[Commercial] Brexit and the UK/EU Free Trade Agreement
18 January 2021
Having left the EU and the transition period now expired, the UK is a “third country” operating outside the EU’s single market and customs union. To govern much of the economic relationship between both sides, the UK and the EU have agreed a Free Trade Agreement (FTA) which came into effect before midnight on 31 December 2020.
Set out below are some of the key issues arising from the FTA.
Tariffs & Quotas The FTA provides for no tariffs or quotas on goods crossing the UK/EU border. This is good result for UK businesses, although there will be increased paperwork and likely delays as goods cross the border, albeit it is not clear yet how significant these will be. There will be tests for state of origin for goods, so there may still be tariffs on goods which contain significant amounts of non-UK components, for example certain cars.
Conformity standards No agreement was reached on the mutual recognition of standards. This could mean that some products crossing the border may require two sets of conformity standards being met. The EU mark will be required for certain goods sold in the EU and the UKCA mark will be required for certain goods sold in the UK.
Level playing field A key point for the EU was the level playing field, whereby both jurisdictions would have common standards that promoted fair and open competition. The UK has, however, negotiated the right to set its own standards in certain areas such as employment law. Nonetheless, although both sides are not obliged to follow identical rules, each will be subject to a rebalancing mechanism if they stray in such a way that causes an unfair advantage. As regards state aid, companies in each jurisdiction will be able to challenge state aid if they believe it violates common principles set out in the FTA.
Data flow The FTA contains a grace period for the existing position on data flow to continue. It is expected that a decision on the UK’s “adequacy” for data protection will be issued in the forthcoming months and the hope is that, given the UK’s regulations currently mirror those of the EU, that an “adequacy” finding will be issued, subject to no material deviation by the UK in its data protection laws in the future.
Financial services These were largely ignored in the FTA and will be subject to further agreement. What is clear is that the “passporting rights” enjoyed by UK businesses, which enabled them to conduct business throughout the EU without registering in each country individually, have been lost. Although the UK government did manage to keep out of the FTA a proposed measure preventing the outsourcing of work to the UK, the EU Commission has previously indicated that it would be looking at such arrangements to prevent shell companies being set up to get round the passporting restrictions.
Professional services Professional service providers will lose their automatic right of recognition of their professional qualifications, meaning businesses such as architects and accountants will need to comply with the relevant regulations in each individual country.
Travel UK nationals will need a visa for stays longer than 90 days in the EU in a 180 day period. For business travel, visas may be needed depending on the country to which travel is made, although there are exemptions for certain business activities such as attending meetings and conferences.
For more information please contact Keith McAlister at .
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