Mar 22, 2018 - May delivered a speech on 'Our future partnership' with the EU. ... main legal issues raised or addressed
LexisNexis What does the future hold for UK’s economic partnership with the EU? 22/03/2018 Public Law analysis: Discussing the Prime Minister’s Mansion House speech on the UK’s future economic partnership with the EU, Ros Kellaway, partner, and Annabel Borg, professional support lawyer, at Eversheds Sutherland (International) LLP say that for many lawyers it is a question of ‘wait and see’ as to whether the UK will achieve a free trade deal which is better than that between the EU and Canada. Original news Our future partnership—PM sets out ‘five tests’ for future UK/EU relationship, LNB News 02/03/2018 125 Following a series of speeches by the government on the ‘road to Brexit’, Prime Minister Theresa May delivered a speech on ‘Our future partnership’ with the EU. Following cautionary warnings from the EU on the need for clarity and realism from the UK, the PM acknowledged that the UK will not achieve everything it wants from the negotiations. Nevertheless, the PM argued that the UK’s model for an ambitious free trade agreement, based on managed regulatory divergence, is in the interests of the UK and the EU27. What were the main legal issues raised or addressed in Theresa May’s plan for the future UK/EU economic partnership? The Prime Minister reiterated that the UK will be leaving the EU single market and the customs union. However, she wants no border or regulatory checks between the UK and the EU. This is predominately because the UK will not agree to a hard border between Northern Ireland and the Republic of Ireland or, as the EU has suggested via a backstop position based on continued regulatory alignment, to a customs and regulatory border in the Irish Sea. To address this, the Prime Minister repeated the two proposals in the UK government’s position paper on customs: •
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a customs partnership where the UK would mirror the EU’s requirements for imports from the rest of the world, applying the same tariffs and the EU’s rules of origin for goods entering the UK and intended for the EU, or a highly streamlined customs arrangement where the UK/EU would agree to implement a range of electronic and other measures to minimise frictions to trade (including specific provisions for Northern Ireland)
In order for the UK/EU border to be as frictionless as possible, the Prime Minister stated that a comprehensive system of mutual recognition would be needed so that ‘products will only need to undergo one series of approvals, in one country, to show that they meet the required regulatory standards’. To achieve this, the Prime Minister offered to commit to maintaining the same high regulatory standards in the UK as in the EU. Furthermore, she proposed associate membership of certain EU agencies, such as the European Medicines Agency, the European Chemicals Agency and the European Aviation Safety Agency, in exchange for a financial contribution. The Prime Minister reiterated that, long term, the UK is not seeking an economic partnership based on the ‘Norway model’ (ie membership of the European Economic Area (EEA)). Although the ‘rights’ obtained through the EEA match the UK government’s requirements, the ‘obligations’ do not. The
LexisNexis UK does not want to be obliged to implement new EU laws and continue to allow the free movement of people. The Prime Minister stated that the UK wants the ‘broadest and deepest possible partnership— covering more sectors and co-operating more fully than any free trade agreement anywhere in the world today’. This would be underpinned by five foundations: • • • • •
reciprocal binding commitments to ensure fair and open competition an independent arbitration mechanism ongoing dialogue and the means to consult each other regularly, with regulators continuing to work together (as they do with regulators internationally) an arrangement for data protection which is more than an adequacy arrangement and an ongoing role for the UK’s Information Commissioner’s Office maintain links between EU citizens and UK citizens to enable them to work and study in the UK and EU, respectively—but not free movement of people
Were there any notable inclusions, omissions, and/or priorities? What sectors were highlighted? The Prime Minister set out a number of ‘hard facts’. One of these was the acknowledgment that EU law and decisions of the Court of Justice of the European Union will continue to affect the UK after the UK leaves the EU, despite leaving the jurisdiction of the EU courts. Furthermore, on workers’ rights and environmental standards, she confirmed that the UK would ‘not engage in a race to the bottom’. The Prime Minister accepted that by leaving the EU single market, ‘life is going to be different’ for the UK and the EU and that ‘access to each other’s markets will be less than it is now’. The Prime Minister highlighted that she wants the UK’s future partnership with the EU to cover civil judicial co-operation, which would be broader than the Lugano Convention, as well company law and intellectual property. In addition to aviation, chemicals and pharmaceuticals, a number of other sectors were highlighted in the speech including the following: •
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agrifood and fisheries—the UK will be leaving the Common Agricultural Policy and the Commons Fisheries Policy. However, as part of the UK’s economic partnership with the EU, the UK will work with the EU to ‘manage shared stocks in a sustainable way and to agree reciprocal access to waters’ broadcasting—the UK wants to explore options to allow for continued transfrontier broadcasting financial services—the UK is not seeking continued financial passporting (as this is linked to the EU single market), but a ‘collaborative, objective framework that is reciprocal, mutually agreed, and permanent’ energy—the UK wants to protect the single electricity market across Ireland and Northern Ireland, and is seeking continued participation in the EU’s internal energy market transport—the UK wants to ensure the continuity of air, maritime and rail services, and protect the rights of road hauliers to access the EU market and vice-versa digital services—the UK will not be part of the EU’s digital single market science and research—the UK is seeking a ‘far-reaching science and innovation pact’ with the EU enabling the UK to participate in key programmes in exchange for a financial contribution
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education—the UK wants to continue to participate in the EU’s education programmes in exchange for a financial contribution
What has the reaction been in the EU? On 7 March 2018, the European Council issued its draft negotiating guidelines on the framework for the future relationship with the EU. President Donald Tusk addressed some of the points in the Prime Minister’s speech. He confirmed that: • • •
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the UK will be able to participate in EU programmes in the fields of research, innovation, education and culture he wants to reach an agreement to avoid ‘the absurd consequence’ of the disruption of flights between the UK and the EU as the UK wants to leave the EU single market, the customs union and the jurisdiction of the Court of Justice of the European Union, the only possible model for the UK’s future relationship with the EU is a free trade agreement, but it will be ‘ambitious and advanced’ the free trade agreement will cover all sectors with zero tariffs on goods and cover services the EU wants reciprocal access to fishing waters and maintained resources
President Tusk, however, highlighted that the UK cannot have the rights under the Norwegian model with the obligations under the Canadian model. Furthermore, he reiterated that the EU would not accept a ‘pick-and-mix’ sector approach. What has the reaction been in the legal market? Our assessment is that for many lawyers it is a question of ‘wait and see’ as to whether the UK will achieve a free trade deal which is better than that which EU concluded with Canada in 2016. The negotiations have a long way to go and we are still at the stage of opening positions. Has the speech delivered the clarity required? The Prime Minister did not say anything groundbreaking in her speech. Instead, she expanded on the points made in her previous Brexit speeches at Lancaster House and in Florence. What are the key takeaways for lawyers trying to prepare for Brexit? The Prime Minister’s speech did not specifically cover the legal sector. However, on services, she stated that the UK would be seeking to: • •
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limit the barriers that could prevent UK firms setting up in the EU (and vice versa) agree an appropriate labour mobility framework that enables UK businesses and selfemployed professionals to travel to the EU to provide services to clients in person, as well by phone or the internet continue the mutual recognition of qualifications
What are the next steps? In recent weeks, the European Commission and the UK government have been in the process of negotiating the terms of a transitional arrangement. On 19 March 2018, the European Commission announced that the UK and the EU have agreed the draft terms of a transitional arrangement, which will run from 30 March 2019 until 31 December 2020 (see: LNB News 19/03/2018 96).
LexisNexis During this period, it is intended that businesses and individuals will continue to benefit from free trade in goods, services and people between the UK and the EU, and the recognition of professional qualifications will continue. However, the UK will no longer be represented in the EU bodies and institutions meaning that it will not have a say on new laws. EU law will, however, continue to apply in the UK during the transitional period including any new laws adopted during that period. Furthermore, the Court of Justice of the EU will continue to have jurisdiction in the UK during the transitional period. The UK may sign international agreements that it negotiates with third countries during transition provided that those agreements do not actually enter into force during that period. On 19 March 2019, the European Commission published an updated draft of the Withdrawal Agreement which is being negotiated between the UK and the EU, highlighting progress made in the recent negotiations, including agreement on the draft terms for transition. The terms of the transitional arrangement, as well as the next set of draft guidelines for the Brexit negotiations, are expected to be approved by the European Council when it meets on 22–23 March 2018. This would pave the way for the negotiations to move onto the next phase―the framework for the future relationship between the UK and the EU. The EU has repeatedly stated that the Brexit negotiations will have to end by October 2018 to allow sufficient time for the Withdrawal Agreement to be approved by the EU Member States and the UK Parliament before the UK leaves the EU on 29 March 2019. Therefore, both the UK and the EU are keen for the next phase of the negotiations to begin. Ros Kellaway is head of the firm’s EU competition and regulatory group and has been a partner in the commercial practice since 1989. She specialises in cartels, competition investigations, distribution and advice on EU law. Ros has researched and spoken extensively on the subject of Brexit to numerous organisations. Annabel Borg is a professional support lawyer in the competition, EU and trade team, and has written and spoken extensively about Brexit. Together, Ros and Annabel lead Eversheds Sutherland’s Brexit Steering Committee and play a strategic role in advising clients on Brexit. Eversheds Sutherland is ranked in tier 1 for its Brexit work in Legal 500. Interviewed by Kate Beaumont. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
