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Draft Withdrawal Agreement and Political Declaration

The lead negotiators for the UK and the EU have agreed a withdrawal agreement that would provide for a transitional period until December 2020, as well as a political declaration on the framework for a future relationship thereafter. Both need to be formally adopted.

The agreement is earmarked to come into force on 30 March 2019, with a transition period lasting until 31 December 2020. The UK can extend this period once – this is likely to be for up to one or two years. The UK will make appropriate financial contributions for an extended transition period.

Page last updated

22 November 2018

A joint statement of the state of play, published at the same time, indicates  that final agreement on the UK’s exit from the EU will be subject to endorsement of the Withdrawal Agreement and adoption of a more fleshed-out. It also indicates, with regard to the backstop in the Protocol on Northern Ireland (attached to the Withdrawal Agreement), that neither side “wish to see the backstop enter into force [as it would] represent a sub-optimal trading arrangement for both sides”.

A breakdown of the draft withdrawal agreement

Introductory provisions

The text applies to the UK, as well as the Channel Islands, Isle of Man, Gibraltar, sovereign bases in Cyprus and overseas countries and territories insofar as these already fall under elements of EU law.

Broadly speaking, the Withdrawal Agreement maintains the current status quo with regard to the application of EU law during the transition period, although the UK will no longer participate in in any EU decision-making or governance structures or of any of the other bodies, offices and agencies (ie, Commission, Council, Parliament, ECB, EIB, ESAs, etc]. The UK may be invited, under strict criteria, to join meetings of the various committees / expert bodies in a non-voting capacity and for specific agenda items only.

Citizens’ rights

As mostly agreed earlier in the year, EU citizens in the UK and UK citizens registered in an EU member state (“host state”) will retain existing rights. This applies to all those who move up to the end of the transition period although they may be required to formally apply for new residency permits. The withdrawal agreement explicitly references the right to “non-discrimination” and the “right to equal treatment” (with some caveats in relation to social assistance) between UK and EU nationals in host member states. They retain their rights as workers and self-employed persons. Broadly speaking these are “life-long” rights.

Professional qualifications

Chapter 3 on Professional Qualifications makes explicitly clear that recognition procedures already concluded (or introduced before the end of the transition period) will continue to be applicable in the host member state. This includes a specific reference also to the Statutory Audit Directive. The UK and the EU27 shall cooperate to ensure the application of any ongoing recognition procedures after the end of the transition period.

The provisions are explicitly extended to nationals of Iceland, Liechtenstein, Norway and Switzerland, providing they put in place reciprocal arrangements with the UK. More detail on professional qualifications can also be found in our guidance.

Separation provisions / financial provisions

The Withdrawal Agreement includes a number of different chapters which deal with other separation issues, often in some detail and almost always via cross-referencing the existing body of EU legislation. Aspects, relating to goods placed on markets, ongoing customs procedures, IP and public procurement are specifically dealt with.

VAT

With regard to VAT, Title III indicates that EU law (Directive 2006/112/EC) continues to apply to goods dispatched / transported from the UK to the EU (or vice versa), provided that the dispatch / transport started before the end of the transition period. Similar provisions apply to excise goods. The UK is granted access to relevant network and information systems / databases in this area.

Cooperation in criminal and civil law matters

Title V and Title VI deal with different aspects of cooperation in criminal and civil law matters. As a rule of thumb, EU legislation continues to apply to any activity started before the end of the transition period (ie, European arrest warrant requests, freezing or confiscation orders, application of judgements). Rome I will apply in respect of all contracts concluded before the end of the transition period and Rome II will apply in respect of all events giving rise to damage which occurred before the end of the transition period.

Insolvency

From an insolvency perspective, Regulation 2015/848 will apply to all insolvency proceedings opened before the end of the transition period.

Personal data

Article 71 on personal data provides that EU law (primarily GDPR) will continue to apply to the processing of personal data of ‘data subjects outside the UK’ in the UK, provided this has already been processed under the EU regime.

Judicial and administrative procedures

These procedures (including issues relating to cases before the ECJ and the competence of the ECJ) are dealt with in Titles X and XI. Generally, EU law continues to apply until the end of the transition period. The text includes provisions to ensure that EU legislation / case law adopted between withdrawal and the end of the transition period also applies. Pending cases before the ECJ will continue to be heard (before the end of the transition period), including appeal proceedings.

Financial provisions

Part 5 deals with the financial provisions. While no specific  numbers are provided, the methodology is outlined over several pages of legal provisions. An annual calculation of outstanding commitments will be made and communicated to the UK.

Interpretation and application of the agreement

This will require the establishment of an Independent Authority in the UK to monitor implementation and application of the agreement. The Authority will be able to respond to complaints received directly from EU citizens and to conduct inquiries on its own initiative, with the right to bring legal action in the UK or to consult the European Commission.

A Joint Committee will also be set up to meet at least once a year, with overall responsibility for implementation and application. Responsibilities may be delegated to specialised committees, including on citizens’ rights and one on issues related to Ireland / Northern Ireland. The Committee’s decisions will be binding on both parties. It may also decide to submit disputes to the ECJ – any subsequent rulings will be binding.

Disputes arising from the agreement will be dealt with according to the procedures laid out in the agreement. These provide for an arbitration panel of 5 members will be established, with both sides nominating 10 potential members and 5 potential chairs. The list will not include individuals who are members or officials of the UK, EU27 and EU institutions. The European Court of Justice will continue to be involved.

Protocol on Ireland / Northern Ireland

Issues relating to Ireland and Northern Ireland are  addressed in a lengthy protocol to the agreement including multiple annexes (including on one taxation – Annex 4).
Without covering the “backstop” issue (“both sides will use their best endeavours to conclude an agreement which supersedes the Protocol”), the following points may be of interest:

  • The UK will ensure that there is no diminution to the current rights / safeguards / equality of opportunities of individuals.
  • The UK and Ireland may continue to make arrangements to retain the common travel area for persons. 
  • A distinguishable numeric code will be introduced by the UK in respect of Northern Ireland (relating to goods), as will specific labelling ((UK)(NI)) or United Kingdom (Northern Ireland)) where required under the Protocol.
  • The Protocol will be implemented and applied so as to maintain continued North-South cooperation ‘including in’ a number of areas (environment, health, transport, education, higher education, justice and security, broadcasting etc) [no mention of professional services].
  • A specialised committee will be set up to deal with issues relating to the implementation of the Protocol, alongside a joint consultative working group.

The Political Declaration

The UK Government and the European Commission have now agreed a political declaration addressing what a future EU27–UK relationship could cover. If all goes to plan, it will be endorsed by EU27 leaders in the coming days.

If the Withdrawal Agreement is concluded, preparatory work on future arrangements will start immediately (ahead of Brexit). Full negotiations will be launched after Brexit and will be accompanied by a clear programme with a timetable, including regular review points, and entail public reports on progress, including a high-level conference between the two sides at least every six months.

The introduction to the declaration provides the following.

  • Where both parties "consider it to be in their mutual interest", the future relationship may encompass areas of cooperation beyond those outlined in the declaration.
  • The future relationship will be based on a "balance of rights and obligations … ensuring the autonomy of the Union’s decision-making" and in respect of the integrity of the single market and customs union, including the "indivisibility of the four freedoms". Equally, "it must ensure the sovereignty of the United Kingdom and the protection of its internal market".
  • Both parties will approach the future relationship "with high ambition" with regards to scope and depth, and will recognise that it might evolve over time.

The initial provisions cover the basis for cooperation, including shared values and rights.

Both parties commit to a high level of personal data protection (with the EU due to start adequacy assessments with a view to adopt appropriate decisions by the end of 2020). Arrangements should be made for regulatory cooperation in this area.

General principles, terms and conditions will be set for the UK’s participation in EU programmes and other areas of dialogue, subject to the conditions set out in EU legislation. These could include instruments in areas such as science and innovation, youth, culture and education, overseas development and external action, defence capabilities, civil protection and space. Participation will involve a fair and appropriate contribution.

Both parties note the UK’s intention to explore options for a future relationship with the EIB.

The declaration makes clear the intention to develop an ambitious, wide-ranging and balanced economic partnership, with a free trade area for goods combining "deep regulatory and customs cooperation underpinned by a […] level playing field".

In the services area this will include "ambitious, comprehensive and balanced arrangements" which respect each party’s right to regulate while going well beyond WTO / GATS commitments. The aim is for "substantial sectoral coverage" covering all modes of supply. Professional and business services are specifically mentioned.

A section on regulatory aspects calls for regulation which is "compatible to the extent possible" and which avoids "unnecessary regulatory requirements". Both parties should establish a framework for voluntary regulatory cooperation in areas of mutual interest, including exchange of information and sharing of best practice.

On professional qualifications in particular, the declaration calls for both parties to "develop appropriate arrangements on those professional qualifications which are necessary to the pursuit of regulated professions" where it is in the mutual interest.

On financial services, the approach will be based on equivalence decisions alongside "close and structured cooperation on regulatory and supervisory matters".

On mobility, arrangements will be based on non-discrimination between the EU’s member states and full reciprocity. Both parties will aim to provide visa-free travel for short-term visits and agree to consider conditions for entry and stay for purposes including study and training. These provisions will be without prejudice to the Common Travel Area between the UK and Ireland.

Other areas covered include: digital, IP, public procurement, capital payment and movements, transport, energy, fishing, global cooperation and open / fair competition.

A security partnership should be established to cover law enforcement and judicial cooperation in criminal matters, including cooperation with Europol and Eurojust as well as support for international measures against money laundering / terrorist financing. Specific reference is made here to transparency around beneficial ownership and ending anonymity associated with virtual currencies.

Both parties will aim for close, flexible and scalable cooperation on foreign policy, security and defence as well as thematic cooperation on issues such as cybersecurity, counter-terrorism, illegal migration, civil protection and heath security.

Institutional arrangements should be set up, including an overarching framework which potential specific governance arrangements in individual areas, alongside mechanisms for dialogue at all levels.

While the declaration references cooperation in the area of criminal justice, including AML and counter-terrorism, there is still no reference to civil justice (including insolvency).

Read the documents in full: