Leaving the EU - The FEBRUARY 2020 process and preparations

The UK left the EU at 11pm GMT on 31 January 2020 into a transition The section is part of our period in accordance with the Withdrawal Agreement settled with the Brexit Legal Guide. EU in October 2019. That transition period (called the "implementation period" in the UK's (Withdrawal Agreement) Act Deal/transition period 2020) is due to end on 31 December 2020 and the UK Government has Now it has been approved by the ruled out extending that period. It remains to be seen whether the UK UK and EU Parliaments, the can agree its future relationship with the EU in time for new Withdrawal Agreement applies to arrangements to come into force at the beginning of 2021, whether arrangements for the UK’s withdrawal from the EU with there will effectively be no deal at that point, whether there will be some effect from 11pm GMT on 31 sort of halfway house, such as a "goods only" deal or whether there will January 2020 - when the UK be a further temporary arrangement while negotiations are completed. ceased to be an EU Member State. The UK is now in a transition period following its exit from EU until the end of 2020. UK Behind that succinct statement of the legal •The UK Government’s agreement with the position lies: EU of a revised form of Withdrawal calls this the Agreement and Political Declaration, with an "implementation period". •Impasse in the UK House of Commons over “ only” replacement for the backstop the Withdrawal Agreement and the During transition, EU continues and a non-binding commitment to a free to apply in and to the UK and the non-binding Political Declaration on the trade agreement between the EU and the future relationship as originally negotiated UK continues to trade with the EU UK, which would not require the UK to as part of the . leading to an extension of the UK's adhere to EU rules, except in Northern membership of the EU to 31 October 2019 Ireland and which would leave the UK free to The non-binding Political and the resignation of as make trade deals with third countries on Declaration on the future leader of the Conservative Party and then as different terms than those agreed by the EU; relationship between the UK and Prime Minister; •A great deal of political and legal activity the EU accompanies the •The change of Prime Minister in summer which resulted in: Withdrawal Agreement – there 2019, when took over these will now be an intense period of roles, with the Conservative Party • extension of the leaving date to 31 January negotiations seeking to finalise continuing to govern without a majority in 2020, the future relationship between the UK Parliament; the UK and the EU so that it can BREXIT – LEAVING THE EU THE PROCESS AND PREPARATIONS HERBERT SMITH FREEHILLS

• a move towards the Brexit wing of the In any event, except possibly in the last of come into force in legally binding Conservative Party with the expulsion of a these options, the UK loses the advantage of form at the beginning of 2021. number of leading members regarded as in EU trade deals with third parties, except to the favour of remain, and extent it has agreed a "roll-over" with the See accompanying section: countries concerned or a new trading • deadlock in the UK Parliament regarding Withdrawal Agreement Q&A. arrangement on different terms. The UK will approval of the revised Withdrawal be free to implement its own trade deals and Agreement. to set its own tariffs for WTO countries. At the end of transition – will there be elements of no •Breaking of the deadlock by agreement on a Progress on this is likely to be patchy and may general election, held on 12 December 2019, be prolonged, except for countries happy to deal? in which the Conservative Party was agree a “roll-over” of the terms on which they At the end of the transition period, returned to government with a majority of trade with the EU to apply to trade with the UK. if the new trading relationship is not 80 in the UK House of Commons; in place, there could be a no-deal It is conceivable that a separate deal may be situation in which the UK and EU •Passage of the UK European Union done on aviation (which is outside the WTO) (Withdrawal Agreement) Act 2020 and revert to trading with each other and it appears that some agreement must be on basic WTO terms. It is more approval of the Withdrawal Agreement by reached on energy because of the UK's the and Council; likely that this will be modified by geographical position. the introduction of agreed •The UK leaving the EU at 11pm GMT on elements of the future relationship Friday 31 January 2020. The UK leaves the EU or some other temporary set of rules, even though the UK In the Lisbon revision of the EU Treaties in Against this background, businesses had to Government has ruled out 2007, a new clause, Article 50 of the Treaty on implement strategies to cope with the extending the transition period. continuing uncertainty about when and on European Union ("TEU"), was introduced what terms the UK might leave the EU. providing a mechanism for an EU Member The short negotiating timetable Although it is now clear that trading terms State to leave the EU. means that, while important with the EU are largely unchanged until the provisions relating to tariffs and In June 2016, the UK electorate in a end of the transition period at end 2020, the quotas on goods may be ready for voted to leave the EU. The UK short time left to negotiate a complex trade implementation in early 2021, Government had indicated it would act on the deal and the potentially different ambitions of service industries are likely to referendum result and, after a change of Prime the UK and the EU for the contents of that deal experience what is effectively a Minister, embarked on this course. After mean that business will continue to be no-deal Brexit in any event and be various legal challenges and the passage of the exposed to uncertainty as to the position at left to trade on the terms of the EU (Notification of Withdrawal) Act 2017, the the beginning of 2021 (please see: the View WTO GATS agreement, while process was able to begin. from Brussels of 19 December 2019). Broadly goods may escape the application speaking, there are the following possible On 29 March 2017, the then UK Prime of WTO tariffs in trade with the options for January 2020: Minister, Theresa May, gave notice under EU under the terms of a new Article 50 of the TEU of the UK’s intention to future relationship. •Comprehensive trade agreement between leave the EU, thereby formally starting the the UK and the EU as contemplated in the In any event, the UK will cease to Brexit process. This should have resulted in the Political Declaration - this seems unlikely benefit from the free trade UK leaving the EU by 30 March 2019 but without an extension of the transition period; agreements the EU has negotiated political deadlock in the UK, where the with third countries, except to the •Less comprehensive trade agreement Conservative Party had lost its majority in the extent that any third country has probably centred on removal of tariffs and House of Commons, prevented the approval of agreed with the UK to “roll-over” quotas related to some or all goods and with a Withdrawal Agreement in the form the current trade terms as between little or nothing for services - while more negotiated by Theresa May, or in the form the UK and that country, as a likely to be achieved in the time-frame, this renegotiated by her successor, Boris Johnson. number have done already. The UK would place service businesses in much the will set its own WTO tariff rates. same position as a no-deal Brexit, save To avoid a no-deal Brexit, the UK's membership of the EU was extended, first to where the UK and the EU use parallel There will be no clarity on what 31 October 2019 and then, in a fraught unilateral action, such as equivalence will happen until towards the end political atmosphere, to 31 January 2020. decisions in the field of financial services, to of 2020 and the adage "plan for Following the UK General Election on 12 ameliorate the position; the worst, hope for the best" December 2019, it was clear that the continues to apply and no-deal •Failure of the negotiations and the UK/EU Conservative Government had achieved a guidance therefore remains relationship reverting fully to WTO terms - large majority and was in a commanding appropriate. this is effectively the same as a no-deal position to obtain Parliamentary approval for Brexit and again, does not preclude the revised Withdrawal Agreement. The body of EU law in force at the unilateral action; end of 2020 will be imported into The European Union (Withdrawal Agreement) •A recognition that longer is needed to UK law (with necessary Act 2020 approving the implementation of the negotiate a sensible trading relationship and amendments) for the start of Withdrawal Agreement in the UK became law either extension of transition, or entry into a 2021 under the European Union on 23 January 2020. short term interim trade arrangement, (Withdrawal) Act 2018 and UK possibly of similar effect. HERBERT SMITH FREEHILLS BREXIT – LEAVING THE EU THE PROCESS AND PREPARATIONS

On the EU side, the Withdrawal Agreement Long-term aspects of the Withdrawal legislation made to implement EU required approval of the European Parliament Agreement by a simple majority vote and approval of the law will be retained, with suitable The Withdrawal Agreement settles various Council by qualified majority vote (20 of the amendments – this will be called matters for the longer term, including the rights 27 Member States representing at least 65% "retained EU law": see of UK citizens resident in an EU Member State of their combined population). These accompanying section: The UK’s and of EU citizens resident in the UK. Similar approvals were given on 30 January 2020. new legal order post-Brexit: A new arrangements apply between the UK and the class of UK law. Some of these As a result, the Withdrawal Agreement has EEA States, as well as with Switzerland. amending are already in been formally adopted under TEU Article 50 place (but subject to further The arrangements for , which and will form part of EU law under Article changes according to what is will see it continue to apply much EU law, are 216(2) of the TFEU, in the same way as any agreed for the future relationship). one of the major and most hotly disputed issues other international agreement to which the EU dealt with by the Withdrawal Agreement. is a party. However, the approval of the While the border between Northern Ireland and Withdrawal Agreement means Finally, at 11pm on 31 the will remain open, there that: January 2020 the UK ceased to be a Member will be checks and in some cases customs duty State of the EU and entered the transition to pay in relation to goods entering Northern •the rights of UK citizens living period provided for in the Withdrawal Ireland from Great Britain. and working in an EU Member Agreement (called the "implementation State and of EU citizens living and Issues of finance, and the period" in UK legislation). The UK also ceased working in the UK will be settled, treatment of certain consequences of to be a member of the European Economic •there will be a basis for avoiding separation, including and other issues Area ("EEA") and of the European Atomic a border between Northern related to Euratom, are also settled in the Energy Community ("Euratom"). Ireland and the Republic of Withdrawal Agreement on a long-term basis. Ireland, involving some degree The transition period Finally, the Withdrawal Agreement covers of checks and controls on goods transitional arrangements when EU law ceases crossing the Irish sea between The transition period is due to end on 31 to apply in the UK, such as how to deal with Great Britain and Northern December 2020. pending cases before the of of the Ireland, The immediate effect of the UK leaving the EU European Union ("CJEU") and administrative •Many other transitional issues, is that it ceases to have any representation on cases before the . such as the treatment of EU bodies, notably the Parliament, the pending cases before the CJEU, More details on these arrangements and on Council, the Commission and the CJEU. will be dealt with in an agreed the non-binding Political Declaration on the During the transition period, however, the UK way at the end of transition. future relationship between the UK and the EU continues to apply EU law and is to be treated are to be found in the accompanying section: as if it were an EU Member State when the The Withdrawal Agreement Q&A and the Article 50 of the Treaty on continuing EU Member States are applying EU accompanying section: Trade: Union law. There is a similar situation regarding the relationships also deals with the Northern three additional EEA states, Norway, Iceland •"Any Member State may decide Ireland relationship. and Liechtenstein. Business and individuals to withdraw from the Union in may, therefore, not be very conscious of accordance with its own differences until the end of transition. The future relationship constitutional requirements. Now that the UK has left the EU, the focus The transitional arrangement for the treatment •A Member State which decides turns to its future relationship with the EU. of the UK as if it were still an EU Member State to withdraw shall notify the of its intention. cannot bind third countries and it is possible While the Withdrawal Agreement settles In the light of the guidelines some of those countries with free trade some aspects of the relationship, the long-term provided by the European agreements with the EU will seek to take trading relationship is only the subject of the Council, the Union shall negotiate advantage of the situation to charge tariffs on non-binding Political Declaration. UK origin goods, while the UK is bound to and conclude an agreement respect the terms of EU trade arrangements as This envisages "an ambitious, wide-ranging with that State, setting out the regards imports from those countries. Several and balanced economic partnership" with: arrangements for its withdrawal, of these countries have, however, agreed with taking account of the framework the UK to "roll-over" the terms of trade they •an absence of tariffs, fees, charges and for its future relationship with have agreed with the EU, so that they will apply quantitative restrictions across all sectors, the Union. That agreement shall to their trade with the UK. be negotiated in accordance •ambitious and far-reaching provisions to with Article 218(3) of the Treaty avoid technical barriers to trade, References to the geographic area of the EU or on the Functioning of the the EEA in and were •liberalisation "well beyond WTO” in European Union. It shall be affected as soon as the UK left the EU on 31 services, concluded on behalf of the Union January 2020 and may, depending on context by the Council, acting by a •cooperation of authorities and interpretation, not extend to the territory qualified majority, after with Union agencies, of the UK. obtaining the consent of the European Parliament. BREXIT – LEAVING THE EU THE PROCESS AND PREPARATIONS HERBERT SMITH FREEHILLS

•the end of of workers, UK Government’s negotiating aims •The Treaties shall cease to apply and and those of the EU to the State in question from the •visa-free travel and temporary entry for The UK Government wants a new trading date of entry into force of the business. relationship with the EU which allows it the same withdrawal agreement or, failing sort of policy freedoms as are enjoyed by other that, two years after the Additional areas to be covered include data major economies with free trade agreements notification referred to in protection and co-operation on security with the EU, such as and . paragraph 2, unless the European matters and . Council, in agreement with the The EU wants to tie down the UK to level Member State concerned, As the UK Government is determined not to playing field commitments in areas such as unanimously decides to extend extend the transition period beyond the end of state aid, , workers' rights and this period in accordance with 2020, the big question is whether a trade deal other "level playing-field" issues by reference Article 238(3)(b) of the Treaty can be done in the remaining 11 months to a to the standards embedded in EU law. The on the Functioning of the point where it could be implemented at the Conservative Party, in the run-up to the European Union. beginning of 2021 and what such a deal could December 2019 election, indicated that on cover. The risk of the UK ending transition state aid, it was looking to adopt a more •For the purposes of paragraphs without a new trade deal with the EU and flexible and speedy approach, while remaining 2 and 3, the member of the reverting to trade on WTO terms remains a consistent with WTO standards and European Council or of the real risk, although this is not what either the maintaining an independent agency to deal Council representing the UK or the EU wants. with compliance issues. This aspect alone will withdrawing Member State make the negotiations difficult, as will the shall not participate in the The possibility of either an extension of the arrangements to resolve disputes about discussions of the European transition period to the end of 2021, or even compliance with any agreed standards. Council or Council or in 2022, or of some other temporary decisions concerning it. A arrangement closer to the transition position The time available also makes dealing with qualified majority shall be than to the future relationship remains but is more than the basic provisions relating to trade defined in accordance with far from certain. in goods seem a tall order. As regards services, Article 238(3)(b) of the Treaty it should be noted that WTO rules would allow on the Functioning of the The new relationship will be negotiated on the a separate agreement on aviation and that both European Union. basis of Articles 207, 217 and 218 of the Treaty parties may use unilateral "equivalence" •If a State which has withdrawn on the Functioning of the European Union decisions to enable trade between the UK and from the Union asks to re-join, ("TFEU") in the same way as a free trade the EU. agreement with any other country outside the its request shall be subject to EU. It will require approval of the Council by In any event, as noted above, some aspects of the procedure referred to in qualified majority and the consent of the the agreement for the new trading relationship Article 49.” European Parliament. If such an agreement is a may require ratification by each of the 27 "mixed” agreement dealing with matters that Member States of the EU before they can Although the CJEU ruled that an are in the shared or sole competence of the come into force. Any provisional application of EU Member State is free to individual Member States, it will also require the new trading terms would exclude these unilaterally revoke its notice of the approval of all the continuing Member aspects until full ratification was obtained. intention to withdraw from the States of the EU in accordance with their European Union under Article 50 individual processes for treaty approval. This The distance between the parties' negotiating at any time before it leaves the may sometimes require additional approvals, positions should become clearer as the EU, the UK lost this option when it such as in Belgium - the approval of its regions. mandates for formal negotiations are settled. left the EU on 31 January 2020. If The issues raised will be examined in detail in it wishes to rejoin the EU at any In the UK, any new trade treaty with the EU will the accompanying section: Trade: The new time in the future, it will need to go through the normal process for ratification relationships. apply to do so just like any other and implementation of a treaty, which includes non-member country. The both the act of ratification and No-deal contingency planning process in Article 49 of the EU the treaty being laid before Parliament by order Treaty would require an accession in Council and being subject to a negative If there is no extension of the transition agreement to be negotiated and resolution process (in which Parliament can period and there is no new trading ratified by all the EU Member reject but cannot change the treaty). relationship with the EU in place on 31 States at the time. December 2020, on 1 January 2021 the UK Depending on its terms, additional legislation will lose all the benefits of EU law for itself may be required to implement the agreement. and its citizens and businesses (save as covered by the Withdrawal Agreement) or In addition, even with transition, the UK has to converted into UK law as “retained EU law”. implement other important changes, such as the This, so far as trading terms are concerned establishment of an independently operating and in many other aspects, would be as customs system and direct trade relations with abrupt a change as if the UK had left the EU many other countries, as well as adapting its in January 2020 with no deal at all. No-deal immigration laws to a situation where, contingency planning remains relevant in ultimately, most EU citizens no longer have an case that situation arises. automatic right to live and work in the UK. HERBERT SMITH FREEHILLS BREXIT – LEAVING THE EU THE PROCESS AND PREPARATIONS

The exact nature of a no-deal Brexit is much The European Union (Withdrawal Agreement) discussed. The most fundamental aspect is Act 2020 contemplates that much of the that there would be no special relations legislation that started out life as no-deal (EEA) between the EU and the UK regarding trade, preparedness legislation will come into force The EEA applies to the territory of except for the provisions regarding Northern at the end of the transition period, as it is or the EU and of most of the states Ireland in the Withdrawal Agreement and amended to meet the situation. In any event, party to the European Free Trade some of the separation provisions dealing with some of this legislation will be needed to Agreement ("EFTA") (Norway, processes of trade. address aspects of EU law which are outside Iceland, Liechtenstein). The UK, as the scope of the new relationship. a Member State of the European In that event, the UK’s right to trade with the Economic Community (as the EU in both goods and services would be The EU has issued some guidance in the form European Union was then governed solely by the WTO rules, as both the of preparedness notices from Commission called),was itself a "contracting EU and the UK are members. This would place departments on how Brexit will change law party” to the EEA Agreement and it the UK in a similar position to that of the USA and policy. These notices set out the relevant had been suggested that, unless currently but in a less sophisticated EU entity's view of which rights would be lost the UK gave a formal notice to relationship to the EU than that achieved by and call on business and individuals to adjust leave the EEA (which it has not Canada. Under this scenario, it is not so much their behaviour accordingly. Only a few EU done), it would remain in the EEA. the unfavourable nature of the WTO terms measures (eg, in the field of aviation) granted However, all the countries that would be problematic, but the disruption temporary derogations or allowed recognition concerned have accepted that the to existing trade flows and investments in the of UK authorisations on a temporary basis. correct analysis is that, once the event of such sudden change in the conditions The EU Commission had its own Brexit UK has left the EU, it will no longer of trade. Delays and higher costs in imports no-deal Contingency Action Plan which be considered to be within the and exports and the need to have new makes some small, largely temporary, territory of the EU and will registrations, approvals and licences to sell adjustments to smooth some of the worst therefore cease to be a Member goods into the EU or the UK will be the main effects of a no-deal Brexit. Again, it is possible State of the EEA, without any concern. Service businesses would move to a that these plans will need to be revived. separate notice having been given much less favourable regime than that of the These are also addressed in specialist by the UK. EU/EEA Single Market for services and, in a sections of the Legal Guide. number of cases, UK based businesses will The UK has signed a separate only be able to carry on existing business by In view of the continued uncertainty, most agreement with the EEA States, establishing larger branches or subsidiaries in businesses will have conducted a Brexit Norway, Iceland and Liechtenstein, the EU. Service businesses have faced this Assurance Process to ensure that the main dealing with transitional issues and prospect for some time and certain service risks that affect them have been identified affording citizens of those countries sectors, particularly financial services, are well and, to the extent possible, that appropriate living in the UK the same rights in prepared. Losses to the UK economy from this and timely steps are being taken to respond to the UK as resident EU citizens. This situation will become apparent over 2021 and them. Many firms that have identified no-deal agreement is known as the EEA so long as any no-deal situation continues. risks to current operations will have taken EFTA Separation Agreement. steps to mitigate risks, bearing in mind the There is also a separate agreement In the run up to the two extensions of the UK's lead times necessary to build "cliff-edge” risk with Switzerland, (an EFTA country membership of the EU, both the UK and the EU resilience. They will need to keep these plans which has its own bilateral made contingency plans through temporary in mind as we move towards the end of the arrangements with the EU), known waivers and derogations in the event of no deal. transition period. Priority areas will include as the Swiss Citizens' Rights For instance, for financial services, the UK service continuity, market access rights, Agreement: this takes the same Government legislated for a Temporary supply chain disruption, contractual approach. These agreements are Permissions Regime ("TPR") that would allow amendments and termination rights, implemented in the UK by the EEA firms currently passporting into the UK to workforce and business travel, and protection European Union (Withdrawal continue operating in the UK for up to three of IP rights. While there will be some general Agreement) Act 2020. years after exit, while they apply for full and sector-wide issues to address, it will be authorisation from UK regulators. In the field of the particular characteristics of each firm's human medicines, the UK was planning to business that will be key to managing Brexit continue to recognise batch testing, Qualified changes. For further planning guidance on Person ("QP") certification and release of no-deal planning, see accompanying section: human medicines that has been carried out in Delivering Brexit: Putting plans into practice. the EU. Measures of this sort may need to be used in the event that there is no (or indeed a The Withdrawal Act - retained EU Law limited) new trading relationship after 31 December 2020 and some of these measures The UK also had to make constitutional are likely to be updated in case they are needed changes, the principal one of which is the in 2021. Specialist sections of the Legal Guide of the Act 1972 address the voluminous UK measures in more ("ECA 1972") - the law which gives EU law detail and also describe some of the more effect as part of and provides for limited measures that the EU took in UK law to be adapted to ensure compliance contemplation of a no-deal exit and which it with EU Directives harmonising or providing might need to consider again. minimum legal standards throughout the EU, as well as for the authority of the CJEU in BREXIT – LEAVING THE EU THE PROCESS AND PREPARATIONS HERBERT SMITH FREEHILLS

relation to EU law. This repeal is subject to Other Brexit legislation savings so that EU law continues to apply in The UK Government has announced its the UK during the transition period. intention to make a number of new statutes to Simple repeal of the ECA 1972 would, however, replace areas of EU law where it considers that leave a huge gap in the UK legal system. EU the UK needs its own code of law or where has become so embedded into the law of intends to adopt rules which will diverge from UK that legislation is needed to EU law. The list of legislation is set out in the ensure that those parts of EU law applicable in accompanying section: The UK's new legal the UK are continued after the end of order post-Brexit: A new class of UK law. Some transition, subject to essential adjustment, as of this legislation has been stalled by the UK part of UK law. Parliamentary stalemate, with the result that the UK has left the EU at the end of January This is dealt with by provisions in the European 2020 without a considerable amount of Union (Withdrawal) Act 2018 ("Withdrawal legislation which will need to be applied from Act") as amended, which will come into effect January 2021 yet being in place. at the end of the transition period. These provisions retain the laws in the UK that Other preparations implement EU law and also adopt directly effective EU laws (primarily EU ) as The UK has created a Department for UK law. This corpus of law is described as International Trade and has appointed many "retained EU law”. Further detail on the additional civil servants to deal with the operation of the Withdrawal Act and legislation development of trade policy and to negotiate under it is given in the accompanying section: with counterparts around the world. It has The UK's new legal order post-Brexit: A new agreed the "roll-over” of EU trade agreements class of UK law. with a number of countries to apply as between the UK and the relevant other The UK has been successful in passing a great country but several countries, including Japan deal of secondary legislation under the and Canada, will not do this immediately. Withdrawal Act 2018. This will adapt retained EU law to operate effectively in the UK after it The Department for Exiting the EU has been has ceased to be a member of the EU. This co-ordinating practical arrangements for the legislation, for example, removes references to Brexit process. EU bodies and identifies suitable UK regulators In addition, HMRC, the body that deals with to take over from EU regulators. It also taxation, has been expanded substantially to removes provisions which treat EU countries deal with the new customs regime, while every or businesses more favourably than third government department, but especially those countries and their businesses where this with extensive new legislative requirements or treatment is based solely on EU Treaty regulatory responsibilities, has had to devote requirements. This body of law, with any considerable, and in some cases, additional further amendments that are necessary, will resource to the preparations for the new legal come into force at the end of transition. regime. These costs will be at their highest while the UK is still paying into the EU budget, Retained EU law only applies in the UK that is until December 2020. The UK cannot, by retaining EU law, actually Further changes as to how the work on Brexit is achieve that the EU and its continuing handled within Government are expected to be Member States will treat the UK as if it were made by the UK Government in spring 2020. still a Member State or otherwise make provision for the UK's own (even if One of the key areas of focus is on potential part of retained EU law) to be given the same high-tech long term solutions for the operation as that of EU Member States in terms of of borders between the UK and the EU. These recognition. It is fair to say that the retention in are important to prevent holdups of goods in the UK of EU Regulations (and laws transit and also to address issues relating to implementing EU Directives in similar terms to maintenance of an open Irish border. A those of EU Member States) through retained number of independent groups have been EU law will make it more likely that such working on how these technical solutions recognition can be obtained to apply after the might be incorporated into the arrangements end of transition, either in a future EU/UK between the EU and the UK - for example, the trade treaty or a series of individual work which the Alternative Arrangements arrangements with the EU and its Member Commission has been carrying out. States but this will depend on the EU and its continuing Member States. HERBERT SMITH FREEHILLS BREXIT – LEAVING THE EU THE PROCESS AND PREPARATIONS

The EU preparations for Brexit However, UK businesses operating in the EU, like third country businesses currently, will not EU law in itself does not require much lose their rights to challenge the EU authorities adjustment to deal with the departure of a before EU , eg if the European Member State, even one as significant as the Commission refuses to allow them to merge United Kingdom. with another business operating in the EU or The main body of EU law applies within the EU imposes a fine for breach of competition law Member States and, in many cases, in the EEA rules in relation to their business operations in States. It will continue to do so and it will the continuing EU (or between the EU and the simply be the case that references to the EU, UK before Brexit), they will continue to have the EEA and Member States will no longer rights of appeal to the CJEU. include the UK, at latest at the end of transition. The main substantive changes for “The General Election in December the EU are constitutional in that they affect the 2019 removed some of the operation of the European Parliament and seemingly unending uncertainty to the CJEU. The EU Budget from 2020 will cease to reflect the substantial regarding Brexit, which has contributions from the UK as a Member State: weighed heavily on businesses however, the terms of the Withdrawal and individuals. The very tight Agreement result in the UK contributing and drawing from the EU budget as if it were a timetable to get in place a new Member State up to the end of the present trading relationship to be budget period, the end of 2020. If the operational on 1 January 2021, transition period is extended, new terms for contribution to the EU budget in the new however, means that there is still budget cycle would have to be agreed. As the a no-deal risk of reversion to UK has been the second largest net WTO terms when transition ends. contributor to the EU budget after , the loss of its contributions is one of the most We can all only continue to plan unwelcome aspects of the UK leaving the EU for the worst and hope for better.” for other net contributing Member States, whose contributions will increase DOROTHY LIVINGSTON substantially. As we have mentioned above, the EU has issued a series of papers reminding business of the effects of the UK leaving. The most significant effect is for businesses relying on licences or approvals issued by UK authorities to operate within the EU or that their goods meet EU standards. These will cease to be recognised within the continuing EU and businesses in many cases will need to obtain new licences or approvals from authorities in a continuing Member State. The effects may be significant for business and are discussed in more detail elsewhere in this Legal Guide. Key contacts

Gavin Williams Nihar Lovell Partner Senior Associate T +44 20 7466 2153 T +44 20 7374 8000 [email protected] [email protected]

Dorothy Livingston Kristien Geeurickx Consultant Professional Support T +44 20 7466 2061 T +44 20 7466 2544 [email protected] [email protected]

Paul Butcher Brexit Director T +44 20 7466 2844 [email protected]