The Withdrawal Agreement is the agreement that was negotiated between the EU and the UK under Article 50 of the Treaty of the European Union (“TEU”) which is the provision dealing with the withdrawal by a Member State of the EU. The aim of the Agreement, which was entered into in late 2019, was to set out the arrangements for the UK’s withdrawal from the EU on 31 January 2020. While a number of provisions related purely to the transition period (in English legislation the “implementation period”) which ended on 31 December 2020, important provisions continue to apply, either as transitional provisions relating to matters that straddle the end of the transition period, or as long term arrangements relating to key policy matters for both parties: these include the arrangements for EU citizens already living and working in the UK and UK citizens in the EU, as well as the arrangements intended to avoid a hard border on the island of Ireland. The Withdrawal Agreement was implemented in the UK principally by the European Union (Withdrawal Agreement) Act 2020 (“Withdrawal Agreement Act”). An earlier version of the Withdrawal Agreement was agreed between the UK and the EU in November 2018 under Theresa May’s Government but was rejected three times by the UK Parliament and ultimately resulted in her resignation. The main stumbling block to its approval were the provisions on the Irish backstop which were subsequently re-negotiated, resulting in substantial changes to the Irish Protocol (see Q2 below). The UK’s future trading relationship with the EU was negotiated in a separate agreement: see separate sections on Trade, State Aid and Procurement. 2. The Northern Ireland Protocol – what is it and why was it needed? The Northern Ireland Protocol deals with the position of the island of Ireland once the UK leaves the EU. Both the EU and the UK have been committed to avoiding a hard border between Ireland and Northern Ireland and respecting the Good Friday Agreement. Original discussions led to proposals for a “backstop” which could have kept the whole UK in the EU customs area indefinitely. That arrangement could not gain sufficient parliamentary support in the UK to be adopted. The arrangement was therefore renegotiated by the present UK Prime Minister, Boris Johnson. The Protocol as included in the Withdrawal Agreement takes a very different approach to the previous version in securing the objective of The Withdrawal Agreement Brexit has really happened ••While the UK formally withdrew from the European Union on 31 January 2020, nothing much changed on the ground until 31st December 2020. This is because the Withdrawal Agreement of 2019 between the UK and the EU provided for a transition period during which the UK was for most purposes treated as if it were still a Member State of the EU. ••The transition period (which UK legislation calls the “implementation period”) ended on 31st December 2020 when in most respects EU law became foreign law (part of the law of continuing Member States, such as Germany and France). ••EU law is now binding in the UK only to the limited extent set out in the Withdrawal Agreement, of which the most important aspects for private parties are: MARCH 2021 The section is part of our Brexit Legal Guide. Q&A BREXIT: THE WITHDRAWAL AGREEMENT Q&A HERBERT SMITH FREEHILLS avoiding a hard border between Northern Ireland and the Republic of Ireland. The attempt to avoid creating a regulatory and customs border between Northern Ireland and the rest of the UK has largely been abandoned. Instead, while Northern Ireland remains part of the UK customs territory and is included in any UK free trade agreements, in practice, Northern Ireland will apply most EU customs rules and most of its regulatory regime for goods, both agricultural and manufactured. This creates a customs and regulatory border in the Irish Sea between Ireland and Great Britain. Although the Protocol has allowed the UK to dispense with most checks and other obstacles to goods entering Great Britain from Northern Ireland, goods entering Northern Ireland from Great Britain apart from some transitional reliefs, are subject to much the same checks and costs as if they were entering the EU from the UK. The effect of these arrangements is mitigated by measures enabling Northern Ireland businesses to benefit from the UK customs rates, where they are more favourable but only by later adjustment of the fiscal effects arising from application of the EU regime. The arrangements set out in the Protocol are intended to be permanent, subject to ongoing discussions with a view to making them work smoothly. However, the Protocol allows the Northern Ireland Assembly to vote on the continuation of the main substantive provisions of the Protocol. In the event that there is not a majority to continue these provisions, they will cease to apply at the end of two further years. While there is provision for further negotiation in those circumstances, it is evident that, if the Protocol cannot command support in the Northern Ireland Assembly, this could have serious repercussions. In early 2021, this Protocol has proved to be the main point of friction in relations between the EU and the UK. The difficulties experienced in sending goods (particularly food and agricultural products) from Great Britain to Northern Ireland have been evident, while sales of some products are (or after a short transition, will become) forbidden altogether. This has disrupted traditional supply chains, added costs for Northern Ireland importers and consumers and led many UK firms to decline to deliver to NI at all for commercial reasons, particularly where they did not historically trade with most EU countries and are unfamiliar with the extensive paperwork involved. Consumers and importers in the Republic of Ireland are also affected, but to a more limited degree. This is the subject of on-going discussions with the EU with a view to ameliorating these problems. This is important to the acceptance of the Protocol in Northern Ireland, as is necessary to preserve the open border between Northern Ireland and the Republic. There is a right under Article 16 of the Protocol for either party to impose restrictions at the Irish border where there are serious economic, societal or environmental difficulties that are liable to persist or a diversion of trade. In early February 2021, the EU Commission decided to invoke this with regard to export of COVID 19 vaccines from the Republic into Northern Ireland. This move was almost immediately withdrawn as a “mistake” following a great outcry, including from the Irish and UK governments. This has done nothing to ease the tensions created by the undoubted inconveniences and costs of the Protocol. 3. What else does the Withdrawal Agreement cover? The Withdrawal Agreement covers the key withdrawal issues of citizens’ rights, financial contribution and the Irish border. It also covers a range of other withdrawal issues such as issues relating to intellectual property, ongoing public procurement procedures, ongoing judicial cooperation on civil and commercial matters and ongoing judicial and administrative procedures, particularly the allocation of jurisdiction on cases current at the end of the transition period. The Withdrawal Agreement also contains institutional arrangements specific to the Agreement, including the establishment of a Joint Committee responsible for the implementation and application of the Agreement, and provisions on disputes relating to the Agreement itself. Disputes arising under the Withdrawal Agreement can be referred to the Joint Committee with the aim of reaching a mutually agreed solution. If no agreed solution is reached within three months, there is a mechanism to establish an independent arbitration panel (composed of two members proposed by the EU and the UK each and a chairperson agreed by both parties) to rule on the dispute. See Annex attached for a summary of the Withdrawal Agreement. 4. Why does the Withdrawal Agreement not incorporate details on the future UK/EU relationship? The EU Commission took the view early on that the Withdrawal Agreement could only deal with separation issues and could not • Pending cases before EU institutions and courts; • Domestic cases in the UK relating to periods before 2021, when relevant EU law applied in the UK; • Aspects of the rights of EU and EFTA citizens living and working in the UK; and • The Northern Ireland Protocol. New UK Law – a legal upheaval! ••The UK has been preparing its legal system for change for over two years under the framework of the European Union (Withdrawal) Act 2018 (the “Withdrawal Act”). ••In order to avoid gaps in its legislation, a good deal of EU directly effective legislation and EU derived domestic legislation, both primary and secondary, has been preserved, with appropriate amendments for application in the UK after it had left the EU. These are a class of domestic law, applicable in the UK jurisdictions, broadly known as “retained EU law”. ••In addition retained EU law also preserves other residual rights, powers, liabilities, obligations, restrictions, remedies and procedures which derive from the UK’s past adherence to EU law. ••For further detail on retained EU law and how it affects the application of general principles of EU law and case law the Court of Justice of the European Union (“CJEU”) see our Legal Guide - The UK’s New Legal Order. This also explains the main areas where the UK has chosen not to retain EU law and the areas where the UK has set up new statutory regimes and its own policies, eg in the areas of trade, customs and VAT and agriculture. HERBERT SMITH FREEHILLS BREXIT: THE WITHDRAWAL AGREEMENT Q&A include an agreement on a future trading relationship because such an agreement required a different legal basis and could only be negotiated with a country that is not a Member State. So this meant it could only be negotiated once the UK had left the EU. The result has been the Trade and Cooperation Agreement (“TCA”), which provides a largely tariff-free environment for goods originating in the UK and the EU being exported into the customs territory of the other party, but does not remove non-tariff barriers, Additionally goods originating in third countries or the subject of re-import may be subject to duties even where these do not apply when goods are imported directly. There are only very limited provisions relating to services. 5. Are all aspects of the Withdrawal Agreement in force? The Withdrawal Agreement came into force at the beginning of 2020. Provisions dealing purely with the transition period are now spent and provisions that only applied once the UK ceased to apply EU rules have been implemented with effect from 31 December 2020. These include the provisions about the rights of citizens and the Northern Ireland Protocol. 6. What is the relationship between the Withdrawal Agreement and the Withdrawal Agreement Act? The Withdrawal Agreement Act implements into UK law the Withdrawal Agreement as well as two related agreements (the EEA EFTA Separation Agreement between the UK and Norway, Iceland and Liechtenstein and the Swiss Citizens’ Rights Agreement between the UK and Switzerland). It contains provisions relating to or giving effect to the provisions of the Withdrawal Agreement and provides for the disapplication of UK legislation that is incompatible and conflicts with the Withdrawal Agreement. It is a complex piece of legislation and is designed to work in conjunction with the EU Withdrawal Act 2018 (to which it makes a number of changes in order to deal with the consequences of a transition period), so both Acts need to be considered alongside each other. Part 1 and 2, on the implementation (transition) period, amended the EU Withdrawal Act 2018 (which provides for the repeal of the European Communities Act 1972), so that the effect of the ECA was saved for the duration of the implementation (transition) period and EU law continued to apply during that period. The provisions in the Withdrawal Act on retained EU law, which preserve the UK legislation which implemented the UK’s EU obligations (eg under Directives) and convert much directly effective EU law into a new class of domestic law, only took effect at the end of the transition. Part 3, on citizens’ rights, provides for the implementation into UK law of the citizens’ rights provisions of the Withdrawal Agreement. UK Courts will be able to make references to the CJEU to address questions of interpretation, for a period of eight years after the end of the transition period: see separate section on Migration. A new corporate body, the Independent Monitoring Authority (IMA) is created in order to monitor the implementation and application in the UK of the citizens’ rights provisions. Part 4 deals with other separation issues (goods placed on the market, ongoing customs procedures, intellectual property, ongoing police and judicial cooperation, and data), the financial provisions and the arrangements in the Northern Ireland Protocol. The main financial provision includes a legislative mechanism to authorise the Government to make payments due under the UK’s financial obligations in the Withdrawal Agreement which are to be charged to the Consolidated Fund or, if the Treasury so decides, the National Loans Fund. Ministers are given wide powers to implement the Northern Ireland Protocol , including facilitating access for Northern Ireland goods to the UK market and provisions to ensure there are no changes to the arrangements for North South cooperation as a result of this legislation. 7. Does the Withdrawal Agreement remain relevant now the transition period has ended and the UK’s exit from the EU is completed? The Withdrawal Agreement sets out the terms for the UK’s withdrawal from the EU and ensures the withdrawal takes place in an orderly manner. Over time some of its provisions will no longer be relevant, eg the financial provisions once all payments agreed between the parties have been settled, or the part on separation provisions which sets out how a range of events that are ongoing at the end of the transition period will be resolved. But other parts of the Withdrawal Agreement will continue to be relevant. This is particularly the case for the section on citizens’ rights, which ensures that qualifying citizens will be able to continue to exercise their right of free movement under EU law and live, work and study in the UK as they were able to do before the UK did exit the EU. Similarly, the arrangements set out in the Northern Ireland Protocol are intended to be permanent. The Future Relationship with the EU After nearly 11 months of tense negotiation, the UK and the EU on Christmas Eve 2020 agreed a Trade and Cooperation Agreement (“TCA”), implemented in the UK by the European Union (Future Relationship) Act 2020. In addition the UK has established trade relationships with several countries, mostly on very similar terms to their existing trade agreements with the EU. The Withdrawal Agreement is a very different type of international agreement from the TCA. While the Withdrawal Agreement is part of the EU legal order and the Court of Justice of the European Union (“CJEU”) has a significant on-going role in relation to its interpretation and implementation, the TCA is a stand-alone international free trade agreement, with no role assigned to the CJEU. BREXIT: THE WITHDRAWAL AGREEMENT Q&A HERBERT SMITH FREEHILLS Annex Summary of the Withdrawal Agreement The Withdrawal Agreement (“Agreement”) consists of six parts, three protocols and a number of annexes (which provide additional information necessary to support the technical interpretation and application of the agreement). Part One – Common provisions: this section sets out relevant definitions and territorial scope of the Agreement. It provides for the provisions of the Agreement to be interpreted under the general principles of EU law, including those of the EU Charter of Fundamental Rights. UK courts will be bound by relevant CJEU case law handed down before the end of the transition period and must pay due regard to relevant case law handed down after the transition period. The provisions of the Withdrawal Agreement produce the same legal effects in the UK as they do in the EU and the Member States, including the ability of the courts to disapply incompatible legislation, direct effect and the availability of remedies. The UK and the EU are bound by a duty of good faith, under which they should not act in any way to undermine the Agreement and should support each other in carrying out tasks which flow from the Agreement. Part Two – Citizens’ rights: this section deals with the rights of EU citizens in the UK and UK citizens in the EU who are exercising their free movement rights before the end of the transition period (“the specified date”). Qualifying EU citizens will be able to continue to exercise their right of free movement under EU law and live, work and study in the UK as they are currently able to do. UK citizens exercising their rights in the EU will be able to continue to do this in their host Member State. The right of UK nationals living in the EU27 to live and work in a different Member State after Brexit is not provided for in the Agreement but as part of the future relationship with the EU, the UK will also seek to secure onward movement opportunities for UK nationals in the EU. The same rights will apply to their family members who are legally resident in the host Member State before the end of the specified date. Spouses, registered partners, dependent parents and children related to the EU/UK right holder who are not residing in the host Member State on the specified date will keep their entitlement to join an EU/UK family member at a later date, for the lifetime of the EU/UK national right holder, irrespective of their nationality. The UK and the EU27 are entitled to require citizens concerned to apply to obtain a status which gives them the necessary rights of residence but such administrative procedures must be transparent, smooth and streamlined. Part Three – Separation provisions: this covers a range of events in a variety of areas that may be ongoing by the end of the transition period and sets out how these will be resolved. It deals with the following: ••Goods placed on the market before the end of the transition ••Ongoing customs procedures, ongoing value added tax and excise duty matters ••Continued protection in the UK of intellectual property rights ••Ongoing police and judicial cooperation in criminal matters ••Ongoing judicial cooperation in civil and commercial matters ••Data and information processed or obtained before the end of the transition period or on the basis of the Withdrawal Agreement ••Ongoing public procurement and similar procedures ••Euratom related issues ••EU judicial and administrative procedures ••Administrative cooperation procedures between Member States and the UK ••Privileges and immunities – status of UK nationals working in EU institution and EU staff working in EU bodies in the UK ••Other issues relating to the functioning of the institutions, bodies, offices and agencies of the EU Part Four – Transition period: a transition or implementation period, starting on the date of entry into force of the Withdrawal Agreement and ending on 31 December 2020 was agreed. During this transition period, the UK was no longer an EU Member State, as it had left the EU on 31 January 2020 but unless HERBERT SMITH FREEHILLS BREXIT: THE WITHDRAWAL AGREEMENT Q&A otherwise provided in the Withdrawal Agreement, EU law was applicable to and in the UK, so as to produce the same legal effect as it did prior to exit. The provisions also state that any references to Member States in EU law, including EU law as implemented by Member States, is to be understood as including the UK during the transition period. EU law therefore continued to have direct effect in the UK and the principle of supremacy of EU law applied during the transition period. The UK was no longer represented or able to participate as a matter of course in the EU institutions, thereby losing its right to influence and vote on new legislation. In exceptional circumstances, representatives or experts from the UK were able to, upon invitation, attend meetings of certain committees but without having any voting rights. During the transition period, the UK was free to negotiate, sign and ratify international agreements entered into in its own capacity, provided these agreements did not come into force or apply until after the transition period. Part Five – Financial provisions: both sides agreed a methodology for calculating the financial settlement without agreeing a specific amount. The UK agreed to contribute and participate in the EU budget until the end of the current budget cycle (end 2020) as if it had remained in the EU. The UK will also contribute its share of the financing of the budgetary commitments entered into before the end of the current budget cycle but not yet disbursed at the end of 2020 (the so called “reste à liquider”). Payments arising from the financial settlement will become due as if the UK had remained a Member State, so the UK will not be required to make payments earlier than would be the case, had it remained in the EU. The UK will continue to benefit from EU spending under programmes financed by the current budget until their closure. UK beneficiaries will be required to respect all relevant EU provisions governing these programmes, including co-financing. Part Six – Institutional and final provisions: in order to ensure consistent interpretation of the citizens’ rights provisions of the Agreement, UK courts will be able to make preliminary references to the CJEU for up to eight years from the end of the transition period. A Joint Committee consisting of representatives of the EU and the UK will be responsible for the implementation and application of the Withdrawal Agreement. Disputes arising under the Withdrawal Agreement can be referred to the Joint Committee with the aim of reaching a mutually agreed solution. If no agreed solution is reached within three months, there is a mechanism to establish an independent arbitration panel (composed of two members proposed by the EU and the UK each and a chairperson agreed by both parties) to rule on the dispute. Where the dispute involves a question on the interpretation of EU law, the panel will request the CJEU to rule on it but it will still be for the panel to rule on the dispute as a whole. The arbitration panel’s ruling on a dispute will be binding and the parties will need to comply within a reasonable period. Northern Ireland Protocol this Protocol aims at avoiding a hard border on the island of Ireland. Under the approach set out in the Protocol, the whole of the UK, including Northern Ireland, will leave the EU Customs Union. Northern Ireland remains part of the UK customs territory and will be included in any future UK free trade agreements. But in practice, Northern Ireland will apply most EU customs rules and most of its regulatory regime for goods, both agricultural and manufactured, will remain aligned with the EU internal market rules for goods. This will create a customs and regulatory border in the Irish Sea between Ireland and the rest of Great Britain. The revised Protocol allows the Northern Ireland Assembly to provide consent for certain EU regulations continuing in Northern Ireland at four yearly intervals. Protocol relating to the Sovereign Base Areas in Cyprus: the Protocol is intended to preserve the existing unique arrangements which reflect UK’s international commitments and ensure the continued effective operation of the Sovereign Base Areas for military purposes. Protocol on Gibraltar: the Protocol provides for close cooperation between the UK and Spain in Gibraltar in relation to the implementation of part two of the Agreement on citizens’ rights. The Protocol or any other arrangements between the UK and Spain do not in any way affect the UK’s sovereignty over Gibraltar.