This paper contains a summary presentation of the negotiation, approbation, ratification and conclusion process of the draft United Kingdom withdrawal agreement and an overview of its main provisions relevant to the business community.
On 29 March 2017, the United Kingdom (hereafter the “UK”) notified its intention to withdraw from the European Union (hereafter the “EU”) and the European Atomic Energy Community (hereafter the “Euratom”). As per Article 50 of the Treaty on the European Union, the EU and the UK started to negotiate an agreement to settle issues raised by the withdrawal of the latter.
On 13 November 2018, the EU and UK negotiators agreed on a draft Agreement (hereafter the “Agreement”) on the withdrawal of the UK from the EU and the Euratom. Such “technical” agreement had to be approved at political level before beginning the ratification and conclusion process. On 14 November 2018, the UK cabinet approved the Agreement at political level. On the EU side, the European Council will meet on 25 November 2018 for the same purpose.
Once approved at political level, the Agreement shall be ratified by the UK and concluded by the EU. These require the prior authorization of the British Parliament for the UK and the European Parliament for the EU. The ratification and conclusion process shall be completed before the date on which the UK withdrawal will occur, i.e. 29 March 2019.
2.1. Transition period and application of EU law
The Agreement aims at governing the relationship between the EU and the UK during a transition period (hereafter the “Transition Period”) starting on 30 March 2019 and ending on 31 December 2020.
The Agreement sets out that as a matter of principle, EU law applies to and in the UK as if the latter remains an EU Member State until the end of the Transition Period except for
- EU provisions which were not binding upon and in the UK prior its withdrawal from the EU as a result of the various “opt-out” clauses obtained by this country;
- various political rights granted to EU citizens such as the right to petition EU institutions, the right to apply to the EU Ombudsman, or the right to vote and to stand as candidate in elections to the European Parliament; and
- the institutional rights of the UK allowing this country to nominate, appoint or elect members of EU institutions, agencies, offices and bodies, to participate in decision-making and to attend meetings of EU institutions.
The Agreement’s other provisions expend the application of certain EU provisions after the end of the Transition Period to establish special temporary or permanent regimes for specific situations, including situations beginning before the completion of the Transition Period but ending thereafter.
2.2. Four freedoms
The free movement and residence (including the right to be employed and self-employed, the right to establish and the recognition of professional qualifications) of EU citizens in the UK and UK nationals in the EU are guaranteed without a time limitation. EU citizens and UK nationals can therefore enter and exit respectively the UK and the EU with a valid passport or national identity card only, without any visa, on a permanent basis.
The EU and the UK
- can impose on respectively UK nationals and EU citizens a specific residential status which cannot impede on the free movement and residence; and
- are banned during five years from the end of the Transition Period to impose respectively on UK nationals or EU citizens to held biometric national identity cards for the purposes of entering or exiting their territory.
The free movement of goods will cease to be enforced on and in the UK from the end of the Transition Period. The UK will also leave the EU Customs Union from this date. However, a form of free movement of goods and customs union is provided by the special rules established in consideration of the specific situation of the island of Ireland and could apply after the completion of such Transition Period (see 2.5).
The free movement of capital and services will also cease to be enforced on and in the UK from the end of the Transition Period. From this date, the UK financial institutions will lose the benefit of the so-called EU “bank passport.”
2.3. Competition law
EU competition law will cease to apply to and in the UK at the completion of the Transition Period, subject to the competition provisions set out by the special rules provided in consideration of the specific situation of the island of Ireland which are inspired by EU ones (see 2.5).
However, and during a four-year period from this date, the European Commission remains competent to initiate administrative review procedures relating to State aids granted in the UK after the end of this Transition Period. Procedures started before the completion of said Transition Period can be pursued after the end of this four-year period.
2.4. EU Structural and Cohesion Funds
The UK and UK nationals will cease to benefit from the EU Structural and Cohesion Funds at the end of the Transition Period.
In exchange of a compensation, the Euratom will cease to own the special fissile materials in the UK at the end of the Transition Period. At the same date, the latter will take sole responsibility for insuring that ores, source materials and special fissile materials on its territory are handled in accordance with the applicable international treaties. It shall also establish a safeguard regime equivalent to the one of the Euratom.
2.6. Island of Ireland
Special rules are established in consideration of the specific situation of the island of Ireland and result mutatis mutandis into indirectly maintaining the whole UK in the EU Customs Union and implementing the free movement of goods and EU competition law on and in the UK.
As per these rules, the EU and the UK will form a “single customs territory” until the establishment of their future relationship (and not the end of the Transition Period). Therefore the “single customs territory” will remain in force after the completion of the Transition Period with no time limitation if the EU and the UK fail to set out their future relationship. This is the so-called “backstop” solution.
Under this “single customs territory” and in particular
- goods can move freely between the EU and the UK;
- the UK shall align its tariffs and customs rules with the EU Common Customs Tariff, rules on the origin of goods and rules on the value of goods for customs purposes and harmonize its commercial policy with the EU common commercial policy;
- EU law governing the wholesale of electricity shall apply to and in the UK in respect of Northern Ireland;
- EU State aids law applies to UK’s measures affecting trade between the UK and the EU and will be implemented by the EU and a UK independent authority (possibly the UK Competition Market Authority) within their respective territory; and
- specific competition provisions mirroring Articles 101, 102 and 105 of the Treaty on the Functioning of the EU or inspired by the EU Merger Regulation apply to trade between the EU and the UK which are responsible for their implementation within their respective territory; to this aim, the UK shall establish an independent authority (possibly the UK Competition Market Authority) and insure their private enforcement.
None of the special rules established in consideration of the specific situation of the Island of Ireland applies to the free movement of capital and services which will therefore cease to be binding upon and in the UK at the end of the Transition Period.
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Partner of Delcade heading its Economic Law Department and based in Paris and Brussels, Jérémy Bernard owns a fifteen-year experience in EU and French institutional, competition, distribution and consumer law as well as EU and French regulatory issues.