Overview
On November 14, Prime Minister Theresa May announced that the Cabinet of the UK Government had formally agreed upon two key Brexit texts:
- a “Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community,” (“the Withdrawal Agreement” of 585 pages); and
- an agreement on the “Outline of the Political Declaration Setting Out the Framework for the Future Relationship between the EU and the UK” (“Future Relationship Declaration,” a mere 8 pages).
These texts may define the practical impact of Brexit for companies operating in and accessing the EU market – but only if the texts are approved by the:
- leaders of the EU-27 member states (at a forthcoming European Council summit, which is currently scheduled for November 25),
- House of Commons of the UK Parliament[1], and
- European Parliament[2].
It cannot be assumed that this will happen. At the time of writing this Steptoe Brexit Briefing, several ministers have resigned from the UK government in protest, including the recently appointed Brexit minister Dominic Raab. These texts are the only tangible result of the EU-UK negotiations to date and, most likely, the only basis for a scenario other than no-deal.
In practical terms, (i) UK operators exposed to the EU-27 market, (ii) EU-27 operators exposed to the UK market, and (iii) operators established outside the UK and the EU-27 and exposed to either market need to:
- understand the impacts of these texts on their operations and prepare to (re)structure them accordingly; and
- prepare for a possible no-deal scenario.
Both actions are required to minimise the risk of an interruption to operations and ensure continued market access. This briefing focuses on issues for operators in the Environment and Life Sciences sector. There are no measures in the Withdrawal Agreement which mitigate the regulatory consequences of the fact that the UK will become a third country (like the US or China). Companies need to implement a proactive Brexit compliance strategy if they have not already done so. Reliance on two Brexit texts - alone - will be insufficient to continue business as usual. Active management is required.
Timelines
The Withdrawal Agreement envisages that:
- the UK would withdraw from the EU on March 30, 2019 (the “entry into force” date);
- EU law would continue to apply during a “transition or implementation period” to “avoid disruption” - unless specifically provided otherwise in the withdrawal agreement[3] - . This transition would end on December 31, 2020[4] unless extended once (before July 1, 2020) for an unspecified time period[5]; and
- a Future Relationship Agreement - which remains to be negotiated after the withdrawal - would come into effect at the end of the transition period.[6]
UK’s Future Role
At the end of the transition period, the UK will be deprived of access to EU networks, information systems and databases[7]. With immediate effect, from the date of entry into force of the Withdrawal Agreement, i.e. from March 30, 2019, the UK will “…not act as leading authority for risk assessments, examinations, approvals or authorisations at the level of the Union or at the level of Member States acting jointly…”[8] as referred to in a list of EU acts[9] on:
- Biocides
- Chemicals (REACH)
- Classification Labelling and Packaging of chemicals
- Clinical trials on medicinal products for humans
- Feed
- Genetically Modified Organisms and GM food and feed
- Invasive alien species
- Medicinal products, their residues and pharmacovigilance
- Nutrition and health claims
- Organic product imports
- Plant Protection Products and their MRLs
- Plant variety rights
- Ship inspection and surveys
The UK will cease to (i) play a decision-making role in, or (ii) participate in key decision-making bodies. This is significant because the UK has always played an important role in contributing to the work of EU bodies and agencies such as the European Chemicals Agency (ECHA) and the European Food Safety Authority (EFSA). It has also carried a significant portion of the work as an evaluating authority under various regimes in the Environment and Life Sciences sector, and in the various comitology committees which adopt essential implementing measures.
This means, in particular, that ongoing work will have to be transferred to EU-27 member states. (See, as only one example of this, our recent Biocides & Brexit Update of September 24, 2018). The Withdrawal Agreement expressly envisages the transfer of files and documents relating to ongoing procedures in relation to “assessments, approvals and authorisations ongoing on the day before the date of entry into force” of the Agreement, where “led by a United Kingdom competent authority”, under the Biocidal Products Regulation, Plant Protection Products Regulation, and Directives on medicinal products for human use and veterinary use.[10] There are also express rules on the making available of information in relation to past authorisation procedures for medicinal products[11] and information held by notified bodies (when acting on conformity assessment) established in the United Kingdom or in a Member State[12].
Rights & Remedies
The Withdrawal Agreement is designed to have teeth. Natural and legal persons will be able to “rely directly on”[13] its provisions and it will be applied by the UK’s judicial and administrative bodies. For example, the provisions of the Withdrawal Agreement referring to Union law or its concepts or provisions will be “interpreted and applied in accordance with the methods and general principles of Union law” and their implementation and application will “be interpreted in conformity with the relevant case law of the Court of Justice of the European Union handed down before the end of the transition period”.[14] Even after the transitional period, the UK’s judicial and administrative authorities will “have due regard to relevant case law of the Court of Justice of the European Union handed down after the end of the transition period.”[15]
Furthermore, the CJEU will continue to have jurisdiction “in any proceedings brought by or against the United Kingdom before the end of the transition period” (including for appeal proceedings before the Court of Justice and proceedings before the General Court where the case is referred back to the General Court). The CJEU will also continue to be able to give preliminary rulings on requests from national courts made before the end of the transition period.[16] So the influence of the EU legal regime - through interpretative principles and binding[17] judgments - will continue to be felt in the Environment & Life Sciences sector.
Future Relationship Declaration
We know very little about what will happen after the transition period. However, some key principles have been agreed which are relevant for the Environment and Life Sciences sector:
- The UK will not transform itself into a low regulation jurisdiction. In order to ensure that competition between the UK and EU-27 remains “open and fair,” “environmental standards, climate change” and a range of other areas will maintain a regulatory “level playing field.”
- Cooperation will remain on issues such as “climate change, sustainable development, cross-‐border pollution.” The UK and EU-27 have expressly underlined in the Future Relationship Declaration their “commitments to international agreements to tackle climate change.”
The goal is to undertake rapid negotiations, in order to have a new legally binding relationship in place by the end of 2020. Time will tell as to whether that is realistic.
Building a Brexit Strategy
Companies need to implement a proactive Brexit compliance strategy as a matter of urgency. This should start with an analysis of their exposure to Brexit challenges by reviewing their supply chain. For example:
- identify the UK established and EU-27 established manufacturers or importers in their supply chain;
- quantify their exposure to the UK and EU-27 markets;
- identify which of their EU-27 and UK regulatory compliance systems currently rely upon a UK legal entity or EU-27 legal entity;
- assess the extent to which regulatory compliance functions (registration and authorisation holders, only representatives under REACH etc.) can be transferred to a new legal entity and do so promptly, where possible);
- identify approval and authorisation dossiers which will need to be transferred to a new EU-27 member state authority for evaluation;
- seek binding undertakings that Brexit solutions are in place from actors in their supply chain and be prepared to reply to similar requests from their own customers; and
- review and re-negotiate contracts affected by Brexit (such as supply agreements, data sharing agreements, Only Representative Agreements under REACH etc.) and incorporate Brexit provisions in any new contracts.
Time is of the essence.
[1] The UK ratification process will entail, amongst other things, a “meaningful vote” on the text and additional scrutiny under the Constitutional Reform and Governance Act 2010 (“CRAG”). The UK would also need to adopt the EU (Withdrawal Agreement) Bill, which would give the Withdrawal Agreement effect within the UK’s domestic legal system.
[2] The European Parliament would vote by a “simple majority of the votes cast”.
[3] Article 127.
[4] Article 126.
[5] Article 132.
[6] Preamble.
[7] See Article 8.
[8] Article 128(6). Article 128(5) provides for a limited ability for the EU to invite UK participation in comitology procedures, on specific items in narrowly defined circumstances, without retaining any voting rights.
[9] Annex VII.
[10] Article 44.
[11] Article 45.
[12] Article 46.
[13] Article 4(1). Where they meet the conditions for “direct effect” under EU law. This principle enables individuals to invoke a European provision before a national or European court. It relates to certain EU acts and is subject to conditions: the obligations must be precise, clear and unconditional and must not call for additional measures, either national or European.
[14] Article 4.
[15] Article 4(5).
[16] Article 86.
[17] Article 89.
