Brexit draft Withdrawal Agreement review

This is comprised of 168 different articles covering and addressing: Citizens’ Rights; Separation issues; Transitional arrangements; Financial issues; and Institutional aspects associated with the UK’s departure from the European Union. There are also separate Protocols relating to nations such as Northern Ireland and Cyprus post-Brexit.

It is important to note that the draft document has been produced by the EU and not the UK; consequently it is unlikely to be completely concordant with the final agreement to be reached.

Furthermore, whilst being a useful indicator of what can be expected in the final agreement, the document is still in draft form which, once again, suggests that there are likely to be amendments made prior the final agreement being concluded.

Some have commented that by producing the first draft the EU has perhaps gained an advantage in the negotiations. However, as regards to its motives, the Commission stated:

“[we are] publishing the draft Withdrawal Agreement today to allow for some time for an exchange of views with the Council and the European Parliament and to give as much time as possible to the EU and UK negotiators to reach a deal on the terms of the UK’s orderly withdrawal from the EU.”

The document “is far more a legal document than a diplomatic one”.

The final agreement will come into force on 30 March 2019.

We note some of the key provisions below.

Part one – Common provisions

Article 4 (5): – “In the interpretation and application of this Agreement, the United Kingdom’s judicial and administrative authorities shall have due regard to the relevant case law of the Court of Justice of the European Union handed down after the end of the transition period.”

Commentary

Part One is relatively short and provides various definitions, as well as setting out the territorial scope of the draft Agreement.

Article 4 (5) effectively provides that EU law will govern the interpretation of the Agreement – going against the wishes of certain members of the Government.

Part two – Citizens’ rights

Article 9 (Personal Scope) sets out that (among others) Part Two of the Agreement applies to:

• Union Citizens residing in the UK prior to the end of the transition period, who continue to reside there thereafter; and
• UK nationals residing in the EU prior to the end of the transition period, who continue to reside there thereafter.

Article 14 (1) (Right of Permanent Residence): – “Union citizens, United Kingdom nationals, and their respective family members, who have resided legally in accordance with Union law for a continuous period of five years in the host State… shall have the right of permanent residence in the host State”. – Furthermore, it is stated that periods of legal residence or work “before and after the end of the transition period shall be included in the calculation of the qualifying period necessary for the acquisition of permanent residence.”

Article 18 (2) (Restrictions on the Right of Residence): – “Conduct of Union citizens or United Kingdom nationals, or their respective family members, that occurred after the end of the transition period may constitute grounds for restricting the right of residence by the host State in accordance with national legislation.”

Article 21 (1) (Equal Treatment): – “All Union citizens or United Kingdom nationals residing on the basis of this Agreement shall enjoy equal treatment with the nationals of that State within the scope of this Agreement” – Likewise, this benefit extends to family members.

Article 22 (Rights of workers): – Article 22 states that workers are not to be discriminated against “on grounds of nationality as regards employment, remuneration and other conditions of work and employment” as well as confirming that there is “the right to equal treatment in respect of conditions of employment and work, particular as regards remuneration, dismissal and in case of unemployment, reinstatement or re-employment.”

Article 32 (Scope of rights): – “In respect of United Kingdom nationals and their family members, the rights provided for by this Part shall not include further free movement to the territory of another Member State, or the right to provide services on the territory of another Member State or to persons established in other Member States.”

Commentary

Part Two is largely as expected in relation to equal treatment of workers and individuals. It is important to note however that the effect of Article 32 would be not to allow current UK citizens resident in the EU ‘further free movement’ post-Brexit. Instead, they would only be afforded the right to remain in the state in which they are resident, and would not be permitted unrestricted access to move throughout the EU.

With regard to the effect on UK businesses, those businesses will need to ensure that they do not fall foul of the equality provisions in relation to their European workers.

Part three – Separation provisions

Article 37 (Continued circulation of goods placed on the market): – “Any good that was lawfully placed on the Union market or the United Kingdom’s market before the end of the transition period may: (a) be further made available on the market of the Union or of the United Kingdom and circulated between these two markets until it reaches its end-user; (b) where provided in the applicable provisions of Union law, be put into service in the Union or in the United Kingdom.

Articles 47 & 48 (VAT and Excise goods): – These provide that the current Council Directives should apply in respect of good dispatched or transported from the UK to a Member State (or vice versa) provided that the movement started before the end of the transition period or ended thereafter.

Title IV (Articles 50 – 57) (Intellectual Property Rights): – These provide for Intellectual Property rights. The effects would be that:

• The holders of EU trade marks; Community registered design rights; and Community plant variety rights shall become the holders of the same right in the United Kingdom.
• A trade mark or registered design right which arises in the United Kingdom shall have as its first renewal date the renewal date of the corresponding intellectual property right registered in accordance with Union law.

Article 52 provides for the continued protection in the UK of international registrations designating the EU, and Article 53 provides for the continued protection in the UK of unregistered Community designs.

Title VI (Articles 62 – 65) (Ongoing Judicial Cooperation Civil and Commercial Matters): – This section of the draft Agreement sets out that the below will apply as follows:

• Rome I Regulation (593/2008) on choice of law clauses concluded before the end of the Transition Period;
• Rome II Regulation (864/2007) in relation to conflicts of law events which occur before the end of the Transition Period; and
• Brussels Regime (1215/2012) governing which courts will have jurisdiction in relation to legal proceedings “instituted before the end of the transition period”.

Title X (Union Judicial and Administrative Procedures): –

Article 82 (Pending cases before the Court of Justice of the European Union): – “The CJEU shall continue to have jurisdiction for any proceedings brought before it by the United Kingdom or against the United Kingdom before the end of the transition period. That jurisdiction shall extend to all stages of proceedings, including appeal proceedings before the Court of Justice and proceedings before the General Court after a case has been referred back to it.”

Furthermore, “The CJEU shall continue to have jurisdiction to give preliminary rulings on requests from courts or tribunals referred to it before the end of the transition period.”

Article 83 (New cases before the Court of Justice): – Under this Article, if the Commission or a Member State considers that the UK has failed to fulfil an obligation under EU law or the Withdrawal Agreement before the end of the transition period, the matter may be brought before the CJEU.

Article 85 (Binding force and enforceability of judgements and orders): – “Judgements and orders of the CJEU handed down before the end of the transition period as well as those handed down after the end of the transition period in proceedings referred to in Articles 82 and 83, shall have binding force in their entirety on and in the United Kingdom.”

Commentary

When considering Part Three, it is clear that during a transition period there will be large parts of the current regulatory framework that will continue to apply (including the authority of the CJEU). However, as was expected, this will cease to be the case once such a period has concluded.

Part Three appears thorough and sets out how the separation is to be implemented, as well as its effects on the UK. Clearly businesses will need to be aware of how provisions relating to the internal market will affect issues such as trade, whilst lawyers will need to be aware of aspects of contract drafting – e.g. jurisdiction and choice of law clauses.

It is clear that the draft Withdrawal Agreement looks to protect businesses’ intellectual property interests post-Brexit. However, it remains to be seen as to how smooth the transition will be in practice.

Part four – Transition

On 19 March 2018, UK and EU representatives confirmed that an agreement had been reached in relation to the terms of the transition period post-Brexit.

As a consequence of this, it can be said with confidence that the provisions referred to below will remain present in the final agreement and will govern the transitional period.

Article 121 (Transition period): – “There shall be a transition period, which shall start on the date of entry into force of this Agreement and end on 31 December 2020”.

Article 122 (Scope of the transition): – This sets out the scope of the transition period and clarifies that unless otherwise provided, Union law shall be applicable “to and in the United Kingdom during the transition period”.

Furthermore, during the transition period, “the Union law applicable… shall produce in respect of and in the United Kingdom the same legal effects as those which it produces within the Union and Member States and shall be interpreted and applied in accordance with the same methods and general principles as those applicable within the Union.”

Article 126 (Supervision and enforcement): – “During the transition period, the institutions, bodies, offices and agencies of the Union shall have the powers conferred upon them by Union law in relation to the United Kingdom and natural and legal persons residing or established in the United Kingdom. In particular, the CJEU of the European Union shall have the jurisdiction as provided for in the Treaties.”

Commentary

Part Four is quite concise, but importantly sets out the following:

• The transition period will end on 31 December 2020; and
• EU law will apply to the UK during the transition period.

Accordingly, during the period businesses looking to bring legal proceedings should continue to have due regard to EU law. Furthermore, the issue of timing should be considered by businesses, in particular where they regard it as more appropriate that the provisions of EU law / the current EU legal system apply.

If this is the case then businesses should be sure to bring claims in sufficient time for the current regime to apply.

Part five – Financial provisions

Part Five sets out the various financial arrangements associated with the UK’s withdrawal. It is quite wide ranging in its nature, and perhaps not completely relevant to UK businesses.

It clarifies however that all of the amounts, liabilities, calculations, accounts and payments referred to in the section shall be drawn up and implemented in euros.

Furthermore, under Article 133 (Outstanding Commitments):

“The United Kingdom shall be liable to the Union for its share of the budgetary commitments of the Union budget and of the budgets of the Union decentralised agencies outstanding on 31 December 2020 and the commitments made in 2021 on the carryover of commitment appropriations from the budgets for 2020.”

With regard to the specific amount due:

“The Union shall calculate the amount of commitments referred to [and] it shall communicate that amount to the United Kingdom, adding a list with the reference of each commitment, the budget lines associated, and the amount for each associated budget line.”

These shall be communicated to the UK by 31 March each year.

Part six – Institutional and final provisions

Article 151 (References to the Court of Justice of the European Union concerning Part Two): – In relation to cases concerning citizens’ rights, under Part 2 of the Withdrawal Agreement:

“Where, in a case which has commenced at first instance within eight years from the end of the transition period before a court or tribunal in the United Kingdom, a question is raised concerning the interpretation of Part Two of this Agreement, and where a court or tribunal in the United Kingdom seized with that case considers that a decision on that question is necessary to enable it to give judgment in that case, it may request the Court of Justice of the European Union to give a preliminary ruling on that question… The legal effects in the United Kingdom of such preliminary rulings shall be the same as the legal effects of preliminary rulings given pursuant to Article 267 TFEU in the Union and its Member States”.

Clearly, as a result of this provision, the European Courts will maintain quite a significant influence for at least eight years from the end of the end of the transition period. – This significantly contradicts the desires of “Brexiteers”.

Article 157 (Joint Committee): – Under Article 157, a Joint Committee comprised of representatives of the Union and United Kingdom shall meet at least once a year and shall be responsible for the implementation and application of the Withdrawal Agreement.

Additionally, under Article 159 (Decisions and recommendations) the Joint Committee shall have the power to adopt decisions in respect of all matters “for which [the Withdrawal Agreement] so provides and make appropriate recommendations to the Union and the United Kingdom.” – These decisions shall be binding and legally effective.

Under Article 162 (Settlement of disputes), either the United Kingdom or the Union may bring any dispute concerning the interpretation or application of the Withdrawal Agreement before the Joint Committee. The Joint Committee may settle the dispute through a recommendation, or it may, at any point, decide to submit it to the Court of Justice – and its decision shall be binding on the UK and the Union.

Furthermore, under Article 163 (Non-compliance), if the Court of Justice finds that the Union or the United Kingdom has not complied with its judgement, it may impose a lump sum or penalty payment on it.

Article 165 (Suspension of benefits during the transition period): – This sets out that, “if during the transition period the Union considers that the United Kingdom has not fulfilled, during the transition period, an obligation under Union law [or that it has not respected an order of the Court of Justice made pursuant to the Agreement], and where the functioning of the internal market, of the customs union, or the financial stability of the Union or its Member States would be jeopardised as a result, the Union may suspend certain benefits deriving for the United Kingdom from participation in the internal market.”

Commentary

Part six includes a number of important provisions which will regulate the workings of both the EU and the UK following the UK’s departure from the Union.

Whilst in the short-term, the continued influence of European Courts on the UK’s domestic law may frustrate those in favour a “hard Brexit”; it could also prove useful in preventing a post-Brexit legislative “cliff-edge” from occurring.

Protocol on Ireland / Northern Ireland

The first Protocol to the Withdrawal Agreement focusses on how Ireland / Northern Ireland will be affected by the UK’s separation from the European Union.

Article 1 (Rights of individuals): – Article 1 emphasises that the UK shall ensure that the rights of individuals set out by the 1998 Good Friday Agreement should not be diminished post-Brexit.

Article 2 (Common Travel Area): – This clarifies the situation around the “Common Travel Area”. The United Kingdom and Ireland may continue to make arrangements between themselves relating to the movement of individuals between the territories.

Articles 3 – 4 (Common regulatory area): – These Articles establish a “common regulatory area” (i.e. one without internal borders in which the free movement of goods is ensured and North-South cooperation is protected). Among various provisions seeking to result in the continued free movement of gods, Article 4 (3) states:

• Article 4 (3): – “Customs duties on imports and exports, and any charges having equivalent effect, shall be prohibited between the Union and the United Kingdom in respect of Northern Ireland. This prohibition shall also apply to customs duties of a fiscal nature.”

In addition to the above, the Protocol includes clauses relating to:

• Agriculture and fisheries (Article 5);
• Single electricity market (Article 6); and
• State aid (Article 9).

Commentary

The provisions included in the Protocol look to implement the European Union’s previous assertions that:

“The United Kingdom will ensure that no new regulatory barriers develop between Northern Ireland and the rest of the United Kingdom, unless consistent with the [Good Friday Agreement]… In all circumstances, the United Kingdom will continue to ensure the same unfettered access fir Northern Ireland’s business to the whole of the United Kingdom internal.”

The draft Withdrawal Agreement seeks, as far as is possible, to maintain the Status Quo in relations between Northern Ireland and the rest of the United Kingdom.

In relation to non-compliance under Article 163, the text provides no details as to the size of such a penalty – however, it is likely to be proportionate to the size of the breach of the obligation concerned.

If you have any questions about issues raised in this review, please contact Colin Hewitt.