Brexit transition is happening. The European Union (Future Relationship) Act 2020 was given Royal Assent as 2020 came to an end, ushering in new ground and a new trading relationship for the New Year. The Future Relationship Act brings into UK law the UK-EU Trade and Co-operation agreement, UK-EU security of classified information agreement, and UK-Euratom nuclear co-operation agreement.
The Trade and Cooperation Agreement (TCA) is being provisionally applied from 1 January 2021 until 28 February 2021 and implementation is expected by February 2021. It will be the main agreement governing the UK and EU trading relationship.
The rules and guidance are currently being solidified and rolled out, but there are some key implications of Brexit transition for your business to consider.
Free trade agreement
The UK-EU TCA provides a ‘zero tariff zero quota’ deal on all goods, in the first deal of its kind, preserving free trade.
So, as of 1 January 2021, there will be no tariffs but there will be different rules to the former free movement enjoyed as a member of the single market. These include rules of origin to qualify for preferential trade terms under the free trade agreement and imports into the EU must meet all EU standards and will be subject to checks for safety and health and formalities for customs.
The TCA also provides service providers with a guarantee that there will be no barriers to trade when selling to the EU.
Import and export after Brexit transition – Rules of origin
For no trade tariffs or quotas to apply to goods produced within the UK and EU they must meet the relevant rules of origin. Post Brexit transition, businesses need to be aware of the new requirements and rules which determine where goods come from or where they are made (including those produced using labour or parts from different countries in the supply chain) to ensure the correct duty is paid on the goods, or to take advantage of the zero or reduced tariff.
Whilst there is a temporary easement in place for goods imported from the EU to the UK (but not UK to EU) until 30 June 2021, you will need to be on top of the tariff rates which apply to any goods that you import and the rules for claiming preferential tariffs when importing into the UK or EU and build in the resources to deal with the regime as, broadly:
- Importing into the UK – to claim the beneficial tariffs, you will need to claim preference on the customs declaration and declare you hold proof that the goods meet the rules of origin. You must also retain records for 4 years.
- Exporting from the UK – you must hold evidence that the goods meet the relevant rules of origin before issuing a Statement and provide the customer with a Statement on origin or supporting documents and records if the customer is claiming preference for “importer’s knowledge”.
Data protection post Brexit transition
Under the TCA until the end of June 2021, businesses are still able to transfer personal data to and from the EEA. The future arrangements will be determined before the end of this period. It is hoped that the EU will grant ‘adequacy’ status and deem the UK’s data protection laws in line with the EU’s laws. However, if you offer goods or services to individuals in the EU or you collect their data, you will need to appoint an EU representative unless you have an office located in the EU.
All EU citizens residing in the UK prior to 31 December 2020 can apply for ‘settled status’ until 30 June 2021. Employers can accept passports and national ID cards as evidence of right to work until this date.
If you make any hires from the EU from 1 January 2021 you will need a sponsor licence to hire most eligible employees from outside the UK. The worker will need to meet certain requirements and apply for permission. The standard processing time for a sponsor licence application is 8 weeks.
However, if you are hiring through the Global Talent route, you do not need a sponsor licence, but they will need to have the right to work in the UK. The Global Talent aims to attract promising individuals in science, humanities, engineering, the arts and digital technology. Endorsing bodies for this route currently include UK Research and Innovation (science and research), Tech Nation (digital technology) and The Royal Society (for science and medicine).
Amongst the other routes, there are also Start-up and Innovator routes available to attract talent. The Start-up route is for those setting up an innovative business for the first time, and the Innovator route for those with industry experience and at least £50,000 funding. The current guidance states that applications can be made for individuals or teams.
There is also a Graduate Visa which will be available to international students who complete a degree in the UK from summer 2021 for 2 years after they have completed their studies. International students who complete a PhD from summer 2021 will be able to stay in the UK for 3 years after study to live and work.
Qualifications officially recognised by the relevant regulator in the UK prior to 1 January 2021 will still be valid, but any temporary or occasional declaration to work in the UK will need to be recognised by the relevant regulator. The UK will recognise qualifications from the EU which are of equivalent standard to UK qualifications.
What to do now
- Appoint an EU representative unless you have an office located in the EU if you offer goods or services to individuals in the EU or you collect their data.
- Ensure that your contracts are ‘Brexit-proofed’ and check for references to the EU, the UK being an EU member or EU institutions; check the risk level and if the contract will need to be revised.
- You may wish to have a chat with any EU citizen employees to see if they have any concerns about their status or ‘settled status’ ahead of the June application deadline.
- If you are looking to hire EU workers, apply for a sponsor licence in good time and check that the individual has the right to work in the UK. If they hold a qualification, check that this qualification will be recognised in the UK.
The Role of the European Court of Justice (“ECJ”)
The UK’s departure from the EU necessarily means that the ECJ’s influence and impact will diminish in the future. The ECJ will retain jurisdiction in respect of proceedings already ongoing but as of 1 January 2021, UK appellants in new proceedings will no longer be able to refer matters beyond the Supreme Court to the ECJ.
Following the end of the Brexit transition period, the UK/UK Courts will still:-
- Be obliged to have due regard to the ECJ case law (but not bound to follow it);
- For a period of four years, face the prospect of European Commission action in relation to any infringements that occurred before the end of the transition period or any non-compliance with an administrative decision; and
- Have the option of referring matters to the ECJ for preliminary rulings on part two of the Withdrawal Agreement, issues of citizen’s rights, where the referring court considers the referral necessary.
The ECJ also retains a role in relation to (1) Northern Ireland specific provisions (Northern Ireland Protocol) and (2) in the event of a dispute arising out of the interpretation of the Withdrawal Agreement.
Enforcement of Civil Judgments
Proceedings commenced before 1 January 2021
Before the end of the Brexit transition period, English court judgments remained enforceable in other EU member states by virtue of the Recast Brussels Regulation (1215/2012). This regime allows any EU member state to register a judgment and to then have it enforced in another EU member state as though it were a decision of that member state’s own courts. Under Article 67 of the Withdrawal Agreement, this will continue to be the case for any proceedings which commenced before 1 January 2021.
Proceedings commenced after 1 January 2021
The position on enforcement of judgments has become more complex following the end of the transition period. The UK has already acceded to the Hague Convention on the Choice of Court Agreements (“Hague Convention”) and has applied to do the same in respect of the Lugano Convention which will go some way to streamlining cross-border enforcement.
All EU member states are party to the Hague Convention. In summary, the Hague Convention usually requires that any judgment granted by the court stipulated in an ‘Exclusive Jurisdiction’ clause of contract is to be recognised and enforced by other states that are also party to the Hague Convention. It also prevents parallel proceedings taking place in another contracting state. The Hague Convention will provide a degree of enforcement protection, it is though limited compared to the previous regime – it does not for example allow for the enforcement of interim injunctions or freezing orders.
Aside from relying on international agreements, there are two other options worth considering for the enforcement of a UK judgment in the EU:
- Whether there are any specific reciprocal agreements for the enforcement of judgments in the relevant country. For example, the UK entered into such an agreement with Norway in October 2020; and
- Several EU member states do enforce foreign judgments under their own domestic laws. However, this approach would warrant local law advice as jurisdiction and would likely entail overcoming some procedural hurdles.
Note – Should the UK complete its accession to the Lugano Convention the position on cross-border enforcement will become clearer. The regime under the Lugano Convention is substantially similar to that under the Recast Brussels Regulation but applies to additional countries outside of the EU (i.e. Iceland, Norway and Switzerland).
- Given the relatively fluid and uncertain position concerning the enforceability of judgments in cross-border disputes, it may be advisable to consider electing arbitration as the preferred means of alternative dispute resolution in commercial contracts.
- Review, and potentially revise, existing contractual dispute resolution provisions to take account of the UK’s new position. Further, if it appears likely that you may need to rely on the provisions of the Hague Convention to enforce a judgment across UK-EU borders it is worth ensuring that the wording and certainty of any jurisdiction clause is sufficiently certain.
Service of court proceedings
From the expiry of the transition period, Regulation (EC) No 1393/2007 on the service of judicial and extrajudicial documents in civil or commercial matters (service of documents) is no longer in effect between the UK and the EU member states.
Those parties looking to serve court documents out of the UK’s jurisdiction should now consult the ‘Hague Convention of 15 November 1965 on the service abroad of judicial and extrajudicial documents in civil and commercial matters’ (“the Convention”). The Convention covers 78 counties, including all EU member states, and allows service to take place through:-
- The destination jurisdiction’s Central Authority (as defined in Article 2, 15 and 16);
- Competent Persons, typically diplomatic or consular agents, judicial officers, or other identified officials;
- Post – provided the signatory state to the Convention has not objected to this.
Each signatory to the Convention has the right to object to methods (ii) and (iii). As such it is imperative that you check for any such reservations and objections before attempting service in reliance on the Convention. If you have any questions in relation to litigation issues or matters outlined above in general, please contact Will Bainbridge or Debs Leonin.
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