Sunday, 8 July 2018

The Chequers Statement explained

Chequers Court
Author Stephen Simpson
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Jane Lambert

The Statement from HM Government issued from Chequers on 6 July 2018 appears to be a direct response to the European Council's Conclusions of 29 June 2018.  In order to understand both documents it is necessary to have regard for the Joint statement from the negotiators of the European Union and the United Kingdom Government on progress of negotiations under Article 50 TEU on the United Kingdom's orderly withdrawal from the European Union.

The Joint Statement refers to a draft treaty for the withdrawal of the UK from the European Union which was first published on 28 Feb 2018.  The draft treaty is intended to be an agreement "setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union" within the meaning of art 50 (2) of the Treaty of European Union. It provides a timetable and road map for the orderly withdrawal of the UK from the EU. The draft agreement provides for the UK to observe the obligations of membership until 31 Dec 2020 after which a new framework agreement is hoped to be in place.

Without a withdrawal agreement, art 50 (3) provides that the treaties and the entire superstructure of legislation that has governed the relationship between the UK and its neighbours and allies since 1973 will simply fall away on 29 March 2019.

There are some who believe that such an outcome would be a good thing because it would enable:
  • British businesses and consumers immediately to buy goods from suppliers outside the EU more cheaply than they can now because the UK would no longer have to apply the common external tariff on such goods; and 
  • British diplomats to negotiate trade deals with countries outside the EU that would be more favourable to British business than the ones to which HM government is already a party.
That may or may be the case but it is not a view shared by many important businesses in the aerospace and automotive sectors that have warned that they will reconsider investing in the UK if the UK leaves the EU without, at the very least, a withdrawal agreement on the lines of the 28 Feb draft.

The problem for both the British government and the remaining EU member states is that any withdrawal agreement will have to be ratified by the British and European parliaments and the legislatures of the remaining 27 member states and there is not much time left for them to do it. That is why the Council expressed concern that no substantial progress had yet been achieved on agreeing a backstop solution for the border between the Irish Republic and the United Kingdom and called upon the UK to make its position clear on any framework agreement for future trade relations between the UK and EU.

Both the British government and the remaining EU member states are committed to an open border between the United Kingdom and the Republic of Ireland.  The EU Commission proposes a backstop agreement which would require Northern Ireland to remain in a customs union with the Irish Republic.  As that would be politically unacceptable to the UK, the Chequers statement makes two proposals. The first is that:-
"The UK and the EU would maintain a common rulebook for all goods including agri-food, with the UK making an upfront choice to commit by treaty to ongoing harmonisation with EU rules on goods, covering only those necessary to provide for frictionless trade at  the border."
Secondly:
"The UK and the EU would work together on the phased introduction of a new Facilitated Customs Arrangement that would remove the need for customs checks and controls between the UK and the EU as if a combined customs territory."
The government listed the benefits of the proposal one of which is that it should
"enable the Government’s commitments to Northern Ireland to be met through the future relationship, avoiding the need for a border between Northern Ireland and Ireland, or within the UK."
There is no guarantee that these proposals will be accepted but they are a start.  The alternatives to a withdrawal treaty are no agreement at all and the last paragraph of the statement makes arrangements for that eventuality, an agreed extension of the two year negotiating period in accordance with art 50 (3) or, if that is legally or politically possible, the revocation of the notice of intention to withdraw from the EU.

Anyone wishing to discuss this article or Brexit in general should call me on 020 7404 5252 during office hours or send me a message through my contact form.

Tuesday, 3 July 2018

Brexit Briefing - June 2018

Author Mikelo 
Licence Creative Commons Attribution Share Alike 2.0 Generic
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Jane Lambert

Despite Lords' amendments and a threatened revolt by a number of Tory MPs, the European Union (Withdrawal) Bill received royal assent and is now law. I have removed my link to the bill and added one to the Act in the left hand column.

But from the government's point of view that was the only progress that it could celebrate.  Members of the Cabinet could not agree on mechanisms for avoiding a hard border with the Republic of Ireland. There were reports that the Rt Hon Michael Gove MP had torn up a report on a policy said to be favoured by the Prime Minister in a fit of pique (see  'Livid' Michael Gove rips up EU customs partnership report 30 June 2018 BBC website). Major employers like Airbus SE and BMW have been drawing up contingency plans for the UK's departure from the EU without a withdrawal agreement (see Hope for the best but prepare for the worst 22 June 2018).

A draft withdrawal agreement has been available since 28 Feb 2018 but many of its provisions are still to be agreed (see Brexit Briefing - February 2018 7 March 2018).  There has been progress as the European Council acknowledged in its Conclusions of 29 June 2018 but there is a great deal more still to do.    It expressed concern that no substantial progress had yet been achieved on agreeing a backstop solution for Ireland/Northern Ireland despite commitments undertaken by the UK in this respect in December 2017 and March 2018.  It also called for work to be accelerated with a view to preparing a political declaration on the framework for the future relationship. 

The lack of progress with such two issues is the reason for the nervousness of businesses like Airbus and BMW.  At the time that the draft was published there was every hope that the parties would reach an agreement before the 29 March 2019 that would allow integrated aerospace and automotive manufacturing across the Channel and North Sea to continue.  As every day passes such an outcome becomes less and less likely.  There is a growing chance that the UK will withdraw from the EU without any agreement at all.

Although most businesses seem to regard withdrawal without agreement as a bad thing some will find opportunity.   Regardless of whether such an outcome would be good or bad it has to be planned for and it is reassuring that many organizations are doing just that,

Anyone wishing to discuss this article or Brexit in general should call me on 020 7404 5252 or send send me a message through my contact form.

Saturday, 30 June 2018

The Best that can be achieved from the Withdrawal Agreement Negotiations and the Likelihood of achieving it














Jane Lambert

In Hope for the best but prepare for the worst 22 June 2018, I advised businesses of all kinds to make risk assessments and draw up contingency plans for the UK's departure from the EU without a withdrawal agreement.  Comparing what needs to be done before 29 March 2019 with what has been achieved to date it has become increasingly unlikely that such an agreement can be concluded and ratified in time. 

The remaining 27 member states appear to be of a similar view.  In a statement following the Council meeting of 28 and 29 June 2018 President Tusk said:
"On Brexit. The EU27 has taken note of what has been achieved so far. However, there is a great deal of work ahead, and the most difficult tasks are still unresolved. If we want to reach a deal in October we need quick progress. This is the last call to lay the cards on the table."
This was amplified in the  Conclusions of the Council of 29 June 2018. 

While the governments of the remaining 27 member states welcomed the progress mentioned in the  joint statement from the negotiators of the European Union and the United Kingdom Government on progress of negotiations under Article 50 TEU on the United Kingdom's orderly withdrawal from the European Union, they noted that "other important aspects still need to be agreed, including the territorial application of the Withdrawal Agreement, notably as regards Gibraltar." They expressed concern that no substantial progress had been achieved on a backstop solution for the Irish border despite British commitments made in December 2017 and March 2018, and that negotiations can only progress as long as all commitments undertaken so far are respected in full.

The remaining member states also concluded that work must be accelerated with a view to preparing a political declaration on the framework for a future relationship between the UK and EU.  Such a political declaration would have to appear in a withdrawal agreement because the EU 27 made plain in paragraph 6 of their Guidelines of 15 Dec 2017 that an agreement on a future partnership can only be concluded after the UK leaves the EU.  In paragraph 8 of their Guidelines of 23 March 2018 the 27 remaining states emphasized that although they were prepared to countenance a  "balanced, ambitious and wide-ranging free trade agreement" such an agreement could not offer the same benefits as EU membership and or allow participation in the single market or parts thereof.  

It could, however, cover such matters as:
"i) trade in goods, with the aim of covering all sectors and seeking to maintain zero tariffs and no quantitative restrictions with appropriate accompanying rules of origin. In the overall context of the FTA, existing reciprocal access to fishing waters and resources should be maintained;
ii) appropriate customs cooperation, preserving the regulatory and jurisdictional autonomy of the parties and the integrity of the EU Customs Union;
iii) disciplines on technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures;
iv) a framework for voluntary regulatory cooperation;
v) trade in services, with the aim of allowing market access to provide services under host state rules, including as regards right of establishment for providers, to an extent consistent with the fact that the UK will become a third country and the Union and the UK will no longer share a common regulatory, supervisory, enforcement and judiciary framework;
vi) access to public procurement markets, investments and protection of intellectual property rights, including geographical indications, and other areas of interest to the Union."
There could also be collaboration on climate change, sustainable development and pollution control. Agreement could be reached on free movement of people, recognition of professional qualifications and judicial cooperation, transport and scientific research and development.

Such an agreement would go a long way towards ensuring the continuation of integrated manufacturing in industries like motor manufacturing and aerospace and the provision of financial and professional services by the city of London. That is the best possible outcome that could be hoped for.  Both sides want it but it is increasingly unlikely that they will be able to deliver it by the end of March.

Anyone wishing to discuss this article or Brexit in general should call me on +44 (0)20 7404 5252 or send me a message through my contact form.

Friday, 22 June 2018

Hope for the best but prepare for the worst

Author Ienac
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Source Wikipedia



















Jane Lambert

It is important for businesses to remind themselves of the plain words of art 50 (3) of the Treaty on European Union:
"The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period."
In other words, unless a withdrawal treaty is agreed by the teams led by Michel Barnier and David Davis and ratified by the British and European Parliaments and the legislatures of the other 27 EU member states by the 29 Feb 2019, the the whole legal framework that has been constructed on the Treaty on European Union and the Treaty on the Functioning of the European Union will fall away.

On 19 June 2018 the negotiators for the European Union and the United Kingdom published a joint statement from the negotiators of the European Union and the United Kingdom Government on progress of negotiations under Article 50 TEU on the United Kingdom's orderly withdrawal from the European Union.  Agreement has been reached on the following articles since 19 March 2018:
  • Title I – Goods placed on the market: Article 42 (Making available of information held by notified bodies established in the United Kingdom or in a Member State); 
  • Title III – Ongoing value added tax and excise duty matters: Article 47 (Value added tax); - 
  • Title IV – Intellectual property: Article 56 (Pending applications for supplementary protection certificates in the United Kingdom); 
  • Title VI – Ongoing judicial cooperation in civil and commercial matters: Article 63 (Jurisdiction, recognition and enforcement of judicial decisions, and related cooperation between central authorities); 
  • Title VIII – Ongoing public procurements and similar procedures: Article 72 (2) (Rules applicable to ongoing procedures); Article 73 (Review procedures); 
  • Title IX – EURATOM-related issues: Article 79 (Ownership and rights of use and consumption of special fissile materials in the United Kingdom); and 
  • Title XI – Administrative cooperation procedures: Articles 94 (Administrative cooperation for matters related to indirect tax); Article 95 (Mutual assistance for the recovery of claims relating to taxes, duties and other measures).
Agreement has also been reached on several annexes.  However, Monsieur Barnier has warned that serious divergences remain on the protocol on Ireland, that any withdrawal agreement must contain a fully operational backstop solution on the border and while there has been a step forward in the withdrawal negotiations a lot more work needs to be done before October.

Comparing what needs to be done over the next 4 months with what has been achieved to date it seems to me increasingly unlikely that agreement will be achieved.   In a speech to that he gave to both houses of the Irish parliament on 21 June 2018, President Juncker remarked:
"Of course, it is in everyone's interest for the United Kingdom and the European Union to stay as close as possible. We will be friends, partners, allies.
The reality is that there is no arrangement outside the European Union which is as good as membership. This simply does not exist. Instead, our goal is to secure the next best option for both sides.
But with pragmatism comes realism. As the clock to Brexit ticks down, we must prepare for every eventuality, including no deal. This is neither a desired nor a likely outcome. But it is not an impossible one. And we are getting ready just in case."
The Commission is not alone in preparing for a failure for such an outcome.

In a Risk Assessment published on 21 June 2018, Airbus SE noted:
"Aerospace operates in a unique, safety driven and heavily regulated environment. The design, production, maintenance, repair & overhaul and use of parts follow tight regulations and can only be executed by certified organizations under EASA, such as Design Organisation Approval (DOA), Production Organisation Approval (POA) and Maintenance Organisation Approval (MOA). More than 10,000 original aircraft parts originate in the UK.
In the absence of a Brexit agreement, UK aerospace companies will not be covered anymore under existing regulatory approvals including EASA approvals. All UK companies will need to transfer their DOA, POA and MOA into the EU. This means that should a single supplier not be certified, its parts cannot be installed and consequently prevent the delivery of aircraft. It is therefore vital that the EU supply chain gets duly prepared.
This is why Brexit imposes additional major risks to the aerospace sector compared to other industries and Airbus is getting increasingly concerned by the lack of progress on the Brexit process. "
Even if a withdrawal agreement can be agreed Brexit will impose costs and introduce inefficiencies. If the UK withdraws from the EU without an agreement Airbus the consequences for Airbus SE would be even worse.  Accordingly, the company has announced that until it knows and understands the new EU/UK relationship, it will carefully monitor any new investments in the UK and refrain from extending its UK suppliers/partners base here. The extent of Airbus's involvement in British industry was considered in a report by Oxford Economics entitled The Impact of Airbus on the UK Economy which was published a year ago.

Airbus's announcement has been criticized in some quarters but it seems to me to be prudent for  businesses to make risk assessments and draw up contingency plans for a disorderly Brexit.  It will affect different businesses in different ways.   Some believe that they could benefit from it. Whether or not that is so, it is sensible to consider the legal as well as business issues that would arise on Brexit.  If, for example, you fear that your imports or deliveries abroad could be disrupted, check your supply and distribution agreements (particularly force majeure clauses) and insurance cover. Also, your trade mark and design registrations, licences and joint venture agreements.  If you find that you are at risk you still have time to do something about it.   I you wait until a problem arises it may be too late to do anything about it.

Should amplification or clarification be required, call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form.

Monday, 11 June 2018

Brexit Briefing - May 2018


















   


Jane Lambert

Although there has been a lot of interest in the UK in the cabinet debate over the relative merits and demerits of maximum facilitation and the customs partnership and in the Lords' amendments to the European Unions (Withdrawal) Bill, there has not made much progress in the negotiations for a withdrawal agreement or a future partnership with the EU since April's Brexit Briefing. The stumbling blocks are, as they have always been, the border between Northern Ireland and the Irish Republic and the governance of any agreement that may be concluded between the UK and the remaining member states.

At the beginning of the month Ed Balls and Peter Sands of the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School published On the Rebound:Prospects for a US-UK Free Trade Agreement which concluded that a free trade agreement with the USA would be difficult to negotiate and probably not worth doing even if negotiations were successful (see Jane Lambert What Sort of Trade Deal (if any) could the UK negotiate with the USA? 8 June 2018). The imposition of tariffs on imported steel and aluminium and the recriminations at the G7 meeting do not offer much reason for optimism.

It is stressed that nothing is agreed until everything is agreed.  If an agreement over the stumbling blocks cannot be reached there will be no transition or implementation period.   Without a withdrawal agreement, he UK will be in no more advantageous relationship with its former partners than any other third country and in a rather less advantageous position than some.  There have already been warnings over the consequences of dropping out without an agreement such as shortages of food and medicines (see  Civil Servants Warn of Food, Fuel, Medicine Shortages Without Brexit Trade Deal 3 June 2018 Bloomberg) and the exclusion of British products  under preferential rules of origin (see Notice to Stakeholders Preferential Rules of Origin  6 June 2018).

If there is to be an agreement with the EU it has to be reached by the Autumn otherwise there will be insufficient time for the parliaments of the member states and the European Parliament to consider it. It is by no means certain that that deadline will be met. While I continue to hope for the best it is increasingly important for clients and other readers to prepare for the worst.

Should amplification or clarification of this article be required, call me on 020 7404 5252 during office hours or send me a message through my contact form

Friday, 8 June 2018

What Sort of Trade Deal (if any) could the UK negotiate with the USA?

The Prime Minister with President Trump at the White House
Author Shealah Craighead
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Jane Lambert

The argument for quitting the single market and customs union is that it will enable the British government to negotiate trade deals with countries outside the EU. On the face of it it is an attractive proposition as the economies of many of the countries in Asia and the Americas are growing more rapidly than those of our European neighbours.

Despite the rapid growth of China and India the largest of those countries remains the USA. With a GDP of US$19.4 trillion its economy is even larger than that of the EU and is currently growing more rapidly. It shares our language, common law and political traditions. We have been close allies since 1941 despite upsets like Suez and Grenada. It ought to be easy to negotiate a trade deal with the USA. Especially as the current incumbent of the White House has declared himself in favour of one.

At least that is what one might think but how far (if at all) is it a realistic expectation?   Not very, according to On the Rebound:Prospects for a US-UK Free Trade Agreement, a report by Ed Balls and Peter Sands of the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School.  Together with a team of research students from Harvard and King's College, London the authors interviewed senior British and American civil servants, experts, academics and business leaders and made the following findings:

  1. "The UK needs a deal, but it is unclear how committed the US is",
  2. "There is a clear power imbalance between the US and UK." Such imbalance lies not just in the relative economic disparity of the two countries but in the lack of experience of British officials in conducting trade negotiations.
  3. "The UK must strike a deal with the EU before it can negotiate an FTA with the US."
  4. The UK will have little to gain and will have to concede more on tariff reductions than the EU offered in the Transatlantic Trade and Investment Partnership negotiations."
  5. "The US demands on non-tariff and regulatory issues will be politically contentious and difficult for the UK to meet."
  6. "Negotiating non-tariff and regulatory issues will force the UK to choose between regulatory alignment with the US or EU."
  7.  "The US cannot, or will not, concede on many British non-tariff and regulatory objectives."
The researchers concluded that "a US-UK FTA is only going to happen if the UK makes concessions that are unlikely to be politically acceptable and in any case, promises relatively limited upside for UK business."

If Ed Balls and Peter Sands are right, there is no reason to suppose that negotiating a trade deal with the USA will be any easier than the negotiations over the withdrawal agreement and future partnership with the remaining EU countries.  Even if terms can be agreed they are unlikely to be as favourable as those we enjoy with other EU states.  Distance and freight costs will prevent manufacturers in the UK taking full advantage of the economies of scale that we enjoy right now. In other words even if an FTA with thre USA can be agreed it may not be worth the effort and concessions.

Should anyone wish to discuss this article or Brexit generally, call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form.  

Saturday, 5 May 2018

Brexit Briefing - April 2018















Jane Lambert

One European initiative upon which the United Kingdom has been consistently communautaire has been a single European patent for the whole European Union.  Her Majesty's government was one of the signatories to the Community Patent Convention in 1975 and one of the reasons for the Patents Act 1977 was to give effect to that Convention.  The Convention never came into force because other parties failed to ratify it.  Several attempts have been made to revive the initiative or to launch other initiatives through the European Union or the European Patent Convention. The British government has supported all of those initiatives but they have all come to nought.

The reason why the United Kingdom has supported those initiatives is obvious upon consulting TaylorWessing's Patent Map.  There is a comparison of the typical costs at first instance of an action for patent infringement in each of the jurisdictions of Europe and England and Wales is by far the most expensive. The cost of enforcement goes a long way to explaining why the United Kingdom consistently lags behind not only Germany and France with similar populations and GDP to ours in the number of European patent applications but also Switzerland with one eighth of our population and the Netherlands with a third (see European patent applications per country of origin on the European Patent Office website).  A single European patent covering the territories of the United Kingdom and those of its European partners with a single patents court for all those countries would level the playing field for British business.

As it did not prove possible to launch an EU patent because of objections from Spain and Italy the other member states decided to establish a single European patent for their territories by themselves through a procedure known as "enhanced cooperation" (see Jane Lambert The Community Patent is Dead - Long Live the Unitary Patent 29 April 2018 NIPC Law). The result was the Agreement on the Unified Patent Court ("the UPC Agreement") which was signed by Her Majesty's and other governments on 19 Feb 2013. The Agreement establishes a Unified Patents Court consisting of a Court of First Instance and a Court of Appeal and one of the sections of the Central Division of the Court Instance is to sit in London. The British government acquired premises for the new court in Aldgate and began to fit them out long before the Brexit referendum.

Art 89 of the UPC Agreement provides that it will come into force after 13 signatories including France, Germany and the United Kingdom ratify it.  Over 13 states including France have already done that.  On World Intellectual Property Day, which falls on 26 April. the Minister for Intellectual Property announced that the UK had also ratified the UPC Agreement (see Jane Lambert British Ratification of the UPC Agreement - Possibly the best thing to happen on World Intellectual Property Day 26 April 2018 NIPC News). The last remaining condition for the implementation of that Agreement is German ratification but that is delayed by litigation in the German Federal Constitutional Court.  The Alternative for Germany Party has also tried to repeal legislation to ratify the UPC Agreement that has been passed by both houses of the German Parliament and is now awaiting presidential assent.

It is not clear how long it will take for the Constitutional Court to determine the legal challenge to German ratification but it could easily exceed the time in which the UK will remain a member of the EU.  After that it is by no means clear whether the UK can remain a party to the UPC Agreement.  My own view is that it cannot but there is a contrary view held by, among others, the British government that the UPC Agreement is an international treaty that lies outside the EU.  The reason for my scepticism is that such a treaty would be incompatible with EU law for the reasons given by the Court of Justice of the European Union in Opinion 1/09 of 8 March 2011 (see Jane Lambert Court of Justice of the European Union holds European and Community Patent Court to be incompatible with EU Law 8 March 2011 NIPC website).

Our chances of remaining party to the UPC Agreement will depend in large part on whether we leave the EU with a withdrawal agreement and on our future relations with the remaining member states.  Although a lot of progress has been made in negotiations for a withdrawal agreement. Monsieur Barnier warned at the Hanover Trade Fair that it is not a done deal (see Jane Lambert Withdrawal Agreement - Not a Done Deal Yet 26 April 2018). He emphasized at the All-Island Civic Dialogue in Dundalk on 30 April 2018 that a likely stumbling block is the Irish border (see EU press release Speech by Michel Barnier at the All-Island Civic Dialogue of 30 April 2018 on the Commission website). British ideas for "maximum facilitation" and a "customs partnership" appear not to have been agreed even by the British cabinet let alone the EU. There are reports in today's Guardian that British civil servants have drawn up plans for customs checks between Great Britain and Ireland which would be in line with the draft withdrawal agreement (see Daniel Boffey Brexit plan drawn up for border checks between NI and rest of UK 4 May 2018 The Guardian).

Such a plan would be tantamount to the economic partitioning of the United Kingdom which could have all sorts of political and constitutional consequences beyond the obvious such as the withdrawal of DUP support for the Conservative administration and renewed requests by the Scottish government to remain in the single market and customs union. However, if it led to a free trade agreement that covered services it would be welcomed widely by the financial services industry.  Such an agreement is on the table (see the memorandum from the art 50 task force to the EU 27 Topics for discussions on the future framework at forthcoming meetings 4 May 2018). Monsieur Barnier made some encouraging remarks about London remaining an important financial centre after Brexit in his speech to the Eurofi think tank's high level seminar in Sofia on 26 April 2018 (see EU press release Speech by Michel Barnier at the Eurofi High-level Seminar 2018 at Sofia, 26 April 2018 on the Commission website).

Should anyone wish to discuss this briefing, the UPC Agreement or Brexit generally, he or she should call me on 020 7404 5252 during office hours or send me a message through my contact form.

Thursday, 26 April 2018

Withdrawal Agreement - Not a done deal yet

Hanover from space
Author NASA/Chris Hadfield
Licence Copyright waived by copyright owner



























Jane Lambert

Monsieur Barnier was is Hanover last Monday and he gave a speech at the 8th EU Policy Reception: How hard will Brexit be for industry?. A transcript appears on the Commission's website (see Speech by Michel Barnier at Hannover Messe 23 April 2018). In it, he sketched out the sort of trade relationship that he hopes to negotiate with the British government but he also warned of the difficulties that could destroy the progress that has already been made and that "companies must waste no time, and prepare for all scenarios now" including a disorderly Brexit.

The vision that he sketched out would suit most people in the United Kingdom very well:
"Even with the UK's current red lines, our intention is to reach an ambitious and wide-ranging free trade agreement with:
  • Zero tariffs and no quantitative restrictions on goods;
  • Customs cooperation to facilitate goods crossing the border;
  • Rules to limit technical barriers to trade and protect food safety [sanitary and phytosanitary measures];
  • A framework for voluntary regulatory cooperation to encourage convergence of rules;
  • An open market for services, where companies from the other party have the right of establishment and market access to provide services under host state rules – I repeat, under host state rules;
  • Access to public procurement markets, investments and protection of intellectual property rights."
The future relationship could even extend to such fields as coordination of social security and the recognition of professional qualifications, air transport, and participation by the UK in programmes in the field of research and innovation, where participation of third countries is allowed.

However, such a relationship will be possible only if there is an agreement on the terms of the UK's withdrawal from the EU. Monsieur Barnier noted that there had been a lot of progress in the negotiations of those terms but nothing is agreed until everything is agreed. There are plenty of potential stumbling blocks such as the border between the Irish Republic and Northern Ireland and the governance of the withdrawal agreement.

During the referendum campaign and at various times since, proponents of British withdrawal have argued that our market is so important to German car makers, Italian white goods manufacturers and French farmers that they will force their governments to make concessions.   Monsieur Barnier gave two reasons why that is unlikely in his speech.  First, the trade of the remaining member states with UK may be big but but not all that big:
"Let me remind you that, for the EU27 today, 6% of trade in goods is with the UK, while 60 % of this trade is inside the EU27 Single Market. Ten times as much!"
Secondly, the single market and the principles on which it is founded matter more to the remaining member states than trade with the UK.  Professor Grey suggested a possible third in Business gets vocal about Brexit 12 April 2018 The Brexit Blog.  If the supposedly pro-business government of the UK refuses to pay heed to business interests in its own country, why should  the Commission that represents the whole EU be any more inclined to listen to the voices of business leaders of individual member states?

We may get a 20 month implementation period to allow the UK to adjust to its new status in accordance with the draft withdrawal agreement (see The Draft Withdrawal Agreement: Getting Down to Business at Last 3 March 2018) but then again we may not.  My advice to British business is the same as Monsieur Barnier's in Hanover.  Hope for the best but prepare for the worst.

Anyone wishing to discuss this article or Brexit in general should call me on 020 7404 5252 during office hours or send me a message through my contact form.

Wednesday, 4 April 2018

Brexit Briefing - March 2018


Standard YouTube Licence


Jane Lambert

Although nothing is agreed until everything is agreed and there are still a number of issues such as the border between  Northern Ireland and the Republic of Ireland where the parties are as far apart as ever, March has been a quiet month in the Brexit negotiations. Contrary to initial indications, British negotiators were able to reach agreement with the Commission on many of the provisions of the draft withdrawal treaty. The other important development is that both the European Council and the Parliament have published guidelines for negotiations on the UK's future relationship with the EU.

In order to understand the significance of the draft treaty and the Council and Parliament's guidelines, it should be remembered that art 50 (2) of the Treaty of European Union requires the European Union to negotiate and conclude an agreement with a withdrawing state, setting out the arrangements for its withdrawal and taking account of the framework for its future relationship with the EU. The document published on 19 March 2018 is a draft of the agreement contemplated by art 50 (2). It covers the matters that were negotiated before Christmas, namely citizens' rights, the Irish border and the UK's financial contribution. It provides for a transitional or implementation period between 29 March 2019 and 31 Dec 2020 when the UK will cease to be a member of the EU but will continue to be bound by EU law. It makes arrangements for all kinds of matters from the protection of personal data to Community designs and EU trade marks. But it does not (and is not intended to) provide for the UK's relationship with the EU from 1 Jan 2021 though, of course. it is supposed to take account of it.

The draft agreement has attracted some criticism in the UK, especially for its Protocol on Ireland and Northern Ireland and the continuation of the common fisheries policy in British waters after 29 March 2019. Consequently, it is not a foregone conclusion that it will be signed.  If the agreement is not signed, art 50 (3) makes clear that the EU treaties simply cease to apply to the UK on 29 March 2019 without anything taking their place.  Despite the assurances that the government has given to businesses about a period of stability after the UK leaves the EU, my advice is to keep planning for the worst - that is to say, no agreement on anything after Brexit day - while, of course, hoping for the best - namely a withdrawal agreement substantially on the terms of the 19 March draft.

In the hope that we will conclude a withdrawal agreement in accordance with art 50 (2) the European Council which represents the 27 remaining member states published Guidelines for the negotiation of the future relationship between the UK and the EU on 23 March 2018.  Paragraph 8 of those Guidelines states:
"As regards the core of the economic relationship, the European Council confirms its readiness to initiate work towards a balanced, ambitious and wide-ranging free trade agreement (FTA) insofar as there are sufficient guarantees for a level playing field. This agreement will be finalised and concluded once the UK is no longer a Member State. Such an agreement cannot however offer the same benefits as Membership and cannot amount to participation in the Single Market or parts thereof. This agreement would address:
i) trade in goods, with the aim of covering all sectors and seeking to maintain zero tariffs and no quantitative restrictions with appropriate accompanying rules of origin. In the overall context of the FTA, existing reciprocal access to fishing waters and resources should be maintained;
ii) appropriate customs cooperation, preserving the regulatory and jurisdictional autonomy of the parties and the integrity of the EU Customs Union;
iii) disciplines on technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures;
iv) a framework for voluntary regulatory cooperation;
v) trade in services, with the aim of allowing market access to provide services under host state rules, including as regards right of establishment for providers, to an extent consistent with the fact that the UK will become a third country and the Union and the UK will no longer share a common regulatory, supervisory, enforcement and judiciary framework;
vi) access to public procurement markets, investments and protection of intellectual property rights, including geographical indications, and other areas of interest to the Union."
Other paragraphs cover continued cooperation in other areas such as law enforcement and security.

Over the last few months I have been focusing on the negotiations between the British government and the Commission and overlooked the European Parliament's role in the negotiations.   I was reminded that the European Parliament's view matters by the Bar Council's representative in Brussels in the 141st Brussels News newsletter which was published yesterday.  Under the heading "Why does the EP’s view matter?" the newsletter explains:
"The EP has a central role to play in the negotiations and how they turn out. Not only is its 6-member Brexit Steering Group in constant contact and influential with the Commission’s Task Force 50 (TF50), led by Mr Barnier, but the EP’s consent will be required for the final package: the Withdrawal Agreement (WA), including the transition period and the framework for the Future Relationship (FR). Indeed, leaving enough time for the EP to consider and vote on that package is one of the reasons the deal needs to be finalised by October of this year. Moreover, the EP’s formal consent is almost certainly going to be required, in accordance with the relevant Treaty articles (cited above), (cited above), to the detailed terms of the Future Relationship, whatever form it takes,  (cited above), to the detailed terms of the Future Relationship, whatever form it takes, if and when we get that far."
Incidentally, the author adds:
"One should also not forget its potential influence on content: the EP sees itself as guardian of citizen’s rights, SMEs, consumers – basically any group that needs defending. Its presence in the negotiations therefore serves as a balance to big business interests that might otherwise dominate."
That short passage contains the answer to those who argue that the British market is so important to German car and Italian white goods manufacturers and French farmers that our negotiators can afford to play hard ball in order to pick some cherries or eat some cake. We may still be the 6th largest economy running a massive trade deficit with the 27 remaining member states but compared to those 27 the world's 6th largest economy is not all that big. In any case, there are interests to be considered other than those of big business.

The European Parliament's Guidelines on the framework of future EU-UK relations European Parliament pursuant to its resolution of 14 March 2018 on the framework of the future EUUK relationship propose that any future relationship should be based on the following four pillars:
  • trade and economic relations,
  • foreign policy, security cooperation and development cooperation,
  • internal security, and 
  • thematic cooperation.
On the first of those pillars, the European Parliament reiterates that continued membership of the single market and customs union would be the best option for both sides but, if that is not possible, it suggests at paragraph 14 an agreement based on the following principles:
  • "the level of access to the EU market must correspond to the degree of continued convergence with and alignment to EU technical standards and rules, with no provision for any sector-by-sector approach and preserving the integrity of the internal market,
  • the EU’s autonomy in setting EU law and standards must be guaranteed, as well as the role of the CJEU as the sole interpreter of EU law,
  • a level playing field is ensured and EU standards are safeguarded to avoid a race to the bottom and prevent regulatory arbitrage by market operators, 
  • rules of origin are to be based on EU standard preferential rules and the interests of EU producers, 
  • reciprocal market access must be negotiated in full compliance with World Trade Organisation (WTO) rules, including for goods, services, public procurement and – where relevant – foreign direct investment, and all modes of supply of services, including commitments on the movement of natural persons across borders (mode 4), and be regulated in full compliance with EU rules in relation to equal treatment principles, especially for workers, 
  • regulatory cooperation should be negotiated, with a specific focus on SMEs, mindful of the voluntary nature of regulatory cooperation and the right to regulate in the public interest, while recalling that provisions on regulatory cooperation in a trade agreement cannot fully replicate the same frictionless trade as provided for by membership of the internal market."
As for services paragraph 16 underlines that under a free trade agreement ("FTA"). market access for services is limited and always subject to exclusions, reservations and exceptions.  Paragraph 17 add that:
"..... leaving the internal market would lead to the UK losing both passporting rights for financial services and the possibility of opening branches in the EU subject to UK supervision; recalls that EU legislation provides for the possibility, in some areas, to consider third-country rules as equivalent based on a proportional and risk-based approach, and notes the ongoing legislative work and upcoming Commission proposals in this area; stresses that decisions on equivalence are always of a unilateral nature; stresses also that in order to safeguard financial stability and ensure full compliance with the EU regulatory regime and standards and their application, prudential carve-out and limitations in the cross-border provisions of financial services are a customary feature of FTAs."
It is perhaps for  that reason that the Fourth Report of Session 2017–19 on The future UK-EU relationship by the Exiting the EU Committee of the House of Commons published on 4 April 2018 keeps as many options on the table as possible.

Changing the subject dramatically, very little has been said about the Unified Patent Court Agreement o unitary patent up to now and I take that as a good sign.  In One Year to Brexit - Are Rumours of the Death of the Unified Patent Court Agreement Greatly Exaggerated? 29 March 2018 NIPC Law I noted that all the legislative hurdles to British ratification have been cleared. Also, there is only the challenge to the constitutionality and a motion in the federal parliament to rescind the ratification bills that have previously been passed that is delaying  German ratification. It is still just possible that the UPC and unitary patent before 31 Dec 2020 if not 29 March 2019.

Anyone wishing to discuss this article should call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form.

Wednesday, 7 March 2018

Brexit Briefing - February 2018

Author Mikelo 
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Source: Wikimedia Commons



















Jane Lambert

The most significant event last month was the publication by the European Commission of a draft agreement for the withdrawal of the United Kingdom from the European Union and the European Atomic Energy Community on 28 Feb 2018.  It has not yet been presented to the British government as it must first be discussed by the governments of the remaining member states and the Brexit steering group of the European Parliament,  I sketched out its structure and main provisions in The Draft Withdrawal Agreement: Getting Down to Business at Last 3 March 2018.

There has been some grumbling from the British side, particularly over the border between Ireland and Great Britain and no doubt some concessions will be made here and there by both parties but the basic shape and content of the agreement contemplated by art 50 (2) of the Treaty of European Union is unlikely to be very different.  There is not much room for movement on the European side because the Commission's negotiators are bound by the Council's Guidelines of the 29 April 2017.  Moreover, the draft is said to be based on the Joint report from the negotiators of the European Union and the United Kingdom Government on progress during phase 1 of negotiations under Article 50 TEU on the United Kingdom's orderly withdrawal from the European Union (see No Fudge - the Next Stage of Negotiations between the EU and UK 12 Feb 2018).  So if we want a trade deal of any kind with the remaining member states of the European Union we will have to accept something like that draft. The alternative is no deal at all.

The most welcome aspect of the Prime Minister's Mansion House speech of 2 March 2018 were the following hard facts:
  1. "Brexit will be no bed of roses: 'We are leaving the single market. Life is going to be different. In certain ways, our access to each other's markets will be less than it is now. How could the EU's structure of rights and obligations be sustained, if the UK - or any country - were allowed to enjoy all the benefits without all of the obligations?
  2. 'Even after we have left the jurisdiction of the ECJ, EU law and the decisions of the ECJ will continue to affect us.' Aside from the niggle that the initials 'ECJ' are no longer used as that tribunal is now known as the Court of Justice of the European Union ('CJEU') and has been for many years, I welcome that remark. It will make it easier to reach agreement on the withdrawal treaty and it may just make it possible for the UK to remain a party to the Uniform Patent Court Agreement. On the other hand, she omitted to say that the UK will lose its judge and advocate general on the Court who have hugely influenced its decisions since 1973. 
  3. No State Aids or Featherbedding: 'If we want good access to each other's markets, it has to be on fair terms. As with any trade agreement, we must accept the need for binding commitments - for example, we may choose to commit some areas of our regulations like state aid and competition to remaining in step with the EU's.'
There are still folk who think that cake exists for eating and cherries for picking but it does not appear that the Prime Minister is one of them (see Mrs May's Mansion House Speech: Some Home Truths At Last 4 March 2018).

Finally, some crumbs of comfort on the Uniform Patent Court ("UPC"). The first is that the legislative hurdles to British ratification of the UPC Agreement appear to have been cleared.  Secondly, as I noted above, the Prime Minister is prepared to countenance some future role for the CJEU in British affairs after we quite the EU which removes one of the difficulties that I mentioned in my article What if anything can be salvaged from the UPC Agreement? 26 Jan 2018 NIPC Law and my presentation to Queen Mary University London on 12 Feb 2018 (see My Contribution to the Discussion on the Implications of Brexit at Queen Mary University London on Monday 12 Feb 2018 17 Feb 2018). The third crumb is that the constitutional challenge to German ratification of the UPC agreement (Verfassungsbeschwerde gegen das Zustimmungsgesetz zu dem Übereinkommen vom 19. Februar 2013 über ein Einheitliches Patentgericht (EPGÜ)) has been listed for hearing in the German Constitutional Court in Karsruhe before Professor Dr Huber under case number 2 BvR 739/17.  Fourthly, there was nothing unhelpful to the UPC in Title IV of Part 3 of the draft withdrawal agreement which covers intellectual property.

Anyone wishing to discuss this briefing or Brexit in general should call me on +44 (0)20 7404 5252 during normal office hours or send me a message through my contact form.

Sunday, 4 March 2018

Mrs May's Mansion House Speech: Some Home Truths At Last


Source Guardian,  Standard YouTube Licence

 Jane Lambert

The Prime Minister's speech at the Mansion House on Friday has received a mixed reception.  According to Toby Helm "most Conservative MPs and peers gave the prime minister a period of grace after Friday’s address."  However, Lord Heseltine dismissed it as "more detail on a set of demands that the European Union had made clear all along it would never agree to" (see Tories’ Brexit unity fades as Heseltine slams May’s speech 2 March 2018 The Guardian).

I hold no brief for the Prime Minister, but I think that is a little unfair.  She did speak some home truths though I fear she may have pulled her punches:
  1. Brexit will be no bed of roses:  "We are leaving the single market. Life is going to be different. In certain ways, our access to each other's markets will be less than it is now. How could the EU's structure of rights and obligations be sustained, if the UK - or any country - were allowed to enjoy all the benefits without all of the obligations?"
  2. "Even after we have left the jurisdiction of the ECJ, EU law and the decisions of the ECJ will continue to affect us." Aside from the niggle that the initials "ECJ" are no longer used as that tribunal is now known as the Court of Justice of the European Union ("CJEU") and has been for many years, I welcome that remark.  It will make it easier to reach agreement on the withdrawal treaty and it may just make it possible for the UK to remain a party to the Uniform Patent Court Agreement.  On the other hand, she omitted to say that the UK will lose its judge and advocate general on the Court who have hugely influenced its decisions since 1973. 
  3. No State Aids or Featherbedding:  "If we want good access to each other's markets, it has to be on fair terms. As with any trade agreement, we must accept the need for binding commitments - for example, we may choose to commit some areas of our regulations like state aid and competition to remaining in step with the EU's."
The reason Mrs May had to say these things is that there has been a lot of wishful thinking about Brexit. Some have argued that the shock of the departure of its third largest member state would rip the EU apart. That could happen but there are no signs of its happening yet.  It is equally possible that the remaining member states could integrate more quickly and become stronger and more influential than ever. Another bit of wishful thinking is that German car manufacturers, Italian white goods makers and French farmers will force their governments to make concessions were we ever to play hardball. I have never understood that argument because we are not going to start making those goods in Britain or sourcing those goods from elsewhere. Tariffs might dent demand for EU goods and services but it won't destroy it and the business communities in those countries know it.  The fact is that the UK is not negotiating from a position of strength and will on many issues have to take what the remaining member states have to offer or leave it.

Finally, the Institute for Government has produced an excellent, tabulated analysis of the PM's speech with "Area" in come column, "What the Prime Minister said" in another and "What this means" in the third (see The Prime Minister's Mansion House Brexit speech 2 March 2018 The Guardian).  I was about to do my own analysis along similar lines but this is so much better.

Anyone wishing to discuss this article or Brexit in general should call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form.

The Chequers Statement explained

Chequers Court Author Stephen Simpson Licence Copyright released by the author Source Wikipedia Jane Lambert The...