EU and United Kingdom agree on Brexit withdrawal agreement
On Sunday, 25 November 2018, the governments of the United Kingdom and the remaining 27 EU Member States reached agreement on the treaty spelling out the conditions for the United Kingdom’s withdrawal from the European Union ("Withdrawal Agreement"). The United Kingdom made its formal application for withdrawal on 29 March 2017 and thus will no longer be a member of the club of states after 29 March 2019 according to Art. 50 of the EU Treaty.
The Withdrawal Agreement, almost 600 pages long including its protocols, is intended to make it possible for the United Kingdom to withdraw from the customs union, the internal market and the political and administrative institutions of the European Union in an orderly manner. The British Parliament will vote, on 11 December 2018, on whether the Agreement will enter into effect. In light of the current political situation in the United Kingdom, ratification is anything but a sure thing.
Transition period with continued effect of Union law in the United Kingdom
During the transition period for the orderly withdrawal, initially set to last until 31 December 2020, the United Kingdom will remain bound by all aspects of EU law including the fundamental freedoms, by the enforcement authority of the EU institutions and by the jurisdictional authority of the European Court of Justice (ECJ), and it will remain obliged to make its EU financial contributions. At the same time, the United Kingdom will lose all of its voting rights, representations and posts in the institutions of the EU. The Common Security and Defence Policy, the Common Foreign and Security Policy and cooperation in Justice and Home Affairs also remain applicable.
The Withdrawal Agreement grants all citizens of the EU who live in the United Kingdom and all UK citizens who live in one of the remaining EU Member States a lifelong right to stay there as long they make this decision before the end of the transition period. This right includes the upholding of almost all of the economic, social and occupational rights to which they were entitled under EU law.
The ECJ retains jurisdiction over all proceedings related to the United Kingdom that were pending at the ECJ before the end of the transition period until the ECJ has reached a final decision in the matter.
Important rules for regulated industries and public funds
For businesses that operate in regulated industries or collaborate with public entities, the Withdrawal Agreement's provisions for ongoing public procurement and ongoing administrative procedures are of special significance (particularly Art. 75 et seq. and Art. 92 et seq. of the Withdrawal Agreement).
One significant aspect relates to ongoing public procurement procedures. The Agreement provides that public procurement procedures pending before the end of the transition period will be also completed according to the currently applicable procedural and substantive Union law governing public procurement procedures. The same applies to administrative procedures related to competition.
Another significant aspect is that the Agreement contains important provisions regarding state aid law. State aid procedures related to the United Kingdom or to natural or legal persons in the United Kingdom that have been initiated before the end of the transition period by Union institutions, bodies, offices or agencies will be handled according to Union law even after the transition period ends. The Agreement also provides for a scrutiny period for state aid. In respect of aid granted before the end of the transition period, for a period of four years after the end of the transition period, the European Commission will be competent to initiate new administrative procedures on state aid.
Effect and monitoring of the Withdrawal Agreement
In conformity with the provisions of Union law, the Withdrawal Agreement is directly applicable and has primacy in application. Matters in dispute regarding the application and interpretation of the Withdrawal Agreement will first be brought to a political solution before a common committee. If the proceedings prove inconclusive, matters of dispute will be submitted to arbitration binding on both parties. The arbitration panel can – and must, in the case of issues regarding Union law – refer the decision regarding the matter in dispute to the ECJ. Violations of the Withdrawal Agreement are punishable by a fine.
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Any questions? Please contact: Dr. Holger Schmitz; Dr. Carl-Wendelin Neubert
Practice Group: Regulatory & Governmental Affairs