Yesterday (January 29th 2020) the European Parliament voted after a very emotional debate on the Withdrawal Agreement with the United Kingdom. The United Kingdom already past the Bill during the last weeks. Today the last step will be done by the European Union. BREXIT done?
The United Kingdom is leaving the European Union at the 31st of January 2020 12pm CET / 11pm UK-Time. The European Parliament voted yesterday overwhelmingly in favor of the Withdrawal Agreement. Only a few MEPs mainly from Scotland, Ireland and Wales voted against the Agreement after given emotional statements.
So, what’s next?
The divorce of the United Kingdom from the European Union will enter at the 1st of February in the next phase. From Saturday on the United Kingdom is no longer a Member State of the European Union. Nevertheless, the European Union and the United Kingdom agreed that during the so call “Transition Period” the United Kingdom shall be treated as if the United Kingdom were still a Member State once it comes to the applicable law. During the transition period the European Union and the United Kingdom will start negotiations about their future relationship. Additionally, the United Kingdom is entitled to reach out to other countries for Free Trade Agreements.
For businesses: Nothing shall change during the transition period.
This Transition Period ends at the 31st of December 2020 unless an extension is agreed in July 2020. As the United Kingdom already took this opportunity off the table it seems to be unlikely that there will be an extension. But in terms of BREXIT nothing is impossible.
If there is no Agreement about the future relationship at the end of 2020 and no extension of the transition period is agreed either, there will be a so called “Hard BREXIT” at the end of 2020.
Free Trade Agreements during the Transition Period
The European Union and the United Kingdom agreed in the Withdrawal Agreement that the United Kingdom should be obeyed by EU law as if they were a Member State during the Transition Period. According to the Withdrawal Agreement this includes also all International Agreements. Free Trade Agreements are International Agreements. As there are third parties involved when it comes to International Agreements (e.g. Switzerland), the third parties need to somehow agree that they are willing to treat UK as a Member State of the European Union according to the International Agreements during the transitional period.
In the Withdrawal Agreement the European Union therefore agreed to notify all third partners on their wish that the United Kingdom shall be treated as a Member State during the transition period.
Switzerland already published last year in March (1st BREXIT-day) their intention to accept this. Even though that Switzerland and the United Kingdom already agreed on a Free Trade Agreement, the FTA CH/UK will only come into force after the transition period is finished. In the mean time the FTA with the EU shall still be applicable with regard to trade between Switzerland and the United Kingdom.
So: basically, nothing should change during the transition period.
But: The European Commission still did not publish anything regarding the Free Trade Agreements. Therefore, some Member States expressed their concerns how to handle this situation. Recently the United Kingdom published on their homepage the situation as described above. Additionally, the United Kingdom stated that the European Union is now in the process to notify the third partners. It seems to be the opinion of the United Kingdom that even if the partner state does not reply or reply in public to the notification, the FTAs are applicable if the partner state have the intention to agree. It is even more unclear what happens if a partner state does not agree and express this intention.
The Transition Period gives businesses a good opportunity to create a realistic plan in view of “Hard Brexit” by the end of 2020. More about what Companies should be doing during the Transition Period in our next communication.