Boardroom Brexit - 15 September 2020
Round seven – more of the same
After the seventh negotiating round between the UK and EU concluded in what was to be the end of the calm before the storm, the UK’s Chief Negotiator, David Frost, said that “little progress” had been made and his EU counterpart, Michel Barnier, rated the chances of a deal as “unlikely”. In fact, Mr Barnier suggested that the direction of travel in the latest talks was “backwards more than forwards”.
Throughout the talks, state aid rules (as part of the so-called “level playing field”) and fishing rights have presented a problem. Given that the EU sees agreement in these areas as a prerequisite for an overall deal, the stalemate on these topics has been slowing talks in other areas more immediately relevant for the UK, such as financial services. Without agreement on these issues, the EU is unwilling to develop legal texts in other areas, even where both parties may be closer together. Once again, the parties have failed to make progress on these stumbling blocks.
The seventh-round highlighted divergence in other areas too. Notably in road transport, which was discussed on the first day of round seven, Brussels made clear that it would not allow UK hauliers’ rights of cabotage to remain unchanged, as that would amount to granting third party operators rights the EU sees as equivalent to those of Union businesses.
The UK Internal Market Bill – a spanner in the works?
The prelude to the eighth negotiating round was dramatic, with Northern Ireland Secretary Brandon Lewis admitting that the government might break some of its international legal obligations under the Northern Ireland Protocol, part of the EU Withdrawal Agreement treaty, in a “specific and limited way”, by means of the Internal Market Bill (draft UK legislation) published last Wednesday. Prior to the eighth round, UK Prime Minister Boris Johnson also clarified the UK’s position – a free trade deal with the EU would have to be concluded by 15 October 2020 (the date of a European Council meeting) or else the UK will leave the EU with no deal, an outcome the Prime Minister described as “good”.
The introduction of the Internal Market Bill received condemnation from the EU and has also been criticised from within the UK. If the Bill is passed, the UK will avoid some of its obligations under the Northern Ireland Protocol. An emergency meeting of the EU-UK Joint Committee was held, and afterwards the European Commission Vice President Maroš Šefčovič stated that “Violating the terms of the Withdrawal Agreement would break international law, undermine trust and put at risk the ongoing future relationship negotiations.” Mr Šefčovič requested that the UK withdraw the UK Internal Market Bill by the end of September 2020, or otherwise face legal proceedings. The UK Government stood firm, and “made clear that the legislative timetable for the Bill would continue as planned.”
Under the Bill, UK ministers would have the power to disapply or modify customs procedures carried out for goods moving from Northern Ireland to Great Britain and determine how state aid law is applied, even in cases that would affect competition in Northern Ireland and thereby in the EU Single Market – running contrary to the Northern Ireland Protocol and thereby the UK’s international obligations. In doing so, the UK government aims to effectively ensure the level playing field within the internal market (Scotland, Wales, Northern Ireland and England). The Internal Market Bill also includes mutual recognition and non-discrimination provisions, in an attempt to ensure that both goods and services can be provided freely within the United Kingdom.
Look out for our recent Trade Truths technical article which discusses the UK Internal Market Bill and the Northern Ireland Protocol in more detail, published recently on our DLA Piper Trade Truths page.
The state of play – little to show
The eighth negotiating round between the UK and EU has concluded and the end of the transition period is now firmly in sight. Michel Barnier noted that “Significant differences remain in areas of essential interest for the EU” including on the level playing field “on social, environmental, labour and climate standards.” David Frost also noted that “a number of challenging areas remain and the divergences on some are still significant”, but reaffirmed the UK negotiation team’s commitment “to working hard to reach agreement by the middle of October”.
There are too many such gaps and disagreements at this late stage for comfort. Disagreement over the UK’s implementation of the Northern Ireland Protocol is likely to further divert attention and resources on both sides away from the already stalling technical talks. Moreover, it has created an additional political hurdle, with the European Parliament threatening to veto any agreement on a UK-EU trade deal should the contested provisions of the Internal Market Bill be implemented.
We are entering the last chance saloon. The transition may expire at the end of the year, but a deal would need to be struck long before that – realistically in the next few weeks – if it were to have time to be ratified by the UK and EU parliaments. The EU’s internal arrangements might also require national (and in some case regional) legislatures to approve the agreement before it enters into force, in some cases even preventing provisional application of some provisions. More talks are scheduled to be held this week.
Brexit planning guidance
The UK Government provides a Transition advice page on its website, featuring the slogan “Check, Change, Go”. This highlights the key actions businesses should be taking to be ready for the new environment that begins on 1 January 2021. It includes specific checklists for importers and exporters, as well as for EU and UK citizens living either side of the Channel.
The EU Commission’s task force for relations with the United Kingdom has similarly published a Communication on readiness at the end of the transition period, as well as a Brexit readiness checklist for companies doing business with the UK. This notably includes several elements of advice applicable for any possible outcome of the ongoing negotiations that businesses should be ready for. The Commission stresses that “there will be far-reaching and automatic changes and consequences for citizens, consumers, businesses, public administrations, investors, students and researchers, as of 1 January 2021”.
What should you be doing
Act now – don’t wait for a breakthrough that may never come.
Make use of government guidance on Brexit planning and start preparing for no deal. Get your contingency plans into place, factoring in adjustments in the event of a last-minute deal.
In a little over 100 days’ time trade between the UK and EU may be on WTO terms. Is your business ready?
How can we help you?
DLA Piper’s team of lawyers, trade professionals and government affairs consultants in London and Brussels are here to assist you in your future preparations.
Our market-leading Brexit practice has a strong track record of helping clients prepare. We can carry out audits of your contractual agreements to assess their exposure to Brexit and undertake legal, commercial and human resources impact assessments, to identify areas requiring action.
From relocation to restructuring, we can then help you to implement your contingency plans, drawing upon our full service, global capabilities.
