Approaching the Brexit ‘cliff-edge’
By Simon De Cesare, President, Malta Business Bureau
This opinion piece was featured on The Times of Malta on Sunday, 7th October 2018.
For months the EU and UK have been negotiating a withdrawal agreement that in turn would open up a transition period until December 2020 to allow additional time to forge out a new relationship between the two parties.
Unfortunately, negotiations for long have been frustrated by internal domestic disputes in the UK on the nature of the future relationship with the EU; an intrinsic battle between ‘remainers’, ‘soft’ and ‘hard’ Brexiteers. The EU-UK future relationship is also tangled with the Irish border question that needs to be addressed in the withdrawal agreement and thus makes it more urgent. On its part, the EU has been strong on the principle that the Single Market’s four freedoms are indivisible.
If a Withdrawal Agreement is not concluded and ratified by March 29, 2019, unless negotiations are unanimously extended, no transition would take place and EU law would cease to apply to the UK as of immediately. This so-called ‘no-deal’ or ‘cliff-edge’ scenario would also mean that EU citizens in the UK and UK citizens in the EU would have no specific arrangement in place.
In such event, the EU and UK would have to apply respective regulations and tariffs at borders as applied to third countries, including for customs declarations and sanitary and phytosanitary standards. With regard to trade and regulatory issues, the EU and UK relations would be then governed by World Trade Organisation rules that are by far the most basic and least advantageous, considering the voluminous trade that goes on between the two blocs. Moreover, UK and EU entities would no longer be eligible to participate in respective public procurement.
A ‘no deal’ scenario will also have implications on consumer rights. While businesses and consumers will still be able to resort to the jurisdiction of their habitual residence in claims against UK traders, after the withdrawal it will be ultimately up to the UK government to recognise and enforce EU court judgments independently and voluntarily.
There will also be implications on package travel for instance. EU rules oblige traders to take out insolvency protection to refund or repatriate consumers in case of bankruptcy. As the package travel directive will no longer apply to the UK, EU citizens that purchase services from UK traders will not have such safeguards, unless the traders actively sell to the EU market. In that case, the same obligations continue to apply.
EU passengers’ rights will only continue to hold for travellers flying on EU registered carriers. In other words, passengers flying from the UK to any EU country and vice-versa on an EU airline will be covered by EU passengers’ rights, while passengers flying on a UK airline shall not. The UK could introduce new rights for UK carriers, but the level of protection may differ.
Another concerning consequence of Brexit is that the UK would fall out of the Open-Skies Agreement and unless a separate deal is struck on aviation, effectively flights between the two blocs will be grounded.
Although unlikely, the EU has not discarded the option of introducing a visa requirement for UK citizens in case of a ‘no deal’.
Undoubtedly, this ‘cliff-edge’ scenario would cause disruptions leading to serious repercussions, on citizens, businesses and administrations.
There are numerous measures that businesses can take to prepare themselves for Brexit. Actions, of course differ, depending on the company’s commercial activity and sector in which it operates.
To mention a few, businesses who rely on certificates, licences or authorisation issued by UK authorities will need to transfer or seek new ones issued by any of the EU-27-based ones. On rules of origin, UK input to the finalised product will no longer be considered as EU content, thus businesses will have to re-examine their supply chain and start treating any UK input as ’non-originating’.
Businesses trading with the UK will also need to ensure compliance with the EU’s export and import prohibitions and restrictions, to protect health and safety and the environment. Similarly, companies that are currently transmitting personal data to the UK will be subject to specific conditions set out in EU law as this will become a transfer of personal data to a third country.
Citizens holding a professional qualification obtained in the UK should consider whether it is advisable to obtain the recognition of a professional qualification in the EU27 while the UK is still a Member State.
While Brexit would only take effect after March 29, 2019, a withdrawal agreement is required by mid-November the latest to allow sufficient time for a ‘fast-track’ ratification process to take place in the EU.
As the clock continues ticking on the EU and UK to close a deal, business operators and professionals with interests in the UK market are invited to be informed and prepare for any eventuality that the departure of the UK will unavoidably bring, to avoid any disruption that could potentially come into effect as soon as six months from now.
Simon De Cesare is president of the Malta Business Bureau. The MBB is the EU-advisory and support office of the Malta Chamber of Commerce, Enterprise and Industry and the Malta Hotels and Restaurants Association.