Brexit is back! European Commission issues Communication on readiness for end of transition period
28 July 2020
After a few months where organisations’ attention has been diverted by the coronavirus pandemic, the deadline for an extension to the Brexit transition period has passed without one being agreed and the UK will leave the EU Single Market and customs union from 1 January 2021.
The European Commission has now adopted Getting ready for changes: Communication on readiness at the end of the transition period between the EU and the UK. It will apply whether or not the UK and EU come to an agreement on trade before the end of this year and covers various areas which will be of interest to commercial and technology lawyers.
The areas covered by the Communication include, among other areas, trade in goods and services (including audiovisual services), contractual jurisdiction clauses and IP. Its aim is to ensure that organisations are prepared for the UK leaving the EU and the transition period ending at the end of 2020.
Trade in goods
The changes in the Communication will not apply to trade between the EU and Northern Ireland: the Protocol on Ireland and Northern Ireland will apply after the transition period, alongside any agreement on a future partnership. Under that Protocol, EU rules will continue to apply to and in Northern Ireland.
The Communication sets out the changes that will apply to trade in goods after the transition period ends, including customs formalities, checks and controls; customs and taxation rules for import and export of goods; and certificates, authorisations, establishment rules, labelling and marking.
Trade in non-financial services
As of 1 January 2021, the freedom of establishment and the freedom to provide services, as provided for by the EU treaties, will no longer benefit individuals and businesses from the UK operating in the EU or EU individuals and businesses operating in the UK. Authorisations granted by UK authorities under the EU Single Market framework will no longer be valid in the EU as of 1 January 2021.
To access the EU market, UK service providers and professionals established in the UK will need to demonstrate compliance with all relevant EU rules, procedures and authorisations, and vice versa. Those rules may be set out in national or EU law, but will also depend on commitments under the World Trade Organization's General Agreement on Trade in Services, and also by any future relationship agreement between the UK and EU.
As of 1 January 2021, businesses established in the UK will no longer be able to benefit from the country-of-origin principle under the Audiovisual and Media Services Directive. As a result, UK-based audiovisual media service providers will need to comply with each of the rules of the relevant Member State in which they would want to provide their services. Audiovisual media service providers established in the UK and supplying audiovisual media services to the EU should take the necessary measures to ensure compliance with each of the national regimes where they intend to provide services. EU providers wishing to supply services in the UK will need to abide by UK rules.
Contractual jurisdiction clauses
As of 1 January 2021, EU rules facilitating the cross-border recognition and enforcement of judgements in the EU and in the UK during the transition period will no longer apply. If the UK accedes to the 2005 The Hague Convention on Choice of Court Agreements in its own right after the end of the transition period (as is planned), the Convention would only apply to the recognition and enforcement of judgments given by courts designated in exclusive choice of court agreements concluded after the UK has become party to the Convention. Therefore, for the time being, the recognition and enforcement of UK judgments will be governed by the national rules of the Member State in which recognition/enforcement is sought. All businesses are advised to consider this situation when assessing contractual choices of international jurisdiction. Businesses should be aware that judgments handed down by a UK court might not be as swiftly enforceable in the EU compared to now.
As of 1 January 2021, traders in the EU can no longer invoke exhaustion vis-à-vis right-holders when sourcing products from the UK. Businesses engaged in parallel trade from the UK should re-visit their business arrangements.
In addition, as of 1 January 2021, while existing EU unitary intellectual property rights (EU trademarks, Community designs, Community plant variety rights and geographical indications) remain protected under the Withdrawal Agreement, any new EU unitary rights will have a reduced territorial scope as they will no longer have effect in the UK. Organisations should take the necessary measures to ensure protection in the UK of future intellectual property rights, where relevant.
.eu domain names
As of 1 January 2021, businesses that are established in the UK, but not in the EEA, and UK residents who are not EU citizens, will no longer be eligible to register or hold .eu domain names. If they are not able to demonstrate their continued eligibility to be holders of .eu domain names, their domain names will be withdrawn after the end of the transition period. However, EEA citizens resident in the UK will be able to hold .eu domain names, or register new ones, beyond the end of the transition period.
The Communication is likely to be one of many guidance notes and stakeholder notices – we will report on these as they are published.