The UK left the European Union at 11pm on Friday, 31 January. The UK Government's 80-seat majority in the House of Commons ensured that the Withdrawal Agreement Act, the legislation necessary to make the Withdrawal Agreement legally effective in the UK, passed.
On the EU's side, the Withdrawal Agreement was ratified by the European Parliament on Wednesday, 29 January.
Under the Withdrawal Agreement, a transition period (in Brussels terms) or an implementation period (in Westminster terms), comes into force until 31 December 2020.
During this time EU rules and regulations as they currently apply to your business remain the same. Any new EU laws that come into force during the transition period will also apply in the UK, although UK ministers will have no role negotiating them in Brussels.
Section 33 of the Withdrawal Agreement Act makes clear that it would be unlawful for a UK minister to ask for the transition period to be extended from 31 December. This prohibition has been put in place to bind the UK Government. Unless the section is repealed, any extension would be successfully overturned in a UK court.
Until the advent of coronavirus, such a repeal had seemed unlikely and made the 31 December deadline a rigid one.
However, the gravity and the unprecedented nature of the coronavirus situation has suddenly put the prospect of an extension back on the table. The government’s position has remained firm thus far, but is likely to be tested.
The EU will act on this deadline in good faith and limit the scope of the trade negotiations to what can be achieved in 11 months. The European Commission is working on a “basic package with a basic free trade agreement for goods linked to conditions of level playing field, governance, external and internal security and fisheries”.
The trade negotiations are being led by EU Chief negotiator, Michel Barnier, who stressed that the negotiations have to be phased. The first stage of talks will focus on duty-free zero-tariff trading in goods, a regulatory level playing field and access to fishing waters, all of which will be inter-linked by the EU. This means that, if there is no agreement on fishing, there can be no agreement on goods.
The UK delegation is being led by David Frost, a former diplomat and government adviser who has also chaired a number of British industry bodies during his career.
The parties published their negotiating objectives in February. The gap between their positions, particularly on level playing field and state aid, looks difficult, if not impossible, to bridge before 31 December. This was so even without coronavirus to contend with.
EU and UK negotiators are meeting (via video link) every 2-3 weeks in 11 parallel working groups. The UK’s stated position is that, if insufficient progress has been made by June, it is willing to walk away from the talks at that point.
Although the risk of a no-deal Brexit on 31 January 2020 has passed, businesses should still prepare for the UK leaving without a deal on 31 December 2020, or with a limited deal. The more limited in scope the UK-EU trade deal, the more no-deal planning remains relevant. DLA Piper's Brexit Director, Paul Hardy, told The Guardian:
"Cementing the end of the transition in legislation is a game-changer. It shows this is not a negotiating tactic. Businesses must now expect a limited trade deal in goods with the EU on 1 January 2021, but not in services; or the possibility of no deal at all. They should keep their no-deal Brexit planning warm: it may well come in useful in a year."
For more information on what businesses can do to prepare for the regulatory consequences of Brexit, read our latest Boardroom Brexit alert.
How DLA Piper can help
To discuss how we can help your business, please get in touch with your usual DLA Piper contact; Paul Hardy, our dedicated Brexit Director in the UK; Richard Sterneberg, head of our EU Government Affairs practice in Brussels; or Richard Bonnar, chair of the DLA Piper Brexit Committee. The key to navigating Brexit successfully is informed analysis, accurate forecasting and practical contingency planning.
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