Member Article

The UK invoked the exit procedure under Article 50 of the Treaty on European Union in March 2017. Unless the UK's decision is withdrawn or the period is extended, this will become effective in a little over 80 days. While the UK and EU agreed the terms of the Withdrawal Agreement on 14 November 2018, the Commission is implementing its 18 November 2018 "Contingency Action Plan" (Plan) in the event of a no Brexit deal scenario given the uncertainty surrounding the ratification process on the UK side.

On 19 December 2018, the Commission adopted a number of proposed measures under the Plan (with remaining measures to be ready by 15 February 2019). The European Parliament and the Council are now expected to adopt the Commission's proposals under the Plan.

If the Withdrawal Agreement is not ratified by 30 March 2019 then what are these proposed Commission measures and how will they impact businesses in Ireland (and elsewhere in the EU) for: (i) financial services, (ii) air transport, (iii) road haulage and (iv) customs?

Financial services

Financial operators established in the UK will lose the right to provide their services in the EU under the EU financial services passports. The EU believes only a limited number of temporary contingency measures are necessary to safeguard financial stability as follows:

1. A conditional "equivalence" (where the EU grants foreign financial firms market access if it deems their home rules “equivalent” or aligned sufficiently with its own rules) decision for one year to ensure no disruption in central clearing of derivatives. This will allow the European Securities and Markets Authority temporarily to recognise central counterparties currently established in the UK. This will allowing them to continue providing services in the EU and will enable EU companies to put viable alternatives to UK operators in place.
2. A conditional equivalence decision for two years to ensure no disruption in services provided by UK central securities depositories. It will enable them to continue providing notary and central maintenance services to operators in the EU. This will also allow EU operators that currently have no immediately available alternative in the EU to comply with their obligations under EU law.
3. Two Delegated Regulations facilitating novation, for a fixed period, of certain over-the-counter derivatives contracts with a counterparty established in the UK to replace that counterparty with one established in the EU. This allows such contracts to be transferred to an EU counterparty while maintaining exempted status. It also prevents these contracts from becoming subject to clearing and margining obligations under the European Market Infrastructures Regulation.

The Commission is encouraging firms to inform clients on steps taken and how they are implementing them. For their part, EU clients of UK firms are encouraged to prepare for a scenario in which their provider is no longer subject to EU law.

Air transport

Air traffic between the EU and the UK will be affected. The Commission adopted two temporary measures to avoid interruption of air traffic between the EU and the UK to ensure basic connectivity:

1. A proposal for a Regulation to ensure the provision of certain air services between the UK and the EU for one year.
   This will allow air carriers from the UK to:

• fly across the territory of the EU without landing
• make stops in the EU for non-traffic purposes
• perform scheduled and non-scheduled international passenger and cargo air transport services
  
  This is subject to the UK conferring equivalent rights to air carriers from the EU, as well as to the UK, ensuring conditions of fair competition.

2.        A proposal for a Regulation regarding aviation safety. This extends, for nine months, the validity of certain existing licences to address the specific situation in the aviation safety sector. The EU Aviation Safety Agency can only issue certain certificates on the basis of a licence issued in a third country. The UK can only issue licences as of the withdrawal date, when it has re-gained the status of "State of design" under the Convention on International Civil Aviation.

Additional national contingency measures are not regarded as necessary by the Commission given the EU's jurisdiction in this area. The Commission has emphasised the need for air carriers, manufacturing and maintenance organisations as well as licensed personnel, to seek air transport licences, certificates and approvals as early as possible. The Commission also reiterated the need for companies to take all necessary measures to ensure that they meet this requirement on 30 March 2019.

Road haulage

Road haulage between the EU and the UK may become restricted to an international system of limited quotas. The Commission therefore adopted a proposed Regulation to ensure basic connectivity. This is designed to allow operators from the UK to temporarily carry goods into the EU, provided the UK confers equivalent rights to EU road haulage operators and also subject to conditions ensuring fair competition. The proposed Regulation would allow, for nine months, access for road haulage operators licenced in the UK to the carriage of goods by road between the UK and EU. The Commission has warned against reliance on any old bilateral agreements on road haulage rights as they would raise problems under EU law. Therefore a new road haulage arrangement will be needed in time.

Customs and the export of goods

EU legislation on imported goods and exported goods from third countries (i.e. the UK) will apply. This includes the:

• levying of duties and taxes
• formalities and controls required by the current EU legal framework

Member States would be required to apply the Union Customs Code (Code) and the relevant rules on indirect taxation to all imports from (and exports to) the UK. They are also required to apply measures under the Code for the issuing of necessary customs authorisations. The Commission adopted a Delegated Regulation to include the seas surrounding the UK in the provisions on time-limits within which entry summary declarations  and pre-departure declarations must be lodged prior to entering or leaving the EU’s customs territory.

The Commission also proposed a Regulation regarding individual licences for the export of dual-use items from the EU to the UK (i.e. goods, software and technology that can be used for both civilian and military applications).

Other sectors

The Commission is committed to ensuring that the current programmes between the border counties of Ireland and Northern Ireland continue in all scenarios. The Commission adopted a proposed Regulation to ensure the continuation of the PEACE IV (Ireland-UK) and the - UK-Ireland (Ireland-Northern Ireland-Scotland) programmes until the end of the 2020.

Next steps on contingency

The Commission will continue to implement its Plan in the coming weeks and has called on the European Parliament and Council to ensure the proposed measures are adopted as soon as possible.