55: Brexit – Making plans for Nigel

The government has published the first 25 in a series of technical notices which provide information and guidance to businesses and citizens on how to prepare for a ‘no deal’ scenario in March 2019, should it arise. The government also published an ‘overarching framing notice’ which explains its general approach to preparations for ‘no deal’.

Deal or no deal?

‘No deal’ refers not to the catchphrase from a television gameshow but to the scenario whereby the UK and EU do not agree the terms of a withdrawal agreement (or indeed the terms of the UK’s future relationship with the EU) by 11pm on March 29 2019 (so-called ‘exit day’). In these circumstances, there would be no transition period between the UK’s current EU membership and its status as a ‘third country’, as is currently provided for in the draft withdrawal agreement.

Background

To put the announcement in context, the legal preparations for Brexit to date have included:

• the sending of a notice under Article 50 of the Treaty on European Union (as authorised by the European Union (Notification of Withdrawal) Act 2017 following the Supreme Court’s decision in the Miller case);
• the passing of the European Union (Withdrawal) Act 2018, which provides for the repeal of the European Communities Act 1972 on exit day, together with provisions regarding the transposition of all existing EU legislation into UK law;
• the introduction of the Taxation (Cross-Border Trade) Bill, which seeks to provide for a new customs regime as a contingency solution in the event of ‘no deal’ and the Trade Bill, intended to enable the UK to continue to benefit from trade agreements entered into between the EU and third countries; and
• the passing of preparatory legislation in certain sectors, for example the Nuclear Safeguards Act 2018 (which establishes a UK nuclear safeguards regime following the UK’s withdrawal from the Euratom treaty) and the Haulage Permits and Trailer Registration Act 2018 (which provides for the introduction of a permit system, if required, to enable UK hauliers to continue operating in the EU after exit day).

These steps have been (or are being) taken in order to ensure that the UK will cease membership of the EU on exit day.

Two of the most important outstanding pieces of the puzzle are the terms of the UK’s withdrawal, and the framework for its future relationship with the EU.

Negotiations between the UK government and the EU are continuing on the remaining parts of the Withdrawal Agreement which have not yet been agreed. If agreed, the government will bring forward the EU (Withdrawal Agreement) Bill in order to give domestic legal effect to the Withdrawal Agreement.

However, in accordance with another oft-repeated mantra, that ‘nothing is agreed until everything is agreed’, the UK government’s position is that the Withdrawal Agreement cannot be considered to be agreed until both sides agree the framework for their future relationship.

It is the debate on the nature and form of the UK’s future relationship with the EU that has caused so much of the domestic division and debate in the UK, and which culminated in the announcement in July of the so-called ‘Chequers proposals’ and the resignations of the Foreign Secretary and Brexit Secretary.

Brexiteers (including several Conservative backbenchers and one N. Farage) have repeatedly pressed the government to confirm its preparations for ‘no deal’, as they seek to bolster the strength of the UK’s negotiating position by demonstrating that the UK is taking the necessary steps to implement a ‘no deal’ exit.

No doubt partly in response to this but also out of the sheer need to allay fears and give some clarity, the government has published the first in a series of information notices.

What did the government actually announce?

The overarching framing notice sets out in general terms the government’s intention to prioritise stability for citizens, consumers and business, in order to minimise disruption to the economy. This will be helped, the government says, by the fact that the Withdrawal Act provides for a ‘common rule book’ on exit day, as existing EU legislation will be transposed into domestic law.

However, the simple transposition of the acquis into domestic legislation will not in and of itself plug the gap left by withdrawal from the institutions and regimes of the EU, particularly where a new UK regulator is required to implement and administer the transposed EU law (as the UK will no longer be a member state).

In order to get around some of these issues, the government has indicated that it will continue to accept EU recognition or approval of certain products and services, and will match funding of EU programmes where funding is committed before the end of 2020.

How does the government intend to address the issues caused by a ‘no deal’ exit in certain sectors?

The sector-specific information notices recognise the peculiar consequences that a ‘no deal’ Brexit will give rise to for those sectors.

On organic food, for example, in the event of ‘no deal’, UK producers of organic products would not be entitled to use the EU organic logo and would have to be certified by an organic control body which had been recognised by the EU in order to export to Europe.

On tobacco products and packaging, in the event of ‘no deal’ the UK will need to introduce new picture warnings of the harmful effects of tobacco use as the copyright in the existing images vests in the EU.

In some instances, the government’s prioritisation of ‘stability’ in the event of ‘no deal’ means in practice that existing EU standards will continue to be applied by the UK. For example, in respect of batch testing of medicines, where medicines which have been tested in other EU member states will not have to be separately tested in the UK.

In other respects, the government’s intention seems to be to seek a kind of ‘no deal-but-with-a-deal’.

On organic food products, for instance, the government’s position is that:

‘We would expect to negotiate an equivalency arrangement with the EU which will allow the free movement of organic goods between the EU and the UK. We will ask the European Commission to discuss these applications in advance of 29 March 2019.’

The consequences of ‘no deal’ for the availability of organic avocados for millennials remains uncertain.

State aid is a good example of a policy area where ‘no-deal’ will create a lacuna. Currently, there is no domestic legislation on state aid, as the provisions of the Treaty on state aid have direct effect in the UK and are enforced by the European Commission. In the event of ‘no deal’, the provisions of the Treaty will no longer apply to the UK.

The government has indicated in the information notice on state aid that it will seek to transpose the existing EU rules into domestic legislation under the Withdrawal Act. The government also intends to transpose all existing block exemptions. The Competition and Markets Authority (CMA) will assume the supervisory and regulatory role currently performed by the European Commission. Following exit day, UK public authorities would notify state aid to the CMA and UK undertakings will be able to make complaints about potentially unlawful state aid to the CMA.

Of course, all of this assumes that the government can pass the necessary legislation in time for exit day and that the new regulator is ready to assume its responsibilities. The government’s intention is that it will pass the necessary secondary legislation in ‘autumn 2018’.

Further developments

The government has left many of the trickier issues in the event of ‘no deal’ to subsequent information notices, which are to be published in the next couple of months. Such topics include the Irish Border ‘backstop’ solution, mutual recognition of professional qualifications and public procurement.

With the 29 March 2019 now less than seven months away, the critical issue of the Irish Border apparently no nearer a workable solution and the bulk of the technical notes still to be published, the prospect of ‘no deal’ is focusing many minds.

‘We’re only making plans for Nigel / we only want what’s best for him’ (XTC, Making Plans For Nigel)