The Withdrawal Agreement Q&A

MARCH The Withdrawal Agreement 2021 Q&A

1. What is the Withdrawal times by the UK Parliament and ultimately Agreement? resulted in her resignation. The main stumbling The section is part of our block to its approval were the provisions on the Brexit Legal Guide. The Withdrawal Agreement is the agreement Irish backstop which were subsequently that was negotiated between the EU and the re-negotiated, resulting in substantial changes UK under Article 50 of the Treaty of the to the Irish Protocol (see Q2 below). Brexit has really happened European Union (“TEU”) which is the provision •While the UK formally withdrew dealing with the withdrawal by a Member The UK’s future trading relationship with the from the European Union on State of the EU. The aim of the Agreement, EU was negotiated in a separate agreement: 31 January 2020, nothing much which was entered into in late 2019, was to set see separate sections on Trade, State Aid changed on the ground until out the arrangements for the UK’s withdrawal and Procurement. from the EU on 31 January 2020. 31st December 2020. This is because the Withdrawal While a number of provisions related purely 2. The Northern Ireland Protocol Agreement of 2019 between to the transition period (in English legislation – what is it and why was it the UK and the EU provided for the “implementation period”) which ended needed? a transition period during which on 31 December 2020, important provisions The Northern Ireland Protocol deals with the the UK was for most purposes continue to apply, either as transitional position of the island of Ireland once the UK treated as if it were still a provisions relating to matters that straddle the leaves the EU. Both the EU and the UK have Member State of the EU. end of the transition period, or as long term been committed to avoiding a hard border •The transition period (which arrangements relating to key policy matters for between Ireland and Northern Ireland and UK legislation calls the both parties: these include the arrangements respecting the Good Friday Agreement. “implementation period”) for EU citizens already living and working in the ended on 31st December 2020 UK and UK citizens in the EU, as well as the Original discussions led to proposals for a when in most respects EU law arrangements intended to avoid a hard border “backstop” which could have kept the whole became foreign law (part of the on the island of Ireland. The Withdrawal UK in the EU customs area indefinitely. That law of continuing Member Agreement was implemented in the UK arrangement could not gain sufficient States, such as Germany principally by the European Union parliamentary support in the UK to be and France). (Withdrawal Agreement) Act 2020 adopted. The arrangement was therefore (“Withdrawal Agreement Act”). renegotiated by the present UK Prime •EU law is now binding in the UK Minister, Boris Johnson. only to the limited extent set An earlier version of the Withdrawal out in the Withdrawal Agreement was agreed between the UK and The Protocol as included in the Withdrawal Agreement, of which the most the EU in November 2018 under Theresa Agreement takes a very different approach to important aspects for private May’s Government but was rejected three the previous version in securing the objective of parties are: BREXIT: THE WITHDRAWAL AGREEMENT Q&A HERBERT SMITH FREEHILLS

avoiding a hard border between Northern This is the subject of on-going discussions with • Pending cases before EU Ireland and the Republic of Ireland. The attempt the EU with a view to ameliorating these institutions and courts; to avoid creating a regulatory and customs problems. This is important to the acceptance border between Northern Ireland and the rest of the Protocol in Northern Ireland, as is • Domestic cases in the UK of the UK has largely been abandoned. Instead, necessary to preserve the open border relating to periods before while Northern Ireland remains part of the UK between Northern Ireland and the Republic. 2021, when relevant EU law customs territory and is included in any UK free applied in the UK; trade agreements, in practice, Northern Ireland There is a right under Article 16 of the Protocol • Aspects of the rights of EU will apply most EU customs rules and most of for either party to impose restrictions at the and EFTA citizens living and its regulatory regime for goods, both Irish border where there are serious economic, working in the UK; and agricultural and manufactured. This creates a societal or environmental difficulties that are customs and regulatory border in the Irish Sea liable to persist or a diversion of trade. In early • The Northern Ireland between Ireland and Great Britain. February 2021, the EU Commission decided to Protocol. invoke this with regard to export of COVID 19 Although the Protocol has allowed the UK vaccines from the Republic into Northern New UK Law – a legal to dispense with most checks and other Ireland. This move was almost immediately upheaval! obstacles to goods entering Great Britain from withdrawn as a “mistake” following a great •The UK has been preparing its Northern Ireland, goods entering Northern outcry, including from the Irish and UK legal system for change for over Ireland from Great Britain apart from some governments. This has done nothing to ease two years under the framework transitional reliefs, are subject to much the the tensions created by the undoubted of the European Union same checks and costs as if they were entering inconveniences and costs of the Protocol. (Withdrawal) Act 2018 (the the EU from the UK. “Withdrawal Act”). 3. What else does the Withdrawal The effect of these arrangements is mitigated Agreement cover? •In order to avoid gaps in its by measures enabling Northern Ireland legislation, a good deal of EU businesses to benefit from the UK customs The Withdrawal Agreement covers the key directly effective legislation and rates, where they are more favourable but only withdrawal issues of citizens’ rights, financial EU derived domestic legislation, by later adjustment of the fiscal effects arising contribution and the Irish border. It also covers both primary and secondary, from application of the EU regime. a range of other withdrawal issues such as has been preserved, with issues relating to intellectual property, appropriate amendments for The arrangements set out in the Protocol are ongoing public procurement procedures, application in the UK after it had intended to be permanent, subject to ongoing ongoing judicial cooperation on civil and left the EU. These are a class of discussions with a view to making them work commercial matters and ongoing judicial and domestic law, applicable in the smoothly. However, the Protocol allows the administrative procedures, particularly the UK jurisdictions, broadly known Northern Ireland Assembly to vote on the allocation of jurisdiction on cases current at as “retained EU law”. continuation of the main substantive provisions the end of the transition period. of the Protocol. In the event that there is not a •In addition retained EU law also majority to continue these provisions, they will The Withdrawal Agreement also contains preserves other residual rights, cease to apply at the end of two further years. institutional arrangements specific to the powers, liabilities, obligations, While there is provision for further negotiation Agreement, including the establishment of restrictions, remedies and in those circumstances, it is evident that, if the a Joint Committee responsible for the procedures which derive from Protocol cannot command support in the implementation and application of the the UK’s past adherence to Northern Ireland Assembly, this could have Agreement, and provisions on disputes EU law. serious repercussions. relating to the Agreement itself. Disputes •For further detail on retained EU arising under the Withdrawal Agreement law and how it affects the In early 2021, this Protocol has proved to be can be referred to the Joint Committee with application of general principles the main point of friction in relations between the aim of reaching a mutually agreed solution. of EU law and case law the the EU and the UK. The difficulties If no agreed solution is reached within three Court of Justice of the European experienced in sending goods (particularly months, there is a mechanism to establish an Union (“CJEU”) see our Legal food and agricultural products) from Great independent arbitration panel (composed of Britain to Northern Ireland have been evident, Guide - The UK’s New Legal two members proposed by the EU and the UK . This also explains the while sales of some products are (or after a Order each and a chairperson agreed by both main areas where the UK has short transition, will become) forbidden parties) to rule on the dispute. chosen not to retain EU law and altogether. This has disrupted traditional the areas where the UK has set supply chains, added costs for Northern See Annex attached for a summary of the up new statutory regimes and Ireland importers and consumers and led Withdrawal Agreement. its own policies, eg in the areas many UK firms to decline to deliver to NI at all of trade, customs and VAT and for commercial reasons, particularly where 4. Why does the Withdrawal agriculture. they did not historically trade with most EU Agreement not incorporate details countries and are unfamiliar with the extensive on the future UK/EU relationship? paperwork involved. Consumers and importers in the Republic of Ireland are also The EU Commission took the view early on affected, but to a more limited degree. that the Withdrawal Agreement could only deal with separation issues and could not HERBERT SMITH FREEHILLS BREXIT: THE WITHDRAWAL AGREEMENT Q&A

include an agreement on a future trading much directly effective EU law into a new class The Future Relationship relationship because such an agreement of domestic law, only took effect at the end of with the EU required a different legal basis and could only the transition. be negotiated with a country that is not a After nearly 11 months of tense Member State. So this meant it could only be Part 3, on citizens’ rights, provides for the negotiation, the UK and the EU on negotiated once the UK had left the EU. implementation into UK law of the citizens’ Christmas Eve 2020 agreed a rights provisions of the Withdrawal Trade and Cooperation The result has been the Trade and Cooperation Agreement. UK Courts will be able to make Agreement (“TCA”), Agreement (“TCA”), which provides a largely references to the CJEU to address questions of implemented in the UK by the tariff-free environment for goods originating in interpretation, for a period of eight years after European Union (Future the UK and the EU being exported into the the end of the transition period: see separate Relationship) Act 2020. customs territory of the other party, but does section on Migration. A new corporate body, not remove non-tariff barriers, Additionally the Independent Monitoring Authority In addition the UK has established goods originating in third countries or the (IMA) is created in order to monitor the trade relationships with several subject of re-import may be subject to duties implementation and application in the UK countries, mostly on very similar even where these do not apply when goods are of the citizens’ rights provisions. terms to their existing trade imported directly. There are only very limited agreements with the EU. provisions relating to services. Part 4 deals with other separation issues (goods placed on the market, ongoing customs The Withdrawal Agreement is a procedures, intellectual property, ongoing very different type of international 5. Are all aspects of the Withdrawal police and judicial cooperation, and data), the agreement from the TCA. While Agreement in force? financial provisions and the arrangements in the Withdrawal Agreement is The Withdrawal Agreement came into force at the Northern Ireland Protocol. The main part of the EU legal order and the the beginning of 2020. Provisions dealing purely financial provision includes a legislative Court of Justice of the European with the transition period are now spent and mechanism to authorise the Government to Union (“CJEU”) has a significant provisions that only applied once the UK ceased make payments due under the UK’s financial on-going role in relation to its to apply EU rules have been implemented with obligations in the Withdrawal Agreement interpretation and effect from 31 December 2020. These include which are to be charged to the Consolidated implementation, the TCA is a the provisions about the rights of citizens and Fund or, if the Treasury so decides, the stand-alone international free the Northern Ireland Protocol. National Loans Fund. Ministers are given wide trade agreement, with no role powers to implement the Northern Ireland assigned to the CJEU. 6. What is the relationship between Protocol , including facilitating access for the Withdrawal Agreement and Northern Ireland goods to the UK market and the Withdrawal Agreement Act? provisions to ensure there are no changes to the arrangements for North South cooperation The Withdrawal Agreement Act implements as a result of this legislation. into UK law the Withdrawal Agreement as well as two related agreements (the EEA EFTA 7. Does the Withdrawal Agreement Separation Agreement between the UK and remain relevant now the transition Norway, Iceland and Liechtenstein and the period has ended and the UK’s exit Swiss Citizens’ Rights Agreement between the from the EU is completed? UK and Switzerland). It contains provisions relating to or giving effect to the provisions of The Withdrawal Agreement sets out the the Withdrawal Agreement and provides for terms for the UK’s withdrawal from the EU and the disapplication of UK legislation that is ensures the withdrawal takes place in an incompatible and conflicts with the orderly manner. Over time some of its Withdrawal Agreement. It is a complex piece provisions will no longer be relevant, eg the of legislation and is designed to work in financial provisions once all payments agreed conjunction with the EU Withdrawal Act 2018 between the parties have been settled, or the (to which it makes a number of changes in part on separation provisions which sets out order to deal with the consequences of a how a range of events that are ongoing at the transition period), so both Acts need to be end of the transition period will be resolved. considered alongside each other. But other parts of the Withdrawal Agreement will continue to be relevant. This is particularly Part 1 and 2, on the implementation the case for the section on citizens’ rights, (transition) period, amended the EU which ensures that qualifying citizens will be Withdrawal Act 2018 (which provides for the able to continue to exercise their right of free repeal of the European Communities Act 1972), movement under EU law and live, work and so that the effect of the ECA was saved for the study in the UK as they were able to do before duration of the implementation (transition) the UK did exit the EU. Similarly, the period and EU law continued to apply during arrangements set out in the Northern Ireland that period. The provisions in the Withdrawal Protocol are intended to be permanent. Act on retained EU law, which preserve the UK legislation which implemented the UK’s EU obligations (eg under Directives) and convert BREXIT: THE WITHDRAWAL AGREEMENT Q&A HERBERT SMITH FREEHILLS

Annex

Summary of the Withdrawal right holder who are not residing in the host Agreement Member State on the specified date will keep their entitlement to join an EU/UK family The Withdrawal Agreement (“Agreement”) member at a later date, for the lifetime of the consists of six parts, three protocols and a EU/UK national right holder, irrespective of number of annexes (which provide additional their nationality. information necessary to support the technical interpretation and application of the agreement). The UK and the EU27 are entitled to require citizens concerned to apply to obtain a status Part One – Common provisions: this section which gives them the necessary rights of sets out relevant definitions and territorial residence but such administrative procedures scope of the Agreement. It provides for the must be transparent, smooth and streamlined. provisions of the Agreement to be interpreted under the general principles of EU law, Part Three – Separation provisions: this including those of the EU Charter of covers a range of events in a variety of areas Fundamental Rights. UK courts will be bound that may be ongoing by the end of the by relevant CJEU case law handed down transition period and sets out how these will before the end of the transition period and be resolved. It deals with the following: must pay due regard to relevant case law handed down after the transition period. The •Goods placed on the market before the end provisions of the Withdrawal Agreement of the transition produce the same legal effects in the UK as •Ongoing customs procedures, ongoing value they do in the EU and the Member States, added tax and excise duty matters including the ability of the courts to disapply incompatible legislation, direct effect and the •Continued protection in the UK of availability of remedies. intellectual property rights •Ongoing police and judicial cooperation in The UK and the EU are bound by a duty of criminal matters good faith, under which they should not act in any way to undermine the Agreement and •Ongoing judicial cooperation in civil and should support each other in carrying out commercial matters tasks which flow from the Agreement. •Data and information processed or obtained Part Two – Citizens’ rights: this section deals before the end of the transition period or on with the rights of EU citizens in the UK and UK the basis of the Withdrawal Agreement citizens in the EU who are exercising their free •Ongoing public procurement and similar movement rights before the end of the procedures transition period (“the specified date”). •Euratom related issues

Qualifying EU citizens will be able to continue •EU judicial and administrative procedures to exercise their right of free movement under EU law and live, work and study in the UK as •Administrative cooperation procedures they are currently able to do. UK citizens between Member States and the UK exercising their rights in the EU will be able to •Privileges and immunities – status of UK continue to do this in their host Member State. nationals working in EU institution and EU The right of UK nationals living in the EU27 to staff working in EU bodies in the UK live and work in a different Member State after Brexit is not provided for in the Agreement but •Other issues relating to the functioning of as part of the future relationship with the EU, the institutions, bodies, offices and agencies the UK will also seek to secure onward of the EU movement opportunities for UK nationals in the EU. The same rights will apply to their Part Four – Transition period: a transition or family members who are legally resident in the implementation period, starting on the date of host Member State before the end of the entry into force of the Withdrawal Agreement specified date. and ending on 31 December 2020 was agreed. During this transition period, the UK Spouses, registered partners, dependent was no longer an EU Member State, as it had parents and children related to the EU/UK left the EU on 31 January 2020 but unless HERBERT SMITH FREEHILLS BREXIT: THE WITHDRAWAL AGREEMENT Q&A

otherwise provided in the Withdrawal reaching a mutually agreed solution. If no Agreement, EU law was applicable to and in agreed solution is reached within three the UK, so as to produce the same legal effect months, there is a mechanism to establish an as it did prior to exit. independent arbitration panel (composed of two members proposed by the EU and the UK The provisions also state that any references each and a chairperson agreed by both to Member States in EU law, including EU law parties) to rule on the dispute. Where the as implemented by Member States, is to be dispute involves a question on the understood as including the UK during the interpretation of EU law, the panel will request transition period. the CJEU to rule on it but it will still be for the panel to rule on the dispute as a whole. The EU law therefore continued to have direct arbitration panel’s ruling on a dispute will be effect in the UK and the principle of supremacy binding and the parties will need to comply of EU law applied during the transition period. within a reasonable period. The UK was no longer represented or able to participate as a matter of course in the EU Northern Ireland Protocol this Protocol aims institutions, thereby losing its right to influence at avoiding a hard border on the island of and vote on new legislation. In exceptional Ireland. Under the approach set out in the circumstances, representatives or experts Protocol, the whole of the UK, including from the UK were able to, upon invitation, Northern Ireland, will leave the EU Customs attend meetings of certain committees but Union. Northern Ireland remains part of the without having any voting rights. UK customs territory and will be included in any future UK free trade agreements. But in During the transition period, the UK was free practice, Northern Ireland will apply most EU to negotiate, sign and ratify international customs rules and most of its regulatory agreements entered into in its own capacity, regime for goods, both agricultural and provided these agreements did not come into manufactured, will remain aligned with the EU force or apply until after the transition period. internal market rules for goods. This will create Part Five – Financial provisions: both sides a customs and regulatory border in the Irish agreed a methodology for calculating the Sea between Ireland and the rest of Great financial settlement without agreeing a Britain. The revised Protocol allows the specific amount. The UK agreed to contribute Northern Ireland Assembly to provide consent and participate in the EU budget until the end for certain EU regulations continuing in of the current budget cycle (end 2020) as if it Northern Ireland at four yearly intervals. had remained in the EU. The UK will also Protocol relating to the Sovereign Base Areas contribute its share of the financing of the in Cyprus: the Protocol is intended to preserve budgetary commitments entered into before the existing unique arrangements which the end of the current budget cycle but not yet reflect UK’s international commitments and disbursed at the end of 2020 (the so called ensure the continued effective operation of the “reste à liquider”). Sovereign Base Areas for military purposes. Key Contacts Payments arising from the financial settlement Gavin Williams Protocol on Gibraltar: the Protocol provides for will become due as if the UK had remained a Partner close cooperation between the UK and Spain in Member State, so the UK will not be required to T +44 20 7466 2153 Gibraltar in relation to the implementation of make payments earlier than would be the case, [email protected] part two of the Agreement on citizens’ rights. had it remained in the EU. The UK will continue The Protocol or any other arrangements to benefit from EU spending under programmes between the UK and Spain do not in any way Dorothy Livingston financed by the current budget until their affect the UK’s sovereignty over Gibraltar. Consultant closure. UK beneficiaries will be required to T +44 20 7466 2061 respect all relevant EU provisions governing [email protected] these programmes, including co-financing.

Part Six – Institutional and final provisions: in Paul Butcher order to ensure consistent interpretation of the Brexit Director citizens’ rights provisions of the Agreement, T +44 20 7466 2844 UK courts will be able to make preliminary [email protected] references to the CJEU for up to eight years from the end of the transition period. A Joint Committee consisting of representatives of the Kristien Geeurickx EU and the UK will be responsible for the Professional Support Lawyer implementation and application of the T +44 20 7466 2544 Withdrawal Agreement. Disputes arising [email protected] under the Withdrawal Agreement can be referred to the Joint Committee with the aim of