February 10, 2020

Brexit update: Entering the implementation period

The United Kingdom has now entered the implementation (or transition) period following its withdrawal from the institutions of the European Union on 31 January 2020. The EU Treaties no long apply to the UK, whose relationship with the EU is now governed by the terms of the Withdrawal Agreement.

In this article, David Hansom looks at some of the practical issues and most common questions for global business.

1. It feels like nothing has changed?

During the implementation period, which is due to end at 11pm GMT on 31 December 2020 unless extended by the parties, EU law continues to apply to the UK in a very similar way as before the withdrawal.  The UK is treated, essentially, as an EU member state during that time. Existing EU licences, consents and authorisations which UK businesses may hold continue to apply with full validity.

Business can, therefore, understandably feel that very little has changed in practice since 31 January.

It is right to say that the major impact will be felt at the end of the implementation period. The scale of the impact will depend on the progress made by the EU and the UK to negotiate a new relationship before the end of December 2020.

On the basis that the implementation period is not going to be extended, a timescale of (a little under) 11 months means that businesses need to be engaged with the negotiations and be prepared to make changes quickly.

2. Does ALL EU law apply to the UK in the implementation period?

There are some specific areas where the application of EU law has changed in relation to the UK. These are set out in the Withdrawal Agreement (and see in particular Article 122 and Annex VII).

3. What will happen at the end of the implementation period?

The basis of the UK/EU relationship needs to be agreed during the implementation period. 

If there is no agreement as to the future relationship, and no extension, the UK would not have any formal relationship with the EU. It would be treated as a third country for all EU external actions and outside of the EU single market and customs union.

There are provisions in the Withdrawal Agreement which deal with processes between the UK and EU which started before the end of the implementation period and which continue after it ends.

4. What should we do now?

Business certainty is, to a large extent, dependant on Government policy and how far a broad free trade agreement can be agreed between the UK and the EU in the remaining time.  It may be, for example, that a basic free trade agreement is agreed and then a series of separate treaties are agreed between the UK and EU in areas of mutual interest. This so-called "Swiss model" is perhaps not attractive to the EU but would be an alternative to an extension of the implementation period, which the UK Government has said that it does not wish to see.

As part of any implementation period Action Plan, businesses are considering a wide range of issues including:

  • Audits to identify potential changes to protect interests.  Businesses are considering, for example, the potential impact of tariff and non-tariff barriers to the free movement of goods; the ongoing protection of intellectual property rights; data protection and the recognition of professional qualifications.
  • Reviewing business critical contracts and supply chains. Contract reviews can include jurisdiction clauses, force majeure; change in law and addressing currency fluctuations.  Substitute suppliers and stockpiling arrangements are being put in place.
  • Enforcement of UK judgments in the EU post-Brexit. It is currently unclear whether UK judgments will need to be enforced under the domestic law of the EU member state, and please see our earlier briefing on this topic

Clyde & Co is working with a number of clients to consider all of the issues around Brexit from our integrated, global network. For more information or advice on any issue please contact David Hansom, Partner, or your usual contact at Clyde & Co.