European Union: What Businesses Should Know About The Brexit Draft Withdrawal Agreement

Last Updated: 22 November 2018
Article by TMF Group

The draft Withdrawal Agreement on the terms that the UK will leave the European Union on 29 March 2019 runs to hundreds of pages. But what certainty does it provide to business?

The draft Withdrawal Agreement on the terms that the UK will leave the European Union on 29 March 2019 has been published jointly by the EU and UK. It reflects 18 months of negotiations and runs to 585 pages. Close to 100 pages deal with the future of Northern Ireland during the transition period and beyond, should no final agreement be reached by 31 December 2020.

The real results are contained in just a few paragraphs – but they are widely scattered throughout the document. Looking at these core items, there is very little of substance. Nothing in the document brings certainty for citizens, business, commerce or government departments. The draft Withdrawal Agreement avoids a cliff-edge rupture on 'divorce day' and buys time for real trade talks to begin once the UK has left the Union.

How prepared is your competition for 29 March 2019? Register for the free 28 November webinar to find out.

In a nutshell

The draft Withdrawal Agreement includes proposals addressing the following areas:

  • Citizens' rights. Protecting the life choices of more than three million EU citizens in the UK, and over one million UK nationals in EU countries, safeguarding their right to stay and ensuring that they can continue to contribute to their communities.
  • Separation issues. Avoiding a cliff-edge during a transition period. Dealing with goods in transit at Brexit; protection of existing intellectual property rights including geographical indications; winding down of ongoing police and judicial cooperation in criminal matters; use of data and information exchanged before the end of the transition period; issues related to Euratom (The EU Framework Programme for Research and Innovation) and "other matters".
  • A transition period. During this time, the EU would treat the UK as if it were a Member State, with the exception of participation in the EU institutions and governance structures.
  • The financial settlement. Ensuring that the UK and the EU will honour all financial obligations undertaken while the UK was a member of the Union.  This is estimated as a settlement of £39 billion.
  • The overall governance structure of the Withdrawal Agreement. Ensuring the effective management, implementation and enforcement of the agreement, including appropriate dispute settlement mechanisms through the European Court of Justice.
  • The terms of a legally operational backstop to ensure that there will be no hard border between Ireland and Northern Ireland. It allows the UK and Irish governments to continue the 'Common Travel Area' - and preserves the Single Electricity Market on the island of Ireland.
  • A protocol on the Sovereign Base Areas (SBA) in Cyprus, protecting the interests of Cypriots who live and work in the Sovereign Base Areas following the UK's withdrawal from the Union.
  • A Protocol on Gibraltar, which provides for close cooperation between Spain and the UK in respect of Gibraltar on the implementation of citizens' rights provisions of the Withdrawal Agreement, and concerns administrative cooperation between competent authorities in a number of policy areas.

Some key operational clauses

Article 6: "Until the future relationship becomes applicable, a single customs territory between the Union and the United Kingdom shall be established ('the single customs territory'). Accordingly, Northern Ireland is in the same customs territory as Great Britain."

This applies in respect of all trade in goods.  Note that there is no mention of the fourth freedom - services, including financial services.

There is one area explicitly excluded from these potential customs arrangements - fishing.  That's because the trade-off between access for UK fish produce to EU markets, and access for EU boats to UK waters, is too controversial. The draft agreement simply states that "the Union and the United Kingdom shall use their best endeavours to conclude and ratify" an agreement "on access to waters and fishing opportunities".

Article 95: Decisions adopted by institutions, bodies, offices and agencies of the Union before the end of the transition period, or adopted in the [backstop] procedures after the end of the transition period, and addressed to the United Kingdom or to natural and legal persons residing or established in the United Kingdom, shall be binding on and in the United Kingdom

That means that during transition – and any extension to the transition beyond 1 January 2021 - the UK would remain under the jurisdiction of the European Court of Justice [in fact, the ECJ is mentioned more than 60 times in this document].

Article 185: EU Nations could tell the UK that they can no longer send suspects to face trial under the European Arrest Warrant if their own constitutions do not allow them to do so. Germany has an explicit ban on sending its citizens to face trial outside the EU.

Key takeaways for business

The draft Brexit Withdrawal Agreement temporarily extends some of the freedoms for movement of goods, capital and persons within the EU. It does not explicitly extend the freedom to deliver and buy services.

It does not change the end-game - defined in the complementary set of EU and UK technical notices. It is now a question of when and not if, the notices will come into effect.

Preparing for a no-deal Brexit in March on the basis of the technical notices as a contingency is not wasted effort. In fact it's very much encouraged in the face of TMF Group's latest report finding 77% of companies are simply continuing 'business as usual' and not making preparations. This is despite the fact 74% believe Brexit will impact their business. 

Brexit contingency planning is needed – and now. To defer in the hope that a plan won't be necessary until 2021 is a major gamble.

Are you Brexit-ready?

TMF Group's 'Quickstart: To Brexit' services help you figure out what Brexit means for your operations, and put adequate preparations in place. Learn more and make an enquiry today.

You can also register for the free webinar on 28 November with Brexit Partners to discover what actions companies are taking in order to be ready, be it a deal or no-deal Brexit.

A version of this article originally appeared on the Brexit Partners Blog.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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