Brexit What’s coming? How should traders prepare? ACITA National Meeting London | 27 April 2017 Yves Melin

Brexit (sigh) if only one could travel back in time… Article 50 of the TEU: “Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.” “A Member State which decides to withdraw shall notify the European Council of its intention.” “The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification” Brexit vote: 23 June 2016 Notified on 29 March 2017

Agreeing with the EU will not be easy Assuming the UK is willing to make compromises, it is far from certain that the EU will be willing or able to accept the UK’s concessions Willing: Brexit may be the biggest issue in the UK right now, but preserving the EU is the main concern of the EU27. Brexit is only one of the EU’s problems: Turkey, French elections, the new Trump world order, the public’s distrust of the EU institutions, Hungary, Poland, etc. Most, if not all the EU Member State want to protect the EU, at all costs Many red lines: four freedoms are indivisible, the EU market is very valuable and non EU members have to pay to have access to it, the UK has to pay what it committed to pay then we talk, etc. Able: The EU’s internal rules make it unlikely that the required majorities will be met

Let’s agree with the EU What does it take to have the EU agree? It depends: Most of the time, a qualified majority (QM) of the member states in the Council (15 MS, 65% of the population) + a simple majority of the MEPs is needed Sometimes, a reinforced qualified majority (RQM) of the Member States of the Council (20 MS, 65% of the population) + a simple majority of the MEPs is needed For mixed competences, a ratification by the parliament of all 27 MS is necessary, in addition to QM Mixed competence: a competence shared between the EU and the Member States  the scope is not settled. It will be when the Court of Justice adopts its Opinion in procedure 2/15 EU-Singapore FTA (before this summer)

“Who do I call if I want to speak to Europe?” Make sure that you speak to Michel Barnier, chief negotiator of the European Commission Please do not forget to talk to Guy Verhofstadt (please don’t) Stay in touch with the 27 Member States in the Council. Didier Seeuws Stay away from 27 Member States individually at first

Negotiation schedule and voting rules Withdrawal from the EU Within two years (29 March 2019) Reinforced qualified majority Transitory agreement Before the withdrawal from the EU (29 March 2019) QM + possibly ratification by 27 member states’ parliaments A new trade agreement When the UK and the EU agree on a text that is ratified by all the Member States parliaments, approved by a majority of the MEPs and approved by a qualified majority of the Member States governments in the Council of the EU In ten years, ever?

Negotiations will be long and difficult Even if agreed, the withdrawal agreement is about turning the UK into a third country. It’s hard Brexit. Moving EU agencies to the mainland, situation of EU citizens in the UK, enabling flights from the UK, etc., etc., etc. There may or there may not be a transitional agreement A transitional agreement will require the UK and the EU to agree early on that the EU should be replaced by a new free trade agreement, and agree on the general direction and form that this new FTA should take A transitional agreement will have to be approved by a standard qualified majority (Italy, Spain, France and Portugal can block it) A transitional agreement will have to be concluded extremely quickly, by the end of March 2019 There will be no time to negotiate anything substantially different from what already exists

Negotiations will be long and difficult (continued) If the parties agree that the future relationship should be deep, by necessity the transitional agreement will have be something like the EU: Minus the right to vote (for MEP, in the Council, in committees) Minus the right to send UK citizens and representatives to the European Commission and other institutions With the obligation to pay for the right to access the single market and contribute to the EU budget (end of the rebate?) With the obligation to continue the free movement of all EU workers (four freedoms are indivisible) With the obligation to accept the jurisdiction of the CJEU To the extent that it includes mixed competences, ratification of all the Member States would be required, in addition to a majority of the MEP and a qualified majority in the Council So many things can go wrong

Negotiations will be long and difficult (continued) If the parties cannot agree on the continuation of substantially all of the EU rights and obligations for the UK, a fall back option could be to agree to continue the customs union, first on a temporary basis, possibly permanently A customs union would make it possible to trade goods without customs formalities and border controls. A customs union would make it a lot harder (but not necessarily impossible) for the UK to conclude its own free trade agreements (see Turkey) A customs union would not require the ratification by all Member States’ parliament, only a qualified majority in the Council and majority in the Parliament Probably something the UK could agree to. But would the EU? Under what conditions? Preventing the UK to conclude its own FTAs probably. Would that be acceptable to the UK? A transitional agreement would be in place during the negotiations of the FTA So many things can go wrong

Hope for the best, prepare for the worst As said: so many things can go wrong Impossible to divide and conquer: (nearly) all Member States have to agree + the absence of agreement between the UK and the EU means hard (and possibly disorderly) Brexit Operators should assume that as of 29 March 2019: Goods crossing the EU-UK border will be subject to customs duties and controls The UK will cease to be a gateway to Europe. But servicing and supplying the UK market from the EU could be harder too Expect delays at the border. Facilitation procedures exist (e.g., Norway-Sweden border) Greater impact by UK operators on the UK customs rules than before

The UK and the WTO The UK is a WTO member. But the UK does not have its own ‘schedule of concessions’: bound tariff rate, quotas As a WTO member, the UK has the same rights as any other WTO member: it can benefit from the Most Favoured Nation (MFN)’s duty, it can be targeted by trade remedy investigations only under the rules of the WTO ADA and WTO ASCM etc., etc., etc. As a WTO member, the UK has the same obligations too. Problem: without its own schedule of concessions, it is not clear what they are

The UK and the WTO (continued) But the UK would run into trouble in the WTO only if another WTO members successfully claims before the Dispute Settlement Body of the WTO that any benefit accrued under the WTO was nullified or impaired as a result of Brexit One hypothetical scenario of nullification or impairment of a benefit: if the UK adopts an external tariff higher than the EU’s. But why would it? Very concrete risk: the EU’s quotas. How to allocate them? Any WTO member feeling that its exports have suffered because of Brexit could seek remedy in Geneva

The UK and trade remedies UK industries today are protected, or hurt by EU anti-dumping and anti-subsidy measures The UK is building its own trade remedy capabilities and should be able in March 2019 to initiate its own investigations What to do with existing EU measures benefiting the UK economy on 30 March 2019. E.g., anti-dumping duties against imports of steel products Could the UK take over some of the EU’s trade remedies? WTO law is silent about this situation Could the UK consider that it is legitimate to continue those of the EU’s measures that benefit the UK economy, and review those measures one after the other, for instance when they are due to expire? In case of dispute: WTO settlement procedure. Takes at least 3 y.

Thank you Yves Melin https://www. linkedin Thank you Yves Melin https://www.linkedin.com/in/yves-melin-292a361/ +32 473 975 027 The Alliance of European Customs and Trade Law Firms A team of 49 Trade and Customs Lawyers in Brussels and 12 European Countries www.greenlane.eu