On November 14, a technical agreement was reached between the negotiators of the UK and the EU in relation to the terms of the withdrawal of the UK from the EU (the Withdrawal Agreement). Published alongside the Withdrawal Agreement was a non-binding Political Declaration, providing an overview of the intended future relationship between the UK and EU.
The draft Withdrawal Agreement itself spans 585 pages and focuses on the transition period of Brexit, following March 29, 2019 (Exit Day) and ending December 31 2020, with an option for the transition period to be extended once more, up to an as yet unspecified, to be agreed, future date. The transition period is designed to allow for governments, businesses and citizens on both sides to prepare for the final withdrawal of the UK and allow time for the negotiation of the future relationship between the two.
During the transition period, the draft Withdrawal Agreement provides that EU law will continue to apply in the UK, unless stated otherwise. As UK-EU financial services are not specifically addressed, EU law will continue to apply during the transition period, allowing both EU and UK firms to, for example, continue to use passporting rights into and out of the UK. Financial services will then be subject to bespoke UK- and EU-specific legislative solutions at the end of the transition period or, in the event of a no-deal Brexit, following Exit Day.
Some of the highlights from the Political Declaration include:
- a free trade area and deep co-operation on goods, with zero tariffs and quotas;
- commitments by both parties to preserve financial stability, market integrity, investor protection and fair competition, while respecting the parties’ regulatory and decision-making autonomy, and their ability to take equivalence decisions in their own interest;
- both sides working to complete equivalence assessments as soon as possible after the UK’s withdrawal, with the aim of completing equivalence assessments by June 2020; and
- the completion of an adequacy assessment by the EU in relation to the UK’s regime for personal data and the adoption of related decisions by the end of 2020.
Withdrawal Agreement approval requires political approval by the EU 27 Member States (scheduled to take place at an emergency EU summit on November 25), a vote in the UK House of Commons (expected to take place in early December) and votes by the European Parliament and European Council.
If the Withdrawal Agreement fails to pass any of the above steps before Exit Day, no-deal Brexit contingency plans are currently being put into place (for examples of some of the efforts taking place to plan for a no-deal Brexit, see the August 24 and November 9 editions of Corporate & Financial Weekly Digest).
The Withdrawal Agreement is available here.
The Political Declaration is available here.