On 27 March 2018, the European Union accepted the amendments to the European Commission’s revised draft of the withdrawal agreement negotiated with the UK so far. The agreement is expected to form the basis of a treaty that will govern both the withdrawal of the UK from the EU and the transition period following that withdrawal.

The next key staging post in the Brexit process will be the European Council meeting in June 2018 but the real one will be in autumn 2018. A deal will effectively have to be agreed by this point if it is to be approved by Parliament, the European Parliament and by EU 27-member states.

EU Citizens

The UK and the EU recently accepted that the changes relating to the current EU citizen rights of the draft withdrawal agreement are agreed.

However, there are still some uncertainties about certain citizens.

  1. The withdrawal agreement deals with the transition arrangements. These arrangements will form part of UK legislation if the full text of the agreement is agreed and if it is ratified in accordance with the treaties and the UK’s constitutional arrangements before the UK leaves the EU on 29 March 2019 (although the UK and the European Council, acting by unanimity, could agree to extend this date). At the time of writing this is set to occur between October 2018 and March 2019. Therefore, it will be some time before we have full legal certainty as to the transition arrangements. Assuming that the transitional agreement does come into force, UK rights derived from EU law will continue. These include TUPE, GDPR, rights attached to the working time directive, maternity and parental rights, equal pay rights, anti-discrimination rights, human rights, right to information and consultation on business reorganisations, redundancies and outsourcing exercises, Health and Safety, right to claim before the ECJ, the right to be given a written statement of pay and work conditions within 28 days of starting work.. etc.
  2. During the transition period (from 29 March 2019 to 31 December 2020), it is practically a given that the UK will accept most of the new EU laws. There may be exceptions such as certain aspects of Schengen. There are also question marks regarding the UK’s willingness to accept new tax rules from the EU.
  3. Third country agreements. There are still some uncertainties regarding the fact that the UK would, according to the EU, still be bound by the EU’s obligations under its external/third party agreements but would not participate in any institutional arrangements under them. The EU has agreed that the UK could start negotiating its own deals but not sign or implement them.
  4. The competency of the ECJ Court. The competency of the ECJ Court or the setting up of a Joint Committee of the parties to supervise and enforce the withdrawal agreement is still under discussion
  5. Long Term residence rights and the financial settlement. The draft texts do not specifically address the long term residence rights of EU27 citizens moving to the UK during the transition period (or those of UK citizens moving to the EU in that period). The EU negotiating directives envisage that they would acquire the same rights as citizens who had enjoyed freedom of movement prior to 29 March 2019. The UK is also considering a registration scheme for EU citizens moving to the UK during the transition period. The draft texts also do not specifically address financial settlement. This will be dealt with in other parts of the withdrawal agreement
  6. What happens at the end of the transitional period? Like the EU text, the UK text is silent about what happens at the end of the transition period. It does not propose any mechanism to agree an extension of the period (which might otherwise be difficult as it is unclear that the EU could agree an extension using Article 50 of the Treaty on European Union – thus an extension, or amendment, might require a full treaty process). The agreement in its current form, would move the ‘cliff edge’ of a ‘hard Brexit’ until 31 December 2020. Neither party has made proposals addressing issues such as contract continuity or how to transition EU27 or UK market participants or financial market infrastructure from their status within the single market to their new status when the transition period ends and the UK becomes a third-party country.
  7. Long-term agreements. There are currently no written proposals to deal with the implementation steps relating to any eventual long-term agreement concluded during the period except in so far as the text envisages that the UK would drop out of the transition provisions relating to Freedom, Justice and Security measures if and when an EU-UK agreement on those subjects enters into force. The European Union’s area of Freedom, Security and Justice was created to ensure the free movement of persons and to offer a high level of protection to citizens. It covers policy areas that range from the management of the European Union’s external borders to judicial cooperation in civil and criminal matters and police cooperation. It also includes asylum and immigration policies and the fight against crime (terrorism, organised crime, cybercrime, sexual exploitation of children, trafficking in human beings, illegal drugs, etc…).

What if there is no deal – can a company now rely on there being a transition period?

Both the EU and the UK maintain that “nothing is agreed until everything is agreed”. As such, the transition elements in the draft withdrawal agreement represent a political agreement which depends on signature and ratification by both parties. There are a number of open political issues that might still prevent its conclusion, such as the Irish and Gibraltar issues, the financial services and the fishery and agricultural policies which are yet to be addressed. This could have implications on the timing of companies operating cross border to implement contingency plans as it will depend on their own circumstances and risk appetite and that of the UK and EU regulators generally.

Cliff-edge and Britain’s own legal framework to effect a transitional period

If the discussions on the withdrawal agreement fail to deliver a transition period, then the UK is putting in place the legal framework to introduce this unilaterally, although some aspects of this are dependent on cooperation by EU27 firms’ home state regulators.

By contrast, there are no public plans to put in place any legislative machinery at EU27 or EU27 member state level. The EU may be able to take some actions at reasonably short notice following a no-deal exit to mitigate some of the adverse effects on the EU, for example by activating some of the existing third country regimes in EU legislation, but their scope is limited. Therefore, more practically, it is likely that the transitional period will be extended.