Brussels issues warning to Boris Johnson over UK plans to diverge (FT)

  • Brussels has warned the UK it will never grant an extensive trade deal if Britain insists on diverging from EU standards, as Boris Johnson firmly rejected the bloc’s stance in a clash that will define the coming months of future relationship negotiations.
  • Almost three days after the UK formally left the EU on Friday last week, both sides are anxious to lay out their initial positions on the mammoth trade talks ahead with the clock ticking down to the end of the Brexit transition period on 31 December.
  • Michel Barnier, the EU’s chief Brexit negotiator, said that Britain had to decide if it wanted to “continue to adhere to [the] EU social and regulatory model in future” or “seek to diverge”.
  • Brussels’ draft mandate for the future relationship talks, published on Monday, calls on the UK to continue to “ensure the application” of EU state-aid rules in the UK. Britain would also be required to stay in line with EU environmental and labour market rules as they stand at the end of Britain’s post-Brexit transition period.
  • Brussels also insists that the European Court of Justice must have a role in settling any disputes that arise in the future relationship over how to interpret EU law. Mr Johnson signed up to this in a political declaration he agreed as part of the UK’s withdrawal treaty with EU leaders last year, but on Monday he rejected any role for the ECJ. 
  • Mr Barnier said that the ECJ role was essential to future EU-UK security co-operation, notably when it came to sharing sensitive personal data.
  • Senior EU figures such as European Commission president Ursula von der Leyen have already said that it will be impossible to have the entire future relationship settled by the end of this year, and that a second phase of talks will be needed in 2021.

Post-Brexit UK trade deal may skip national parliaments’ approval, EU plans say (MLex)

  • An EU-UK trade deal could skip lengthy national approval procedures to make sure goods and services continue to move freely between the two economies, according to plans sketched out by EU officials today. 
  • For this to work, parties must conclude talks by October, making the timeline for an already-ambitious work program even tighter.
  • The European Commission and the UK government today have separately outlined their expectations from a bilateral trade deal (see here and here). While the UK left the EU last Friday, it remains under EU law until 31 December. Both sides want to strike a deal on their relationship, such as on how businesses can continue to trade during this “transition period,” to avoid any regulatory cliff-edge.
  • To buy more time, the commission is suggesting that the Brexit deal skip any national parliamentary approval from the EU side, because it says the accord will deal mostly with EU-only matters, not national matters. Gaining the parliamentary approval of all 27 member states can slow down the approval of a deal, or even potentially bring it grinding to a halt. The objection from a single parliament can hold up the ratification for the whole of the bloc.
  • The commission’s proposed mandate will now be sent to EU governments for approval, with the hope that capitals will adopt the text at a meeting on 25 February. Negotiations are set to start in March.

UK finance industry should get ‘predictable, business-friendly’ Brexit deal, Johnson says (MLex)

  • UK financial services companies should enjoy a “predictable, transparent” environment post-Brexit, Boris Johnson said today as he set out plans for a UK-EU trade deal, warning Brussels at the same time not to play politics with equivalence decisions.
  • In a written statement to UK lawmakers, the prime minister called for a UK-EU trade agreement that “should require both sides to provide a predictable, transparent, and business-friendly environment for financial services firms, ensuring financial stability and providing certainty for both business and regulatory authorities, and with obligations on market access and fair competition.”
  • Those words are likely to provide some reassurance to financial services companies, which fear that the UK is set on diverging from all EU regulations to underline its insistence that it won’t maintain alignment with Brussels.
  • The finance industry has urged the government not to diverge in its laws for the sake of it, as keeping close alignment with the bloc’s rules will enable the UK to more easily obtain an equivalence determination from Brussels. That would allow trading to continue with EU companies in a more seamless way than absent an access regime.
  • There is little indication that the EU is interested in amending its tried-and-tested equivalence regime for a post-Brexit UK. However, as the two sides negotiate their wider political demands, the financial services industry is hopeful it could achieve preferential access, if the UK government were to capitulate on fishing rights for EU member states, for example.
  • While there is little doubt from a technical perspective that the UK would achieve an equivalence status for many of its financial services laws, which have been brought over from the EU post-Brexit, the question is how far UK rules may diverge in the months and years following the end of the transition period on 31 December this year.
  • Additionally, there are a number of EU regulations and directives that were either not in force at the time of Brexit or are still being negotiated in Brussels. The bill that sought to bring those laws onto the UK statute book failed to pass through Parliament, meaning the UK may be required to enact its own version of various pieces of EU legislation in order to achieve equivalent status.
Author

Jessica's practice focuses on international trade and anti-bribery work, encompassing customs, export control and sanctions matters. Jessica's trade work includes advising international clients on fast-moving and evolving EU and UN sanctions, notably in respect of Iran and Russia, and on compliance with UK and EU export controls. Her trade experience also includes advising on tariff classification and customs valuations. Jessica's anti-bribery experience includes assisting with investigations, and advising clients on compliance with anti-bribery laws. Jessica has also taken a lead role in monitoring Brexit-related developments; analysing how they will affect the UK's trading position generally, and clients' businesses specifically. She has helped clients begin to conduct risk assessments of how Brexit will impact their businesses, and has assisted them in developing tailored Brexit strategies. Jessica also presents at various seminars, webinars, and conferences on the complexities of Brexit. Jessica advises global clients on complex issues arising from international transactions and works with clients across a number of sectors including pharmaceuticals, defence, finance, aviation, energy, and telecommunications. Jessica has also worked previously in Paris, and is fluent in French.

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