Twentieth Report of Session 2019–21 Contents

3EU preparations for the end of the post-Brexit transition period5

This EU document is politically important because:

  • it contains the European Commission’s description of the new barriers to trade between the UK and the EU when the UK leaves the Single Market and Customs Union at the end of the post-Brexit transition period on 31 December 2020; and
  • the Commission has not confirmed whether it intends to ‘reactivate’ earlier EU contingency measures to mitigate any disruption in UK-EU trade, especially for road and air transport links, if no trade agreement is in place by the end of the year.

Action

  • Draw the European Commission’s policy paper to the attention of the Committee on the Future Relationship with the EU, the Business, Energy and Industrial Strategy Committee, the International Trade Committee, the Transport Committee, the Treasury Committee and the Northern Ireland Affairs Committee.

Overview

3.1The UK left the European Union on 31 January 2020 but stays in its Single Market and Customs Union until the end of a transitional period on 31 December. At that point, the practical consequences of Brexit for UK businesses and residents when trading with or travelling to the EU will take effect. In July 2020, the European Commission published a policy paper summarising the EU’s view of the impact of the end of the transitional arrangement on UK-EU trade in particular, and how some of the disruption might be mitigated by the outcome of the UK-EU trade negotiations.

3.2Given the slow progress in those trade talks, both sides have also begun considering unilateral measures to mitigate the impact of the UK’s exit from the Single Market and Customs Union. However, the Government has gone much further — for example by delaying the application of full customs and regulatory controls on goods imported from the EU for a further six months until July 2021– than the EU, which expects its Member States to apply the full suite of EU rules to goods and services imported from the UK from 1 January 2021. However, the EU has previously considered limited and temporary contingency measures to mitigate any disruption in its relationship with the UK in the fields of air and road transport, fisheries and financial services. It is unclear to what extent it intends to reactivate those unilateral policies if the UK-EU negotiations do not result in an agreement by the end of the year.

3.3Given the Committee’s remit of scrutinising the impact of EU law and policy for the UK, we examine the substance of the Commission’s paper in greater detail below. We have also considered what, if any, unilateral measures the EU might take as the end of the transition approaches if there is no trade agreement with the UK in place.

The transitional arrangement in the Withdrawal Agreement

3.4The UK left the European Union on 31 January 2020. While it ceased to have political representation within EU bodies and institutions on that day, under the terms of the Withdrawal Agreement approved by Parliament, the UK stays part of the EU’s economic and security arrangements until the end of a transitional period on 31 December 2020. In practice, this means the UK is still in the Single Market and Customs Union, and therefore its trading arrangements with the EU remain unchanged, until that date. In addition, the UK retains access to justice and home affairs mechanisms like the European Arrest Warrant for the duration of the transition.6

3.5However, this also means that the UK remains bound by EU law as if still a Member State and it is subject to the powers and jurisdiction of the European Commission and the Court of Justice of the EU (CJEU) until the end of the transition. The justification for this arrangement advanced by the Government is that it “provides certainty to businesses and individuals and ensures they only have to adjust to one set of changes in line with the future relationship with the EU”.7

The European Commission’s Communication of 9 July 2020

3.6The European Commission, like the Government, has published a range of information notices on the specific implications of the UK’s withdrawal from the Single Market — now due to happen on 31 December, rather than when the UK formally exited the EU on 31 January — for specific sectors and business activities since 2018.8 To bring this information together, on 9 July 2020 the Commission published a more comprehensive policy paper on “readiness at the end of the transition period between the European Union and the United Kingdom”. It focuses on the consequences of the UK’s exit from the EU’s Single Market and Customs Union, where there will be direct ramifications for individuals and businesses, summarising the contents of its readiness notices on a sector-by-sector basis.

3.7While we do not repeat the detail of the Commission notices here, which cover a vast range of areas from the recognition of UK drivers’ licences to food safety, it is clear that the overarching message in the document is that, at the end of the transition period, the UK’s relationship with the EU will change drastically in practical terms in a way it did not when it actually ceased to be a Member State on 31 January. In particular on 31 December 2020 the UK will fully exit the Single Market and Customs Union and be treated as a ‘third country’. Focussing on the ability of the UK to sell goods and services into the EU, the Commission describes how this will impose certain barriers to trade automatically by operation of EU law.

3.8As we and other Committees have set out in previous Reports, the EU’s default market access and trade arrangements for the UK will be very different from the current situation when the transition period ends:

3.9The Commission’s policy paper does not cover consequences of the end of the transition related to the UK’s exit from EU justice, home affairs and security arrangements including the European Arrest Warrant. We continue to assess the implications of the end of the transition period for law enforcement cooperation separately, and therefore do not cover them here.11

3.10The economic, social and political impact of the change in the UK’s legal status under EU law in both the UK and the EU remains a matter of debate and is likely to remain controversial for some time. Given the likelihood of disruption in trade and travel that these changes will entail12 while the economic ramifications of the COVID-19 crisis are still significant, the Commission also pointedly refers to the Government’s decision not to extend the transition period into 2021 — as had been possible under the Withdrawal Agreement13 — to delay any disruption in UK-EU relations caused by the end of the transition until a later date.14

3.11The Commission also warns that the impact of these changes will, at best, be mitigated only partially by the outcome of the UK-EU negotiations on a new treaty or new treaties to underpin a new post-Brexit relationship, and that the EU will only take limited unilateral action to prevent disruption to trade in goods and services between the EU and the UK at the end of the transition. It states categorically that “inevitably, the fact that the United Kingdom will no longer participate in [EU] policies as of the end of the transition period will create barriers to trade in goods and services and to cross-border mobility and exchanges that do not exist today”. We assess the potential mitigations available to both the UK and the EU with respect to any disruption at the end of the transition, on a bilateral or unilateral basis, in more detail below.

Trade facilitation and market access under a new UK-EU trade agreement

3.12The European Commission document describes the default position on how imports of goods and services from the UK will be treated from the end of transition, based on the relevant EU legislation. However, the EU can agree to diverge from that standard approach via preferential bilateral or multilateral agreements that supersede those rules. For example, imports of animal products like lamb meat from New Zealand face a lower physical inspection rate on entry into the European Union under a bilateral sanitary agreement, rather than the default rate under EU law.15

3.13Similarly, the substance of a new UK-EU trade agreement could to some extent mitigate the barriers to trade that will arise when the UK leaves the Single Market and Customs Union. As such, the conditions under which UK-EU trade will take place from the end of the transition period may be different in certain respects from the “default” picture painted by the Commission in its paper. Indeed, the document acknowledges as much: although it states that it is describing “main areas of change that will take place in any event as of the end of the transition period, whether there is an agreement on a future partnership between the European Union and the United Kingdom or not”, the summary of those changes for certain sectors makes clear the outcome of the negotiations on the new economic relationship could make a difference.

UK-EU trade in goods

3.14The key area of the future relationship under negotiation in this respect is the level of customs duties on trade in goods between the EU and the UK.

3.15Both sides have agreed to seek a continued absence of tariffs on bilateral trade in goods, but have very different views with respect to the wider “level playing field” conditions that should be attached to make this a possibility.16 In any event, the Commission and Government have both emphasised that even if the two sides conclude a zero-tariff, zero-quota trade agreement, this will not eliminate border controls on goods exported from the UK to the EU and vice versa. While it would, in principle, remove the need for the payment of tariffs, paperwork and physical checks which are currently absent on UK-EU trade will still be required, for example to apply “rules of origin” to verify a good meets the conditions for tariff-free importation, to ensure collection of other import taxes (notably VAT and excise duty) and to perform regulatory checks.

3.16The Government is not pursuing the continued absence of border controls on trade in goods because the EU had insisted this would require continued regulatory alignment with European law (as demonstrated, for example, by the extensive alignment provisions contained in the aforementioned Protocol on Northern Ireland).17 The Prime Minister, in his negotiating objectives for the new UK-EU relationship, has been explicit that his Government “will not agree to any obligations for our laws to be aligned with the EU’s”.18 It is noteworthy that this “red line” precludes the UK from pursuing all the facilitations for trade with the EU for which precedent already exists in the EU’s trade relations with other countries outside the Single Market and Customs Union.

3.17The most eye-catching example of this is the Government’s decision not to seek a reciprocal waiver for Safety and Security Declarations for UK imports into the EU.19 Such documentation is required under EU law in advance of cargo arriving in its territory to enable customs officers to assess potential safety risks associated with incoming goods, alongside traditional customs declarations (which serve, for example, to determine the applicable tariff or rules of origin). The European Commission is expected to require Safety and Security Declarations to be submitted for imports from the UK that arrive by sea from any British port, including Dover, at least two hours before arrival in the EU.20 The haulage industry has warned that the impact of transport operators having to complete 220 million such declarations annually — especially across the Channel, where the EU time limit essentially requires the form to be submitted before a truck has even rolled onto the ferry, or risk being turned away by French or Belgian customs — could cause delays at ports.21

3.18While Norway and Switzerland have negotiated the removal of this requirement on their trade with the EU by agreeing to maintain “an equivalent level of security through measures based on legislation in force in the [EU]”, the Government has apparently rejected this possibility because it would be contrary to its determination to avoid any alignment with European law.22 Instead, the EU has characterised the Government’s approach as one of wanting to remove customs formalities on UK-EU trade by having British rules and procedures ”recognised as equivalent, while refusing to commit to the necessary compliance checks and monitoring, or alignment to EU rules where necessary”. The extent to which this approach will be successful in reducing the practical customs procedures that will become applicable to UK-EU trade when the UK leaves the Single Market and Customs Union on 31 December is unclear.

UK-EU trade in services

3.19As regards trade in services, the Government is actively seeking new bilateral arrangements with the EU that would preserve, to a limited extent, the ability of British companies in certain sectors to operate across the EU without needing to establish a physical presence in an EU Member State first.

3.20For example, the UK has proposed ambitious arrangements with the EU on mutual recognition of professional qualifications, the ability of UK professionals like solicitors to perform their activities within the EU for short periods, and restrictions on the ability of either side to withdraw “equivalence” decisions that grant market access rights for financial institutions. The EU has shown little enthusiasm for these proposals, with its Chief Negotiator, Michel Barnier, describing them as an attempt to “pick and choose the most attractive elements of the Single Market without the obligations [to follow EU law]”. He has also been explicit that the EU may have an interest in rejecting some of the UK’s proposals, as part of a longer-term EU objective to force relocation of economic activity from Britain into the European Union.23

3.21Presumably for this reason, the Government’s proposed bilateral mitigations to facilitate UK-EU trade in services from January next year are not explicitly referenced in the Commission paper, reflecting the difficulty the British negotiating team faces in persuading the EU to build on the — limited — default market access for UK services providers under EU and Member State law with these proposed preferential arrangements.

3.22The Commission does, nevertheless, accept that there is the potential for preferential arrangements between the UK and the EU as regards trade in services. In particular, with respect to air and road transport operations, the European Commission notes that “the access rights that EU operators and UK operators will have to each other’s respective markets will depend on the outcome of the negotiations between the EU and the United Kingdom”. Similarly, when it comes to the coordination of social security entitlements for workers who move between the UK and the EU from 1 January 2021, it refers to the possibility that “under a future partnership agreement with the United Kingdom […] certain social security entitlements could potentially be ensured […] for instance on health care costs or pension rights”, even if these will not offer “the same extensive cross-border social security protection as under current [EU] rules”.

3.23More generally, a trade agreement between the UK and the EU could in theory contain an implementation phase during which the UK’s participation in — and therefore trade arrangements with — all or parts of the Single Market and Customs Union is maintained beyond the end of the transition period set out in the Withdrawal Agreement. Such an arrangement would constitute a reversal from the normal situation, where trade agreements routinely are phased in gradually from more to fewer trade barriers. Instead — like the transitional arrangement does at present — it would defer the application of such barriers until the new base line envisaged by the trade agreement is fully in place after one or multiple deadlines where the UK’s rights and obligations as a participant in the Single Market and Customs Union fall away. Neither the EU nor the UK have to date proposed a phased implementation of the new trade agreement of this kind to date, by default implying the UK-EU relationship will change significantly as soon as the transition period ends even if a deal is in place.24

3.24Overall therefore, at present it appears there is some scope for bilateral arrangements to offset the fundamental changes that will occur in UK-EU trade at the end of the transition period, but their impact is likely to be limited. The negotiations are not intended to avoid the application of customs and regulatory controls on UK trade in goods with the EU (even if there is a “zero tariff” trade agreement), or the loss of the passport for British services providers. As such, both the EU and UK have also turned to certain unilateral arrangements, to be taken and revoked at their own discretion, to mitigate any disruption to UK-EU trade and transport links from 1 January 2021. We consider this further in the next section.

Unilateral EU measures related to the UK’s exit from the Single Market and Customs Union

3.25In areas where a new UK-EU agreement does not aim to mitigate the impact of the former’s withdrawal from the Single Market (or if no such agreement is in place by the end of the transition period), the new barriers to trade between the two sides would, in principle, be as described in the Commission paper of 9 July 2020.

3.26However, these barriers would arise from the internal legislation of the UK and the EU, as well as its Member States, on the default treatment of imports and overseas services providers. As such, it is open to both sides to amend relevant legislation unilaterally to mitigate any disruption at the end of the transition period, subject of course to their respective international obligations (for example at the World Trade Organisation). This gives the UK and EU the flexibility to introduce domestic measures to lessen any disruption that could not be agreed bilaterally. It is inherently also less stable than a bilateral arrangement because it can be modified or revoked unilaterally and can lead to asymmetric situations where one party is taking more drastic measures to avoid trade disruption.

3.27This is, in fact, what has already happened. The UK Government in spring 2020 announced its intention to defer the full application of customs and regulatory controls to goods imported from the EU until July 2021 to give “industry extra time to make necessary arrangements”. The UK is also taking a liberal approach to the continued provision of services by EU companies, for example having granted a “adequacy” decision allowing personal data to flow from the UK to the EU until at least 2024 and permitting EU financial services to continue operating on the British market temporarily beyond the end of transition on the basis of their European licence.

3.28The EU, however, is not reciprocating these UK measures.25 While the European Commission and the individual Member States have of course made a variety of practical preparations in anticipation of the UK’s exit from the Single Market and Customs Union, and individual EU countries retain a wide margin of discretion whether they want to allow UK services providers to operate in their territory (see above), specific EU-wide mitigation measures to offer the UK preferential market access or trade facilitations on a temporary basis beyond the end of the transition period are likely to be rare.

3.29In particular, the EU intends to apply its full suite of customs and regulatory controls to goods imported from the UK immediately after the end of the transition period on 1 January 2021. The only partial exemption of which we are aware in this respect — aside from the unique arrangements for the island of Ireland set out in the Withdrawal Agreement — is the fact that British seafood exports entering the EU at Calais after crossing from Dover will be allowed to travel onwards to an inspection point at Boulogne for customs and sanitary controls, deviating from the usual requirement that such food products should be inspected at their immediate point of entry into the EU.26 This will relieve some pressure on the new customs and regulatory infrastructure at Calais and, to a limited extent, facilitate exports of UK seafood products to the EU.

3.30With respect to services, the European Commission has announced it will adopt a specific legal act giving market access to British “Central Counterparties” — a key part of the financial market infrastructure for derivatives trading — because the EU lacks its own capacity in this area (but it is actively putting pressure on the industry in the UK to relocate activities to the EU).27 However, it is not reciprocating the UK’s approach of giving British financial firms more generally the continued ability to operate within the EU on the basis of their UK licence, forcing them to comply instead with the applicable domestic rules in every EU country where they want to operate when they lose their Single Market passport. Similarly, it is not yet clear if the EU will agree to an “adequacy” decision for the UK’s data protection regime by the end of transition, which has significant implications for flows of personal data from the EU to the UK and sectors that rely on such flows.28

3.31There is however a possibility that the EU may implement some further — limited — unilateral measures to mitigate disruption to UK-EU trade beyond the end of the transition period.

3.32In particular, before the Withdrawal Agreement was ratified, the EU created a temporary legal framework giving UK airlines and road transport operators preferential access into its market.29 This would have allowed UK firms to move goods and passengers to and from any EU Member State on a larger scale than would be the cause for a “third country” without bilateral transport agreements with the EU, albeit without fully replicating the freedom to provide services those firms enjoy at present as part of the Single Market.30 Moreover, this temporary preferential access was made conditional on continued UK compliance with EU employment, State aid and transport legislation, and was subject to unilateral revocation by the EU at its own discretion. Similarly, the EU put in place legislation for the temporary continued recognition of UK-issued safety certificates relating to certain aeronautical products, parts, appliances and companies in the aviation industry, which would otherwise lapse when the UK leaves the Single Market.

3.33Aside from the transport services sector, where any disruption would naturally also have an impact on trade in goods, the EU also put in place contingency measures to deal with the UK’s withdrawal in two other areas: fisheries and financial services.

3.34With respect to the former, in anticipation of the UK’s withdrawal from the Common Fisheries Policy without a new UK-EU fisheries agreement in place, a new Regulation was adopted that created a simplified framework to allow the EU to easily grant fishing authorisations to UK vessels to enter EU waters, should reciprocal access rights to waters be confirmed by the UK Government based on the quota allocation already agreed for the whole of 2019.31 The UK Government has made restrictions on access by EU boats to its fishing grounds one of the key objectives of its post-Brexit strategy, and Ministers have not confirmed whether they intend to grant such reciprocal access. The EU therefore also set aside additional reserves within its Maritime and Fisheries Fund to support fishing communities affected by a lack of access to UK waters.32

3.35In financial services, the EU’s Brexit contingency measures focussed on the “post-trade” market infrastructure in which the UK is dominant and which EU-based companies could not feasibly replace at the necessary scale before the UK’s withdrawal. This included the aforementioned, time-limited equivalence decision for British Central Counterparties to allow them to continue facilitating derivatives trades in the EU,33 as well as equivalence for UK-based Central Securities Depositories.34 It should be noted that, unlike the transport and fisheries measures described above, the legal framework for these arrangements already existed and the UK is not unique being able to secure preferential market access for these types of services in this way.35 The Commission also used its paper on the end of the transition period to announce that it is not currently considering UK equivalence for a number of financial sectors as part of the new economic relationship at all, ostensibly because “the EU legal framework is not yet fully in place” for areas including investment services and prospectuses, accounting, statutory audits, and certain exemptions from the EU’s market abuse and short-selling rules.36

3.36The above EU contingency measures, had they taken effect, would be time-limited to put further pressure on the Government to agree to bilateral arrangements with the EU in the areas they cover, which provide greater stability but could also ‘lock in’ a UK commitment to continued regulatory alignment with European rules. However, the EU’s mitigating measures in the field of transport, fisheries and financial services automatically lapsed when the UK ratified the Withdrawal Agreement and the transitional period took effect. Their “reactivation” — or the introduction of similar unilateral measures not put in place previously — would require a formal proposal or legal act by the European Commission to that effect, as well as the agreement of qualified majority of the 27 Member States and — in certain cases — the approval of the European Parliament.37

3.37The Commission’s paper of 9 July 2020 does not provide any clarity about its intentions in this regard, most likely as a way of applying additional political pressure on the UK by deferring any mitigating measures for as long as possible.38 The sole exception is the aforementioned “equivalence” decision for UK-based Central Counterparties, which is expected to be published in the near future. The Commission has not made any commitments to reintroduce the special unilateral arrangements for transport or fisheries described above, nor confirmed whether it intends to reactivate the equivalence decision for UK-based Central Securities Depositories.39

The Government’s position

3.38During the post-Brexit transition period, the Government continues to submit to Parliament Explanatory Memoranda setting out its position on important EU documents and proposals produced by the European Commission.

3.39The Cabinet Office published such a Memorandum on the Commission’s policy paper on 28 July 2020 which detailed the consequences of the end of the transition period. Signed by the Rt Hon. Michael Gove MP, the Chancellor of the Duchy of Lancaster, the Memorandum reinforces the message that the requirements for conducting trade between the UK and EU will change significantly on 1 January 2021 irrespective of the outcome of the trade negotiations. Although the Minister refuses to echo the Commission’s language about the UK’s exit from the Single Market and Customs Union creating “barriers” to such trade, focussing on the trade in goods element he “welcomes the infrastructure and resourcing preparations that the EU is making in respect of border requirements” and says the Government “would encourage further preparations and engagement to facilitate flow at the border”.40

Conclusions

3.40The UK’s exit from the Single Market and Customs Union on 31 December this year will have significant consequences for businesses and individuals in both the UK and the EU. The European Commission’s recent paper on the end of the transition period, like the notices issued by the UK Government, underlines the scale of the change.

3.41The Committee will continue to closely follow any discussions at EU-level on specific measures to mitigate potential disruption at the end of the transition period. Such measures may include new bilateral arrangements agreed between the UK and the EU, for example a new system on market access for road and air transport or a gradual phase-in of the new customs and regulatory controls that will apply to UK-EU trade in goods. In the absence of bilateral agreements, it could also consist of unilateral measures the EU may adopt as it did in 2019 in anticipation of a potential “no deal” Brexit.

3.42In particular, the Committee will focus on the potential reactivation of earlier EU contingency measures put in place before the Withdrawal Agreement was ratified and the current transitional arrangement took effect. Of particular note is that, should there be no UK-EU agreements on air and road transport in place by the end of the transition period and the EU ‘reactivates’ its earlier contingency measures to maintain traffic flows, the Government will face a politically difficult decision. It could stand by its rejection of any alignment with EU transport and employment rules, which the EU set as a precondition for continued preferential market access for British airlines and hauliers if it legislates to that effect unilaterally, or risk further disruption to cross-border supply chains and passenger transport between the UK and the EU.

3.43We will continue to report any relevant developments with respect to the EU’s preparations for the end of the transition period to the House. In the meantime, we draw the European Commission’s paper, and our assessment thereof, to the attention of the Committee on the Future Relationship with the EU, the Business, Energy and Industrial Strategy Committee, the International Trade Committee, the Transport Committee, the Treasury Committee and the Northern Ireland Affairs Committee.


5 Communication from the Commission: Getting ready for changes Communication on readiness at the end of the transition period between the European Union and the United Kingdom; 9538/20, COM(20) 324; Legal base: – ; Department: Cabinet Office; Devolved Administrations: Consulted; ESC number: 41394.

6 Germany, Austria and Slovenia, for constitutional reasons, no longer extradite their nationals to the UK on the basis of the European Arrest Warrant since the start of the transition period.

7 HM Government, “Explainer for the agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union“ (14 November 2018). The provisions on the transitional arrangement in the Withdrawal Agreement as ratified in January 2020 are identical to those initially negotiated while Theresa May MP was Prime Minister and put to Parliament in early 2019.

8 It is in the process of updating those, as they were originally drafted before it was known whether the UK and EU would ratify the Withdrawal Agreement. That Agreement contains a number of transitional provisions, especially with respect to commercial transactions between the UK and the EU initiated before the end of the transition period, which change the effect of the UK’s withdrawal from the Single Market and Customs Union. For example, under Article 147 of the Agreement, no customs duties will be payable on goods which were shipped from the UK before the end of transition but do not reach their final destination within the EU after it had ended.

9 The UK-EU Joint Committee established by the Withdrawal Agreement is empowered to take certain decisions to adjust how these border controls will work on intra-UK trade, but these have not yet been agreed at the time of consideration of this Report. The Government on 9 September 2020 introduced the Internal Market Bill in Parliament, which — if passed as published — would allow it to override certain provisions of the Protocol as a matter of domestic law (the implications of which for the overall functioning of the Protocol are unclear). The unique position of Northern Ireland was subject to a comprehensive Report by the Northern Ireland Affairs Committee in July 2020: Unfettered Access: Customs Arrangements in Northern Ireland after Brexit (First Report of Session 2019–21), HC 161, 8 July 2020.

10 In some cases, the EU has legislated with respect to third-country access for the provision of a specific type of service, in which case individual EU countries must observe those rules. This is the case, for example, with respect to transport and insurance services.

11 See for example our recent assessment of the UK’s access to the “Prüm” database on exchange of DNA material.

12 The UK Government is also acknowledging the potential for disruption, with the Department for Transport in August 2020 launching a consultation on management of traffic in Kent if lorries are unable to pass through the port and toward Calais without causing traffic jams. The document specifically refers to the fact that “at the end of the transition period, the UK will be treated as a third country with respect to EU rules, which creates new potential sources of disruption for the Short Straits” because “the French authorities will impose full EU customs and controlled goods checks on all goods travelling from GB to the EU’s customs territory”.

13 Article 132 of the Withdrawal Agreement allowed for the transition period to be extended once, for a period of no more than two years. However, that possibility to make use of this option expired on 30 June 2020.

14 The Commission document states: “The choices made by the United Kingdom’s government on the future relationship and on not extending the transition period mean that these inevitable disruptions will occur as of 1 January 2021 and risk compounding the pressure that businesses are already under due to the COVID-19 outbreak.”

15 The default sanitary inspection rates for animal and food imports into the EU are established under the Official Controls Regulation (Regulation 2017/625).

16 Of particular contention are the EU’s demands in the field of new domestic subsidy controls (“State aid”) in the UK. See for more information the Report of the Committee on the Future Relationship with the EU, “The need for progress in the negotiations“ (First Report of Session 2019–21, 17 June 2020) and also our Report of 16 July 2020 on the EU’s new approach to foreign subsidies.

17 This is echoed by the Government itself in its recent publications on preparing businesses for the end of the transition period. For example, in its new “Border Operating Model“ for trade in goods between the UK and the EU from 1 January 2021, it states: “Heavy Goods Vehicle (HGV) drivers will need to have evidence that EU import requirements have been met for the goods they are transporting [from the UK to the EU]. These include customs or transit declarations and any other commodity-specific approvals such as Export Health Certificates. This will be true regardless of the outcome of negotiations and whether the UK and the EU conclude a Free Trade Agreement” (emphasis added).

18 HM Government, “The Future Relationship with the EU: the UK’s Approach to Negotiations“ (27 February 2020), p. 3. The same document also states the UK “will not agree to any obligations for […] the EU’s institutions, including the Court of Justice, to have any jurisdiction in the UK”. However, it has since conceded that the Court of Justice could have jurisdiction over funding agreements between the European Commission and British recipients of EU funding under EU scientific programmes in which the Government is seeking continued UK participation.

19 Similar documentation will also be required under EU law for EU exports to the UK. They are also known as Entry and Exit Summary Declarations.

20 The European Commission introduced the two-hour time limit for submission of Safety and Security Declarations on imports from the UK in December 2018, when it was not yet clear if there would be a transitional period. See Commission Delegated Regulation 2019/334. That Regulation lapsed when the Withdrawal Agreement was ratified and the transitional period took effect. In light of the Government’s decision not to negotiate a waiver, it is likely to be reintroduced by the European Commission in time for the end of the transition.

21 The Daily Telegraph, “Truckers face paperwork mountain after Britain opts against fast-track security checks agreement with EU” (8 March 2020).

22 There is no indication that the refusal to seek a UK-wide waiver from Safety and Security Declarations on trade with the EU is based on concerns about the substance of the latter’s customs security rules (which were, of course, agreed while the UK was an EU Member State). The UK will also require such declarations on goods exported to or imported from the EU (like it does for the rest of the world). The UK is, however, seeking the EU’s agreement to waive the need for Safety and Security Declarations (and export declarations more generally) on goods moved between Northern Ireland and Great Britain under the aforementioned Protocol in the Withdrawal Agreement. The outcome of those efforts is not yet known.

23 In a speech on 10 June 2020, Mr. Barnier told the European Economic and Social Committee: “As [the UK] prepares to leave the Single Market and the Customs Union, we must ask ourselves whether it is really in the EU interest for the UK to retain such a prominent position. […] Do we really want the UK to remain a centre for commercial litigation for the EU, when we could attract these services here?”

24 Any implementation arrangement of this nature would most likely face significant political opposition, given that it might be seen as a de facto extension of the transitional period if — as the EU would undoubtedly insist — it involve continued UK adherence to EU law in the areas where the UK retained Single Market-style access It might also be legally complicated on the EU’s side, were it to engage the competences to legislate of both the EU and its individual Member States.

25 For reasons likely to be both political and economic.

26 As noted on the website of the Port de Calais. Making use of this derogation will require the seafood consignment to be placed under a customs transit procedure allowing it to be tracked, which will lead to additional costs. It also does not remove the need for full customs and regulatory controls before the goods can be released by the French customs authorities.

27 The EU recently amended its Regulation of Central Counterparties with respect to derivatives trades, called EMIR, to make it more difficult for non-EU operators like those based in the UK to perform their activities in the EU without either the host country committing to regulatory alignment or the companies relocating operations into the EU. We will explore this issue further in the near future.

28 The Commission Communication of 9 July 2020 states: “The EU will use its best endeavours to conclude the assessment of the UK [data protection] regime by the end of 2020 with a view to possibly adopting a decision if the United Kingdom meets the applicable conditions. The Commission is currently conducting this assessment and has held a number of technical meetings with the United Kingdom to gather information in order to inform the process.”

29 Regulations (EU) 2019/502 (aviation connectivity) and 2019/501 (road connectivity).

30 For example, for UK-based road transport operators if there is no UK-EU agreement, the ability to carry goods to and from the EU will depend on a quota-based permit system operated by the European Conference of Ministers of Transport, heavily limiting how many journeys can be made and likely shutting certain operators out of the EU market altogether.

31 Regulation (EU) 2019/498. When the UK leaves the Common Fisheries Policy, and if there is no new UK-EU fisheries agreement in place by that date, default position would be that EU vessels would not be able to fish in UK waters and vice versa. Even under that scenario, both the EU and the UK would be required under international law to cooperate on the management of shared stocks.

32 Regulation (EU) 2019/497. EU countries recently reached provisional agreement on a new €5bn “Brexit Adjustment Reserve” under its 2021–2027 long-term budget, which may be used in part for a similar purpose. See for more information our Report of 22 July 2020.

33 Commission Implementing Decision (EU) 2018/2031 as amended. It would have expired on 31 January 2021.

34 Central Securities Depositories perform the registration and transfer of ownership of securities via digital means to settle a trade. UK-based CSDs would have obtained EU equivalence under Commission Implementing Decision (EU) 2018/2030 as amended. Had it taken effect, this decision would have expired on 30 March 2021.

35 See “Equivalence Decisions taken by the European Commission as of 22/06/2020“ (accessed 5 August 2020). This shows that equivalence decisions for CCPs are already in place for countries including the United States, Australia and Japan. There are currently no equivalence decisions for CSDs, with the — lapsed — decision in relation to the UK the first example.

36 European Commission, “Getting ready for changes Communication on readiness at the end of the transition period between the European Union and the United Kingdom”, page 13 and footnote 21.

37 The precise procedural requirements to adopt any new mitigating measures will depend on their legal basis in the EU Treaties and whether they are secondary EU legislation (analogous to Acts of Parliament) or tertiary EU legislation (analogous to Statutory Instruments).

38 While the Commission document notes there were a “limited number of [EU] legislative measures adopted in 2019 in view of preparedness for any scenario in terms of the United Kingdom’s withdrawal from the EU” it goes on to refer only to those that “remain in force” — such as the relocation of the European Medicines Agency from London to Amsterdam — or “become applicable at the end of the transition period”, like the visa waiver for UK nationals visiting the EU.

39 The EU put in place a range of “Brexit preparedness” legal acts in advance of the UK’s withdrawal. Some of these it considered necessary irrespective of the outcome of that process, such as the relocation of EU agencies from London. Others related to specific issues that have since been addressed in the Withdrawal Agreement, such as the UK’s financial obligations to the EU and the rights of EU citizens in the UK (and vice versa). The final category related to measures relevant to the new UK-EU economic relationship, such as the temporary preferential access for British road and air transport operators after the UK had left the Single Market.

40 The Explanatory Memorandum notes: “We share the Commission’s assessment that there are […] a number of guaranteed changes, for which businesses and citizens need to prepare.”




Published: 16 September 2020