of personal data between the UK and EU, arguing that the UK’s rules will already be aligned with the EU’s and that the UK played a crucial role in developing those rules. It also looks to be able to benefit from existing adequacy agreements the EU has with third countries and to maintain some sort of role on the European Data Protection Board.
Due to the fact that EU data protection law has been recently overhauled and will apply in the UK before exit, this does not seem overly ambitious from a legal perspective. Politically, things may not be quite so straightforward and concerns over the impact of the Investigative Powers Act 2016 on the privacy of EU citizens could also derail the government’s proposals. The EC’s position paper on the use of data and protection of information obtained pre-Brexit does not suggest any kind of special arrangement for post-Brexit data transfers.