Mayer Brown is helping companies and organizations worldwide understand, and respond to, the emerging legal and business implications of the UK’s decision to leave the EU. The majority vote in the UK referendum on membership of the European Union, announced on 24 June 2016, in favor of departure by the United Kingdom from the European Union, means that businesses operating in the United Kingdom now face a period of uncertainty.
After multiple years of negotiations and uncertainty, the United Kingdom left the European Union on January 31, 2020. But when will Brexit actually be done? The scale of the task ahead for the UK and EU is significant and three key questions remain: (i) will the "standstill" transition period be extended beyond December 2020; (ii) what kind of trade deal can be negotiated with the EU in the limited time available; and (iii) how real is the threat of a further "no deal" cliff edge at the end of December?
Mayer Brown is helping companies and organizations worldwide understand, and respond to, Brexit’s evolving legal and business implications. For example, companies must prepare for changes in the legal and regulatory framework at the end of 2020 that will affect their operations and strategic decision-making. However, given the limited time frame for negotiations, the nature of the future trading relationship with the EU may not become clear until the end of the year. Businesses may, as a result, only have a few weeks to prepare.
There will be other immediate domestic pressures on the Government during this time. The UK will need to seek to 'roll over' existing trade agreements that the EU has with third countries (for example, Canada and Japan), as well as negotiate and ratify new ones (notably with the USA). It will also need to pass primary legislation to replace existing EU frameworks and establish new domestic policies, for example, in relation to immigration and trade.
January 2020: Ratification of the Withdrawal Agreement and Political Declaration
As well as the Northern Ireland Protocol, the formal legal terms of the Withdrawal Agreement relate to separation issues such as citizens' rights, the transition period and the financial settlement, as well as provisions to allow businesses more time to adjust to leaving the EU, e.g. the ongoing recognition of professional qualifications.
The Act to put the Withdrawal Agreement onto the UK statute book, the WAA, has become law. The Withdrawal Agreement has also been approved by the European Parliament in a plenary vote and endorsed by the 27 remaining Member States. It has the status of an international treaty.
The accompanying Political Declaration is not legally binding, but forms the basis for the negotiation of an agreement between the EU and UK on their future trading relationship.
1 February 2020 – 31 December 2020 (subject to extension): Transition Period
The WAA provides for EU law to continue to apply in the UK as if the UK were still a Member State during the transition period, subject to certain exceptions, e.g. elements of the EU Charter of Fundamental Rights will not be binding on the UK. New directly applicable EU legislation will also apply automatically within the UK, while other new EU measures will need to be implemented domestically as before.
The UK and EU will aim during the transition period to negotiate and ratify a legally binding agreement for their future relationship. The WAA does not now require the Government to seek approval of its negotiating objectives, or the final trade agreement, from the UK parliament. Negotiations will be conducted by a new 'Taskforce Europe' sitting in the Cabinet Office and 10 Downing Street.
EU law as it exists at the end of the transition period (with some limited exceptions) will be transposed into UK law, creating a body of 'retained EU law' which will provide legal continuity for the UK going forward. As noted above, the UK will be in a position to diverge from this at the end of the transition period, subject to any level playing field commitments agreed as part of the trade negotiations with the EU.
Beyond 31 December 2020 (subject to extension): The Future Relationship
The UK may face a potential legal and regulatory cliff edge at the end of December if there is no trade deal in place. Trade talks with the EU negotiating team are in any event likely to continue well beyond this time.