Brexit - European Commission's communication on UK's withdrawal from the EU

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Brexit - European Commission publishes communication on preparing for the UK's withdrawal from the EU

24 July 2018

Regulatory News Alert

On 19 July 2018, the European Commission adopted a communication outlining the ongoing work on the preparations for all possible outcomes of the United Kingdom's withdrawal from the European Union. The text calls on Member States and private parties to step up preparations and follows a request by the European Council last month to intensify preparedness at all levels and for all outcomes, including preparing for the worst case scenario. This call follows several other communications from various EU authorities in the last few months.

While the EU is actively working towards a deal to ensure an orderly withdrawal, the UK's withdrawal will inevitably cause disruption – for example in business supply chains – whether or not there is a deal, this should be the core focus of preparations. As there is still no certainty that there will be a ratified withdrawal agreement in due time, or what it will entail, preparations have been ongoing to try to ensure that the EU institutions, Member States and private parties are prepared for the UK's withdrawal.

In any event, as a consequence of Brexit, even if an agreement is reached, the UK will no longer be a Member State after withdrawal and will no longer enjoy the same benefits as a member. The European Council has consistently recalled that a third country cannot have the same rights and enjoy the same benefits as a Member State. Therefore, preparing for the UK becoming a third country is of paramount importance, even in the case of a deal between the EU and the UK, which would be the least disruptive scenario.

Over the past year, the Commission has screened the entire Union acquis (body of EU law) to examine whether any changes are needed in light of the UK's withdrawal. To that effect, the Commission has adopted (and will adopt whenever necessary) specific, targeted legislative proposals to ensure that EU rules continue to function smoothly in a Union of 27 after the UK's withdrawal. The Commission has also published over 60 sector-specific preparedness notices, including for financial services, to inform the public about the consequences of the UK's withdrawal.

Finally, as a first concrete step toward Brexit, by 30 March 2019, the two London-based agencies – the European Medicines Agency and the European Banking Authority – as well as other UK-based bodies, like the Galileo Security Monitoring Centre, will be leaving the UK. A number of tasks performed currently by UK authorities will also be reassigned away from the UK.

Therefore, all stakeholders and national and EU administrations need to prepare for two possible main scenarios:  

  • If the Withdrawal Agreement is ratified before 30 March 2019, so that it can enter into force on that date, EU law will cease to apply to and in the United Kingdom on 1 January 2021, i.e. after a transition period of 21 months, the terms of which are set out in the Withdrawal Agreement. The transition period should be used to define a new legal framework, obviously without any guarantee of result.
  • In the absence of an agreement on a withdrawal agreement (also referred to as the ʻno dealʼ or ʻcliff-edgeʼ scenario), or if the Withdrawal Agreement is not ratified in time by both parties, there will be no transition period and EU law will cease to apply to and in the United Kingdom as of 30 March 2019.

While the EU has welcomed some of the new proposals in the Brexit White Paper recently published by the UK Government, it is still far below the expectations of EU negotiators. Indeed, the EU considers equivalence as a purely unilateral decision, hence rejecting the idea that jurisdiction should collaborate either on definition or application of rules. There are several issues on which significant progress has to be made in order to finalize a withdrawal agreement, such as the issue of the Irish border as well as the status of Gibraltar, and for many others notably in the services sector, the solutions proposed are neither satisfactory nor aligned with EU regulations. Thus, there is still a lot of uncertainty remaining and the outcome of the negotiations is currently unsure, and as proposed by EU Authorities, it is best to prepare for the worst-case scenario until proven otherwise, even if in the end more positive solutions are found.

How can Deloitte help?

Deloitte has developed a systematic approach: our “Brexit health check” service is designed to assess the potential impacts Brexit might have on your structure and organization. From there, based on your business development plans and legal realities, Deloitte can assist you in implementing operational changes for your post-Brexit environment strategy.

With Deloitte RegWatch, stay on top of regulatory news and prepare your organization to address future regulatory developments.

Contacts

Simon Ramos
Partner – Brexit Coordinator
Tel : +352 45145 2702
siramos@deloitte.lu

Pascal Martino
Partner – Banking Leader
Tel : +352 45145 2119
pamartino@deloitte.lu

Marco Lichtfous
Partner – Brexit Banking
Tel : +352 45145 4876
mlichtfous@deloitte.lu

Francesca Messini
Director – Brexit Banking
Tel : +352 45145 2791
fmessini@deloitte.lu

Julie Van Cleemput
Director – Strategy & Regulatory Consulting
Tel : +352 45145 2989
jvancleemput@deloitte.lu

Benoit Sauvage
Senior Manager – RegWatch, Strategy & Consulting
Tel : +352 45145 4220
bsauvage@deloitte.lu

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