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 9
Telecommunications Regulation 10
Civil jurisdiction and judgments 11
The level playing field 12
Sanctions and export controls 14
Intellectual property (IP) 15
Life sciences 16
Energy 16
Taxes 17
The ongoing effect of the Withdrawal Agreement 17
Next steps 17
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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 bring itself into compliance with the TCA. This must
judicial cooperation in criminal matters. Disputes be done immediately, or within a reasonable time if
relating to carved-out sections of the TCA are to be that is not possible.
resolved by the Partnership Council referenced
above. There are also areas of the TCA to which In the event of non-compliance with an arbitral
the general dispute resolution mechanism applies ruling, and subject to certain pre-conditions, the
but with modifications. For example, certain aspects aggrieved party may request temporary
of the provisions on competition and sustainable compensation from the defaulting party. If the
development have a modified dispute amount of the temporary compensation cannot be
resolution procedure. agreed between the EU and the UK, or the
aggrieved party decides not to request
Before invoking the general dispute resolution compensation, the aggrieved party may instead
procedure, unless they agree otherwise, the EU and temporarily suspend its performance of certain
the UK are required to engage in consultations in an obligations towards the defaulting party (subject to a
effort to reach an agreed solution. If consultations number of conditions).
fail, arbitration can be commenced. The TCA
envisages the swift resolution of arbitrations, The suspension of obligations or the payment of
requiring a final ruling from the arbitral tribunal compensation shall not be applied after: (a) the
within a maximum of 160 days from the arbitral EU and the UK agree that measures taken by
tribunal’s constitution (although this deadline can be the defaulting party bring it into compliance with
extended by agreement between the parties). the TCA; (b) the measure taken that was found to
be a breach of the TCA has been withdrawn or
If the arbitral tribunal finds a breach of the TCA, the amended; or (c) the EU and the UK have reached a
party responsible for the breach must take the mutually agreed solution. Back to contents
necessary measures to comply with the ruling and
The process for ratification
The European Commission deemed the TCA an 2021 pending the consent of the European
EU-only agreement (ie that all aspects of the Parliament and conclusion by the Council of the EU
agreement are within EU competence), under by 28 February 2021.
Article 217 of the Treaty on the Functioning of the
European Union. This means that ratification by the In relation to ratification by the UK, the European
European Parliament will be sufficient and that Union (Future Relationship) Bill, which implements
individual ratification by each Member State will not the TCA, was introduced to Parliament on
be required. 30 December 2020 and passed all stages in the
House of Commons. The Bill also passed the final
Given the TCA was agreed only days before the stages in the House of Lords and, in the early hours
transition period was due to end, there was of 31 December 2020, the European Union
insufficient time for the European Parliament to (Future Relationship) Act 2020 received Royal
ratify the agreement. As a result, the TCA was Assent. Following its approval by the House of
signed by the EU on 30 December 2020 on the Commons, the TCA was signed by the UK.
basis that it applies provisionally from 1 January Back to contents
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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 pharmaceutical, organic products and wine
number of provisions related to technical sectors.
barriers to trade. In particular, the parties have − Trade remedies: as is provided for in the World
agreed to a definition of international standards Trade Organization’s (WTO) rules, the
which identifies the relevant international agreement allows for the parties to impose trade
standard-setting bodies. This should maximise remedies against one another where, for
the extent to which the parties’ domestic product example, there are unfair practices such as
standards and technical regulations are dumping or prohibited subsidies.
compatible. Furthermore, in relation to product
conformity assessments, the parties have The provisions in the TCA discussed above do not
agreed to maintain self-certification of apply to the trade in goods between the EU and
conformity by the manufacturer where this was Northern Ireland, where the Protocol on Ireland and
applied in both the EU and the UK on the date Northern Ireland included in the Withdrawal
that the TCA came into force. Finally, Agreement will apply. Likewise, goods entering
sector-specific provisions are included to Northern Ireland from Great Britain will constitute
promote cooperation and reduce barriers to imports from 1 January 2021. The treatment of
trade in the automotive, chemicals, Northern Ireland under the TCA is further
discussed below. Back to contents
Trade in financial services
For financial services, the TCA is the thinnest of covering general services provisions as opposed to
deals. As expected, it makes no attempt to the specific section on financial services.
reproduce the freedoms of movement, and
establishment and provision of services, that UK Such commitments as are provided are subject to
businesses benefited from when the UK was a the so-called “prudential carve-out”. This is a
member of the EU. With the end of the passporting reservation of each party’s right to adopt or maintain
regime, UK market participants will now be treated measures for prudential reasons, including in order
in the same manner as other third country to protect the interests of consumers of financial
participants, with access rights being limited services and to preserve financial stability and the
accordingly. While the TCA sets out provisions that integrity of financial markets. This overrides all other
are similar to those seen in other recent EU free provisions of the TCA, albeit that the TCA provides
trade agreements, the terms covering financial that such measures under the prudential carve-out
services are comparably slimmer, and marginally should not be used as a means of avoiding
less favourable, than those set out in the CETA commitments under the TCA. In practice the
which the UK Government had suggested, at prudential carve-out largely guts the TCA’s
certain intervals during the negotiation process, it commitments relating to market access as they
was seeking to achieve. apply to financial services. Subject to the prudential
carve-out, the TCA commits each party to maintain
While the European Commission states that the its markets open for financial services operators
TCA provides for a significant level of openness for from the other party seeking to supply services
trade in services and investment, going beyond the either through a commercial establishment or on a
baseline provisions of the WTO’s General cross-border basis. In relation to subsidiaries, the
Agreement on Trade in Services (GATS), the TCA TCA confirms existing third country access to, and
only has a small number of provisions governing treatment in, both jurisdictions with respect to legal
financial services regulation. This is due in part to form and equal treatment with domestic and other
the fact that the provisions on non-discrimination foreign firms. As regards branches of third country
and market access are incorporated in the section firms, the ability to regulate on a national basis is
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reserved. Two key general exceptions apply to cooperation set out within the TCA (beyond the
financial services – namely, that such services are provision on international standards). Instead, the
exempted from the general Most Favoured Nation non-binding Declarations confirm that the EU and
provision and that subsidiaries are exempt from the the UK have agreed to “establish structured
right of the relevant state to impose a specific regulatory cooperation, with the aim of establishing
legal form. a durable and stable relationship between
autonomous jurisdictions”. Such cooperation will be
For cross-border trade in financial services, the TCA based on a shared commitment to preserve
ensures that national treatment provisions apply financial stability, market integrity, and the
and that the ability to provide those services cannot protection of investors and consumers. The
be made conditional upon commercial arrangements will allow for:
establishment (again, subject to the prudential
carve-out). Although it should be noted that, similar − bilateral exchanges of views and analysis on
to CETA, the EU and UK both have a right to adopt regulatory initiatives and other issues of interest
measures to limit cross-border trade except in − transparency and appropriate dialogue in the
limited circumstances, for example reinsurance. process of adoption, suspension and withdrawal
of equivalence decisions
The financial services section confirms that the − enhanced cooperation and coordination
EU and UK commit to ensuring that internationally including in international bodies as appropriate
agreed standards (for example prudential, AML and
tax-avoidance measures) in the financial services The EU and the UK intend to agree a memorandum
sector are implemented and applied in their of understanding by March 2021 to establish the
territories. In addition to confirming that any new framework for this cooperation.
service that could be supplied under existing
regulation is covered by the agreement (and Equivalence decisions
therefore subject to the same local licensing regime The TCA does not include any provisions regarding
as local firms), the TCA guarantees access for EU the equivalence frameworks for financial services
and UK firms (as applicable) to any self-regulatory on the basis that these are unilateral decisions of
bodies required for the conduct of their business each party and are not subject to negotiation. The
and to public clearing and payments systems. Declarations include a statement that, as part of the
proposed regulatory cooperation framework, the
The position regarding the transfer of data is “Parties will discuss, among other things, how to
discussed further below but the financial services move forward on both sides with equivalence
section states that confidential information relating determinations between the EU and the UK, without
to consumers (but not clients or counterparties that prejudice to the unilateral and autonomous
are not consumers) and their affairs and accounts decision-making process of each side.”
which is in the possession of public entities cannot
be disclosed between EU and UK authorities. That When the TCA was agreed, the European
is unless required under the provisions on law Commission confirmed that it had assessed the
enforcement and judicial cooperation in criminal UK’s replies to the Commission’s equivalence
matters. Facilitations for short-term business trips, questionnaires in 28 areas. The Commission states
temporary secondments and intra-group transfer of that a series of further clarifications will be needed,
highly skilled employees are envisaged by the TCA, in particular regarding how the UK will diverge from
and these provisions extend to financial services. EU frameworks after 31 December 2020, how it will
use its supervisory discretion regarding EU firms
Regulatory cooperation on and how the UK’s temporary regimes will affect EU
financial services firms. For these reasons, the Commission stated
Unlike other recent EU trade agreements, there are that it cannot finalise its assessment of the UK’s
no detailed provisions regarding regulatory equivalence in the 28 areas and therefore will not
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take decisions “at this point in time”. The In this table, we summarise existing third country
assessments are therefore expected to continue. provisions within EU financial services legislation
The Commission has confirmed that it has taken and outline whether the European Commission has
note of the UK’s equivalence decisions announced taken an equivalence decision for each provision in
in November 2020 (and notes that these were relation to both the UK and other third countries. We
adopted in the UK’s interest) and concludes by also highlight whether relief is available under the
stating that the “EU will consider equivalence UK regulators’ temporary transitional powers or
[decisions] when they are in the EU’s interest”. because of a UK equivalence decision.
Back to contents
Data protection and cybersecurity
The EU Commission’s consideration of the UK’s to flow cross-border from the EEA to the UK,
adequacy in the context of the protection of without the need for appropriate safeguards, until
personal data and cross-border transfers was never the earlier of adopted adequacy decisions and with
due to be part of the TCA. However, the agreement an initial period of up to four months from 1 January
and ancillary documents do include provisions that 2021, automatically extendable to 1 July 2021. This
address some aspects of personal data protection, grace period is intended to provide sufficient time to
at least in the short term. allow for the completion of the adequacy
assessment process and should avoid significant
International data transfers business disruption that would arise from
Under UK data protection law, although each EEA restrictions on personal data transfers.
state is now considered to be a “third country”,
personal data may continue to be transferred from It is worth noting that the arrangement will only
the UK to those EEA states without need for further continue to apply to the extent the UK does not
appropriate safeguards on the basis of their change its data protection laws (away from those in
inclusion in adequacy regulations under the place on 1 January 2021), nor exercise certain
UK Data Protection Act 2018 (Schedule 21). The “designated powers” regarding data transfers during
approach to transfers of personal data from the EEA this period without Partnership Council approval
to the UK remains more complex but perhaps, (including, for example, granting adequacy
reassuringly, a Joint Declaration of the EU and the decisions to new third countries, issuing UK
UK specifically notes the European Commission’s standard contractual clauses, approving certain new
intention to launch the procedure for adoption of certification mechanisms and draft codes of
adequacy decisions for the UK (under both the conduct, approving new binding corporate rules,
GDPR and Law Enforcement Directive) as well as authorising new contractual clauses and
its intention to work closely with others involved in administrative arrangements).
the process.
Therefore, despite the UK now being subject to a
The adoption of adequacy decisions would allow separate (if near identical) data protection regime
personal data to continue to flow (replacing the GDPR with the UK GDPR,
cross-border from the EEA to the UK, without the supplemented by the amended Data Protection Act
need for appropriate safeguards. However, the 2018, and accounting for Article 71 of the
process first requires a proposal from the European Withdrawal Agreement regarding “stock” personal
Commission, an opinion from the European Data data), it will not be able to exercise all of its powers
Protection Board (and EU Member State approval) fully without consequence for a number of months
and is therefore not a quick procedure. or until adequacy has been obtained. However,
given the relatively short-term nature of the
In the interim, the TCA provides for a bridging restrictions, the inclusion of exceptions to enable
mechanism that enables personal data to continue the UK to make changes to ensure alignment with
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EU rules (perhaps useful to enable adoption of things, on enforcement of personal data protection.
equivalent new standard contractual clauses or to It remains to be seen how this cooperation will work
re-approve existing binding corporate rules) and the in practice.
clear advantages to business, this is perhaps a
small price to pay. Law enforcement cooperation
Finally, the TCA addresses personal data in the
Sounding a note of caution, although these context of law enforcement and criminal record
provisions may imply an EU desire to grant exchange, with provisions regarding the sharing of
adequacy, a decision is not certain and so the UK passenger name record data, vehicle registration
ICO prudently calls for organisations to consider details, DNA, fingerprint data and sharing of
and implement other appropriate safeguards to personal data with EUROPOL and EUROJUST.
enable EEA to UK data transfers in preparation for a The EU and the UK are committed to ensuring that
July 2021 cut-off. personal data is processed in compliance with data
protection regimes and specific account is made,
Data localisation
amongst other things, for the potential onward
More generally, the TCA preamble calls out the transfers to third countries, requiring consent of the
need to balance facilitating opportunities for authority that provided the information and
business and consumers through digital trade and appropriate safeguards regarding the protection of
the protection of personal data. This is further personal data. More significantly, it is possible for
reflected in the agreement as a way of not the EU or the UK to suspend law enforcement
restricting cross-border data flows, for example cooperation where it considers that there are
through data localisation requirements or use of serious or systemic deficiencies in the way the other
particular approved/certified or sited computing is protecting personal data and those deficiencies
facilities (to be reviewed within three years, with have led to a relevant adequacy decision ceasing to
scope for earlier amendment). That said, the TCA apply.
does acknowledge that nothing shall prevent the EU
or the UK from adopting or maintaining measures to Cybersecurity
protect personal data (including regarding With regard to cybersecurity, the TCA makes
cross-border transfers) so long as there are provision for cooperation between the EU and the
instruments enabling transfers where conditions to UK with a view to exchanging information, sharing
transfer apply generally. best practice and taking cooperative action to
promote and protect cyberspace. This cooperation
Future cooperation and development of
is envisaged to occur through international bodies
standards and forums as well as between the CERT-EU and
In any event, while the EU and the UK reaffirm the UK computer emergency response teams; the EU
right to regulate to achieve privacy and data Cooperation Group and UK national authorities (on
protection policy objectives, they also confirm that invitation and voluntarily); and ENISA and the UK
they will ensure a high level of data protection and (on invitation and voluntarily, with financial
shall endeavour to work together to promote high contribution). Back to contents
international standards, cooperating, among other
Digital trade
The TCA aims to facilitate digital trade between the be concluded by electronic means. Provisions are
UK and the EU. Most significantly, the agreement also included in the agreement covering online
provides that the parties shall not impose customs consumer trust, unsolicited direct marketing
duties on electronic transmissions and, subject to communications (so-called “spam”) and open
certain exceptions, must ensure that contracts can government data. The UK Government has stated
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its belief that the agreement “will promote trade in
digital services and facilitate new forms of trade in
goods and services”. Back to contents
Telecommunications Regulation
Authorisation, use, access and benefit trade and enhance consumer welfare) and
interconnection to encourage suppliers of public
telecommunications services to make information
There was little change to the UK
on international roaming rates publicly available.
telecommunications regulatory framework after the
The establishment of the “Roam like at Home”
end of the Transition Period. The TCA’s
international mobile roaming regime was intensely
requirements in respect of authorisation, use,
political and following the end of the Transition
access, allocation of spectrum and numbering,
Period, the legal basis to require UK mobile
number portability and interconnection of networks
operators to allow their customers to roam in the
and services, as well as the TCA’s measures to
EEA without roaming surcharges, and vice-versa,
protect competition, have been largely
has ended. It has been replaced with transparency
grandfathered in from the previous EU electronic
and consumer protection requirements, which (in
communications framework, and the new European
the UK at least) have already been in place since
Electronic Communications Code, that UK
the anti-bill-shock regulations made in 2019. It will
government had already announced that it would
be interesting to see whether operators in the UK
implement at the end of 2020.
and EEA begin to increase charges for cross-border
The TCA ensures the continued rights and roaming, which would likely start with a change in
obligations of suppliers of telecommunication the underlying wholesale roaming rates.
networks and services to negotiate the
interconnection of those networks and services,
Investment restrictions
including in relation to the confidentiality of The TCA also limits the ability of the UK to impose
information revealed at such negotiations. However, joint venture requirements or certain foreign capital
the TCA diverges from the previous regime in restrictions on investments from the EU, or vice-
obliging the UK and the EU to require major versa, with regards to the provision of
suppliers of telecommunications networks or telecommunications networks or services. This
services to provide interconnection at any clearly is expressed in different terms from the
technically feasible point in the network in a Maastricht Treaty’s requirement for free movement
non-discriminatory and timely manner upon request. of capital, and does not have the history of
This approach, which derives from the WTO Basic interpretation of the free movement of capital. It will
Telecommunications Agreement and can be found be interesting to see whether governments on either
in many other free trade agreements, is side seek to introduce restrictions which will be
considerably broader than the provisions of the challenged under this aspect of the TCA.
EECC, which the UK is implementing. The UK had
in any case previously announced that it did not
Net neutrality
intend to implement interconnection requirements of Following the end of the Transition Period, the Open
the EECC for number-independent services (eg Internet Regulation (EU) 2015/2120 is no longer
OTT messaging). directly applicable in the UK. However, under the
TCA both the EU and UK must continue to require
International mobile roaming that suppliers of internet access services manage
The TCA requires EU-UK cooperation to promote network access in a non-discriminatory, reasonable,
transparent and reasonable roaming rates (to transparent and proportionate way and enable
10 allenovery.comusers to use devices of their choice (subject to aligned with EU law, Ofcom is no longer required to
security requirements). take utmost account of BEREC recommendations in
this context, UK courts’ interpretation of these
UK law retained net neutrality requirements in the retained requirements may diverge from the position
Open Internet Access (Amendment) (EU Exit) as interpreted in the EU. Back to contents
Regulations 2018. Whilst these remain generally
Civil jurisdiction and judgments
The TCA does not provide for continued consent at the latest within one year after they were
cooperation between the UK and the EU on civil notified of an application to re-accede.
jurisdiction and judgments. This is unsurprising. The
UK Government has made it clear that, rather than It is unclear at this stage what position the EU will
seeking to agree bespoke arrangements on civil take on the UK’s re-accession. The likelihood of
justice as part of the TCA, it would instead seek to consent is certainly greater than it would have been
re-accede to the Lugano Convention 2007 as an “off had no agreement been reached on the future
the shelf” solution for continued civil judicial relationship, but the fact that the TCA has been
cooperation following the end of the transition agreed does not make consent inevitable, not least
period. The Lugano Convention provides for the because the UK-EU relationship is no longer based
allocation of jurisdiction and the enforcement of on the UK’s participation in the Single Market.
judgments in civil and commercial matters as
If the EU does consent to the UK’s re-accession to
between Contracting States and is broadly similar to
the Lugano Convention, the Convention will come
the Recast Brussels Regulation (the primary
into force on the first day of the third month
jurisdictional regime applied between the UK and
following the deposit of the instrument of accession.
EU Member States prior to the end of the transition
In that scenario, the position on civil justice as
period). However, the Lugano Convention applies
between the UK, the EU and Switzerland, Iceland
more broadly than the Recast Brussels Regulation,
and Norway will be almost exactly as it was when
covering Switzerland, Iceland and Norway as well
the UK was an EU Member State. In particular,
as all EU Member States.
English jurisdiction clauses will be respected and
The UK was a Lugano Convention Contracting English judgments enforced in all Lugano
State until the end of the transition period. In April Convention Contracting States on essentially the
2020, in anticipation of its participation coming to an same basis as before the transition period came to
end on 31 December 2020, it deposited an an end. Any concerns that commercial parties may
application to re-accede to the Lugano Convention. have had in this area should therefore fall away.
The UK’s re-accession requires the consent of all
Until that point, we are effectively in a “no deal”
current Contracting States. Switzerland, Iceland and
scenario on civil jurisdiction and judgments.
Norway have all indicated their willingness to
Currently, therefore, the only applicable multi-lateral
consent, but the EU has not yet clarified its position.
regime on jurisdiction and judgments between the
It has been suggested that the EU has delayed
UK and the EU is the Hague Convention on Choice
making a decision because the European
of Court Agreements 2005. The UK had been party
Commission has seen the issue as bound up with
to the Hague Convention since 1 October 2015 in
the wider negotiations on the future relationship.
its capacity as an EU Member State, meaning its
Now that an agreement has been reached, we
participation in that capacity came to an end at the
anticipate that the EU will confirm its position shortly
end of the transition period. However, the UK
and in any event by April 2021, as the Contracting
Government was proactive in re-acceding in its new
States are required to endeavour to give their
capacity as an independent Contracting State, and
the Hague Convention therefore came into force in
allenovery.com 11the UK in that new capacity immediately following enforcement may be more time consuming and
the end of the transition period. The Hague costly. However, this is not the case in all
Convention requires Contracting State courts to Member States.
respect exclusive jurisdiction clauses in favour of
other Contracting State courts and enforce related Parties considering including asymmetric or
judgments, but it is more limited in scope than the non-exclusive English jurisdiction clauses in their
EU regime or the Lugano Convention, applying only transaction documents must therefore consider on a
where parties have agreed an exclusive jurisdiction case-by-case basis whether a judgment pursuant to
clause and only where that clause was agreed after such a clause will be enforceable in the Member
the Hague Convention came into force in the States in which their counterparty is based or holds
jurisdiction chosen under the clause. Where assets. In light of this, pending any UK accession to
exclusive English jurisdiction clauses are the Lugano Convention, we may see a shift by
concerned, it is unclear whether EU Member State commercial parties towards including exclusive
courts will treat the relevant date for these purposes English jurisdiction clauses in their contracts with a
as 1 October 2015 or 1 January 2021 (the view to ensuring they fall within the scope of the
European Commission has suggested it is the latter Hague Convention regime. If the UK is not
date, although the UK takes the opposite view). permitted to accede to the Lugano Convention,
we may see a continuation of that trend in the
Where the Hague Convention does not apply, the longer term.
question of whether English jurisdiction clauses will
be respected and related judgments enforced in Finally, the TCA has no impact on the position on
Member State courts will be a question of national governing law. Save where there are specific
law in the relevant State. In many Member States, regulatory or political drivers for a change of
English jurisdiction clauses and judgments falling approach, this means there continues to be no
outside the scope of the Hague Convention will reason to move away from English governing law
continue to be respected and enforced as a matter clauses in commercial contracts. Back to contents
of national law, although the process of
The level playing field
The obligations related to the level playing field for practices which have as their object or effect the
open and free competition and sustainable prevention, restriction or distortion of
development were reportedly subject to intense competition; (b) abuse of dominant position; and
negotiation between the EU and the UK in light of (c) for the UK, mergers and acquisitions, and,
concerns that the UK may seek a competitive for the EU, concentrations, which may have
advantage through subsidies and lower significant anticompetitive effects.
regulatory standards. − Subsidy control: the parties have agreed to a
comprehensive body of rules governing
The key components of the level playing field under subsidies granted to “economic actors”. The
the TCA are as follows: rules are subject to a number of exceptions
such as subsidies in response to natural
− Competition law: the parties agree to maintain
disasters and subsidies related to the
competition law that effectively addresses
audio-visual sector. In broad terms, the parties
anti-competitive business practices and which is
are obliged to maintain an effective system of
enforced by an operationally independent
subsidy control to ensure that six principles are
authority or authorities in a transparent and non-
met. These principles include a requirement for
discriminatory manner. The anti-competitive
subsidies to be proportionate and appropriate to
business practices that are specifically identified
a public policy objective that cannot be achieved
are: (a) agreements, decisions and concerted
12 allenovery.comthrough other less-distortive means. Certain in the fight against climate change. Importantly,
forms of subsidy are prohibited including the TCA provides that the UK and the EU will
unlimited state guarantees and most export cooperate on carbon pricing and will give
subsidies. The TCA provides that the parties “serious consideration” to linking their respective
must ensure that their courts are competent to carbon-pricing systems (although there is no
review subsidy-related decisions and the obligation to do so). Any link between the
available remedies must include recovery of a EU Emissions Trading System and the UK
subsidy from its beneficiary. carbon pricing system would be subject to a
− Labour and social standards: each party has separate negotiated agreement.
the right to set and modify its own policies and − Taxation: the TCA commits each party to
priorities, determine levels of protection and implementing principles of good governance
adopt and amend laws relating to labour and relating to tax, including global standards on tax
social standards. However, a non-regression transparency and exchange of information and
clause applies, such that the UK and the fair tax competition. Each party is required to
EU cannot weaken or reduce their labour and maintain the level of protection agreed in the
social levels of protection in certain areas (as in OECD at the end of the transition period in
place at the end of the transition period) in a relation to exchange of information, interest
way that would affect trade or investment limitations, controlled foreign companies and
between themselves. This includes hybrid mismatches, and to retain their current
enforcement, meaning that, while a party can requirements in respect of public country-by-
exercise its reasonable discretion regarding the country reporting by financial institutions.
allocation of enforcement resources, it must not
fail to effectively enforce those labour and social Perhaps unsurprisingly, the Paris Agreement and
laws and standards in a way that impacts trade greenhouse gas reduction targets are specifically
or investment. In addition to the non-regression dealt with by the TCA. Under these provisions, each
clause, the TCA further contains provisions party reaffirms its ambition to achieve climate
under which the parties commit to respecting, neutrality by 2050 and commits to effectively
promoting and implementing multilateral labour implementing the United Nations Framework
standards and agreements (eg the fundamental Convention on Climate Change (UNFCC) and the
ILO Conventions) and to working together on Paris Agreement. The UK and the EU also agree to
trade-related aspects of labour policies promote the mutual supportiveness of trade and
and measures. climate policies and to facilitate the removal of
− Environment and climate: the TCA contains a obstacles to trade and investment in goods and
non-regression clause in respect of services relevant to climate change mitigation and
environmental and climate change levels of adaptation. Apart from the carbon and
protection, which follows the same formulation climate-related commitments, the environmental
as that relating to labour and social standards. and climate obligations in the level playing field
The TCA also requires each party to have in provisions specifically cover trade and biological
place an effective system of carbon pricing as at diversity, forests, marine biological resources
1 January 2021, covering greenhouse gas and aquaculture.
emissions from electricity and heat generation,
Finally, each party commits to respecting
industry and aviation (although there is a
internationally recognised environmental principles,
derogation for aviation, which is able to be
including the: (a) precautionary principle; (b) polluter
brought within the carbon pricing system within
pays principle; and (c) principle of preventative
two years). These carbon pricing systems must
action. As part of this, the UK and the EU reaffirm
respect the level of protection in place as at the
their commitments to procedures for evaluating the
end of the transition period and must be
likely environmental impact of a proposed activity,
maintained so long as they are an effective tool
including environmental impact assessments where
allenovery.com 13appropriate. As is the case under the labour and question with the relevant provisions. Where the
social standards provisions, the parties also commit final report determines that a party has not
to implementing the multilateral environmental conformed to its obligations under the relevant
agreements, protocols and amendments that they provisions, the parties will discuss the measures to
have ratified and to working together on trade- be implemented by the respondent party to address
related aspects of environmental and the non-conformity. Where there is a disagreement
climate policies and measures. on the measures taken, a party may ask the original
panel of experts to consider the matter, after which
− Trade and sustainable development: the UK it will again deliver its findings. Temporary remedies
and the EU commit to enhancing the role of may also be available in disputes regarding
trade and investment in achieving certain provisions relating to labour, social
(economically, socially and environmentally) standards, the environment and climate, being
sustainable development and recognise the role “non-regression areas”.
of trade in promoting the responsible
management of supply chains. In this regard, in The TCA also includes a novel unilateral
addition to the measures outlined above, the rebalancing procedure in the event that significant
parties agree to promote trade in goods and divergences emerge as between the parties in
services that contribute to better social relation to labour and social standards,
conditions and sound environmental practices, environmental or climate protection, or with respect
among other things. They also agree to to subsidy control. If material impacts on trade or
encourage corporate social responsibility and investment arise as a result of such significant
responsible business conduct, including through divergences, either party may take “appropriate
putting in place associated policy frameworks rebalancing measures to address the situation”. An
and supporting the implementation of relevant assessment of such impacts must be based on
international instruments, such as the OECD “reliable evidence and not merely on conjecture or
Guidelines for Multinational Enterprises and the remote possibility” and the measures must be
UN Guiding Principles on Business and “restricted with respect to their scope and duration
Human Rights. to what is strictly necessary and proportionate in
order to remedy the situation”. A notification and
The TCA establishes specific avenues to resolve consultation procedure in relation to rebalancing
disputes regarding the application of the level measures involving the Partnership Council has
playing field provisions concerning labour and social been established with disputes ultimately being
protections, environmental and climate change settled by an arbitral tribunal. Examples of where
protections and trade and sustainable development, rebalancing measures may be used could include
as outlined above. These bespoke dispute where one party significantly increases its levels of
resolution procedures displace the general dispute protection related to the environment resulting in an
settlement system and, in its place, establish increased cost of production and hence a
procedures for convening a panel of experts. Under competitive disadvantage. In such a case, the other
these procedures, a panel of experts can be party could adopt rebalancing measures such as
requested to examine a matter and deliver a report imposing tariffs. Back to contents
making findings on the conformity of the measure in
Sanctions and export controls
The TCA does not substantively cover sanctions accompanying Political Declaration. This position
cooperation in contrast with the positions set out by was foreshadowed in the UK Foreign Secretary’s
the EU and the UK in Article 127(2) of the letter to the EU Security and Justice Sub-Committee
Withdrawal Agreement and the UK’s of the House of Lords in November 2020 in which
14 allenovery.comMr Raab stated that the UK did not “see the need By way of contrast, the TCA does contain provisions
for a Treaty to govern our [sanctions] cooperation”. addressing transparency in respect of export control
So, as the European Commission has stated, “[a]s licensing procedures. However, the TCA is not
of 1 January 2021, there will therefore be no expected to impact directly on either the EU or the
framework in place between the UK and the EU to UK’s export control regimes, since the TCA
develop and coordinate joint responses to foreign expressly states that it does not require a party to
policy challenges, for instance the imposition of grant an export licence or prevent a party from
sanctions on third country nationals or economies”. implementing its commitments under United Nations
Indeed, the UK’s autonomous imposition of human Security Council Resolutions and multilateral non-
rights-related sanctions last July heralded its proliferation regimes and export control
emergence as an independently sanctioning State arrangements. The TCA also does not prevent a
(see our publication here) and, no doubt, party from adopting, maintaining and implementing
considerable further divergences will emerge independent sanctions regimes. Back to contents
between the UK and the EU’s sanctions regimes.
For further details on the UK’s post-Brexit sanctions
regimes, see our publication here.
Intellectual property (IP)
The IP section of the TCA sets out minimum unregistered designs disclosed in the EU and the
standards for IP protection and enforcement UK, but unfortunately this did not make it into the
procedures that already exist in UK and EU laws. It agreement. This is disappointing as it complicates
also confirms the parties’ commitment to comply the decision as to where new designs should be first
with international agreements to which they are disclosed. First disclosure in the UK will only
already a party (eg TRIPS). There is a general provide protection in the UK (not the EU) and vice
recognition that the UK will now have separate versa, and it is not clear yet whether any online
systems, eg to register and protect trade marks and disclosure will be deemed to take place
designs and to suspend the release by customs of simultaneously in the UK and the EU, thereby
goods suspected of infringing IP rights. The parties providing protection in both territories.
are also free to determine their own rules for the
exhaustion of IP rights. The TCA does, however, Overall, therefore, the TCA doesn’t affect the
include a general commitment to cooperate and to arrangements that have already been put in place
exchange information on IP issues, such as the for the future protection and enforcement of
enforcement of IP by customs, police and judicial IP rights in the EU and the UK. The Withdrawal
authorities, to coordinate to prevent the export of Agreement, as implemented in the UK, deals with
counterfeits and to educate and promote public IP rights and civil proceedings that were already in
awareness of IP policies. Notably, while the TCA existence on 31 December 2020, the most
recognises that the UK will have a separate scheme important of which is the “cloning” of registered
for the protection of geographical indications (GIs), EU rights into comparable UK rights. The UK has
there is a specific review clause so the parties can, also introduced new national rights to ensure that
if it is in their interests, try to agree new rules for the there is domestic protection for unregistered
protection and enforcement of their domestic GIs. designs first disclosed in the UK and databases
created by UK-based entities. Back to contents
The UK had suggested during the TCA negotiations
that there should be some reciprocal protection for
allenovery.com 15Life 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 Back to contents
regulatory cycles.
Energy
As regards energy, the TCA aims to put in place The key point to note is that there remain
arrangements that will, in due course, facilitate trade substantial new aspects to be agreed by
and investment between the UK and the EU in 30 June 2026 (when the energy part of the TCA
respect of energy and raw materials and to support ceases to apply, unless extended). These include
security of supply and environmental sustainability, new arrangements for electricity trading aimed at
particularly in respect of climate change. To help fill maximising capacity on electricity interconnectors
in some of the gaps (such as for the new electricity (to be agreed by April 2022) and arrangements for
trading arrangements), a “Specialised Committee extensive technical cooperation between respective
on Energy” has been established. EU and UK transmission system operators and
between regulatory authorities in order to facilitate
To this end, the TCA addresses trading of gas and the agreement. Further, there is a requirement for
electricity over interconnectors; cooperation on energy regulators in the UK and the EU to
network development, information and other cooperate in particular areas including markets,
aspects relevant to security of supply; integration of networks, infrastructure planning and offshore
renewables into energy markets; and cooperation energy. Guidance on certain areas is due from the
as regards the North Sea, including its renewable Specialised Committee on Energy as soon as
energy opportunities. Commitments are made in practicable, and this body will have certain ongoing
relation to fair competition, transparency, market supervisory involvement.
access and prohibiting market abuse, subject to
certain exceptions (for example on public In summary, the high-level principles set out in the
policy grounds). TCA still leave much to be discussed and agreed.
Back to contents
16 allenovery.comTaxes
By contrast with the extensive provisions on VAT, businesses can expect an increased burden of
customs and social security cooperation, the TCA administration in order for intra-group payments of
says relatively little about corporate taxes. Tax dividends and interest to be paid or received free
issues are covered by the parties’ wider agreement of withholding.
to cooperate on current and emerging global issues
of common interest. While preserving their The level playing field provisions will give the UK
decision-making autonomy, this includes some additional flexibility in the tax area. The UK
endeavouring to maintain dialogue and coordinating has already taken advantage of this by announcing
positions in multilateral organisations, so we can that it will not implement in full the provisions of
expect to see continued cooperation between the DAC 6 (the controversial EU mandatory disclosure
UK and the EU in the tax area within the G-20 and rules contained in the Directive on Administrative
the OECD where it is in the parties’ interests to Cooperation), limiting the rules to those required by
do so. the OECD standards. This is a very welcome
change and applies retrospectively, although as
As widely expected, the TCA does not preserve the businesses have invested significant resources in
withholding tax exemptions for intra-group preparing to comply with the higher standards of
payments of dividends, interest and royalties DAC6, there may be mixed feelings at least about
contained in the Parent and Subsidiary Directive its timing. Another consequence of the agreement is
(2011/96/EU) or the Interest and Royalties Directive that tax rules will no longer be subject to the
(2003/49/EC). It is therefore necessary to look to European Commission’s increasingly activist
double tax treaties to eliminate the effect of any approach on state aid, but will instead be governed
withholding on such payments. While the UK has by the provisions on subsidies within the TCA. It is
tax treaties with all the EU member states, they do to be hoped that this will increase certainty for
not all provide for zero rates of withholding on businesses in the UK. Back to contents
dividends, interest or royalties. At the very least,
The ongoing effect of the Withdrawal Agreement
It is worth noting that the Withdrawal Agreement will govern trade in goods between the EU and
continue to have effect despite the TCA being Northern Ireland and goods entering Northern
agreed and following its ratification. This is because Ireland from Great Britain will count as imports. This
it covers a number of issues arising from the UK’s means that such goods will need to comply with
withdrawal from the EU that are of continuing EU product rules and be subject to checks and
relevance – for example, certain rights of UK and controls for safety, health and other public policy
EU citizens and the specific arrangements agreed purposes, including all necessary SPS controls
as part of the Protocol on Ireland and Northern applicable between the EU and the UK.
Ireland. As mentioned above the TCA will not Back to contents
Next steps
With so much still to be agreed and put in place the implementation of these agreements and the
under the framework of the TCA and through other progress of the arrangements envisaged. Please
future relationship agreements, it is clear that speak to your usual A&O contacts or the contacts
negotiations will continue for years. We will monitor listed below for further information. Back to contents
allenovery.com 17You can also read
