This Alert gives a high level overview of the new trading relationship between the European Union ('EU') and the United Kingdom ('UK') for goods and service supply.

The EU and the UK reached provisional agreement on a trade agreement in December 2020, and the transition period for the UK's exit from the EU ('Brexit') came to an end on 31 December 2020. 1 The UK Parliament approved the agreement on 30 December 2020 and, last week, the European Parliament did so also. The EU Council signed it on 29 April 2021 and the final agreement has therefore now entered into force. 2 In the meantime, the provisional TCA has been applied since 1 January 2021.

We set out below: (i) some key background; (ii) the main changes for goods supply; and (iii) the main changes for services. We then outline (iv) other key points in the TCA system and structure, and offer some conclusions. The Alert is quite a long read (11 pages), but we hope it is a useful and timely recap.

1. Key Background

The agreement is called the 'Trade and Cooperation Agreement' ('TCA'). The TCA is more than 1,250 pages, including annexes. 3 It covers a large number of areas, ranging from trade in goods and services, to dispute settlement between the parties, and trade with third countries. It contains many sector-specific rules. Even so, it does not cover all the areas that were part of the UK's previous EU membership and it often sets out only the principles of the new relationship, leaving the detail to other documents. 4

To understand the new EU-UK trading relationship, it is also necessary to take into account:

– The EU-UK Withdrawal Agreement ('WA') agreed in October 2019, which entered into force in February 2020. Notably this:

  • deals with the mobility and rights of persons resident in each territory; and
  • established a special status for Northern Ireland ('NI'), so that effectively NI is both in the 'UK Single Market' (with Great Britain, i.e. England, Scotland, and Wales) and in the 'EU Single Market' (with the Republic of Ireland and the other 26 EU Member States). 5 There are special rules, including provision for no duties for products going into NI from another part of the UK if they are 'not at risk' of being exported into the EU. 6

– The UK Parliament's EU (Withdrawal) Act, which was passed in 2018, providing that some EU law was converted into UK law when the UK exited, albeit with related amendments. 7

  • Practically, this means that when trading with the UK, it is necessary to see whether the former EU law has been retained in the UK; if so, to what extent it has been amended8 ; and it may be necessary to see how that amended version of the law fits with the new relationship.

– New implementing rules and guidance in both the UK and the EU which have been adopted since 1 January 2021.

Various issues are also still to be resolved. Notably:

  • Whether the EU will recognise UK data protection rules as 'adequate', allowing for the continued flow of data between the EU and the UK. In the TCA, there is a bridging period, allowing such data transfer until 30 June 20219 . At the time of writing, the EC has issued two draft decisions on adequacy. 10
  • Whether there will be a path forward to allow UK-based financial institutions to trade in the EU to some extent from the UK. Thus far, the EU and the UK have agreed a Memorandum of Understanding for the establishment of a forum to dialogue on financial services issues, and adopted two decisions on the equivalence of UK financial supervision rules. 11

Many businesses in the EU and the UK already had prepared for the new relationship between the Brexit referendum result in 2016 and the end of 2020, so the impact of the end of the transition period was not a surprise.

For others, however, the reality of the changes required only became clear in January 2021, because it was only then that they really appreciated what those changes were. Even then, much of the detail is still being implemented, so adapting to Brexit is an ongoing process, still likely to take some time.

UK exports to the EU in January 2021 were markedly less than in the same period last year, although they partially recovered in February. 12 What will happen through the year is an open question, since the fall may be partly because of COVID-19 related travel restrictions, and partly because some are still working through how they adapt to the changes required.

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Footnotes

1 For more specific information on the impact of Brexit on competition law, please see our Alert available at: https://www.wilmerhale.com/en/insights/client-alerts/20200615-brexit---competition-law-in-the uk-during-the-transition-period-and-after

2 See https://www.europarl.europa.eu/news/en/press-room/20210423IPR02772/parliament-formally approves-eu-uk-trade-and-cooperation-agreement; and https://www.consilium.europa.eu/en/press/press releases/2021/04/29/eu-uk-trade-and-cooperation-agreement-council-adopts-decision-on conclusion/?utm_source=dsms-auto&utm_medium=email&utm_campaign=EU UK+trade+and+cooperation+agreement%3a+Council+adopts+decision+on+conclusi

3 See now, as published in the EU Official Journal at: https://eur-lex.europa.eu/legal content/EN/TXT/HTML/?uri=OJ:L:2021:149:FULL&from=EN.

4 There are useful summaries by the EU and the UK available at: https://ec.europa.eu/info/relations united-kingdom/eu-uk-trade-and-cooperation-agreement_en ('EU Q&A'); and here: https://www.gov.uk/government/publications/agreements-reached-between-the-united-kingdom-of-great britain-and-northern-ireland-and-the-european-union (the 'UK summary')

5 The WA recognised that NI was in UK customs territory yet provided that some EU rules would continue to apply in NI to protect the EU Single Market/the open border between NI and the Republic of Ireland.

6 See Article 5 of the Protocol on Ireland and Northern Ireland to the WA. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/840230/Re vised_Protocol_to_the_Withdrawal_Agreement.pdf; and https://ec.europa.eu/info/relations-united kingdom/eu-uk-withdrawal-agreement/protocol-ireland-and-northern-ireland_en (at page 96 in the link).

7 This is called 'Retained EU law'. See https://commonslibrary.parliament.uk/research briefings/cbp-8375/

8 E.g. Following the UK's departure from the EU, market participants trading wholesale energy products for delivery in Great Britain are no longer required to report information about their trading activity to the Agency for the Co-operation of Energy Regulators (ACER) or to the Energy Regulator in Great Britain (Ofgem), see https://www.ofgem.gov.uk/gas/wholesale-market/european-market/remit.

9 See Article 782, Interim Provision for the Transmission of Personal Data, of the TCA (with Article 783); and the Statement on the end of the Brexit transition period - update 13/01/2021 | European Data Protection Board (europa.eu)

10 See https://ec.europa.eu/commission/presscorner/detail/en/ip_21_661; and https://ec.europa.eu/info/law/law-topic/data-protection/international-dimension-data-protection/brexit_en.

11 See https://www.gov.uk/government/news/technical-negotiations-concluded-on-uk-eu memorandum-of-understanding. The EU has granted equivalence in relation to central counterparties and central securities depositories. There are some 28 areas in issue (see EU Q&A). The UK has made various equivalence declarations in respect of EEA Member States, allowing some access to UK markets.

12 See BBC, 'UK exports to European Union drop 40% in January', 12 March 2021, https://www.bbc.com/news/business-56370690; and BBC News, 13 April 2021 'UK exports to EU rebound partially after January's slump', https://www.bbc.co.uk/news/business-56729631.

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.