Big changes for 01 January 2021 – The Draft Brexit Agreement

Big changes for 01 January 2021.edited.pdf (115.5 KiB)

Big changes for 01 January 2021 – The Draft Brexit Agreement

Big changes for 01 January 2021 – The Draft Brexit Agreement

Finally, a draft for the Trade and Cooperation Agreement between the EU and the UK was reached between these parties and a sigh of relief went through business and the legal community alike. The reasons for the relief are self – evident. As the EU as a supranational organization had legislation that went beyond mere international treaty, nearly every aspect of life was influenced in the member countries: investment, competition, State aid, tax transparency, air and road transport, energy and sustainability, fisheries, data protection, and social security coordination. After a significant time of ever-increasing cooperation through several different iterations, the first exit from this organization came with a host of difficulties.

While it appears that a hard Brexit, without harmonized rules on both sides on how to treat certain business and legal realities, seems averted, the legal and business worlds are not yet carefree and sure how everything is going to work from here on out.

The most important point to remember is that it is still a draft agreement, which means things may still change. It is also far from clear how secondary treaties, such as the cooperation with EFTA countries, the effect on the WTO agreements, or the voting behavior in the UN Security Council will play out. Foreign policy, external security, and defense cooperation are not covered by the Agreement as the UK did not want to negotiate this matter.

For now, most important to trade, it appears clear that there will be no quotas for or tariffs on goods complying with the rules of origin. Thus thankfully, suppliers and buyers can rest easy that the carefully negotiated contracts do not suddenly shift to less profit or encounter restrictions on that front. Nevertheless, controls at the borders will take more time, specifically as continued and sustainable air, road, rail, and maritime connectivity, falls below previous standards.

More worrisome on a social scale is the optimistically worded announcement, that there would be “a robust level playing field by maintaining high levels of protection in areas such as environmental protection, the fight against climate change and carbon pricing, social and labor rights, tax transparency, and State aid”. To this author, this means that competition for the lowest possible denominator and the slipping of standards and protections at least to a certain degree is inevitable.

To the author as a lawyer, the statement that “effective domestic enforcement, a binding dispute settlement mechanism and the possibility for both parties to take remedial measures” would remain is of most concern. Given that the UK had not been party to every EU harmonization effort concerning judicial matters, the effect is most likely less prominent, but it nonetheless reinforces the notion that arbitration clauses in contracts with UK participation may be prudent, given that the NY Convention on Arbitration was, is and remains independently valid in more than 150 countries.

So that is coming? Where no applicable framework regulating the relations between the EU and the United Kingdom after 31 December 2020, those relations will be significantly disrupted, to the detriment of individuals, businesses, and other stakeholders. In light of these exceptional circumstances, the EU will apply the Agreement on a provisional basis until 28 February 2021 as a stop-gap measure.

What does that mean for Switzerland? EU third-country agreements, including bilateral agreements between Switzerland and the EU, also continue to apply to the UK during the transition period until 31 December 2020.

As part of its Mind the Gap strategy, Switzerland concluded seven new bilateral agreements with the UK, thereby maintaining as far as possible the existing mutual rights and obligations between both countries following Brexit.

  • the services mobility agreement
  • the citizens’ rights agreement
  • the trade agreement
  • the overland transport agreement
  • the insurance agreement
  • the air transport agreement
  • and the police cooperation agreement

Unfortunately, some difficulties exist. While the Trade Agreement CH-UK will come into force on 1 January 2021. Some agreements, or parts thereof, are based on the harmonization CH – EU. This means, they cannot be applied until the EU and the UK agree to equivalent terms based on harmonized standards. Affected is the customs agreement, certain sections of the agricultural agreement, and most sections of the MRA agreement, excluding the chapters on motor vehicles, best laboratory practice, and best manufacturing practice for medicines.

Thus, if you have personal or business connections to the UK, study these agreements or ask your counselor international chamber of commerce for assistance. It is necessary.


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