Welcome to our latest issue of Boardroom Brexit, marking the UK’s departure from the EU tonight, guiding you through the key timelines in the negotiations and recommending action you should consider taking.
The UK will leave the EU at 11.00 pm in London and midnight in Brussels. This short sentence belies three years of political division, anger, stalemate, the loss of political careers and the making of new ones, and the deep polarisation of British society which preceded it.
There is a sense in the UK, however, that the deed has now been done and it is time to move on.
Will anything change tomorrow?
No. The UK leaves the EU tonight in name only. It remains legally bound to the EU’s customs union and single market until the end of the transition period, set for 31 December 2020. It will have to apply all existing and new EU laws during this period and remains under the regulatory supervisor of the European Commission and judicial supervision of the Court of Justice of the EU. The only element of uncertainty arises from those third-country States with trade agreements with the EU who have yet to confirm that they will maintain the same rules on preferential access for UK imports during the transition. In the unlikely event that there is any change, we will keep you informed.
The UK’s EU (Withdrawal Agreement) Act 2020 postpones the 600 or so pieces of no-deal secondary legislation that would have come into force had the UK left today without a deal. The no-deal legislation will now come into force at the end of the transition, but may be amended further during the course of this year to reflect the outcome of the trade negotiations.
- Reduced scope and prioritisation While the UK and EU say they want a comprehensive trade agreement, the EU has confirmed that it will not be possible to negotiate one before the end of this year. Instead, both sides will have to prioritise certain sectors. Michel Barnier, the EU’s chief negotiator, has said that only a basic agreement could be negotiated in such a short time, covering trade in goods, level playing field rules (more detail below), the fisheries sector and internal and external security. He’s since confirmed that transport and aviation would be excluded, but has remained silent on whether trade in services would be included. We will know for sure what is included when the Commission releases its negotiating directives (the scope of what should be covered) in early February 2020. The UK is expected to adopt its own priorities in February too.
- Leverage The EU has made clear that:
- If there’s no agreement on access to UK fishing waters, there will be no trade deal at all. Therefore, expect fish to be the first chapter to be negotiated.
- If there’s no commitment to maintaining alignment with EU social, environmental and competition rules (so-called Level Playing Field rules) there will be no trade deal at all.
- The more access the UK wants to the EU’s single market, the more aligned to EU rules and regulations it will have to be.
- Timelines March Negotiations will start in earnest in March 2020. If the agreement is deemed to be a “mixed” agreement, meaning it covers Member States as well as EU “competences” (policies), it will have to be ratified by all EU Member States, and in some cases by their national and regional Parliaments too. This can take up to six months, leaving three months for the negotiations. Any deal, even if “EU-only,” will need some months to be ratified because the text needs to be legally revised, translated into all EU languages, and also approved by the European Parliament. June All of the above means there will be huge pressure on the UK Prime Minister, Boris Johnson, to agree to an extension of the transition. The decision to extend has to be agreed and reached by both the UK and EU by the end of June 2020. Q3/Q4 By late summer/early autumn this year, some, but far from all, of the chapters of the negotiations should have completed.
The extension of the transition
As we previously reported, section 33 of the EU (Withdrawal Agreement) Act 2020 prohibits a Minister from agreeing to an extension of the transition “in the Joint Committee” (the institution created by the Withdrawal Agreement to oversee its application). The UK government’s line remains very firm that no extension will be sought. One reason for this is that the UK intends to introduce a new immigration regime on 1 January 2021, ending the free movement of EU nationals into the UK. EU free movement rules would have to continue under an extended transition, so the UK’s new immigration regime would have to be postponed. We note, however, that a Minister has the power to amend the date of the end of the transition under the Act by secondary legislation – see section 39. This appears inconsistent with the prohibition in section 33 and may yet be the focus of keen attention in the run up to the end of June.
Action to take
- Monitor the negotiations The earlier you pick up key outputs for your sector, the better. The trade and customs lawyers and ex-UK and EU civil servants in DLA Piper’s UK and EU government and regulatory affairs teams can help you do this. Equally important, we can help you translate complex trade rules into meaningful commercial implications that your senior leadership team needs to understand.
- Influence the negotiations If your business will be affected by changes to UK-EU trade in goods, services and people at the end of the transition, this is the time to influence the outcome. Your competitors will be trying to do the same. The trade negotiations will be more heavily lobbied than the withdrawal negotiations because there are more long-term benefits to play for. DLA Piper’s UK and EU government and regulatory affairs teams can help you strategise to do this.
- Start preparing for the end of the transition in Q3/Q4 2020 Sign up to the UK government transition updates here and make sure you’re prepared for the regulatory changes which will follow the end of the transition. In our view, without an extension of the transition period the negotiations will go to the wire and there will be a rising sense of commercial uncertainty in Q4, similar to the periods last year when a no-deal Brexit looked more likely. Again, our Brexit team is here to help you.