6 September 2019 | By Michael Thaidigsmann
Brexit
The No-Deal checklist
A raft of notices and a checklist has been published by the European Commission to prepare businesses and citizens for a No-Deal Brexit.
Until the early hours of Tuesday, when Parliament was prorogued by an order of the Queen, British politicians were still debating the terms of their country’s scheduled departure from the European Union. Brexit has caused an unprecedented constitutional crisis. The current legal departure date is 31 October 2019, at 11 p.m. BST (midnight CET). So far, no agreed exit deal has been ratified by the UK, and many expect the country to crash out of the EU, its customs union and its Single Market.
Nonetheless, opposition parties at Westminster have coalesced to enact a law aimed at preventing a No-Deal Brexit, obligating the government of Boris Johnson to ask the EU for a further extension of the UK’s EU membership by 19 October 2019 if no mutually acceptable Withdrawal Agreement had been agreed until then, or if Parliament has not changed its mind.
In a No-Deal situation, the UK would become a third country without any transitional arrangements. All EU law will cease to apply directly in Great Britain and Northern Ireland and be replaced by British statues.
For the EU, ‘No Deal’ remains the most likely scenario, despite efforts by the British government to renegotiate aspects of the Withdrawal Agreement which was already thrice rejected by the House of Commons.
Many businesses on both sides of the English Channel, especially smaller ones, remain ill-prepared for the potential impact an unorderly Brexit might have on them.
At the beginning of September, the European Commission published another notice urging companies to prepare for a No Deal scenario in a few weeks’ time, as well as a checklist covering major business aspects such as certificates, licenses and authorisations, labelling requirements, customs procedures, or the recognition of professional qualifications, trademarks and geographical indications.
|
Checklist The EU checklist includes questions such as the following, with the Commission urging companies in the EU-27 countries to address them: Have I re-assessed a choice of UK jurisdiction in my commercial contracts? Have I transferred certificates and authorisations issued by a UK-based body or authority to an EU 27-based body or authority, or sought new ones? Have I ensured compliance with EU-localisation requirements? Have I examined my supply chains and treated any UK input as ‘non-originating’ from the EU, with a view to maintaining a preferential tariff for my exports? Does my business rely on licences or authorisations issued by UK authorities? Have I applied for similar licences or authorisations in the EU-27, or transferred such licences or authorisations issued by the UK to an EU-27-authority? As a client/customer, did I check whether my provider has the licence or authorisation required to provide services in the EU? Have I assessed whether I need to rely on services provided by entities established in the UK? Have I assessed whether I can continue to rely on cross-border services from the UK? Have I taken the necessary steps to ensure continued protection of my intellectual property rights in the UK? Have I taken the necessary steps to ensure compliance with EU rules if I transfer personal data to the UK? |
One hundred so-called Preparedness Notices for stakeholders have been issued by Brussels, covering a broad range of sectors in which Brexit preparations are required from EU-based businesses.
In addition, the European Commission has proposed to treat a No-Deal Brexit as a major disaster so that that the European Solidarity Fund and the European Globalisation Adjustment Fund can intervene in support of those EU businesses, workers and member states that are most affected. However, this proposal has yet to be agreed by the European Parliament and the Council.
The Commission says it does not plan any new measures ahead of the new withdrawal date. Brussels has warned the British government that it will only embark on discussions about the future relationship between the UK and the EU if three major issues are addressed by London first: protecting the rights of EU citizens residing in the UK, honouring the financial obligations the UK has made as an EU member state and preserving the letter and spirit of the Good Friday Agreement for Ireland.
New rules for travellers
UK individuals entering the EU from a UK port or airport will be treated as third-country citizens after Brexit and may no longer use border facilities provided for nationals or permanent residents from the 27 remaining EU states, the countries of the European Economic Area and Switzerland who all enjoy the right to free movement within the European Union.
UK nationals will be subject to thorough checks of all entry conditions for third country nationals upon entry. UK nationals will be allowed to stay in the Schengen area for a maximum of 90 days within a 180-day period. For longer stays, they will in principle require a residence permit or long-term visa which is issued by national authorities. National legislation will apply for these cases, including the issuing of work and residence permits.
Schengen visa exemptions planned
The Commission has proposed to exempt UK citizens from visa requirements for short-stay visits to the Schengen area, subject to reciprocal treatment of EU citizens travelling to the UK. However, this proposal has yet to be approved by the Council and Parliament.
Goods and luggage carried by travellers entering the EU from the UK will be subject to EU customs rules and could be checked at the border. Allowances are made for travellers’ personal effects and certain other items. Goods which are intended to be put on the EU market or intended for private use or consumption within the customs territory of the EU must henceforth be declared.
Goods which are temporarily imported may be declared for the temporary admission procedure. To this end, ATA carnets – international customs documents permitting the duty-free and tax-free temporary export and import of goods for up to one year – must be used.
A No-Deal Brexit could spell the return of duty-free businesses, with the usual allowances applying for purchases.
Travellers carrying more than €10,000 in cash or the equivalent in other currencies who enter or leave the EU will have to make a customs declaration with the relevant authority.
Driving and car insurance
British nationals can continue to enter the EU by car with the UK driving license. So far, driving licences issued by EU member states have been mutually recognised. Once the UK has exited the union, the Vienna Convention on Road Traffic will apply. It provides for the recognition of national driving licences and international driving permits issued by the contracting states. The UK and all but four EU member states – Ireland, Cyprus, Malta and Spain – are parties to this treaty.
These four EU countries and the UK are, however, parties to a previous international agreement which also provides for the recognition of driving licences but which may require drivers to be in possession of an international driving permit. Holders of British driving licences are therefore advised to contact the responsible national authorities regarding the applicable recognition rules.
As for car insurance and third-party liability, the existing Green Card system remains in place. However, insurers in the UK could in future exclude individual EU countries from coverage. At the moment, this is not possible as car insurances in one EU country are automatically valid in all other EU member states.
Driving and car insurance
British nationals can continue to enter the EU by car with the UK driving license. So far, driving licences issued by EU member states have been mutually recognised. Once the UK has exited the union, the Vienna Convention on Road Traffic will apply. It provides for the recognition of national driving licences and international driving permits issued by the contracting states. The UK and all but four EU member states – Ireland, Cyprus, Malta and Spain – are parties to this treaty.
These four EU countries and the UK are, however, parties to a previous international agreement which also provides for the recognition of driving licences but which may require drivers to be in possession of an international driving permit. Holders of British driving licences are therefore advised to contact the responsible national authorities regarding the applicable recognition rules.
As for car insurance and third-party liability, the existing Green Card system remains in place. However, insurers in the UK could in future exclude individual EU countries from coverage. At the moment, this is not possible as car insurances in one EU country are automatically valid in all other member states.
Roaming charges could return
EU rules regarding air travel, notably compensation for passengers booked on delayed or cancelled flights, will continue to apply only to those flights that arrive or originate at an EU airport. Passengers flying from a third-country airport to, or via, the UK will no longer be eligible for compensation under EU law.
Mobile telephone calls made with a UK-operated phone in any EU-27 country, or with a phone in the UK, might become subject to roaming charges again, which have been abolished within the EU. EU-based providers will continue to be obligated to inform their customers about roaming charges applicable in the United Kingdom.
Competition rules and company law
Given that EU competition rules apply regardless of the nationality of the undertaking or its country of incorporation and as they may also cover conduct occurring outside of the EU, Brexit will not have any impact on the antitrust and merger control rules applicable in the Single Market. A British company will thus continue to be subject to EU rules if its anti-competitive conduct is implemented or produces effects in an EU member state.
The British EU withdrawal with restrict the European Commission’s investigative powers somewhat with respect to UK-based companies. The Commission will no longer be able to carry out inspections under Article 20 of Regulation (EC) No 1/2003 in the UK, but it may still obtain information under Article 18 of that regulation.
If the relevant date for establishing EU jurisdiction takes place after Brexit, the Commission will no longer take into account the turnover that the parties to the concentration realise in the UK when establishing the relevant EU-wide turnover and that realised in individual EU countries.
As to pending cross-border mergers involving an EU and a UK entity, national rules for mergers with companies established in third countries will apply to the merger as of the withdrawal date.
However, there will be a significant impact of Brexit on company law. They are set out in a notice published by the European Commission in July 2019.
Disclosure rules
European rules on the compulsory disclosure of certain company information in the business registers (such as documents and particulars related to instruments of constitution, appointment, termination of office and particulars of persons representing a company, the winding-up of a company or a change of the registered office, etc.) will no longer apply with respect to UK companies after Brexit.
Union rules on shareholder rights and engagement also will no longer apply to companies that have their registered office in the UK or which are only listed on a stock exchange there.
National business registers interconnected via a European central platform, the Business Registers Interconnection System (BRIS), will cease to include the UK’s company register. This means that information about UK companies will no longer be included in the BRIS, which is publicly accessible via the European e-Justice Portal.
According to Articles 36 and 37 of Directive (EU) 2017/1132, EU member states’ registers have to provide certain information in relation to companies in a third country, e.g. changes in companies that have a branch in the EU or mergers involving at least one EU company and one third-country company. However, this information is not exchanged through the BRIS. Thus, while the EU-27 business registers will provide at least some information in relation to companies based in the UK, this information is not part of the information exchange via the BRIS.
Businesses registered as SE (‘Societas Europaea’, or ‘European Company’) will have to have their headquarters office in an EU country, i.e. in the same member state where they are registered.
SEs that have their registered office in the UK will no longer enjoy that status. The recognition of such companies by an EU member country would
only be possible on the same basis as other UK incorporated companies. As of the withdrawal date, UK-incorporated companies will not be able to participate in the formation of a new SE.
Those European Companies that have their registered office in one of the EU-27 countries at the time of withdrawal will preserve their legal status, even if they were formed, before the withdrawal date, by a UK company. The same applies with regard to subsidiary SEs.
Moreover, a European Economic Interest Grouping (EEIG) has to be registered in an EU member state. EEIGs registered in the UK will not enjoy the status of an EEIG after a No-Deal Brexit anymore.
Uncertainty will remain for some time to come
As for the British side, under the European Union (Withdrawal) Act 2018, adopted by Parliament to enshrine the UK’s EU withdrawal in law, much of the existing EU legislation is going to be maintained for after Brexit, in order to provide legal continuity. A new category called ‘retained EU law’ will thus be created.
However, once the UK leaves the bloc without a transition deal, Brussels and the European Court of Justice will no longer be able to control its application on UK territory, and they any law could be changed by an Act of Parliament. Moreover, under the Withdrawal Act, the British government enjoys some discretionary powers to adapt and remove EU laws from the statute book which are no longer deemed relevant.
A No-Deal Brexit may wreak havoc on the British and European economies, and it is by no means certain that the contingency planning on either side of the Channel will suffice to mitigate the problems caused by an “unorderly” departure of the UK from the EU after more than four decades of membership.
An early general election in the UK in October 2019, only weeks before the scheduled Brexit date, will further complicate matters and hamper preparations by businesses and governments.
