Irwin Mitchell Hosted Webinar To Help Businesses Prepare For What Is Still To Come
The EU-UK Trade & Cooperation Agreement (TCA), which was signed just days before the transition period ended on 31st December 2020, marked a major landmark in the Brexit process.
Although it’s a significant document containing a host of changes that businesses and individuals need to be aware of, many issues are in transition whilst some are still uncertain and remain unresolved.
The following summary takes a look at what has changed now that the UK has left the EU, but also what is still to happen down the line.
As part of the planning and risk mitigation exercises that many businesses are undertaking, Irwin Mitchell held a webinar in order to explore many of these outstanding issues. The free event took place on Wednesday 13 January and it can be watched by clicking here.
Tariffs and trade
Businesses that import and export goods will have welcomed the news that most traded goods will qualify for a zero tariff if they satisfy the appropriate “Rules of Origin” (RoO). The RoO set out a criteria for determining what proportion of a product’s content is derived from UK or EU materials, and these need to be understood and complied with by UK businesses selling goods to the EU. Organisations seeking to import goods will not only need to determine whether their products meet the requirements of the rules, but they will also need to check that exporting suppliers understand the origin rules and provide evidence to support origin qualification. Also, now that the UK has left the Customs Union, both importers and exporters of goods will need to contend with the completion of import and export customs declarations in line with EU law and UK law.
The position on the trade of services is more complex (due to EU Member State restrictions and sectoral differences), and there is a clear reduction in market access between the UK and the EU. Key commitments reflected in the agreement are that: (i) there should be non-discriminatory treatment between UK and EU service providers and investors; (ii) the EU cannot require a services provider from the UK to be established in their jurisdiction as a condition of the provision of a cross-border service (and vice versa); and (iii) business visitors will benefit from visa-free entry between the UK and the EU for permitted work purposes up to a period of 90 days (in any 180-day period) subject to a number of restrictions.
Changes to immigration policies have dominated much of the media coverage around Brexit. Now the Transition Period has passed, understanding and complying with the new immigration law rules which came into force on 1 January 2021, including rules relating to short term business visits and right to work checks, is a priority for many businesses. There remain some outstanding issues that require monitoring such as understanding how the provisions in the TCA for example in relation to business visits and certain visas relate to the current immigration rules and how discrepancies are being dealt with.
In relation to Dispute Resolution, it’s important to note that where court proceedings were instigated before the end of the Implementation Period, there is certainty that EU law as set out in the Withdrawal Agreement continues to apply to them. However, because the TCA was silent in respect of mutual recognition, there is no provision in respect of enforcement of judgements now that the Implementation Period has expired. This means there is no certainty on the ability to enforce any judgments cross border. Until attempts are made to enforce such judgments and rulings made which establish the interpretation of the new legal position, no certainty can be given.
The TCA was also silent on the point of Applicable Law. Indeed, the only way to be certain what law applies to any dispute is to ensure that your contracts clearly state what law applies to it, and to be specific within any arbitration clause what the applicable law is to determine a dispute. If you concluded your contract before 31 December 2020 and stated your choice of law within the terms of that contract, then EU law will continue to apply.
Data / GDPR
Following the end of the transition period the ‘UK GDPR’, which is almost identical to the EU GDPR, is now in force. Businesses established in the UK must comply with the UK GDPR, together with some businesses outside of the UK. Certain UK businesses will also have to comply with the EU GDPR, for example, if they sell to individuals in the EU or have an establishment in the EU or even if they monitor the behaviour of EU individuals such as via online profiling.
One of the key announcements in relation to data protection from the TCA was in relation to the sending of personal data from the EU to the UK. It has been agreed that this can continue for the next six months whilst the European Commission consider whether the UK provides adequate protection for personal data going forward. Without this, EEA-UK data transfers would otherwise have been restricted at the end of the Brexit transition period and businesses would have had to put additional safeguards in place. Whilst there is this “bridging period” for the next six months, businesses should continue to monitor what happens to ensure that adequacy is agreed. Whilst the TCA deals with data export, there are additional issues which are not dealt with in it and these remain an issue. These include whether a representative is needed, updating documentation including policies, privacy notices, DPIAs, loss of the one stop shop and double jeopardy regarding fines.
There are substantial regulatory changes that occurred on 31 December which need to be tackled – particularly in the financial services sector. The lack of any detail on the future relationship in financial services in the TCA is a major issue. The absence of equivalence provisions and what this means is creating uncertainty now and must be closely monitoring until it is resolved. Other issues that are in transition or still up in the air for the sector include the operation of the Temporary Transitional Power. Also from a regulatory point of view, affected businesses are advised, now that the transitional period has ended, to carefully analyse the requirements of the UK and EU sanctions regimes to ensure that they remain compliant now that the UK sanctions regime is in force.
Before the UK left the EU, companies could reconcile VAT payments and charges through an electronic system that worked out which country would benefit from which tax. This is no longer the case which means that EU companies must register for UK VAT and account for it if the product is valued at less than £135. The Agreement does not govern trade between the EU and Northern Ireland, and goods moving from the UK to Northern Ireland are now imports. Those businesses doing business with Northern Ireland will now need to cater for the new requirements and processes.
From a Corporate point of view there are changes to UK registered Societas Europaea (SEs) and European Economic Interest Groupings (EEIGs) and new filing and disclosure requirements for EEA companies with registered UK establishments or branches. UK businesses operating in the EU may need to consider requirements in the member states that they are operating in. There are also changes to the accounting and reporting regimes in the UK for certain companies from 1 January.
The recast European Insolvency Regulation ((EU) 1215/2012) will now only apply to insolvency proceedings opened before IP completion day. The transition period introduced by the Withdrawal Agreement offered some short-term comfort for insolvency practitioners. However since the recast EIR is based on reciprocity, it ceases to apply to new insolvency proceedings in the absence of a new deal with the EU. There is therefore no guarantee that, in the future, UK insolvency proceedings will be respected elsewhere in Europe in a consistent manner. Instead the outcome for recognition of proceedings depends on the vagaries of private international law in each EU member state. This increases the risk of competing insolvency proceedings between the UK and the EU, due to the removal of the rule requiring automatic recognition of insolvency proceedings. This also creates increased uncertainty for English insolvency practitioners seeking the assistance of courts in the EU.
The end of the transition period brings with it significant changes to intellectual property, but the main changes here were in fact agreed in the Withdrawal Agreement which the TCA refers to general standards of IP protection, but it leaves the changes that IP rights-holders across trade marks, designs and copyright have been preparing for since the Withdrawal Agreement was finalised at the end of at the end of 2019, intact.