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The Political Declaration
The UK exits the EU today, 31st January 2020, following 47 years participation with the European Union.
The Prime Minister outlines plans for alignment with EU rules; and a "zero tariffs, zero quotas" trade agreement. Next week, commencing 3rd February, UK embassies will launch a GREAT 'Ready to Trade' campaign through 17 cities across 13 countries, seeking to secure trading relationships with future global partners.
Following the signatory of the Withdrawal Agreement (Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community) on 24th January 2020, and the European Parliament's ratification of Boris Johnson's Brexit deal on Wednesday 29th January, the deal is now subject to approval by each member states' national parliament.
On 17th October 2019, the UK and EU outlined a non-legally binding agreement, drafting The Political Declaration to outline the aspiration of a future deal and clarify a framework for any future potential trading deal. Negotiations for this deal will begin after 31st January 2020 and are scheduled to be confirmed by 31st December 2020, although this may be subject to an extension.
1. Trade in goods.
The Declaration states that the UK and EU “envisage having an ambitious trading relationship on goods on the basis of a Free Trade Agreement, with a view to facilitating the ease of legitimate trade”. The economic partnership should through a Free Trade Agreement ensure no tariffs, fees, charges or quantitative restrictions across all sectors with appropriate and modern accompanying rules of origin, and with ambitious customs arrangements that are in line with the Parties' objectives and principles above.
This identifies that both parties wish to secure zero tariffs and minimise barriers to trade.
2. Trade in services.
The Declaration provides that both the EU and UK should respect each regime’s right to regulate and start assessing and implementing equivalence regimes for regulatory and supervisory bodies and regimes. In this context, the Parties should agree disciplines on domestic regulation. These should include horizontal provisions such as on licensing procedures, and specific regulatory provisions in sectors of mutual interest such as telecommunication services, financial services, delivery services, and international maritime transport services. There should also be provisions on the development and adoption of domestic regulation that reflect good regulatory practices.
The UK will continue to integrate EU Competition Law within domestic legislation and the Competition Act 1998 when trading with the EU.
The Declaration states that the “economic partnership should through a Free Trade Agreement ensure no tariffs, fees, charges or quantitative restrictions across all sectors, with appropriate and modern accompanying rules of origin, and with ambitious customs arrangements that are in line with” the EU and UK’s objectives and principles. They intend to consider mutual recognition of trusted traders' programmes, administrative cooperation in customs and value added tax (VAT) matters and mutual assistance, including for the recovery of claims related to taxes and duties, and through the exchange of information to combat customs and VAT fraud and other illegal activity.
HMRC has invested significantly into announcing commercial preparations for a reversion to World Trade Organisation rules, including integration the Common Transit Convention, Transitional Simplification Procedures, with Commodity Codes (HS) tariffs and VAT payments aligned with the rest of the world, outlining an estimated impact of £15billion to the economy. If the UK and EU transpire to negotiate a tariff-free Free Trade Agreement, this would be a significant coup for UK trade.
4. Digital Commerce
Provision is made for both parties to ensure they facilitate and address any “unjustified barriers to trade” by electronic means, in respect of both services and goods. The Declaration indicates an intention to seek an “adequacy decision” from the European Commission during the transition period to address EU to UK data transfers from 1st January 2021. There is, however, no guarantee that the UK will obtain an adequacy decision from the European Commission in time, or at all.
New cases such as technology being used to remove the VAT of individual countries to sell products to an international customer basis are currently setting legal precedents within e-commerce agreements, particularly within the rights to distribute products to unauthorised third party suppliers.
The Declaration contains statements on the intended levels of co-operation in respect of both internal police co-operation and on broader foreign policy and defence matters.
Within defence, the E3 group; France, Germany and the United Kingdom continue to align to negotiate with Iran, as a hinge between Nato and the EU.
6. Disputes and courts.
The Declaration envisages a dispute resolution system with a joint committee and an arbitration panel. However, final word on matters of EU law will rest with the European Court of Justice.
Parties should address the risk of arbitrary behaviour when awarding contracts, and make available remedies and review procedures, including before judicial authorities. When entering into new agreements within the EU; companies are advised to indicate the country of jurisdiction within terms, should arbitration or litigation be required.
The EU and the UK have agreed to assess each other over 41 equivalence assessments. These assessments will commence in February 2020, both parties have agreed to "endeavour to conclude (them) before the end of June 2020." Both Parties are committed to preserving financial stability, market integrity, investor and consumer protection and fair competition, while respecting the Parties' regulatory and decision-making autonomy, and their ability to take equivalence decisions in their own interest. This is without prejudice to the Parties' ability to adopt or maintain any measure where necessary for prudential reasons. The Parties agree to engage in close cooperation on regulatory and supervisory matters in international bodies.
Both the EU and the UK have acknowledged that that UK intends to explore options for a future relationship with the European Investment Bank.
8. Freedom of movement.
The United Kingdom has decided that the principle of free movement of persons between the Union and the United Kingdom will no longer apply. The Declaration notes that other mobility arrangements should be made, with visa-free travel suggested for short term visit, with consideration of the conditions for entry and stay for purposes such as research, study, training and youth exchanges, and both parties agree to consider social security systems in light of the new arrangements. Any provisions will be without prejudice to the Common Travel Area (CTA) arrangements as they apply between the United Kingdom and Ireland. The UK is integrating wider changes into the domestic immigration and visa system, proposing a points-based new immigration system which will account for language and skill sets when awarding visas. The UK cap for work based visas is currently 21, 000, with a minimum salary requirement of £30, 000 required. There is no guarantee of exemptions from the new immigration system for EU/EEA nationals entering the UK or going to the EU post Brexit.