Letter of 7 September 2018 from the Minister of Foreign Affairs to the House of Representatives on the current state of preparation for Brexit (contingency planning and preparedness at national and EU level)

Overview of the current state of contingency planning and preparedness in regard to Brexit

The Dutch government, Dutch business and Dutch citizens in the UK must all prepare themselves for the withdrawal of the UK from the EU (preparedness), including planning for the possibility of the UK leaving the EU without a Withdrawal Agreement − the cliff edge or no-deal scenario (contingency planning). This letter informs the House of Representatives about these preparations at EU and national level.

I. Approach to contingency planning and preparedness at EU level

At the start of this year the European Commission (‘the Commission’) began mapping the consequences of the UK’s withdrawal from the EU in all areas to which EU legislation applies. As part of that process it identified two types of measures: preparedness measures, being those that will need to be taken as a result of the withdrawal of the UK from the EU − whether or not the EU and UK reach a Withdrawal Agreement − and contingency measures, being measures required to prepare for the possibility of the UK leaving the EU without a Withdrawal Agreement (cliff edge scenario) on 30 March 2019. The work is being coordinated by a specially formed preparedness team within the Secretariat-General of the European Commission.

On 19 July 2018 the Commission published a Communication1 about the preparations that need to be made for the UK’s withdrawal from the EU on 30 March 2019. One of the key messages of the Communication is that both businesses – including small and medium- sized enterprises – and professionals need to make preparations for the departure of the UK from the EU. The Commission has made relevant information available by publishing notices to stakeholders and by organising technical expert seminars with member states. At the

1 Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank - Preparing for the Withdrawal of the United Kingdom from the European Union on 30 March 2019 (COM/2018/556 final/2).

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same time, the Commission states that the Communication has no effect on negotiations regarding the withdrawal of the UK from the EU, and that these negotiations will continue in the hope that the European Council will give its approval to both the Withdrawal Agreement – including a transitional period up to 31 December 2020 – and the Political Declaration on the framework of future relations. After that the Council of the European Union, the European Parliament and the UK parliament must all ratify the Withdrawal Agreement in accordance with the relevant procedures.

In its Communication the Commission explains that it is preparing for the departure of the UK from the EU in three ways:

1. Drawing up and distributing notices to stakeholders: the Commission has now published 68 such notices. Depending on the progress of negotiations, the Commission intends to draw up more of these notices in regard, for example, to travel to and from the UK and the availability of medicines. A number of European agencies have also published information about the consequences of the departure of the UK from the EU. Web pages specially set up for this purpose on the European Commission’s website provide links to all the available information.2 2. Legislative changes: the Commission has also identified which EU legislation requires amendment as a result of the withdrawal of the UK from the EU. The provisional outcome is a list of eight legislative proposals, six of which have already been published.3 This number is smaller than originally identified by the Commission because it became apparent that, in many cases, it can amend existing EU legislation by means of delegated and executive acts, and because many references to the UK in EU legislation will become irrelevant after the UK’s departure and can, if necessary, be amended at a later stage. 3. Practical measures: these relate mainly to the relocation of the EU agencies the European Banking Authority (EBA) and the European Medicines Agency (EMA) from the UK to other member states and to internal matters such as the disconnection and adaptation of certain IT systems and other platforms for communication and information exchange, to which the UK will no longer have access as a third country, as well as to areas such as transport and customs, where measures such as workforce increases will only be put in place if necessitated by the progress of the negotiations.

2 https://ec.europa.eu/info/brexit/brexit-preparedness/preparedness-notices_en 3 https://ec.europa.eu/info/sites/info/files/brexit-legislative-preparedness-proposals.pdf

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The EU member states, in varying compositions, are also talking to each other about the preparations that need to be made at national level to prepare for the departure of the UK from the EU, and for a cliff edge scenario. The Commission and Council Secretariat are currently mapping the progress of such preparations at national level in the various member states.

The welcomes and supports the above ongoing initiatives, with a view to cushioning − as far as possible collectively − the negative impacts of the UK’s withdrawal from the EU.

On 23 August 2018 the UK published the first 24 of a total of over 80 notices (technical notices) informing citizens and businesses about the options for preparing for a scenario in which the UK leaves the EU on 30 March 2019 without a Withdrawal Agreement (cliff edge scenario). The government is encouraged that the UK government is making serious preparations for a cliff edge scenario.

II. Approach to contingency planning and preparedness at national level

Dutch central government bodies affected by Brexit, including its executive services, agencies and autonomous administrative bodies (ZBOs), are taking preparedness measures in preparation for the withdrawal of the UK from the EU, both for the scenario in which the EU and the UK reach agreement on a Withdrawal Agreement (preparedness) and for the cliff edge scenario in which the UK leaves the EU on 30 March 2019 without an agreement (contingency measures). The House was recently informed about these preparatory measures in a number of policy areas.4 A private technical briefing will also follow on 10 October 2018.

The preparations being made by government bodies can be broken down into the following categories: organisation, communication, legislation and policy/implementation. A related question is what crisis management plan the government has in mind to deal with a cliff edge scenario. This letter does not deal specifically with that question; the private technical

4 Parliamentary Papers II 2017-2018, 23987, nos. 225, 227, 228, 231, 249; Parliamentary Papers II 2017-2018, Proceedings of the House of Representatives, Appendix no. 1643, Parliamentary Papers II 2017-2018, 21501-31, no. 489; Parliamentary Papers II 2017-2018, Proceedings of the House of Representatives, Appendix no. 2946 and the letter from the Minister of Agriculture, Nature and Food Quality, shortly to be debated in the House in regard to the motion submitted by MPs and (in which the House requests the government to make maximum efforts in Europe to ensure that fresh products can continue to be exported to the UK with as little delay as possible after Brexit).

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briefing on 10 October 2018 will provide us with an opportunity to inform the House about this matter.

A. Organisation

The Minister of Foreign Affairs has a coordination role and is supported in contingency planning and preparedness by the Contingency Planning and Preparedness Coordination Unit (CECP). The CECP was set up under the responsibility of the Minister for Foreign Trade and Development Cooperation and the Minister of Foreign Affairs in order to coordinate preparations on cross-ministry issues, by both government authorities and business, for the effects of Brexit on the Netherlands. To that end it also organises periodic consultations with the business community. The purpose of these consultations is to create an opportunity to identify difficulties and find practical, workable solutions, initially focusing on cooperation in supply and value chains and logistical and spatial planning tasks in and around mainports (seaports and airports).

B. Communication

The government is actively informing public authorities, the general public, businesses and civil society organisations about the consequences of the UK’s withdrawal from the EU and the risk of a cliff edge scenario. Communication to the various target groups will be stepped up as the withdrawal of the UK from the EU approaches. The government will do its utmost to minimise all foreseeable impacts but it is inevitable that the cliff edge scenario in particular will result in disruption and difficulties. It is therefore imperative that public authorities, the public, businesses and civil society organisations remain aware of their own responsibility to make the best preparations they can for all possible scenarios. Not all contingency planning and preparedness solutions can be provided by the national government.

The government is making efforts to provide citizens of the UK (British citizens) in the Netherlands and Dutch citizens in the UK with as much information as possible about the potential consequences of the withdrawal of the UK from the EU.5 They can find information on the effects of the UK’s withdrawal for people in their situation on the websites of the national government (Government.nl), the Brexit desk (www.brexitloket.nl), the Immigration and Naturalisation Service (IND) (ind.nl) and the Dutch embassy in London. A government newsletter is also being distributed. Public authorities have an important role in providing

5 Parliamentary Papers II 2017-2018, Proceedings of the House of Representatives, Appendix no. 2946.

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information to the public and will be enabled to provide as much information as possible to UK citizens. The Dutch embassy in London is also holding meetings to provide information to Dutch citizens in the UK.

Some of the steps that have been taken to inform business about the consequences of the withdrawal of the UK from the EU are the establishment of the Brexit desk, the development of the Brexit Impact Scan, the holding of jointly organised business events about Brexit (across the regions of the Netherlands), and support through the provision of Brexit vouchers. Since the end of May this year an online campaign has been running to publicise to business (specifically SMEs) the range of tools and services the government can offer. Stakeholder meetings have also been taking place with business organisations and civil society organisations, such as those in the healthcare sector and those representing the mainports (both seaports and airports). The government will shortly inform the House separately about the progress of information provision to business (specifically SMEs) about the consequences of the UK’s withdrawal from the EU.

Together with the industry umbrella organisations the government is committed to keeping public authorities informed and encouraging them to prepare for the UK’s withdrawal from the EU, both in regard to implementing what may be agreed nationally and in regard to their own business operations, such as data exchange and the protection of personal data. To that end the government, in partnership with knowledge centre ‘Europa decentraal’, has set up a Brexit desk for public authorities and will be developing a Brexit Impact Scan for those partner authorities.

C. Legislation

Various ministries will need to amend, or prepare to amend, legislation in preparation for the withdrawal of the UK from the EU. The government will seek to draft a combined bill covering all amendments related to the UK’s withdrawal. The bill will also include a provision making it possible to respond quickly, in the most exceptional circumstances, to unforeseen and unacceptable consequences of a cliff edge scenario by means of an order in council or ministerial order, such measures being enshrined in a subsequent Act of Parliament. The combined bill will be laid before the States General in accordance with the usual procedure. In addition to the legislative amendments to Acts of Parliament, amendments will also be necessary to existing orders in council and ministerial orders, which will likewise be made through the normal procedures.

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D. Policy and implementation – by area

Citizens

The contingency measures to prepare for a cliff edge scenario for citizens was addressed in the letter dated 16 August 2018, from the Minister of Foreign Affairs in conjunction with the Minister of Social Affairs and Employment and the State Secretary for Justice and Security.6 The letter answered questions put by MPs , Anne Mulder and about the consequences of a no deal scenario for Dutch and other EU citizens in the UK. Their questions relate to the uncertain situation of British citizens in the Netherlands and Dutch citizens in the UK. To partially eliminate some of this uncertainty the Immigration and Naturalisation Service (IND) has published a page on its website, which can be consulted by British citizens residing in the Netherlands to check what action they can take at this stage, irrespective of the outcome of the negotiations.7

The IND is making preparations to recruit and train additional staff in order to be able to regulate the residence status of British citizens residing in the Netherlands. More details can be given during the private technical briefing on 10 October 2018 of contingency measures to be taken in the scenario in which the UK leaves the EU without a Withdrawal Agreement.

Border control processes

Royal Military and Border Police (KMar): The withdrawal of the UK from the EU will result in British citizens acquiring the status of ‘third-country nationals’.8 In accordance with the Schengen Borders Code they will then be subject to thorough checks instead of minimum checks. This will increase the duration of border checks on British citizens travelling from the UK. The Netherlands will also be able, after the withdrawal of the UK, to request passenger information for flights from the UK under the API (Advance Passenger Information) Directive.9 This will require more staff for border controls at entry points and for the processing of passenger data.

6 Parliamentary Papers II 2017-2018, Proceedings of the House of Representatives, Appendix no. 2946. 7 https://ind.nl/Paginas/Brexit.aspx 8 British citizens who are family members of an EU citizen enjoy free movement rights equivalent to those of EU citizens. 9 Council Directive 2004/82/EC of 29 April 2004 on the obligation of carriers to communicate passenger data.

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The KMar has identified the additional capacity needed to deal with the effects of the UK’s withdrawal from the EU. Because of the growth that KMar is currently undergoing as a result of funds already allocated by the government for extra capacity, the necessary additional capacity relating to the UK’s withdrawal in 2019 will be provided in phases.

In preparation for a cliff edge scenario, KMar, in coordination with the air and maritime transport sectors, is also taking operational measures to avoid a negative impact on cross- border travellers.

Tax and Customs Administration (Customs): The Customs service is recruiting 928 FTEs in tranches and making the associated investments in equipment. By mid-August 2018 approximately 170 Brexit vacancies had been filled with suitable candidates, with further applications still being processed. Candidates are currently being tested and selected for a third recruitment tranche. Vacancies for the fourth tranche will be publicised during the course of September 2018. It is expected that seven recruitment tranches will be required in order to fill all the Brexit posts. Work is also being done to expand accommodation and calls for tenders have been issued. The Customs service is consulting regularly with business and is involved in information campaigns for business and the public. Other departments of the Tax and Customs Administration may also experience increased workload as a result of the UK’s withdrawal from the EU and they are making appropriate preparations.

Netherlands Food and Consumer Product Safety Authority (NVWA) and agricultural inspection services: The trade relationship between the EU and the UK will change radically in all scenarios, with more barriers for the Dutch agri-food trade than is currently the case. It is therefore essential that both public authorities and business prepare for these changes. Early this year the government gave the green light to an expansion of capacity at the NVWA and relevant agricultural inspection services. In preparation for a cliff edge scenario 143 FTEs will be recruited at the NVWA and 48 FTEs at the agricultural inspection services. These organisations are currently recruiting and training the necessary additional staff.

Logistics, transport, mainports

Aviation: The UK’s withdrawal from the EU will mean that it is no longer part of the European Common Aviation Area (ECAA). The UK will also no longer be part of EU-wide ‘one-stop security’ arrangements, which means that passengers, baggage and freight coming from the UK and transferring in the EU will require a security inspection. Aviation policy as affected by

AVT18/BZ126685B 7 the withdrawal of the UK is largely an EU competence. That being so it is not only desirable, but in most cases, necessary, for EU contingency measures to be enacted. The measures involved relate not only to air transport and civil aviation safety but also to civil aviation security, so that the principle of ‘one-stop security’ can be applied in relation to the UK even after its withdrawal from the EU. The Netherlands is in discussion about this with the Commission and other EU27 member states.

The government is also in close contact with the aviation sector about the preparations they are making. Where the government and the sector have a shared task, it will be tackled jointly. One such task relates to European Aviation Safety Agency (EASA) licences for aviation staff. If these have been issued by the relevant British authority they will formally cease to be valid from the withdrawal date. The Human Environment and Transport Inspectorate (ILT) and the airlines are currently working to determine how many licences are involved and whether they can be converted in good time into Dutch EASA licences. More information can be provided at the private technical briefing of 10 October 2018 about contingency measures for the scenario in which the UK leaves the EU without a Withdrawal Agreement.

Road transport: The UK’s withdrawal from the EU will result in the loss of Euro permits for goods transport from the UK to the EU and vice versa. The possibility of cabotage transport operations and transit via the UK to Ireland will also disappear. Dutch hauliers will need single-trip permits or a European Conference of Ministers of Transport (ECMT) international road haulage permit to continue haulage operations in the UK. The same applies to carriers in the UK who want to carry out haulage operations in the Netherlands. An agreement will first need to be made with the UK in regard to single-trip permits. In view of the allocation of competences between the EU and the member states, the initiative for this lies with the European Commission.

Maritime transport: Delays in the handling of goods traffic are possible at seaports, with the threat of hold-ups and congestion as a result of different (and probably more protracted) customs procedures for the loading and unloading of sea-going vessels and ferries. Changes to border controls for British passengers after the UK’s withdrawal from the EU will also result in delays. A central government-wide ‘ferry consultation’ is taking place to determine how the ferry process can best be adapted. The ferry consultation focuses primarily on operational issues, which are then discussed with the relevant stakeholders such as shipping companies and the Port of Rotterdam Authority. Creation of the additional

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parking space needed by lorries wishing to make the crossing by ferry is primarily the responsibility of the port management and the local authorities. Rijkswaterstaat will play a role in preventing queuing and delays on the main roads from and to the terminals. Finally, the government is looking at the potential space requirement at ports for the necessary inspection stations for agricultural imports and exports.

Environment

In the cliff edge scenario, chemicals registered by companies established in the UK with the European Chemicals Agency (ECHA), which supports implementation of the REACH Regulation (1907/2006/EC), will cease to be counted as registered because registration can only be effected by businesses established in the EU or the EEA. This will lead to disruptions in the supply chain and an administrative burden. Where a chemical has been registered by a number of businesses under the leadership of a British company, it will be possible for another company established in the EU or EEA to take over the role of main registrant in order to retain the validity of the registration. A British company may also appoint an EU/EEA importer to register on its behalf. This is a standard procedure, for which the REACH Regulation already makes provision. ECHA has been notifying registrants of these options via its website10 as part of a wider information campaign. If needed, businesses can obtain advice from the REACH helpline run by the National Institute for Public Health and the Environment (RIVM).

Because, after the UK’s withdrawal from the EU, waste transport consignments from and to the UK will cross the EU external frontier, they will have to comply with customs formalities, including the associated levies. We have already set out above how the Dutch Customs service is preparing for the UK’s withdrawal.

Healthcare

Problems could arise in the cliff edge scenario in regard to the security of supply of medicines and healthcare products because, for example, agreements regarding reciprocal recognition of inspections and product evaluations are no longer valid. Before the summer the Ministry of Health, Welfare and Sport (VWS) held a meeting in which the healthcare industry was given information about the possible consequences of the UK’s withdrawal from the EU and the preparedness and contingency measures that should be taken. The

10 https://echa.europa.eu/uk-withdrawal-from-the-eu

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Medicines Evaluation Board (CBG/MEB) is also providing the healthcare sector with information about this.11 Steps are currently being taken to determine whether, in the absence of any agreements, the Netherlands could temporarily continue to import products from the UK. Also currently in progress is an exercise to map the movements of medicines and healthcare products from the UK to the EU and vice versa and identify any potential vulnerabilities in regard to public health. The CBG/MEB is working closely within the EU with other national agencies and EMA to re-distribute medicines dossiers currently registered in the UK to other member states. It is also increasing capacity with a view to being able to take over the British share of medicinal products evaluation in the future.

Businesses and institutions in the healthcare and in-vitro diagnostics products sector are in the process of identifying the possible impact on them of the UK’s withdrawal from the EU. Various notified bodies in the UK are examining whether they should transfer some of their activities to other EU member states, including the Netherlands. These notified bodies are currently still authorised to certify healthcare and in-vitro diagnostics products for the European internal market. In the cliff edge scenario, however, they will no longer be authorised for this purpose and manufacturers will have to have their products re-certified by a notified body in an EU member state. It is essential that healthcare businesses ready themselves for this at an early stage.

In addition to medicinal and healthcare products the Ministry of Health, Welfare and Sport is also finding out more about the consequences of the UK’s withdrawal from the EU for food safety and security (in partnership with the Netherlands Food and Consumer Product Safety Authority (NVWA)), and the consequences for the recognition of professional qualifications and alert systems, such as those relating to underperforming health professionals and the spread of infectious diseases.

Recognition of professional qualifications and certificates

In a cliff edge scenario the Directive on the recognition of professional qualifications will no longer apply to the UK.12 The government is examining whether preparedness and contingency measures need to be taken at national level to minimise possible problems for British professionals in the Netherlands (and vice versa). The Commission has already stated in one of its notices to stakeholders that a cliff edge scenario will not affect decisions

11 https://www.cbg-meb.nl/over-cbg/brexit. 12 Directive 2005/36/EC of 7 September 2005 on the recognition of professional qualifications.

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Exchange of information and political and judicial cooperation

In a cliff edge scenario the existing EU legislation and EU mechanisms for political and judicial cooperation will no longer apply with regard to the UK. The police have taken a number of measures to deal with this possible scenario. They have, for example, researched how much additional administrative burden the UK’s withdrawal from the EU will cause for the exchange of information, initiated a project to automate the Interpol channel and extended the term of deployment of the current Dutch police adviser in the UK. A second police officer will be recruited to be deployed in the UK in 2019. The police are also exploring whether any further capacity increase is needed in the organisational units responsible for criminal investigation and the exchange of information.

The Public Prosecution Service (OM) and the Fiscal Intelligence and Investigation Service (FIOD) will also experience additional pressure in the event of a cliff edge scenario, as evident from the impact analyses they have carried out. The Public Prosecution Service is currently preparing for the required increase in capacity.

Financial sector

The withdrawal of the UK from the EU will entail risks for the Dutch financial sector. Transition to a new relationship with the UK will mean adaptation costs and inconvenience for financial institutions, due partly to the sector’s dependence in some areas on the City of London as a financial centre. This will be the case if agreement is reached on a Withdrawal Agreement (including a transition agreement), but the costs and inconvenience will be even greater if the UK leaves the EU on 30 March 2019 without such an agreement (cliff edge scenario).

A cliff edge scenario could result in Dutch financial businesses losing access to central clearing services in London. The EU is currently in negotiation about legislation specifying the terms under which central counterparty clearing houses (CCPs) in third countries can access the European market. This legislation is expected also to be applicable to the UK. The Ministry of Finance, De Nederlandsche Bank (DNB) and the Dutch Authority for the Financial Markets (AFM) are working together intensively to identify the possible

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complications for existing derivatives and insurance contracts. The government has also submitted a bill amending the Bankruptcy Act to ensure that it is still possible to access British winding-up systems after the UK’s withdrawal from the EU.13

Finally, it is essential that financial institutions also prepare for the cliff edge scenario. DNB and AFM14 are overseeing this. One of the forums in which the Ministry of Finance, DNB and AFM discuss developments relating to the withdrawal of the UK from the EU is the Financial Stability Committee.15 That Committee will continue to monitor the progress of financial institutions in preparing for the UK’s withdrawal, devoting special attention to risks that could arise in a cliff edge scenario.

E. Financial consequences of policy

The budgets set out in the Spring Memorandum of 2018 take account of the budgetary consequences of ministries’ preparations for the UK’s withdrawal from the EU.

13 Parliamentary Papers II 2017-2018, 35005, nos. 1-4. 14 https://www.afm.nl/nl-nl/professionals/onderwerpen/brexit 15 Parliamentary Papers II 2017-2018, 32545, no. 77 and no. 82.

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