A Summary and Overview of the EU-UK Trade and Cooperation Agreement

Introduction

Starting January 1, 2021, the UK-EU relationship transitioned from the Brexit withdrawal agreement to a new framework. This new framework relies partly on the existing withdrawal agreement and partly on the newly established Trade and Cooperation Agreement (TCA). It’s important to note that two additional agreements, concerning security information and Euratom, were also established.

This piece provides a summary of the TCA, drawing from initial observations. It is not intended to be a complete analysis of every aspect of the agreement. More detailed examinations of specific provisions will follow. A previous analysis on this blog examined the social security aspects. Links to additional resources about the treaty are included at the end of this post.

Basic Legal Aspects

The EU and UK have decided to implement the TCA provisionally, a common practice in international law, with an end date of February 28, 2021. However, this date is subject to change by mutual agreement within the Partnership Council, which consists of representatives from both the EU and UK. This allows the European Parliament time to review the treaty before granting its consent. The UK Parliament, on the other hand, has already adopted the EU (Future Relationship) Act to give the treaty domestic legal effect. For the EU, some elements of implementation are included in the Council decision on signing.

It is noteworthy that the treaty is solely between the EU and the UK, unlike many other agreements that involve the EU, its Member States, and a non-EU country. This characteristic is further highlighted in statements from various EU institutions and Member States made during the treaty signing, classifying it as an ‘association agreement’ from the EU perspective. The current version of the treaty is considered provisional and will be replaced with a finalized text by the end of April 2021.

A number of joint declarations accompany the treaty, including one suggesting potential bilateral discussions between the UK and individual Member States regarding the return of non-EU citizens. This suggests that the EU did not agree to the UK’s proposals on readmission or child asylum seekers. Additionally, it confirms that the UK is no longer subject to the Dublin system for determining responsibility for asylum seekers. Consequently, the UK government’s assertions that Brexit would simplify the process of returning non-EU citizens to the EU have proven inaccurate; the process is now more complex. The joint declarations also include the finalized text of a protocol outlining UK involvement in specific EU programs, primarily research-related, with the addition of a peace program for Northern Ireland.

The agreement includes provisions for termination by either party with 12 months’ notice, as well as numerous provisions for the termination or suspension of specific parts of the agreement. This differs from the withdrawal agreement, which only includes provisions for terminating the Northern Ireland protocol and not the entire agreement. A common misconception is that the entire TCA automatically ends if the UK withdraws from the European Convention on Human Rights (ECHR). This is false. However, either party could choose to terminate the criminal law section of the treaty using an expedited process if the UK or an EU member state withdrew from the ECHR.

While the UK will be consulted on new EU applicant countries, this does not equate to veto power. Therefore, the UK could not, for example, prevent Scotland from joining the EU. The agreement allows for modifications in response to EU expansion, a common occurrence in agreements between the EU and non-EU countries when a new member joins. However, there are no provisions addressing scenarios like multiple countries leaving the EU, the UK dissolving, or a combination of both. Regarding the potential dissolution of the UK, it’s important to note the CJEU’s adaptable stance on the international legal principle of treaty succession. It cannot be presumed that there wouldn’t be a successor to the UK, at least in the context of the TCA.

A brief transition period, potentially lasting four to six months, is in place for data protection, during which the UK remains fully under EU data protection law, provided it doesn’t substantially modify its own laws in this area. This gives the EU Commission time to assess the possibility of an adequacy decision that would facilitate data transfers between the EU and the UK.

Concerning the agreement’s territorial scope, specific elements apply to the Channel Islands and the Isle of Man. However, it does not address the UK’s overseas territories, a point later confirmed by the UK government. Negotiations for a separate treaty with Gibraltar were ongoing and reportedly reached a preliminary agreement on New Year’s Eve.

The TCA operates under the fundamental principles of international law, with no direct individual rights except for social security and, from the EU perspective, criminal law provisions. Notably, the CJEU is only involved in litigation related to EU programs. In both respects, the TCA differs significantly from the withdrawal agreement.

Economic Cooperation

Part Two of the TCA establishes a free trade area for goods and services in line with the WTO, with WTO case law considered where relevant. However, a free trade agreement does not provide the same level of integration as participation in the single market.

For trade in goods, the primary rules include zero tariffs (with the possibility of customs charges), non-discrimination in taxation and regulation, and freedom of transit. The last two principles are derived from WTO law. The prohibition on quotas also originates from WTO law. Both parties retain the right to implement trade remedies, including anti-dumping duties (a purely economic concept distinct from “social dumping” addressed below as part of the “level playing field”), anti-subsidy duties, and economic safeguards. These provisions are standard in free trade agreements.

The agreement includes extensive details on rules of origin, crucial for determining the origin of a good as either the EU or the UK. These rules are necessary due to the UK’s exit from the customs union. A temporary simplification measure is in place. Contrary to a misleading statement made by the Prime Minister in Parliament, tariff-free access to each other’s markets is contingent upon adhering to these rules of origin, as corroborated by the UK government’s own information.

The agreement sets out comprehensive rules regarding sanitary and phyto-sanitary measures, including a commitment to animal welfare. Additionally, several provisions address customs cooperation and technical barriers to trade.

While it’s incorrect to claim that the treaty completely ignores services, its scope is undoubtedly less extensive than that of the single market. Audio-visual services and specific transport services are excluded. The treaty includes rules governing the entry of various types of business visitors, subject to detailed definitions and conditions. Currently, there is no agreement on recognizing professional qualifications. However, this topic may be revisited in the future. It’s worth noting that the withdrawal agreement ensures the recognition of qualifications for those who already possess it or applied for it before the end of 2020.

The TCA includes specific provisions for certain services, including telecommunications, delivery services, and legal services. However, there are limited provisions for financial services, and the text concerning mobile roaming permits charging.

Regarding intellectual property, the TCA establishes detailed obligations based on WTO law for various types of intellectual property. However, this differs from being an EU Member State, as the detailed EU laws on numerous specific intellectual property rights, which are frequently litigated at the CJEU, will no longer apply to the UK. The agreement also includes specific sections dedicated to public procurement and energy.

Concerning the “level playing field,” which aims to ensure fair competition between the UK and EU, the TCA adopts different approaches across different areas. In the area of competition law, both parties are obligated to maintain and enforce a system, but there is no mechanism for dispute settlement. On State aid and subsidies, the agreement represents a compromise, falling short of the EU’s preference for full application of EU law (including references to the CJEU) but exceeding the UK’s desire for a simple statement of basic rules. The agreement outlines basic principles on subsidies, which are further elaborated upon. Regarding enforcement, both parties must provide access to courts and maintain an independent enforcement body. Remedies must include the recovery of any improperly granted subsidies. In case of disagreements over a subsidy, a fast-track retaliation mechanism is in place. This mechanism includes fast-track arbitration but limits the scope of what arbitrators can review.

For taxation, the TCA includes a vague reference to international standards, a more concrete standstill clause, but no provisions for dispute settlement. The agreement establishes broadly applicable obligations for employment law, including a non-regression clause. This clause activates if a party lowers its standards in a way that might affect trade or investment. This threshold is less stringent than the one used for evaluating divergences in future legislation. The TCA also mandates effective enforcement of labor laws. While a specific dispute resolution process applies to the non-regression obligation, it still includes the potential for retaliatory measures (such as tariff increases) in case of a breach.

The level playing field rules for environmental law are comprehensive, including a specific definition of climate change. The non-regression rule functions similarly to the one for employment law, while the rule for domestic enforcement is less specific. However, the possibility of retaliation remains the same. General commitments to international principles of labor and environmental law are also present, but they lack any provisions for retaliatory measures.

Concerning discrepancies in future legislation relating to labor, the environment, or subsidy control, the threshold for retaliation is a “significant divergence” that has a “material impact on trade or investment.” It is not implied that this equates to a “material breach” of the treaty, which would then invoke the general rules of international law regarding treaty termination.

The agreement provides detailed rules for air and road transport, as well as fisheries. It also includes a protocol on social security. The provisions related to tourist visas refer to matching unilateral visa waiver programs for short-term visits.

Criminal Law Cooperation

The foundation of Part Three of the treaty rests on upholding human rights, encompassing the ECHR, and data protection standards. Enforceability is ensured through either a general power to terminate the criminal law section with nine months’ notice (on any grounds) or an expedited termination option if the UK or an EU member state withdraws from the ECHR or its first, sixth, or thirteenth protocols (pertaining to the abolition of the death penalty). This section can also be temporarily suspended based on concerns related to human rights, the rule of law, or data protection. Instead of arbitration, a purely political dispute settlement process is used for the entire criminal law section.

Regarding specific rules, the UK will continue to participate in data exchanges on DNA, fingerprints, vehicle registration, passenger name records, and operational information. Cooperation will also continue with Europol and Eurojust, extradition, transfer of evidence, anti-money laundering efforts, and asset freezing and confiscation measures.

Dispute Settlement Rules

The general dispute settlement provisions broadly mirror those of the withdrawal agreement, albeit with some variations. One notable difference is the absence of CJEU involvement, both directly (except for EU programs) and indirectly (e.g., arbitrators referring questions about EU law to the CJEU). Certain areas are excluded from dispute settlement, and there are variations in the rules (some discussed above).

Typically, disputes are addressed through consultation. If parties cannot reach an agreement, the dispute proceeds to arbitration. Arbitrators then issue a ruling (with tighter deadlines for numerous issues compared to the withdrawal agreement). If a party is found to have violated its obligations, it is given a timeframe to rectify the breach, with arbitrators potentially determining this timeframe. If the issue is not resolved within the given time, the parties can either agree on compensation or suspend specific obligations. This retaliatory action cannot be applied to social security or visa regulations. Retaliatory measures under the TCA are also possible for violations of the withdrawal agreement. Any suspension of obligations must be proportionate, and arbitrators can rule on this proportionality (meaning suspending the entire treaty in response to a labor standards divergence, for instance, would be deemed disproportionate). Cross-retaliation (e.g., suspending services obligations in response to a violation of goods rules) is permitted with certain limitations.

Comments

It’s evident that the full impact of the TCA, in comparison to EU membership, remains to be seen. While certain aspects of EU membership (such as zero tariffs) are preserved, new trade barriers have undoubtedly arisen. The UK’s relationship with the EU now operates within an international law framework, without the CJEU’s involvement (excluding the closer relationship within the scope of the withdrawal agreement). This fundamental trade-off between market access and moving away from EU integration lies at the heart of this new agreement.

Despite the UK’s departure, some connections and avenues for dispute resolution remain. While the EU typically resolves trade disputes with other countries politically (except within the WTO), the UK might prove different given the range of obligations, the scale of the trade relationship, and the often-contentious political landscape. The treaty offers numerous paths that could lead to a further unraveling of the relationship. These paths include not just retaliation through dispute settlement, but also the numerous suspension and termination clauses scattered throughout the agreement. Simultaneously, it presents opportunities for the UK to join a “faster lane” of association with the EU by strengthening the relationship. Only time will tell which direction the EU-UK dynamic will take.

Further Reading:

This section lists various resources, such as articles and analyses by experts and organizations, offering further insights into specific aspects of the TCA. These areas include sectoral industry impact, fisheries, extradition, sovereignty, services, social security, employment law, subsidy control, security cooperation, Northern Ireland, customs, the car industry, and more.