The first anniversary of the UK's Article 50 withdrawal notice has now passed but, with less than a year to go until the UK formally leaves the EU, how much progress has been made?
The transitional period
The latest draft of the withdrawal agreement, published last month, provided some clarification on the transitional period. We now know the transitional period will run from the date the UK leaves the EU (29 March 2019) until 31 December 2020, effectively stalling the full consequences of Brexit for a further 21 months. It has also been agreed (at least in principle, it will not become legal certainty until the final withdrawal agreement is ratified) that during the transitional period:
- most EU law will continue to apply in the UK (although the UK will not be able to participate in decision-making of the EU institutions, the EU will consult with the UK on any new EU laws that directly refer to member states to ensure appropriate implementation in the UK);
- decisions of the Court of Justice of the EU (CJEU) will continue to preside over the UK courts; and
- the UK will be able to negotiate and sign international agreements but they will not be able to enter into force until the end of the transitional period (unless specifically authorised by the EU).
While clarification of these aspects of the transitional arrangements assist businesses with some of their Brexit planning, there still remains considerable uncertainty as to what the final picture will look like. Calls are being made for the government to finalise the arrangements which will be in place at the end of the transitional period, particularly in relation to trade and investment, by October this year, to give businesses the certainty they need to enable them to plan ahead.
Below we look at the current position for a few of the key areas affecting businesses:
Brexit is expected to have a fairly limited impact on the UK's employment laws, at least in the short to medium term. While a large proportion of our domestic employment laws come from the EU and at the end of the transitional period the UK will be able to repeal many of the laws that it is currently bound to maintain due to its EU membership (for example, the TUPE rules or Working Time Regulations), it is felt unlikely that any substantial changes will be made immediately.
It is possible that the government will take the opportunity to examine and refine some areas that are considered to place an unreasonable regulatory burden on businesses, for example, amendment or even repeal of the Agency Workers Regulations 2010, revising TUPE to make it more business friendly (such as the rules around amending terms following a TUPE transfer) or addressing some of the restrictions in the Working Time Regulations (such as the unpopular rights around holiday pay accrual during sick leave). However, implementing these changes will take time, and we now know cannot occur before 2021.
Clearly, the biggest practical implication for employers is expected changes to the right of freedom of movement of EEA nationals following Brexit which is considered below.
The government has reached an agreement and published guidance on the status of EU citizens and their families once the UK has left the EU. This should provide certainty for millions of citizens and their families as it allows these persons to remain in the UK and continue to access public funds and services. There will be no change to the status of EU citizens living in the UK while the UK remains part of the EU; the changes will apply from 29 March 2019, which is when the UK is due to leave the EU.
The agreement reached is that EU citizens and their family members who have arrived in the UK by 29 March 2019 will be able to apply for either settled or temporary status. Settled status will mean applying to stay in the UK indefinitely. This will be available to those who have continuously and lawfully lived in the UK for five years by 29 March 2019. Temporary status will be available for those EU citizens and their family members who have not reached the five-year threshold by 29 March 2019. There will be a new digital system for EU citizens and their family members to apply for either status document, and the cost will be no more than a British citizen applying for a UK passport (currently £72.50 for adults). This system is expected to go live in late 2018 and will remain open for applications for at least two years after the UK leaves the EU.
These arrangements will also apply for the duration of the transitional period. However, the position in relation to those EU citizens and their family members that arrive in the UK after 31 December 2020, is still unclear. This is still subject to negotiations with the EU and so we await further announcements.
The latest withdrawal agreement indicates that agreement has been reached in relation to a number of IP rights which now only remain open to technical legal revisions. It has been agreed in principle that:
- at the end of the transitional period, holders of EU trade mark registrations and registered community designs will automatically become the holder of a comparable UK trade mark registration or design registration which will sit alongside the existing EU registration, and which will enjoy the benefit of the original EU dates. Registered trade mark and design protection can therefore be obtained in the UK via the EU route until the end of the transitional period. However, caution should be exercised, as any EU application still pending at the time of expiry of the transitional period will have to be re-filed as a UK Application within a set nine month period. After expiry of the transitional period, protection in the UK can only be obtained via a separately filed UK registration;
- the existing EU trade mark registration or design registration will remain in force, and will continue to provide protection in the remaining member states beyond the transitional period. However, use in the UK will no longer be sufficient to defend the EU registration against a non-use attack;
- unregistered community design rights in place before the end of the transitional period will have the same level of protection in the UK after the transitional period.
European patents will not be affected by Brexit, as these are governed by the European Patent Convention and are not therefore dependent upon the UK's membership of the EU. This means it will still be possible to obtain European patent protection post-Brexit.
Currently .eu domain name registrations are expected to become unavailable to UK entities post-Brexit. There is still time for this to change as negotiations progress, but if you have a pan-European business, consider transferring the .eu domain name to an EU-based subsidiary to ensure ownership can be maintained.
The impact of Brexit on competition law remains largely uncertain, but is unlikely to lead to any dramatic changes in at least the short to medium term. Following the EU and UK's agreement on the transitional period, we can expect that nothing will change during that period. The EC will continue to have enforcement powers in the UK and will be able to start investigations for any competition law breaches that occurred before the 29 March 2019 Brexit date.
In a speech at the start of March 2018, Andrea Coscelli, head of the UK competition regulator Competition and Markets Authority (CMA), predicted that there will still be at least some level of cooperation post-Brexit with other EU competition agencies which together form the European Competition Network (ECN); especially with regards to merger control. In contrast, he predicts that there might be less cooperation for cartel enforcement where procedural issues are more likely to arise.
The CMA has been awarded an additional £23.6 million by the government in order to cope with the increased workload of cases that will no longer be under the EC's jurisdiction.
Post-Brexit, the CMA is likely to be able to set its own competition law precedents and legislation will inevitably develop and, potentially, diverge from EU competition law. However, much like other European adjacent countries including Norway or Switzerland, the CMA may continue to observe EC decisions and EU case law.
There are prospects for greater flexibility and a less burdensome system of remedies, particularly as the UK government appears to want to have greater freedoms to make its own rules. However, these are currently only prospects, rather than firm plans and whether sweeping changes will be made and how the procurement landscape will eventually look are still matters for speculation. If the UK remains a member of the EEA, the EU procurement rules will continue to apply as they currently do, but this would leave the UK without voting privileges regarding future changes to the rules. However, remaining a member of the EEA is currently not appearing as likely as the following potential options in relation to trade agreements:
- a full trade agreement between the UK and the EU that covers public procurement, which would mean that the current procurement regime continues to apply exactly how it does now;
- a more limited trade agreement between the UK and the EU, based on the framework that the EU uses with other trading partners under the World Trade Organisation's Government Procurement Agreement (GPA). The UK would need to apply for GPA membership in its own right, and changes to the current procurement rules could be negotiated as part of a bespoke arrangement, meaning that in the long term the UK could seek simpler rules and a less detailed remedies regime to align it with UK law on judicial review;
- no agreements are reached on procurement before March 2019, either by choice or failure to conclude negotiations. This would give the UK flexibility to regulate procurement and design its own regime, but would be at the cost of losing immediate access to foreign markets.
In the meantime, until the end of the transitional period, it is likely to be business as usual for the UK public sector and there will be no immediate impact on procurement legislation.
To aid businesses with their Brexit planning we have produced a Brexit radar checklist highlighting potential issues and, where appropriate, actions to take to prepare for the changes ahead. You can download a copy on the Brexit hub on our website.