Legal advice on the Brexit trade pact: the legal risks for companies

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The British leave the EU: Much will change in 2021.

Our series highlights the legal risks for companies

Photo: TOLGA AKMEN / AFP

The relief on both sides of the English Channel that a trade and cooperation agreement between the EU and the United Kingdom has been concluded is great.

Nevertheless, a closer look at the agreement leaves many question marks.

Future trade relations between the EU and the UK still lack a solid legal basis.

On the one hand, because the agreement can only enter into force provisionally because the European Parliament has not given its consent and it will not come before February either.

But above all because there are many areas for which no fixed regulations have yet been made.

This gives rise to risks for companies that depend on a smoothly functioning and legally secure exchange of goods.

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Jörg Philipp Terhechte

is Professor of Public Law, European and International Law as well as Regulatory and Antitrust Law at the Leuphana University of Lüneburg and at the University of Glasgow and specializes in issues of economic and constitutional law.

1246 pages plus two subsidiary agreements

The complex structure of the 1,246-page agreement, as well as the two subsidiary agreements on information security and nuclear civil cooperation between the European Atomic Energy Community and the United Kingdom, along with various explanations, shows how difficult it was to find a suitable framework for future relations.

The focus, however, is on future trade relations between the EU and the United Kingdom, so the rules on trade in goods are in the foreground.

Bureaucratic barriers to trade in goods

Even if there will generally be no customs duties between the EU and the United Kingdom in the future, the regulations show that trade in goods will nonetheless become more complicated and, above all, more bureaucratic.

In order for it to function, it will be crucial that the relevant competent authorities adjust their processes accordingly;

How this will work from January 1st, 2021 is written in the stars.

There will also be special regulations for the area of ​​services and capital and payment transactions.

The sections on the conditions of competition and fisheries were particularly contentious during the negotiations.

With the title XI.

In the second part of the agreement, a new approach was chosen

(Level Playing Field for Open and fair Competition and Sustainable Development)

, which is intended to prevent deviating standards to the detriment of competition or the environment across the board.

Here one can already guess that the field of state aid in particular will lead to conflicts.

A definitive solution for fisheries has been postponed - for now, EU fishermen will continue to have generous access to UK waters.

There are also special regulations for traffic and transport and for other areas, many of which still need to be specified.

The power of the new committees

Newly created institutions, in particular a Partnership

Council

and an extremely large number of specialized committees that will deal in particular with detailed areas, are to monitor

these rules

.

There are also working groups.

A

"Parliamentary Partnership Assembly"

, which will be composed of representatives from the European Parliament and the British Parliament, will be set up, but its influence will remain limited.

In addition, civil society is to be given the opportunity in various forums to comment on the implementation of the agreement.

A "democratic life of its own" will find it difficult to develop in these structures, and it may not be supposed to. 

No competences for the European Court of Justice

It is also important that the dispute settlement between the EU and the United Kingdom will in future no longer be in the hands of the European Court of Justice, but in those of an arbitration tribunal that will consist of three arbitrators.

This separation from the European Court of Justice played an important role for the British side, but given the ongoing discussions about arbitration courts in international contexts, a permanent EU-UK court would have been the better choice.

The European Court of Justice only retains a certain special role when it comes to Northern Ireland.

The European Parliament still has to agree

The signing of the agreement by Commission President

Ursula von Leyen

and President of the European Council

Charles Michel

on December 30th.

2020 must not hide the fact that the consent of the European Parliament is still required - the agreement will initially only be applied temporarily (Art. 218 (5) Treaty on the Functioning of the European Union).

In theory, the European Parliament could still stop the agreement, so that there will be a period of uncertainty before its final approval, which is now expected in February or March 2021, even if it is often heard that approval is considered certain.

This shows once again how difficult it is to bring complex treaties to adequate parliamentary treatment.

In any case, the approach is not only heavily criticized in the EU, but was also viewed with skepticism in the debates on the European Future Relations Bill in the House of Commons on Wednesday, December 30th, 2020.

The bill was nevertheless adopted by a large majority, so that nothing stood in the way of ratification from the British side.

Open questions and a clear cut

Right from the start, it was not to be expected that all questions related to Brexit could be resolved straight away.

The British side had made it clear that there are some areas in which they want to go their own way in the future.

These include foreign policy, defense and foreign trade policy.

But there are also loss balances beyond these areas.

In addition to the clear bureaucratisation of trade, it is noticeable that the entire area of ​​civil justice cooperation is not even mentioned in the agreement.

This could, for example, make it more difficult for companies to collect claims across borders.

The withdrawal of the British side from the Erasmus program, which serves student mobility, is also a heavy blow.

This does not suggest anything good for the future mutual recognition of professional qualifications.

The provision of cross-border services is likely to prove much more difficult in the future.

This list could certainly be expanded further;

it shows that Brexit will ultimately lead to completely new relationships.

Both sides are not currently aiming for a "veiled membership" of the United Kingdom in the EU, but rather a clear cut has been made in large parts.

Businesses will have to adapt to this.

To this end

, we will take a

closer look at a number of areas

in the series "Brexit - the legal risks for companies" in the course of the first half of January

, such as the new customs formalities and the control of state aid. 

Jörg Philipp Terhechte is Professor of European Law at the Leuphana University of Lüneburg and the University of Glasgow and specializes in issues of economic and constitutional law.