Brexit certainty at last? An overview of the new EU-UK trading relationship
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Brexit certainty at last?
An overview of the new
EU-UK trading relationship
Following months of protracted negotiations and coming four and a half years after the UK voted to leave the
EU, 24 December 2020 saw the EU and UK finally agree the shape of their future relationship. While the Trade
and Cooperation Agreement (TCA) runs over 1,200 pages, in many key areas it is essentially a framework for
the substantial agreements and arrangements still to be put in place, and a number of its provisions simply
mirror the position agreed under other recent EU trade agreements, for example with Japan. The primary focus
is on trade in goods where zero tariffs or quotas will be imposed on goods traded between the UK and the EU,
provided that they meet the applicable rules of origin.
The end of the EU-UK transition period saw the cessation of Single Market access rights and participation in
the Customs Union for the UK. The TCA represents a fundamental change in the trading relationship from
1 January 2021 with substantially reduced market access – particularly in relation to financial and other services.
This is principally as a result of the UK being treated as a third country by the EU (and vice versa). Further, while
the TCA has largely brought clarity (although not simplicity) in relation to trade in goods, uncertainty remains in a
number of key areas.
In this publication, we consider the structure of the TCA, the key provisions most relevant for our clients and the
process for ratification.
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Contents
The overarching structure of the TCA, governance of the relationship
and dispute resolution mechanism 3
The process for ratification 4
Trade in goods 5
Trade in financial services 6
Data protection and cybersecurity 8
Digital trade 10
Telecommunications Regulation 10
Civil jurisdiction and judgments 11
The level playing field 12
Sanctions and export controls 15
Intellectual property (IP) 15
Life sciences 16
Energy 16
Taxes 17
The ongoing effect of the Withdrawal Agreement 18
Next steps 18
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The overarching structure of the TCA, governance of the relationship
and dispute resolution mechanism
Overarching structure Council is co-chaired by a Member of the European
The TCA consists of seven parts which cover: Commission and a representative of the UK at
ministerial level. It will meet at least once a year, but
− Part 1: general and institutional provisions can meet more often at the request of either the EU
(including governance) or the UK. Any decision taken by the Partnership
− Part 2: trade in goods and services, and level Council is to be by mutual consent between the
playing field guarantees parties, which may lead to tensions and delay in
− Part 3: cooperation on law enforcement and relation to any future amendments to the TCA.
criminal justice
− Part 4: “thematic” issues, notably The EU and the UK will each be able to refer any
health collaboration issue to the Partnership Council which relates to the
− Part 5: participation in EU Programmes, implementation, application and interpretation of the
principally scientific collaboration TCA. The Partnership Council will be assisted by a
through Horizon Trade Partnership Committee and Specialised
− Part 6: dispute settlement, basic values and Committees (18, with powers to create more) and,
safeguard measures in some areas such as medicinal products, by
− Part 7: final provisions including a review technical working groups. The TCA also envisages
mechanism whereby the TCA will be reviewed the possible establishment of a Parliamentary
five years after implementation and every Partnership Assembly, which would consist of
five years thereafter members of the European Parliament and the
UK Parliament and provide a forum to exchange
In addition to the TCA, the future relationship views on the partnership. The need for this number
agreements comprise: of bodies reflects that the TCA only constitutes a
framework in many key areas and that it is likely to
− a series of Joint Declarations on a range of be many years before envisaged arrangements are
issues where further cooperation is foreseen, for fully in place (although there are also provisions for
example in relation to financial services termination of the whole or parts of the TCA and
regulatory cooperation and the declaration of some elements of the TCA have specified
adequacy decisions (the Declarations) end dates).
− an Agreement on Security Procedures for
Exchanging and Protecting Classified Dispute resolution mechanism
Information Disputes arising under the TCA are to be resolved
− a Nuclear Cooperation Agreement exclusively according to the dispute resolution
procedures set out in the TCA. Neither national
The texts of the agreements were published in the
courts nor the European Court of Justice (CJEU)
Official Journal on 31 December 2020, subject to
has any role in interpreting the TCA or resolving
final legal-linguistic revision. The definitive texts of
disputes thereunder. There is no investor-state
the agreements will be published in the Official
dispute settlement procedure. Only the EU and the
Journal by 30 April 2021.
UK are able to bring claims under the TCA. The
Governance of the relationship participation of natural or legal persons in the
dispute resolution process is limited to the provision
Under the institutional framework provisions of the
of amicus curiae submissions.
TCA, the EU and the UK have agreed to create a
joint body, called the Partnership Council, to Part 6 of the TCA sets out the general dispute
oversee the attainment of the TCA’s objectives and resolution procedure applicable to disputes under
facilitate its implementation. The Partnership the agreement except for specified carved-out
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sections, such as Part 3 on law enforcement and be done immediately, or within a reasonable time if
judicial cooperation in criminal matters. Disputes that is not possible.
relating to carved-out sections of the TCA are to be
resolved by the Partnership Council referenced In the event of non-compliance with an arbitral
above. There are also areas of the TCA to which ruling, and subject to certain pre-conditions, the
the general dispute resolution mechanism applies aggrieved party may request temporary
but with modifications. For example, certain aspects compensation from the defaulting party. If the
of the provisions on competition and sustainable amount of the temporary compensation cannot be
development have a modified dispute agreed between the EU and the UK, or the
resolution procedure. aggrieved party decides not to request
compensation, the aggrieved party may instead
Before invoking the general dispute resolution temporarily suspend its performance of certain
procedure, unless they agree otherwise, the EU and obligations towards the defaulting party (subject to a
the UK are required to engage in consultations in an number of conditions).
effort to reach an agreed solution. If consultations
fail, arbitration can be commenced. The TCA The suspension of obligations or the payment of
envisages the swift resolution of arbitrations, compensation shall not be applied after: (a) the
requiring a final ruling from the arbitral tribunal EU and the UK agree that measures taken by
within a maximum of 160 days from the arbitral the defaulting party bring it into compliance with
tribunal’s constitution (although this deadline can be the TCA; (b) the measure taken that was found to
extended by agreement between the parties). be a breach of the TCA has been withdrawn or
amended; or (c) the EU and the UK have reached a
If the arbitral tribunal finds a breach of the TCA, the mutually agreed solution.
party responsible for the breach must take the
necessary measures to comply with the ruling and Back to contents
bring itself into compliance with the TCA. This must
The process for ratification
The European Commission deemed the TCA an Parliament and conclusion by the Council of the EU
EU-only agreement (ie that all aspects of the by 28 February 2021.
agreement are within EU competence), under
Article 217 of the Treaty on the Functioning of the In relation to ratification by the UK, the European
European Union. This means that ratification by the Union (Future Relationship) Bill, which implements
European Parliament will be sufficient and that the TCA, was introduced to Parliament on
individual ratification by each Member State will not 30 December 2020 and passed all stages in the
be required. House of Commons. The Bill also passed the final
stages in the House of Lords and, in the early hours
Given the TCA was agreed only days before the of 31 December 2020, the European Union
transition period was due to end, there was (Future Relationship) Act 2020 received Royal
insufficient time for the European Parliament to Assent. Following its approval by the House of
ratify the agreement. As a result, the TCA was Commons, the TCA was signed by the UK.
signed by the EU on 30 December 2020 on the
basis that it applies provisionally from 1 January Back to contents
2021 pending the consent of the European
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Trade in goods
As set out in the introduction above, until the end of preferential trade agreements with Japan,
the transitional period, the UK was part of Japanese components will be considered to
the EU’s Single Market and Customs Union. The be non-originating material for the purposes
freedom of movement for goods as between the of applying the TCA’s specific rules of origin.
UK and the EU provided under those arrangements − Helpfully, companies will be able to
has now been replaced by the terms of the TCA. “self-certify” the origin of goods and, until
31 December 2021, supplier declarations
The key points in relation to the trade in goods will not be required by the UK Government,
under the TCA are as follows: though businesses may be required to
retrospectively provide a supplier’s
− Tariffs and quotas: zero tariffs or quotas will be
declaration after that date. Together, these
imposed on goods traded between the UK and
measures should relieve some of the
the EU, provided that they meet the applicable
administrative burden associated with
rules of origin.
complying with the rules of origin under
− Rules of origin: the rules of origin are complex
the agreement.
and, in some respects, differ from those
provided for in similar agreements such as the − Customs formalities: the agreement provides
EU-Canada Comprehensive Economic and for customs cooperation mechanisms and, in
Trade Agreement (CETA). In broad terms: particular, allows for the mutual recognition of
the parties’ respective Authorised Economic
− Goods originate from a party if they are:
Operator (AEO) schemes. This will enable
(a) wholly obtained in that party;
trusted traders to enjoy a more simplified
(b) exclusively made from originating
approach to their customs operations. However,
materials in that party; or (c) produced in a
as of 1 January 2021, in general terms, customs
party and incorporate non-originating
formalities will apply to trade between the
materials satisfying specific rules of origin.
EU and the UK.
Specific rules of origin are provided for in
− Sanitary and phytosanitary (SPS)
the case of many products and a number of
requirements: UK agri-exporters will be
novel requirements are introduced. For
required to meet all EU SPS import
example, in relation to electrified vehicles
requirements and vice versa. However, the UK
and batteries, there are more lenient
was granted “national listed status” separately
transitional rules that apply until the end
from the conclusion of the TCA, which means
of 2026.
that UK exports to the EU of live animals and
− Production carried out in a party on
products of animal origin can continue, albeit
non-originating material may be taken into
with greater customs formalities needing to be
account for the purpose of determining
satisfied. The EU has also lifted a number of
whether a product is originating in the other
plant health prohibitions and granted
party (subject to the rules that apply in
equivalence for certain products (such as some
relation to insufficient production). However,
seeds and propagating material), so exports of
importantly, while bilateral cumulation is
relevant products from the UK to the EU
allowed under the agreement, the EU has
can continue.
successfully resisted the inclusion of
− Technical barriers to trade and product
diagonal cumulation. This may cause some
conformity assessments: from 1 January
products assembled in the UK or the EU to
2021 all products exported from the EU to the
fall outside of the TCA’s preferential tariff
UK will need to meet the UK’s technical product
treatment. For example, even though the
regulations (and vice versa). However, to
EU and the UK have both concluded
prevent and reduce unnecessary technical
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barriers and requirements, the TCA includes a − Trade remedies: as is provided for in the World
number of provisions related to technical Trade Organization’s (WTO) rules, the
barriers to trade. In particular, the parties have agreement allows for the parties to impose trade
agreed to a definition of international standards remedies against one another where, for
which identifies the relevant international example, there are unfair practices such as
standard-setting bodies. This should maximise dumping or prohibited subsidies.
the extent to which the parties’ domestic product
standards and technical regulations are The provisions in the TCA discussed above do not
compatible. Furthermore, in relation to product apply to the trade in goods between the EU and
conformity assessments, the parties have Northern Ireland, where the Protocol on Ireland and
agreed to maintain self-certification of Northern Ireland included in the Withdrawal
conformity by the manufacturer where this was Agreement will apply. Likewise, goods entering
applied in both the EU and the UK on the date Northern Ireland from Great Britain will constitute
that the TCA came into force. Finally, imports from 1 January 2021. The treatment of
sector-specific provisions are included to Northern Ireland under the TCA is further
promote cooperation and reduce barriers to discussed below.
trade in the automotive, chemicals,
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pharmaceutical, organic products and
wine sectors.
Trade in financial services
For financial services, the TCA is the thinnest of and market access are incorporated in the section
deals. As expected, it makes no attempt to covering general services provisions as opposed to
reproduce the freedoms of movement, and the specific section on financial services.
establishment and provision of services, that UK
businesses benefited from when the UK was a Such commitments as are provided are subject to
member of the EU. With the end of the passporting the so-called “prudential carve-out”. This is a
regime, UK market participants will now be treated reservation of each party’s right to adopt or maintain
in the same manner as other third country measures for prudential reasons, including in order
participants, with access rights being limited to protect the interests of consumers of financial
accordingly. While the TCA sets out provisions that services and to preserve financial stability and the
are similar to those seen in other recent EU free integrity of financial markets. This overrides all other
trade agreements, the terms covering financial provisions of the TCA, albeit that the TCA provides
services are comparably slimmer, and marginally that such measures under the prudential carve-out
less favourable, than those set out in the CETA should not be used as a means of avoiding
which the UK Government had suggested, at commitments under the TCA. In practice the
certain intervals during the negotiation process, it prudential carve-out largely guts the TCA’s
was seeking to achieve. commitments relating to market access as they
apply to financial services. Subject to the prudential
While the European Commission states that the carve-out, the TCA commits each party to maintain
TCA provides for a significant level of openness for its markets open for financial services operators
trade in services and investment, going beyond the from the other party seeking to supply services
baseline provisions of the WTO’s General either through a commercial establishment or on a
Agreement on Trade in Services (GATS), the TCA cross-border basis. In relation to subsidiaries, the
only has a small number of provisions governing TCA confirms existing third country access to, and
financial services regulation. This is due in part to treatment in, both jurisdictions with respect to legal
the fact that the provisions on non-discrimination form and equal treatment with domestic and other
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foreign firms. As regards branches of third country Regulatory cooperation on
firms, the ability to regulate on a national basis is financial services
reserved. Two key general exceptions apply to
Unlike other recent EU trade agreements, there are
financial services – namely, that such services are
no detailed provisions regarding regulatory
exempted from the general Most Favoured Nation
cooperation set out within the TCA (beyond the
provision and that subsidiaries are exempt from the
provision on international standards). Instead, the
right of the relevant state to impose a specific
non-binding Declarations confirm that the EU and
legal form.
the UK have agreed to “establish structured
For cross-border trade in financial services, the TCA regulatory cooperation, with the aim of establishing
ensures that national treatment provisions apply a durable and stable relationship between
and that the ability to provide those services cannot autonomous jurisdictions”. Such cooperation will be
be made conditional upon commercial based on a shared commitment to preserve
establishment (again, subject to the prudential financial stability, market integrity, and the
carve-out). Although it should be noted that, similar protection of investors and consumers. The
to CETA, the EU and UK both have a right to adopt arrangements will allow for:
measures to limit cross-border trade except in
− bilateral exchanges of views and analysis on
limited circumstances, for example reinsurance.
regulatory initiatives and other issues of interest
The financial services section confirms that the − transparency and appropriate dialogue in the
EU and UK commit to ensuring that internationally process of adoption, suspension and withdrawal
agreed standards (for example prudential, AML and of equivalence decisions
tax-avoidance measures) in the financial services − enhanced cooperation and coordination
sector are implemented and applied in their including in international bodies as appropriate
territories. In addition to confirming that any new
The EU and the UK intend to agree a memorandum
service that could be supplied under existing
of understanding by March 2021 to establish the
regulation is covered by the agreement (and
framework for this cooperation.
therefore subject to the same local licensing regime
as local firms), the TCA guarantees access for EU Equivalence decisions
and UK firms (as applicable) to any self-regulatory
The TCA does not include any provisions regarding
bodies required for the conduct of their business
the equivalence frameworks for financial services
and to public clearing and payments systems.
on the basis that these are unilateral decisions of
The position regarding the transfer of data is each party and are not subject to negotiation. The
discussed further below but the financial services Declarations include a statement that, as part of the
section states that confidential information relating proposed regulatory cooperation framework, the
to consumers (but not clients or counterparties that “Parties will discuss, among other things, how to
are not consumers) and their affairs and accounts move forward on both sides with equivalence
which is in the possession of public entities cannot determinations between the EU and the UK, without
be disclosed between EU and UK authorities. That prejudice to the unilateral and autonomous
is unless required under the provisions on law decision-making process of each side.”
enforcement and judicial cooperation in criminal
When the TCA was agreed, the European
matters. Facilitations for short-term business trips,
Commission confirmed that it had assessed the
temporary secondments and intra-group transfer of
UK’s replies to the Commission’s equivalence
highly skilled employees are envisaged by the TCA,
questionnaires in 28 areas. The Commission states
and these provisions extend to financial services.
that a series of further clarifications will be needed,
in particular regarding how the UK will diverge from
EU frameworks after 31 December 2020, how it will
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use its supervisory discretion regarding EU firms In this table, we summarise existing third country
and how the UK’s temporary regimes will affect EU provisions within EU financial services legislation
firms. For these reasons, the Commission stated and outline whether the European Commission has
that it cannot finalise its assessment of the UK’s taken an equivalence decision for each provision in
equivalence in the 28 areas and therefore will not relation to both the UK and other third countries. We
take decisions “at this point in time”. The also highlight whether relief is available under the
assessments are therefore expected to continue. UK regulators’ temporary transitional powers or
The Commission has confirmed that it has taken because of a UK equivalence decision.
note of the UK’s equivalence decisions announced
in November 2020 (and notes that these were Back to contents
adopted in the UK’s interest) and concludes by
stating that the “EU will consider equivalence
[decisions] when they are in the EU’s interest”.
Data protection and cybersecurity
The EU Commission’s consideration of the UK’s Commission, an opinion from the European Data
adequacy in the context of the protection of Protection Board (and EU Member State approval)
personal data and cross-border transfers was never and is therefore not a quick procedure.
due to be part of the TCA. However, the agreement
and ancillary documents do include provisions that In the interim, the TCA provides for a bridging
address some aspects of personal data protection, mechanism that enables personal data to continue
at least in the short term. to flow cross-border from the EEA to the UK,
without the need for appropriate safeguards, until
International data transfers the earlier of adopted adequacy decisions and an
Under UK data protection law, although each EEA initial period of up to four months from 1 January
state is now considered to be a “third country”, 2021, automatically extendable to 1 July 2021. This
personal data may continue to be transferred from grace period is intended to provide sufficient time to
the UK to those EEA states without need for further allow for the completion of the adequacy
appropriate safeguards on the basis of their assessment process and should avoid significant
inclusion in adequacy regulations under the business disruption that would arise from
UK Data Protection Act 2018 (Schedule 21). The restrictions on personal data transfers.
approach to transfers of personal data from the EEA
It is worth noting that the arrangement will only
to the UK remains more complex but perhaps,
continue to apply to the extent the UK does not
reassuringly, a Joint Declaration of the EU and the
change its data protection laws (away from those in
UK specifically notes the European Commission’s
place on 1 January 2021), nor exercise certain
intention to launch the procedure for adoption of
“designated powers” regarding data transfers during
adequacy decisions for the UK (under both the
this period without Partnership Council approval
GDPR and Law Enforcement Directive) as well as
(including, for example, granting adequacy
its intention to work closely with others involved in
decisions to new third countries, issuing UK
the process.
standard contractual clauses, approving certain new
The adoption of adequacy decisions would allow certification mechanisms and draft codes of
personal data to continue to flow conduct, approving new binding corporate rules,
cross-border from the EEA to the UK, without the authorising new contractual clauses and
need for appropriate safeguards. However, the administrative arrangements).
process first requires a proposal from the European
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Therefore, despite the UK now being subject to a protection policy objectives, they also confirm that
separate (if near identical) data protection regime they will ensure a high level of data protection and
(replacing the GDPR with the UK GDPR, shall endeavour to work together to promote high
supplemented by the amended Data Protection Act international standards, cooperating, among other
2018, and accounting for Article 71 of the things, on enforcement of personal data protection.
Withdrawal Agreement regarding “stock” personal It remains to be seen how this cooperation will work
data), it will not be able to exercise all of its powers in practice.
fully without consequence for a number of months
or until adequacy has been obtained. However, Law enforcement cooperation
given the relatively short-term nature of the Finally, the TCA addresses personal data in the
restrictions, the inclusion of exceptions to enable context of law enforcement and criminal record
the UK to make changes to ensure alignment with exchange, with provisions regarding the sharing of
EU rules (perhaps useful to enable adoption of passenger name record data, vehicle registration
equivalent new standard contractual clauses or to details, DNA, fingerprint data and sharing of
re-approve existing binding corporate rules) and the personal data with EUROPOL and EUROJUST.
clear advantages to business, this is perhaps a The EU and the UK are committed to ensuring that
small price to pay. personal data is processed in compliance with data
protection regimes and specific account is made,
Sounding a note of caution, although these amongst other things, for the potential onward
provisions may imply an EU desire to grant transfers to third countries, requiring consent of the
adequacy, a decision is not certain and so the UK authority that provided the information and
ICO prudently calls for organisations to consider appropriate safeguards regarding the protection of
and implement other appropriate safeguards to personal data. More significantly, it is possible for
enable EEA to UK data transfers in preparation for a the EU or the UK to suspend law enforcement
July 2021 cut-off. cooperation where it considers that there are
serious or systemic deficiencies in the way the other
Data localisation
is protecting personal data and those deficiencies
More generally, the TCA preamble calls out the have led to a relevant adequacy decision ceasing to
need to balance facilitating opportunities for apply.
business and consumers through digital trade and
the protection of personal data. This is further Cybersecurity
reflected in the agreement as a way of not With regard to cybersecurity, the TCA makes
restricting cross-border data flows, for example provision for cooperation between the EU and the
through data localisation requirements or use of UK with a view to exchanging information, sharing
particular approved/certified or sited computing best practice and taking cooperative action to
facilities (to be reviewed within three years, with promote and protect cyberspace. This cooperation
scope for earlier amendment). That said, the TCA is envisaged to occur through international bodies
does acknowledge that nothing shall prevent the EU and forums as well as between the CERT-EU and
or the UK from adopting or maintaining measures to UK computer emergency response teams; the EU
protect personal data (including regarding Cooperation Group and UK national authorities (on
cross-border transfers) so long as there are invitation and voluntarily); and ENISA and the UK
instruments enabling transfers where conditions to (on invitation and voluntarily, with financial
transfer apply generally. contribution).
Future cooperation and development of Back to contents
standards
In any event, while the EU and the UK reaffirm the
right to regulate to achieve privacy and data
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Digital trade
The TCA aims to facilitate digital trade between the communications (so-called “spam”) and open
UK and the EU. Most significantly, the agreement government data. The UK Government has stated
provides that the parties shall not impose customs its belief that the agreement “will promote trade in
duties on electronic transmissions and, subject to digital services and facilitate new forms of trade in
certain exceptions, must ensure that contracts can goods and services”.
be concluded by electronic means. Provisions are
also included in the agreement covering online Back to contents
consumer trust, unsolicited direct marketing
Telecommunications Regulation
Authorisation, use, access and the EECC for number-independent services (eg
interconnection OTT messaging).
There was little change to the UK International mobile roaming
telecommunications regulatory framework after the
The TCA requires EU-UK cooperation to promote
end of the Transition Period. The TCA’s
transparent and reasonable roaming rates (to
requirements in respect of authorisation, use,
benefit trade and enhance consumer welfare) and
access, allocation of spectrum and numbering,
to encourage suppliers of public
number portability and interconnection of networks
telecommunications services to make information
and services, as well as the TCA’s measures to
on international roaming rates publicly available.
protect competition, have been largely
The establishment of the “Roam like at Home”
grandfathered in from the previous EU electronic
international mobile roaming regime was intensely
communications framework, and the new European
political and following the end of the Transition
Electronic Communications Code, that UK
Period, the legal basis to require UK mobile
government had already announced that it would
operators to allow their customers to roam in the
implement at the end of 2020.
EEA without roaming surcharges, and vice-versa,
The TCA ensures the continued rights and has ended. It has been replaced with transparency
obligations of suppliers of telecommunication and consumer protection requirements, which (in
networks and services to negotiate the the UK at least) have already been in place since
interconnection of those networks and services, the anti-bill-shock regulations made in 2019. It will
including in relation to the confidentiality of be interesting to see whether operators in the UK
information revealed at such negotiations. However, and EEA begin to increase charges for cross-border
the TCA diverges from the previous regime in roaming, which would likely start with a change in
obliging the UK and the EU to require major the underlying wholesale roaming rates.
suppliers of telecommunications networks or
services to provide interconnection at any
Investment restrictions
technically feasible point in the network in a The TCA also limits the ability of the UK to impose
non-discriminatory and timely manner upon request. joint venture requirements or certain foreign capital
This approach, which derives from the WTO Basic restrictions on investments from the EU, or vice-
Telecommunications Agreement and can be found versa, with regards to the provision of
in many other free trade agreements, is telecommunications networks or services. This
considerably broader than the provisions of the clearly is expressed in different terms from the
EECC, which the UK is implementing. The UK had Maastricht Treaty’s requirement for free movement
in any case previously announced that it did not of capital, and does not have the history of
intend to implement interconnection requirements of interpretation of the free movement of capital. It will
10 allenovery.combe interesting to see whether governments on either users to use devices of their choice (subject to
side seek to introduce restrictions which will be security requirements).
challenged under this aspect of the TCA.
UK law retained net neutrality requirements in the
Net neutrality Open Internet Access (Amendment) (EU Exit)
Following the end of the Transition Period, the Open Regulations 2018. Whilst these remain generally
Internet Regulation (EU) 2015/2120 is no longer aligned with EU law, Ofcom is no longer required to
directly applicable in the UK. However, under the take utmost account of BEREC recommendations in
TCA both the EU and UK must continue to require this context, UK courts’ interpretation of these
that suppliers of internet access services manage retained requirements may diverge from the position
network access in a non-discriminatory, reasonable, as interpreted in the EU.
transparent and proportionate way and enable
Back to contents
Civil jurisdiction and judgments
The TCA does not provide for continued Commission has seen the issue as bound up with
cooperation between the UK and the EU on civil the wider negotiations on the future relationship.
jurisdiction and judgments. This is unsurprising. The Now that an agreement has been reached, we
UK Government has made it clear that, rather than anticipate that the EU will confirm its position shortly
seeking to agree bespoke arrangements on civil and in any event by April 2021, as the Contracting
justice as part of the TCA, it would instead seek to States are required to endeavour to give their
re-accede to the Lugano Convention 2007 as an “off consent at the latest within one year after they were
the shelf” solution for continued civil judicial notified of an application to re-accede.
cooperation following the end of the transition
period. The Lugano Convention provides for the It is unclear at this stage what position the EU will
allocation of jurisdiction and the enforcement of take on the UK’s re-accession. The likelihood of
judgments in civil and commercial matters as consent is certainly greater than it would have been
between Contracting States and is broadly similar to had no agreement been reached on the future
the Recast Brussels Regulation (the primary relationship, but the fact that the TCA has been
jurisdictional regime applied between the UK and agreed does not make consent inevitable, not least
EU Member States prior to the end of the transition because the UK-EU relationship is no longer based
period). However, the Lugano Convention applies on the UK’s participation in the Single Market.
more broadly than the Recast Brussels Regulation,
If the EU does consent to the UK’s re-accession to
covering Switzerland, Iceland and Norway as well
the Lugano Convention, the Convention will come
as all EU Member States.
into force on the first day of the third month
The UK was a Lugano Convention Contracting following the deposit of the instrument of accession.
State until the end of the transition period. In April In that scenario, the position on civil justice as
2020, in anticipation of its participation coming to an between the UK, the EU and Switzerland, Iceland
end on 31 December 2020, it deposited an and Norway will be almost exactly as it was when
application to re-accede to the Lugano Convention. the UK was an EU Member State. In particular,
The UK’s re-accession requires the consent of all English jurisdiction clauses will be respected and
current Contracting States. Switzerland, Iceland and English judgments enforced in all Lugano
Norway have all indicated their willingness to Convention Contracting States on essentially the
consent, but the EU has not yet clarified its position. same basis as before the transition period came to
It has been suggested that the EU has delayed an end. Any concerns that commercial parties may
making a decision because the European have had in this area should therefore fall away.
allenovery.com 11Until that point, we are effectively in a “no deal” Member State courts will be a question of national
scenario on civil jurisdiction and judgments. law in the relevant State. In many Member States,
Currently, therefore, the only applicable multi-lateral English jurisdiction clauses and judgments falling
regime on jurisdiction and judgments between the outside the scope of the Hague Convention will
UK and the EU is the Hague Convention on Choice continue to be respected and enforced as a matter
of Court Agreements 2005. The UK had been party of national law, although the process of
to the Hague Convention since 1 October 2015 in enforcement may be more time consuming and
its capacity as an EU Member State, meaning its costly. However, this is not the case in all
participation in that capacity came to an end at the Member States.
end of the transition period. However, the UK
Government was proactive in re-acceding in its new Parties considering including asymmetric or
capacity as an independent Contracting State, and non-exclusive English jurisdiction clauses in their
the Hague Convention therefore came into force in transaction documents must therefore consider on a
the UK in that new capacity immediately following case-by-case basis whether a judgment pursuant to
the end of the transition period. The Hague such a clause will be enforceable in the Member
Convention requires Contracting State courts to States in which their counterparty is based or holds
respect exclusive jurisdiction clauses in favour of assets. In light of this, pending any UK accession to
other Contracting State courts and enforce related the Lugano Convention, we may see a shift by
judgments, but it is more limited in scope than the commercial parties towards including exclusive
EU regime or the Lugano Convention, applying only English jurisdiction clauses in their contracts with a
where parties have agreed an exclusive jurisdiction view to ensuring they fall within the scope of the
clause and only where that clause was agreed after Hague Convention regime. If the UK is not
the Hague Convention came into force in the permitted to accede to the Lugano Convention,
jurisdiction chosen under the clause. Where we may see a continuation of that trend in the
exclusive English jurisdiction clauses are longer term.
concerned, it is unclear whether EU Member State
Finally, the TCA has no impact on the position on
courts will treat the relevant date for these purposes
governing law. Save where there are specific
as 1 October 2015 or 1 January 2021 (the
regulatory or political drivers for a change of
European Commission has suggested it is the latter
approach, this means there continues to be no
date, although the UK takes the opposite view).
reason to move away from English governing law
Where the Hague Convention does not apply, the clauses in commercial contracts.
question of whether English jurisdiction clauses will
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be respected and related judgments enforced in
The level playing field
The obligations related to the level playing field for − Competition law: the parties agree to maintain
open and free competition and sustainable competition law that effectively addresses
development were reportedly subject to intense anti-competitive business practices and which is
negotiation between the EU and the UK in light of enforced by an operationally independent
concerns that the UK may seek a competitive authority or authorities in a transparent and non-
advantage through subsidies and lower discriminatory manner. The anti-competitive
regulatory standards. business practices that are specifically identified
are: (a) agreements, decisions and concerted
The key components of the level playing field under practices which have as their object or effect the
the TCA are as follows: prevention, restriction or distortion of
competition; (b) abuse of dominant position; and
12 allenovery.com(c) for the UK, mergers and acquisitions, and, − Environment and climate: the TCA contains a
for the EU, concentrations, which may have non-regression clause in respect of
significant anticompetitive effects. environmental and climate change levels of
− Subsidy control: the parties have agreed to a protection, which follows the same formulation
comprehensive body of rules governing as that relating to labour and social standards.
subsidies granted to “economic actors”. The The TCA also requires each party to have in
rules are subject to a number of exceptions place an effective system of carbon pricing as at
such as subsidies in response to natural 1 January 2021, covering greenhouse gas
disasters and subsidies related to the emissions from electricity and heat generation,
audio-visual sector. In broad terms, the parties industry and aviation (although there is a
are obliged to maintain an effective system of derogation for aviation, which is able to be
subsidy control to ensure that six principles are brought within the carbon pricing system within
met. These principles include a requirement for two years). These carbon pricing systems must
subsidies to be proportionate and appropriate to respect the level of protection in place as at the
a public policy objective that cannot be achieved end of the transition period and must be
through other less-distortive means. Certain maintained so long as they are an effective tool
forms of subsidy are prohibited including in the fight against climate change. Importantly,
unlimited state guarantees and most export the TCA provides that the UK and the EU will
subsidies. The TCA provides that the parties cooperate on carbon pricing and will give
must ensure that their courts are competent to “serious consideration” to linking their respective
review subsidy-related decisions and the carbon-pricing systems (although there is no
available remedies must include recovery of a obligation to do so). Any link between the
subsidy from its beneficiary. EU Emissions Trading System and the UK
− Labour and social standards: each party has carbon pricing system would be subject to a
the right to set and modify its own policies and separate negotiated agreement.
priorities, determine levels of protection and − Taxation: the TCA commits each party to
adopt and amend laws relating to labour and implementing principles of good governance
social standards. However, a non-regression relating to tax, including global standards on tax
clause applies, such that the UK and the transparency and exchange of information and
EU cannot weaken or reduce their labour and fair tax competition. Each party is required to
social levels of protection in certain areas (as in maintain the level of protection agreed in the
place at the end of the transition period) in a OECD at the end of the transition period in
way that would affect trade or investment relation to exchange of information, interest
between themselves. This includes limitations, controlled foreign companies and
enforcement, meaning that, while a party can hybrid mismatches, and to retain their current
exercise its reasonable discretion regarding the requirements in respect of public country-by-
allocation of enforcement resources, it must not country reporting by financial institutions.
fail to effectively enforce those labour and social
laws and standards in a way that impacts trade Perhaps unsurprisingly, the Paris Agreement and
or investment. In addition to the non-regression greenhouse gas reduction targets are specifically
clause, the TCA further contains provisions dealt with by the TCA. Under these provisions, each
under which the parties commit to respecting, party reaffirms its ambition to achieve climate
promoting and implementing multilateral labour neutrality by 2050 and commits to effectively
standards and agreements (eg the fundamental implementing the United Nations Framework
ILO Conventions) and to working together on Convention on Climate Change (UNFCC) and the
trade-related aspects of labour policies Paris Agreement. The UK and the EU also agree to
and measures. promote the mutual supportiveness of trade and
climate policies and to facilitate the removal of
allenovery.com 13obstacles to trade and investment in goods and The TCA establishes specific avenues to resolve
services relevant to climate change mitigation and disputes regarding the application of the level
adaptation. Apart from the carbon and playing field provisions concerning labour and social
climate-related commitments, the environmental protections, environmental and climate change
and climate obligations in the level playing field protections and trade and sustainable development,
provisions specifically cover trade and biological as outlined above. These bespoke dispute
diversity, forests, marine biological resources resolution procedures displace the general dispute
and aquaculture. settlement system and, in its place, establish
procedures for convening a panel of experts. Under
Finally, each party commits to respecting these procedures, a panel of experts can be
internationally recognised environmental principles, requested to examine a matter and deliver a report
including the: (a) precautionary principle; (b) polluter making findings on the conformity of the measure in
pays principle; and (c) principle of preventative question with the relevant provisions. Where the
action. As part of this, the UK and the EU reaffirm final report determines that a party has not
their commitments to procedures for evaluating the conformed to its obligations under the relevant
likely environmental impact of a proposed activity, provisions, the parties will discuss the measures to
including environmental impact assessments where be implemented by the respondent party to address
appropriate. As is the case under the labour and the non-conformity. Where there is a disagreement
social standards provisions, the parties also commit on the measures taken, a party may ask the original
to implementing the multilateral environmental panel of experts to consider the matter, after which
agreements, protocols and amendments that they it will again deliver its findings. Temporary remedies
have ratified and to working together on trade- may also be available in disputes regarding
related aspects of environmental and certain provisions relating to labour, social
climate policies and measures. standards, the environment and climate, being
“non-regression areas”.
− Trade and sustainable development: the UK
and the EU commit to enhancing the role of The TCA also includes a novel unilateral
trade and investment in achieving rebalancing procedure in the event that significant
(economically, socially and environmentally) divergences emerge as between the parties in
sustainable development and recognise the role relation to labour and social standards,
of trade in promoting the responsible environmental or climate protection, or with respect
management of supply chains. In this regard, in to subsidy control. If material impacts on trade or
addition to the measures outlined above, the investment arise as a result of such significant
parties agree to promote trade in goods and divergences, either party may take “appropriate
services that contribute to better social rebalancing measures to address the situation”. An
conditions and sound environmental practices, assessment of such impacts must be based on
among other things. They also agree to “reliable evidence and not merely on conjecture or
encourage corporate social responsibility and remote possibility” and the measures must be
responsible business conduct, including through “restricted with respect to their scope and duration
putting in place associated policy frameworks to what is strictly necessary and proportionate in
and supporting the implementation of relevant order to remedy the situation”. A notification and
international instruments, such as the OECD consultation procedure in relation to rebalancing
Guidelines for Multinational Enterprises and the measures involving the Partnership Council has
UN Guiding Principles on Business and been established with disputes ultimately being
Human Rights. settled by an arbitral tribunal. Examples of where
14 allenovery.comrebalancing measures may be used could include party could adopt rebalancing measures such as
where one party significantly increases its levels of imposing tariffs.
protection related to the environment resulting in an
increased cost of production and hence a Back to contents
competitive disadvantage. In such a case, the other
Sanctions and export controls
The TCA does not substantively cover sanctions considerable further divergences will emerge
cooperation in contrast with the positions set out by between the UK and the EU’s sanctions regimes.
the EU and the UK in Article 127(2) of the For further details on the UK’s post-Brexit sanctions
Withdrawal Agreement and the UK’s regimes, see our publication here.
accompanying Political Declaration. This position
was foreshadowed in the UK Foreign Secretary’s By way of contrast, the TCA does contain provisions
letter to the EU Security and Justice Sub-Committee addressing transparency in respect of export control
of the House of Lords in November 2020 in which licensing procedures. However, the TCA is not
Mr Raab stated that the UK did not “see the need expected to impact directly on either the EU or the
for a Treaty to govern our [sanctions] cooperation”. UK’s export control regimes, since the TCA
So, as the European Commission has stated, “as of expressly states that it does not require a party to
1 January 2021, there will therefore be no grant an export licence or prevent a party from
framework in place between the UK and the EU to implementing its commitments under United Nations
develop and coordinate joint responses to foreign Security Council Resolutions and multilateral non-
policy challenges, for instance the imposition of proliferation regimes and export control
sanctions on third country nationals or economies”. arrangements. The TCA also does not prevent a
Indeed, the UK’s autonomous imposition of human party from adopting, maintaining and implementing
rights-related sanctions last July heralded its independent sanctions regimes.
emergence as an independently sanctioning State
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(see our publication here) and, no doubt,
Intellectual property (IP)
The IP section of the TCA sets out minimum counterfeits and to educate and promote public
standards for IP protection and enforcement awareness of IP policies. Notably, while the TCA
procedures that already exist in UK and EU laws. It recognises that the UK will have a separate scheme
also confirms the parties’ commitment to comply for the protection of geographical indications (GIs),
with international agreements to which they are there is a specific review clause so the parties can,
already a party (eg TRIPS). There is a general if it is in their interests, try to agree new rules for the
recognition that the UK will now have separate protection and enforcement of their domestic GIs.
systems, eg to register and protect trade marks and
designs and to suspend the release by customs of The UK had suggested during the TCA negotiations
goods suspected of infringing IP rights. The parties that there should be some reciprocal protection for
are also free to determine their own rules for the unregistered designs disclosed in the EU and the
exhaustion of IP rights. The TCA does, however, UK, but unfortunately this did not make it into the
include a general commitment to cooperate and to agreement. This is disappointing as it complicates
exchange information on IP issues, such as the the decision as to where new designs should be first
enforcement of IP by customs, police and judicial disclosed. First disclosure in the UK will only
authorities, to coordinate to prevent the export of provide protection in the UK (not the EU) and vice
allenovery.com 15versa, and it is not clear yet whether any online IP rights and civil proceedings that were already in
disclosure will be deemed to take place existence on 31 December 2020, the most
simultaneously in the UK and the EU, thereby important of which is the “cloning” of registered
providing protection in both territories. EU rights into comparable UK rights. The UK has
also introduced new national rights to ensure that
Overall, therefore, the TCA doesn’t affect the there is domestic protection for unregistered
arrangements that have already been put in place designs first disclosed in the UK and databases
for the future protection and enforcement of created by UK-based entities.
IP rights in the EU and the UK. The Withdrawal
Agreement, as implemented in the UK, deals with Back to contents
Life sciences
The TCA was never likely to contain many Secondly, at a cost proportional to its GDP, the UK
provisions of immediate operational significance to will remain an associate member of Horizon Europe
the Life Sciences industry. Even in the event of a so that UK companies and academic institutions
“no deal”, tariffs on finished medicinal products and can bid for certain grants to take part in Horizon
most active pharmaceutical ingredients would have Europe research projects.
remained at 0% by virtue of the Most Favoured
Nation application of the WTO Pharmaceutical Tariff The industry is currently wrestling with immediate
Elimination Treaty. There are two welcome pieces effects of the Northern Ireland protocol to the
of news for the industry, nevertheless. Withdrawal Agreement which, at least until the
people of Northern Ireland have their say in four
Annex TBT-2 provides for mutual recognition of years’ time, preserves the application of EU
Good Manufacturing Practice Inspections carried pharmaceutical regulatory law, including the single
out by the MHRA and EU competent authorities. market for medicines and medical devices, in
Although this falls far short of the industry’s original Northern Ireland. In the meantime the MHRA
ambition of a comprehensive mutual recognition continues to issue more and more detailed
agreement covering marketing authorisations, batch guidance on how its new “GB” pathways for the
release and even medical devices, it will avoid at approval of medicinal products and medical devices
least some duplication of effort, expense and delay in England, Wales and Scotland will operate.
in the respective UK and EU pharmaceutical
regulatory cycles. Back to contents
Energy
As regards energy, the TCA aims to put in place To this end, the TCA addresses trading of gas and
arrangements that will, in due course, facilitate trade electricity over interconnectors; cooperation on
and investment between the UK and the EU in network development, information and other
respect of energy and raw materials and to support aspects relevant to security of supply; integration of
security of supply and environmental sustainability, renewables into energy markets; and cooperation
particularly in respect of climate change. To help fill as regards the North Sea, including its renewable
in some of the gaps (such as for the new electricity energy opportunities. Commitments are made in
trading arrangements), a “Specialised Committee relation to fair competition, transparency, market
on Energy” has been established. access and prohibiting market abuse, subject to
16 allenovery.comcertain exceptions (for example on public the agreement. Further, there is a requirement for
policy grounds). energy regulators in the UK and the EU to
cooperate in particular areas including markets,
The key point to note is that there remain networks, infrastructure planning and offshore
substantial new aspects to be agreed by energy. Guidance on certain areas is due from the
30 June 2026 (when the energy part of the TCA Specialised Committee on Energy as soon as
ceases to apply, unless extended). These include practicable, and this body will have certain ongoing
new arrangements for electricity trading aimed at supervisory involvement.
maximising capacity on electricity interconnectors
(to be agreed by April 2022) and arrangements for In summary, the high-level principles set out in the
extensive technical cooperation between respective TCA still leave much to be discussed and agreed.
EU and UK transmission system operators and
between regulatory authorities in order to facilitate Back to contents
Taxes
By contrast with the extensive provisions on VAT, administration in order for intra-group payments of
customs and social security cooperation, the TCA dividends and interest to be paid or received free
says relatively little about corporate taxes. Tax of withholding.
issues are covered by the parties’ wider agreement
to cooperate on current and emerging global issues The level playing field provisions will give the UK
of common interest. While preserving their some additional flexibility in the tax area. The UK
decision-making autonomy, this includes has already taken advantage of this by announcing
endeavouring to maintain dialogue and coordinating that it will not implement in full the provisions of
positions in multilateral organisations, so we can DAC 6 (the controversial EU mandatory disclosure
expect to see continued cooperation between the rules contained in the Directive on Administrative
UK and the EU in the tax area within the G-20 and Cooperation), limiting the rules to those required by
the OECD where it is in the parties’ interests to the OECD standards. This is a very welcome
do so. change and applies retrospectively, although as
businesses have invested significant resources in
As widely expected, the TCA does not preserve the preparing to comply with the higher standards of
withholding tax exemptions for intra-group DAC6, there may be mixed feelings at least about
payments of dividends, interest and royalties its timing. Another consequence of the agreement is
contained in the Parent and Subsidiary Directive that tax rules will no longer be subject to the
(2011/96/EU) or the Interest and Royalties Directive European Commission’s increasingly activist
(2003/49/EC). It is therefore necessary to look to approach on state aid, but will instead be governed
double tax treaties to eliminate the effect of any by the provisions on subsidies within the TCA. It is
withholding on such payments. While the UK has to be hoped that this will increase certainty for
tax treaties with all the EU member states, they do businesses in the UK.
not all provide for zero rates of withholding on
dividends, interest or royalties. At the very least, Back to contents
businesses can expect an increased burden of
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