European Commission updates its call to the 27 remaining nations to prepare for Brexit

Summary:

150 days to Brexit – and counting.

The European Commission update [COM(2018) 556 final/2 – issued in all EU language formats] - works from a starting position that: “there is no certainty that an agreement [on the terms of Brexit] will be reached.  And even if an agreement is reached, the United Kingdom’s relationship with the European Union will no longer be one of a Member State and thus, will be in a fundamentally different situation. 

The withdrawal of the United Kingdom from the European Union has repercussions for citizens, businesses and administrations in both the United Kingdom and the European Union.  These repercussions range from new controls at the EU’s (new) outer border, to the validity of UK-issued licences, certificates and authorisations all the way to new conditions for data transfers.

Therefore, everybody concerned needs to be prepared for the withdrawal of the United Kingdom from the European Union on 30 March 2019.

This Communication is to be seen in the light of the call of the EU27 Leaders to intensify preparedness at all levels and encourages all stakeholders that may be affected by the United Kingdom’s withdrawal to take the necessary preparedness actions and to take them now.

The notice looks at timing issues and the practical implications of the two scenarios that, with 150 days remaining until the point of exit of the UK from the EU – seem most likely.

Those responsible for planning their organisation’s transition to a post-Brexit World, should heed the EC warning, step up their business planning and audit the programme to ensure they will be in a position to implement the myriad of changes needed for a smooth change.

It is worth putting this in to the context of yesterday’s Brexit Partners insight (https://www.brexit-partners.com/blog/2018/10/25/how-close-is-the-uk-to-a-cliff-edge-brexit-maybe-closer-than-you-think) The latest date for a meaningful vote in Parliament is 19 January – and even if the outcome – be it “deal or no-deal” - is accepted at that time, we are counting in days the time left before Brexit at 23:00 GMT on 29 March 2019 to complete preparations and implement either: a temporary set of arrangements; or, a leap into the unknown from the ‘cliff-edge’ (as the European Commission describes the no-deal crash out of Europe on 30 March).  

The EC update:

It was planned to have the Withdrawal Agreement agreed by the European Union and the United Kingdom in October 2018 - accompanied by the political declaration on their future relationship.

This would have provided “just sufficient” time for the conclusion of the process in the European Union – European Council with the consent of the European Parliament- and the ratification in the United Kingdom. Each of the parallel paths are “demanding processes” in their own right.

There might be a transition period… but we need to prepare for all scenarios…and stakeholders and national and EU administrations need to prepare for two possible main scenarios:

  1. The Withdrawal Agreement is ratified before 30 March 2019.  It enters into force on that date.  EU law will cease to apply to and in the United Kingdom after a transition period -anticipated as 1 January 2021.

  2. No-deal.  In the absence of an agreement - or if the Withdrawal Agreement is not ratified in time by both parties. No transition period - and EU law will cease to apply to and in the United Kingdom as of 30 March 2019 (also referred to as the ʻno dealʼ or ʻcliff-edgeʼ scenario).

Main consequences of scenario 1 - “Withdrawal including transition period until 31 December 2020”:

  • The United Kingdom will be a third country;

  • In general, EU law would continue to apply during the transition period;

  • The United Kingdom would from 30 March 2019 no longer participate in EU decision-making, EU institutions, governance of EU bodies and agencies;

  • The role of EU institutions in the supervision and enforcement of EU law in the United Kingdom would continue;

  • The EU should negotiate with the UK an agreement on the future relationship which should ideally be in place (agreed, signed and ratified) at the end of the transition period and apply as from 1 January 2021.

Main consequences of scenario 2: “withdrawal on 30 March 2019 without agreement”:

  • The United Kingdom will be a third country and Union law ceases to apply to and in the United Kingdom;

  • There would be no specific arrangement in place for EU citizens in the United Kingdom, or for UK citizens in the European Union;

  • The EU must apply its regulation and tariffs at borders with the UK as a third country - including checks and controls for customs, sanitary and phytosanitary standards and verification of compliance with EU norms.  Transport between the United Kingdom and the European Union would be severely impacted.  Customs, sanitary and phytosanitary controls at borders could cause significant delays, e.g. in road transport, and difficulties for ports;

  • The UK becomes a third country whose relations with the EU would be governed by general international public law - including rules of the World Trade Organisation.  In particular, in heavily regulated sectors, this would represent a significant drawback compared to the current level of market integration;

  • Depending on the circumstances leading to the withdrawal without an agreement, the EU may wish to enter into negotiations with the UK as a third country;

  • UK entities would cease to be eligible as Union entities for the purpose of receiving EU grants and participating in EU procurement procedures.  Unless otherwise provided for by the legal provisions in force, candidates or tenderers from the UK could be rejected.

EC Advice to stakeholders:

  1. In order to be prepared for the withdrawal - and to mitigate the worst impacts of a potential cliff-edge scenario - all actors shoulder their responsibilities.

  2. Although the withdrawal of the United Kingdom may appear to be playing out at a high and rather abstract level between the UK and the EU: “its consequences will be very real for citizens, professionals and business operators.”

  3. Member States’ economies are closely inter-connected thanks to the Single Market, with integrated supply chains across borders and extensive cross-border provision of services.  The withdrawal may therefore have a significant impact on such economic operators.

  4. It is important that businesses of all sizes, including small and medium-sized enterprises (SMEs), prepare and take action now.

  5. Private actors, business operators and professionals need to take responsibility for their individual situation, assess the potential impacts of a cliff-edge scenario on their business model, make the necessary economic decisions and take and conclude all required administrative steps before 30 March 2019.  Citizens who will be affected by the withdrawal of the United Kingdom - as well as the public administrations that serve them - should also prepare for 30 March 2019.

  6. Industry associations – both at EU level and at national/regional level have a crucial role to play in relaying preparedness information to their members - and in particular to small and medium-sized companies.

  7. Embassies, consulates and population services have a similar role to play in informing citizens.

  8. In this respect, it is recalled that the EU regulatory framework that applies to third countries is in place already and should be known to stakeholders.  This regulatory framework remains unchanged on the withdrawal date.  The Commission has published notices to amend rules that will apply when the United Kingdom becomes a third country.

  9. While public authorities across the European Union of 27 Member States [will aim for] smooth transition, the legal framework cannot be adapted to at an individual level.

  10. Some companies are concerned by the need to exchange a UK authorisation for one issued by an EU27 authority or body.  

  11. Individual professionals may have to exchange a UK certificate for one issued in an EU27 Member State - or to request the recognition of their UK professional qualifications in an EU27 Member State. They are hereby encouraged to take the necessary action as quickly as possible.

  12. The European Union, national and regional authorities and trade organisations have published supporting information and designed tools to assist individuals and businesses but further efforts are needed, focussing in particular on small and medium enterprises.

Preparing for new procedures for Intra-EU trade when the UK as a third country:

  1. International traders are already aware of what trade with third countries outside the European Union means, in terms of customs declarations, sanitary and phytosanitary (SPS) controls, and so forth.  This includes: import formalities; compliance with the applicable Union legislation; and conformity assessment procedures.  

  2. Many companies have no experience with trade with third countries – and the Withdrawal of the UK from the EU represents the highest challenge for them.

  3. Information on trading with third countries is available on the EC website.  Some countries have set up dedicated webpages to help companies assess the impact and/or new procedures that will follow the withdrawal of the United Kingdom from the EU.  Use these if they are accessible to your organisation.

Member States

  1. While the United Kingdom becoming a third country will have significant implications for the European Union as a whole, the impact of Brexit on individual Member States will strongly vary depending on their vicinity to and the closeness of their economic ties with the United Kingdom, for example regarding shared infrastructure or the control of movement of goods and people. 

  2. Member States share the competence to legislate with the European Union in many policy areas, and their national and regional authorities are in charge of implementing and enforcing them.  Adaptations to national rules and guidance for stakeholders will be needed - as well as significant investments in personnel and infrastructures.  For instance: customs, sanitary and phytosanitary controls at the borders; competent authorities in charge of specific procedures; etc..  Regional authorities - especially those with legislative powers - but also local authorities should be involved in the preparations.

  3. Preparedness details and practicalities are discussed by experts of EU27 Member States during technical expert seminars organised by the Commission.  These informal seminars provide a platform for the Commission to provide explanations on, for example, the content of notices and enable Member States to raise issues of concern, address questions and share best practices.

  4. In addition to discussions at the EU level, several Member States have performed a comprehensive screening of the domestic needs for legislative changes and other adaptations of their legal instruments. Several have developed tools to support their economic operators to prepare for the withdrawal of the United Kingdom. 

  5. The Irish website 'prepareforbrexit.com' allows SMEs to assess their exposure to Brexit and find information on related events and support.  Ireland also offers funding to small and medium-sized enterprises of up to €5,000 for Brexit preparedness related expenses (i.e. preparing plans, attending events, building new contacts if there is a need for alternative suppliers, etc.). 

  6.  The Dutch authorities have created the web-based 'Brexit impact scanner' which can be used by SMEs to assess their exposure to potential problems related to the withdrawal of the UK. 

EU institutions, the European Commission and the EU agencies

The EU exclusively legislates in some areas – such as customs, trade, and fisheries, It shares with Member States in others – such as internal market, transport, energy, security.  Brexit preparedness and contingency measures are limited to raising awareness and facilitating discussions with concerned parties.  

European Commission work strands within its own remit:

  1. Legislative changes and other instruments; screening of the Union acquis and policy areas to ensure that the EU rules continue to function smoothly in a Union of 27 after Brexit;

  2. the Commission identified eight measures where adaptations will be necessary irrespectively of the outcome of the withdrawal negotiations;

  3. progress on these legislative proposals must be rapid and adoption must take place 30 March 2019;

  4. It is not legally necessary to amend or delete all references to the United Kingdom or its institutions and actors in existing EU legislation.  These references will simply become obsolete and redundant after withdrawal.  Modifications can be made when the legal acts concerned are reviewed and updated in the future for other reasons;

  5. The Commission may take necessary action by using the empowerments received from the European Parliament and the Council.

Some of legislative changes needed as a result of the United Kingdom’s withdrawal:

  1. Apportionment between the United Kingdom and the EU27 of tariff rate quotas included in the World Trade Organisation schedule of the Union- a necessary adaptation to ensure legal certainty and the continuous smooth operation of imports under the tariff rate quotas to both the Union of 27 and the United Kingdom.

  2. EU type approval legislation in the area of motor vehicles, etc. This will allow holders of UK type approvals to apply for new type approvals with EU27 type-approval authorities for the same types on the basis of the documentation and test reports presented in the context of the earlier UK type approvals.

  3. The EU's 2030 emissions target (expressed in percent) will need to be adapted to take account of the United Kingdom’s withdrawal.

  4. Regulatory lists of countries whose nationals are required to be in possession of a visa when crossing the external borders of the Member States, and the countries whose nationals are exempt from a visa requirement for stays of no more than three months.  The United Kingdom will have to be placed on one or the other list.

  5. Regulation on the Connecting Europe Facility will need to be adjusted to re-alignment of the North Sea-Mediterranean corridor - and design a new maritime route to link Ireland with the continental part of the corridor.

  6. Regulation on common rules and standards for ship inspection and survey organisations to ensure that the task of participating in the regular assessment of two recognised organisations is transferred from the United Kingdom.

Preparedness notices prepared by the Commission services.

  1. The EC started raising awareness end of 2017 through the publication of a large number of technical notices that set out the legal and practical implications of the withdrawal of the United Kingdom from the EU.

  2. The notices set out what the situation in the sector concerned will be after the withdrawal.  They are based exclusively on the factual and legal situation that would prevail after the withdrawal in the absence of any withdrawal agreement and do not contain any interpretation about the outcome of the negotiations or its impact on the rules in a specific sector.

  3. The Commission has published 68 such notices, covering for example the areas of health and food safety, transport, financial stability and financial services, environment, internal market, customs, civil justice, company law and professional qualifications. In several areas the notices are accompanied by Questions and Answers published on the website of individual Commission Directorates-General and services, or EU agencies.

 Relocation of EU agencies and bodies.

  1. Relocation of two London-based agencies - the European Medicines Agency and the European Banking Authority – moving to Amsterdam and Paris respecively, as of 30 March 2019.

  2. Other relocations include the Galileo Security Monitoring Centre; and reassignment of the tasks of the United Kingdom-based EU Reference Laboratories for animal diseases and food safety.   to laboratories in the EU-27 Member States. The relocation and reattribution work will have to be finalised by 30 March 2019.

Other work strands:

  1. The Commission is working on issues, including the disconnection and adaptation of databases and IT systems and other platforms for communication and information exchange to which the United Kingdom should no longer have access. 

  2. The EU - on its own, together with EU Member States or through EU Member States - is party to a vast number of policy areas covered by Union law.  The EU intends to notify its international partners of the withdrawal of the United Kingdom - once it has sufficient certainty about the outcome of the ongoing negotiations on the United Kingdom's withdrawal.

  3. The Commission Representation in the United Kingdom will close - and a Delegation of the European Union in the United Kingdom will be opened on 30 March 2019.

Conclusion of the EC Prepare for Brexit update, October 2018

  1. Preparing for the withdrawal of the United Kingdom from the European Union, in whatever scenario it may take place, is a matter for everyone.  The withdrawal will change the relationship and will have significant effects for the citizens and businesses of the EU of 27 Member States, some of which cannot be remedied.

  2. It is important that everyone – citizens, businesses, Member States and EU institutions – take the necessary steps to be ready and to minimise the negative impact that the withdrawal will have. 

  3. “The Commission invites the European Parliament and the Council to give priority treatment to the legislative proposals that are related to the withdrawal so that the acts can be in force by the withdrawal date. “

In tomorrow’s Insight, Brexit Partners will illustrate some of the specific sectoral impacts inherent in this European Commission paper.

 
John ShuttleworthComment