UK-EU Evolving Relationship Bulletin

Although the UK-EU trade agreement has been concluded, it has become clear that there are still many issues to resolve and many areas left for the UK and EU to discuss further. At Instinctif Partners we will continue to track the evolving UK-EU relationship and monitor major changes in regulations the UK may adopt post-Brexit on a fortnightly basis. We will also include in the bulletin other post-Brexit trade deals to keep you informed of the most important political and regulatory developments between the UK and the rest of the world going forward.

If you have any questions or requests, please contact jason.esi@instinctif.com

The UK and EU have agreed to look for “workable solutions” to make the Northern Ireland protocol work better

• The statement came after the Chairs of the joint UK-EU Committees on the Withdrawal Agreement, Cabinet Office Minister Michael Gove and EU Commission Vice-President Maros Sefcovic, met with businesses in Northern Ireland to hear their concerns.
  • Businesses in Northern Ireland largely echoed the demands made by the UK Government to the EU, asking that barriers preventing parcels, pets, potatoes and plants getting to the region from mainland Britain be eased.
  • Business leaders also asked for an extension to the April grace period for supermarket and parcel deliveries from mainland Britain without customs declarations; an extension to the second grace period for chilled meats (including sausages) entering NI without health checks, which expires in July; and for the EU and the UK to reconsider the issue entirely.
  • Other measures called for include greater certainty through long-term solutions and the simplification of border checks and mitigation to prevent costs for business and consumers in NI rising, which they say would be discriminatory in the single UK market.
  • Following the meeting, business leaders took an optimistic tone, and said that the EU had a legitimate reason to remove or ease the barriers because they were having an impact on daily lives, in breach of a pledge in the Northern Ireland protocol.

• Previously, when Michael Gove had made similar demands to the EU, Sefcovic responded with a letter saying any flexibility the EU was prepared to offer is dependent on the UK complying completely with the protocol.
  • Sefcovic said that “official controls at the border control posts are currently not performed in compliance with the withdrawal agreement protocol and the European Union rules” and that there are were very few identity checks as border control posts at Belfast and Larne ports were “not yet fully operational”.
  • He said that EU representatives were still being denied real time access to the UK’s IT systems, such as the import clearance system  and as a result they are not “receiving the information as to how mutually agreed flexibilities including, e.g. the trusted trader scheme, or simplified health certificates are being used in practice.”
  • Sefcovic has also previously said that if the UK wanted to agree a common travel area for pets moving between mainland Britain and the island of Ireland, and for the lifting of the ban on seed potatoes “and other plants and plant products”, then “any flexibility would entail the UK committing to align with the relevant EU rules”.
  • However he has said the EU is working on a solution to a recent anomaly which would see steel imports into NI from both mainland Britain and the rest of the world hit by tariffs.

• Sefcovic also said the EU is looking to establish a new ‘clearing house’ committee to work out solutions to issues caused by new trade barriers, including controls on supermarket and chilled meat supplies.
  • He stressed, however, that flexibility would only be possible once the UK provided “real time” access to the customs data.
  • The new clearing house system would be set up to assess any political solutions and act as an early warning system to alert both the UK and the EU to problems arising locally.
  • Talks on ways to make the Northern Ireland Protocol work will continue next week.

The EU is posed to allow data to continue to flow freely to the UK

• The decision came after the EU concluded that the UK had ensured an adequate level of protection for personal information.

• • The move will allow businesses to transfer information, something that is essential for the health, insurance and technology sectors that regularly transfer customer personal information, such as bank details.
  • The move will also help with aspects of EU-UK law enforcement co-operation by allowing for data transfers on police matters such as search warrants and the interception of communications for preventing or detecting serious crimes. However, the UK has lost access to the giant SIS II police database and opted out of the European Arrest Warrant network.
  • UK law already allows data transfer to the EU, but a full adoption of the EU’s decision must take place before June 30^th (when the interim regime agreed after Brexit expires) to ensure continuity of data flows between the two.
  • The decision to grant data adequacy to the UK will face scrutiny by the European Data Protection Board before it can be implemented, but the body does not have the power to block the move.
  • According to the draft decision, the arrangement will be re-examined every four years to check that UK rules do not compromise the privacy of EU citizens.
  • However the decision is open to legal challenges at the European Court of Justice, such as the one that led to parts of the EU-US “Privacy Shield” data transfer arrangements being struck down last year, which has left European companies in limbo over information transfers to the USA.

The UK and India have agreed an enhanced trade partnership

• The The revamped partnership will formally be launched during the visit of the UK Prime Minister to India, planned for later this year.
  • UK and Indian Ministers have committed themselves to making concrete progress on the trade and investment front to deliver quick gains for both countries, including joint timelines for further advances.
  • Both sides are hoping that the agreement will act as a step towards a potential comprehensive trade agreement.
  • The UK-India trade relationship was worth £23 billion in 2019, and supports key industries such as technology and life sciences and around half a million jobs in each other’s economies. In 2019/20, the UK was the largest European market for India’s goods exports.
  • The UK also secured investment that will see the Mumbai-headquartered giant Tata create 1,500 new high-skilled British technology sector jobs.
  • In addition Wockhardt, an Indian pharmaceutical and biotechnology company, confirmed further investment in Wrexham, Wales, which will lead to 40 new jobs.
  • The agreement will also fund an extension of the firm’s Covid-19 vaccination contract, underscoring the UK’s fill and finish capacity for vaccines in 2022.

Other post-Brexit news

• Th Former UK chief Brexit negotiator, Lord Frost, has been appointed to a full Cabinet role and has been made Joint Chair of the UK-EU Partnership Council overseeing the overall EU-UK trade relationship. Lord Frost will also replace Michael Gove as joint chair of the Joint UK-EU Committee of the Northern Ireland Protocol from March. However Gove will keep the title of Chancellor of the Duchy of Lancaster,  and will be Lord Frost’s new boss at the Cabinet Office.
• George Eustice, the Environment Secretary, has written to the EU calling for an “urgent resolution” to unexpected barriers being placed on some shellfish exports. It comes after the EU warned fishermen that some types of live shellfish caught in parts of the UK’s fishing waters could not be exported to the EU – a move the UK says does not tally with previous assurances it had received.
• Ireland and the European Commission are exploring ways to create an internal EU alert mechanism to protect the Northern Ireland protocol and avert a repeat of the EU triggering Article 16 without prior warning to Ireland or the UK.  According to reports EU legislation is to be checked early for any implications for the movement of goods between mainland Britain and Northern Ireland, with any concerns channelled to Mairead McGuinness, Ireland’s EU commissioner.

• The Governor of the Bank of England, Andrew Bailey accused the EU of trying to force the UK’s financial service sector to be a rule-taker through equivalence. The EU is yet to allow access to its market for most of the UK’s financial service sector insiting it wants a clearer indication of what the UK’s regulation will be going forward.  It comes as Amsterdam has, for the first time, overtaken London as the share trading capital of Europe.
• Culture Minister Caroline Dinenage has said the UK hopes to open negotiations with individual EU countries “very shortly” to help British artists to tour. Brexit has meant musicians, actors and their crews will face extra red tape and fees for visas to tour in some European countries. Different EU countries have different arrangements for working musicians and other artists. Spain, for example, requires extra visas, while France does not.
• Michel Barnier, the EU’s former Brexit negotiator who is a special adviser to the European Commission on relations with the UK, has warned the City of London that the EU will step up surveillance on City of London firms using so-called “letter-box structures” to bypass post-Brexit rules limiting the access of UK financial services to Europe’s single market.
• Small and medium-sized companies struggling to negotiate Brexit red tape are to be offered vouchers worth up to £2,000 to help them cope. The £20 million SME Brexit Support Fund is intended to help businesses adjust to new customs, VAT and tariff rules when trading with the European Union. The Government said the support fund is aimed at small companies that trade only with the EU and are therefore “new to importing and exporting processes” outside the single market.
• Ministers are moving to scrap strict EU limits on state aid to allow the Government to provide more support to businesses crippled by the costs of the extended coronavirus lockdown.
  • Under proposals being drawn up by the Department for Business, caps would be eased on money that can be paid in grants to companies that have been forced to shut. The caps were put in place last year by the EU.
  • According to reports ministers were now looking to raise the £3.5 million limit on the amount of support a single business can currently receive.
  • There had been concerns that any rise could breach the principles of the trade deal struck with the EU in December, which set broad state aid standards by which the UK agreed to abide.
  • However at the end of last month the EU itself raised the maximum amount a single business could receive in support to €10 million — meaning any UK move would not be giving unfair support to UK businesses under the terms of the deal.

• Ian Duncan Smith MP has been appointed Chair of the Government’s Innovation, Growth and Regulatory Reform Task Force.
  • Duncan Smith has said he is not leading a “slash-and-burn exercise” on regulation, but would instead be proposing “fast and sensible” regulatory reforms, drawing on English common law principles.
  • George Freeman, a former science minister who is also working on the regulatory task force, said “to unlock serious growth in new sectors of the economy we need to replace the EU ‘precautionary principle’ with a pro-innovation framework for regulation.”
  • He cited using new technology to regulate products such as e-scooters and drones and allow farmers to plant a blight-resistant potato banned by the EU.
• Business Secretary Kwasi Kwarteng has announced that he is no longer looking at amending the EU’s Working Time Directive which may have involved scraping the 48 hour week.
• The European Union will ask the UK if it can take an extra two months to ratify the Brexit trade agreement by extending provisional application of the deal until the end of April.  The EU said the extension was required to ensure the agreement was available in all 24 EU languages for its scrutiny by the European Parliament. The extension would have to be agreed by the UK in the EU-UK Partnership Council, but it was not clear when that body would next meet. Without an extension, the European Parliament plans to hold a special session at the end of February to vote on the agreement