Unfinished Business: The Trade and Cooperation Agreement
Concluding the Trade and Cooperation Agreement (TCA) was a significant achievement under the circumstances, given limited time and the impact of the Covid pandemic. But, despite claims to the contrary, not everything was done and dusted when the transition period came to an end on 1 January 2021. The TCA itself applied provisionally at first and only entered into force on 1 May 2021 once the EU had completed its internal ratification procedure. Some areas still required decisions to be taken. In others, the Agreement provides for transitional arrangements, grace periods, and reviews. In addition, each of the two parties also took unilateral measures to make the introduction of new arrangements smoother than they otherwise would have been.
The Specialised Committees set up by the Agreement provide a forum for discussion between the UK and EU on some issues. Just over one year since the entry into operation of the TCA, these are up and running. But in some areas decisions or implementation are pending and in others there have been further extensions.
Decisions left pending by the TCA
In two key areas, the European Commission was left to decide whether UK rules were satisfactory.
Data protection: The TCA provided for a grace period of six months when data could continue to be transferred from the EU to the UK. On 28 June 2021, two days before the grace period came to an end, the European Commission adopted adequacy decisions for the UK’s data protection regime. Personal data can now flow freely from the EU to the UK, where it benefits from an essentially equivalent level of protection to that guaranteed under EU law. Nevertheless, the adequacy decisions include strong safeguards in case of future divergence, including a four-year ‘sunset clause'. In June 2025, the EU will reassess whether or not to continue the arrangement.
Financial services: Although this sector was not included in the TCA, in a non-binding Joint Declaration attached to TCA the parties committed to future regulatory cooperation, underpinned by a Memorandum of Understanding (MoU) to be agreed by March 2021. The parties duly agreed a MoU, but have not yet signed it. The Joint Declaration also referred to discussing, among other things, how to move forward with equivalence determination. In autumn 2020, the UK granted EU and EEA countries equivalence in 18 sectors, but the EU adopted only two, both of which are time-limited. The UK had hoped that the EU would grant equivalence for other sectors in early 2021. To make matters worse, equivalence on Central Securities Depositories (CSDs) expired on 30 June 2021. However,in November 2021, the European Commission announced that it would extend equivalence for eurodenominated transactions cleared by UK-based Central Counterparties (CCPs) beyond 30 June 2022. On 8 February 2022, the European Commission adopted a decision to extend equivalence for UK CCPs. But this is time-limited – it expires on 30 June 2025 – and is motivated primarily by concern for the EU’s short-term financial stability. While the UK has now granted equivalence to a further ten areas, so that 28 areas are covered in total, it is clear that the EU does not intend to grant any other equivalence decisions to UK financial services for the time being.
Grace periods
In some areas, measures were agreed in the TCA, but would only come into effect at a later date. Checks on the rules of origin came into force on 1 January 2022.
Decisions provided for, but as yet not taken[*]
Other measures foreseen in the TCA have not been finalised in a number of important areas. In energy, the Specialised Committee has not yet developed the guidance on the working arrangements and frameworks for cooperation for dissemination to transmission system operators, defined as a ‘matter of priority’ in the TCA (Art 317). In 2021, the Committee still had not completed Annex 19 with the technical guidance for operators, to the evident frustration of the UK representatives. In addition, the forum for technical discussions on an offshore grid development to investigate the potential for offshore renewable energy of the North Seas region (Art 321) is still being set up, even though the parties have started discussions on a Memorandum of Understanding.
In consumer protection, although the TCA invited the Partnership Council to ‘use its best endeavours’ and ‘as soon as possible and preferably within six months’ (Art 96.4) to take action on market surveillance and on non-food product safety and compliance, the parties had not yet established an arrangement for the regular exchange of information in the Rapid Alert System for non-food products (RAPEX) by the end of 2021. The UK has expressed its disappointment at the delay.
Furthermore, Part V of the TCA addresses UK participation in EU programmes. A draft protocol, which lists the Programmes in which the UK will participate and the scope of its participation, is yet to be finalised and adopted by the joint EU-UK Specialised Committee on Participation in Union Programmes. Formal association will be time-limited. The UK has been vocal about its worries and emphasised the EU’s obligation under the TCA to adopt the Protocol. The European Commissioner responsible for Research and Innovation has stated that the EU is waiting for “transversal” political issues (Protocol on Ireland and NI) to be resolved before it moves forward with association talks. Early 2022, this had not yet been finalised.
On state aid, the UK is still in the process of formally establishing an operationally independent authority with an appropriate role in its subsidy control regime (Art 371.1). The UK’s Bill on Subsidy Control was still being discussed in Parliament in January 2022. It establishes the Subsidy Advice Unit, located within the Competition and Markets Authority, to provide monitoring and oversight of the new regime.
Transitional arrangements
In other areas, the TCA included time-limited measures to ease the transition. In Law Enforcement and Judicial Cooperation (data exchange), the TCA includes the possibility for reciprocal cooperation between the competent law enforcement authorities on the automated comparison of DNA profiles, dactyloscopic data and vehicle registration data (Art 530). But the UK is required to take the necessary implementing measures and undergo an evaluation to be able to continue to take part in the so-called Prüm Agreement. To avoid a gap in ongoing cooperation, the TCA stipulates an extension of the automatic exchange of data pending the outcome of evaluations required by the TCA until 30 September 2021. This interim period can be extended once by a maximum of nine months, i.e. until 30 June 2022, by the Specialised Committee on Law Enforcement and Judicial Cooperation (Art 540). In September 2021, the EU agreed to an extension until 30 June 2022 and has started the process for the UK’s evaluation.
Regarding Passenger Name Record (PNR) data of passengers, the EU agreed to extend until 31 December 2022 the initial one year interim period during which the UK may derogate from the obligation to delete PNR data of passengers after their departure from the UK (Art 552). The TCA provides for a derogation to the requirement on a temporary basis, for an interim period of one year, extendable another year, recognising the special circumstances given that the UK has to make certain technical adjustments in order to transform the PNR processing systems. Extension for one more year, until December 2022 was considered in the Specialised Committee in November 2021 and the TCA Partnership Council agreed by decision on 21 December 2021.
The TCA also includes a transition period for the introduction of rules on local content (rules of origin) for electric accumulators for automotive use and electrified vehicles until the 31 December 2026. This allows for a higher proportion of non-originating materials to be included in these products.
In fisheries, the Agreement sets out new arrangements for the joint management of more than 100 shared fish stocks in EU and UK waters. Pending review, EU fishing vessels will continue to have the current level of access to UK waters during an ‘adjustment period’ of five and a half years and with a gradual and balanced reduction of 25 per cent of EU quotas in UK waters over time until 30 June 2026 (Protocol on Access to Waters). Thereafter, the EU and the UK will hold annual consultations to agree on fishing opportunities and access to waters.
In a roundabout way, however, the TCA links future cooperation on fisheries to continued cooperation on energy. The TCA provides for an adjustment period from 1 January 2021 to 30 June 2026 in the Protocol on Access to Waters during which EU fishing vessels continue to have the same level of access to UK waters as before. After that date, however, access to waters will become subject to annual consultations (Art 500). The 30 June 2026 date coincides with that for the termination of the Energy agreement (Art 331.1), which provides for a renegotiation of that part of the TCA. The energy deal ends by default unless a decision is taken by both sides to extend it. It is not accidental that termination of the part of the agreement covering energy part, which allows the UK far-reaching access to EU electricity and gas markets, an area of particular importance for the UK, coincides with expiry on exactly the same date as the adjustment period regarding fish, a sector of considerable importance to the EU.
Governance and cooperation between the UK and the EU: unfinished business and ongoing business
The TCA provides for ongoing cooperation in many areas. It includes a commitment to continuous information sharing (Art 211 on digital trade or Art 274 on intellectual property rights and intellectual property infringement), transparency (Art 145 on rules about entry and temporary stay of persons for business purposes or Art 369 on making subsidies granted or maintained publicly available on an official website or a public database). It also includes regulatory cooperation in certain areas (Art 273 on intellectual property) and more generally (Art 345 stipulates that the exchange of ‘early information on planned regulatory measures’ should happen at least once a year).
There is also commitment to promote the implementation of electronic certification and other technologies to facilitate trade, for instance on Sanitary and Phytosanitary (Art 74) and customs (Art 108). The UK and the EU signed up to promote coordination between all border agencies, both internally and across borders, to facilitate border-crossing processes and enhance control (art 104.2). More generally, the TCA includes cooperation in a number of key areas relating to Sanitary and Phytosanitary, including animal welfare and specific diseases (Art 82, 84, 85 and 86).
Continuous technical cooperation is also required in aviation. The Annex on Airworthiness and Environment Certification establishes a technical coordination body, the Certification Oversight Board. The Board is responsible for the reciprocal acceptance and compliance of new airworthiness certificates and monitoring of civil aeronautical products, environmental certificates and testing of civil aeronautical products and of the design and production certificates.
The ten Trade Specialised Committees and eight Specialised Committees are the main forums in which cooperation take place. In some areas – for example, the MoU on Intellectual Property between UK IPO and EUIPO– there is evidence of advanced cooperation. In relation to Sanitary and Phytosanitary, the minutes of the Trade Specialised Committee show that the UK and the EU are in continuous discussion over conditions and procedures for imports of certain goods, certification and technical requirements, and technical cooperation on the management of disease outbreaks. There is also regular work on fisheries. The Specialised Committee is the only to have met twice in 2021 and has also proposed the creation of a working group on fisheries. In February 2022, the EU was finalising its mandate.
The TCA also provides for cooperation between the two sides on setting annual catch limits for quota species (Art 498) and the development of multi-year strategies for conservation and management of stocks for non-quota species (Art 508). The UK and the EU agreed on catch limits for 2022 on 22 December 2021, but without tonnage limits for non-quota stocks in 2022, so that that non-quota stocks will be treated in the same way as in previous years.
Fisheries, however, remain a sensitive area due to complaints from French fishers about licences to fishing vessels and the overhanging threat that the EU will launch an official procedure against the UK for not implementing the TCA. At the end of January 2022, pending fishing licences were still being discussed by the EU27.
In other regards, the day-to-day implementation of cooperation is slower. Although all Specialised Committees have met at least once during 2021, none of the working groups set up under the TCA are up and running, which highlights the challenges that lie ahead in overcoming technical barriers to trade. For example, the Working Group on Organic Products, the Working Group on Motor Vehicles and the Working Group on Medicinal Products have yet to be set up. Furthermore, the UK has expressed disappointment at the slow progress on finalising the UK’s participation in Union programmes – the Specialised Committee was the last to take place and only met late in December 2021. The UK also appears keen to move more swiftly on technical cooperation for electricity, even suggesting the creation of a working group on electricity trading. Finally, the TCA provides for establishing a Civil Society Forum (Art 14) that will meet at least once a year, with operational guidelines for the conduct of the Forum to be adopted by the Partnership Council. But no Forum took place in 2021.
The TCA also provides for adopting supplementing agreements. Supplementing agreements form part of the overall institutional framework (Art 6). This means that, once adopted, they would be subject to the TCA’s governance and dispute settlement provisions unless otherwise stated. The Security of Classified Information Agreement, announced at the same time as the TCA, is the only supplementing agreement adopted so far and is exempt from the TCA’s dispute settlement provisions. A Joint Declaration attached to the TCA states that 'the Parties will exert their best endeavours to complete negotiations on the Security of Information Agreement’s implementing arrangement, as soon as it is reasonably practicable, to allow the Security of Information Agreement to apply’. The TCA included the provision for a separate agreement on cooperation and coordination between competition authorities (Art 361.4). In May 2021, the European Commission made a Recommendation for a Council Decision authorising the opening of negotiations on a supplementing agreement on cooperation and exchange of information in competition matters – discussed at the Council Working party on Competition and the Working Party on the UK.
Finally, reviews built into the TCA also mean that in practice the agreement between the UK and the EU is ongoing business. On Level Playing Field provisions, there is a review mechanism if parties are too frequently having to adopt counter-measures because of divergences that distort trade. In other cases, whole chapters will be reviewed as already underlined in the area of Fish and Energy. In the case of the UK’s participation in Union programmes, formal association is time-limited in line with the multiannual financial framework cycle of the EU. The TCA itself and any supplementing agreements will be reviewed jointly every five years after the entry into force of the Agreement and every five years after that (Art. 776). The TCA can be terminated by either party by written notification through diplomatic channels with 12 months’ notice (Art 779), and more swiftly on human rights and rule of law grounds (Art 700).
Areas that fall outside the TCA
In a number of areas left out of the formal relationship between the UK and the EU, there has been little sign of the UK retaining any of the advantages of membership, either through alternative international agreements or through bilateral agreements.
In judicial cooperation in civil and commercial matters, the TCA was largely silent. Independently of the negotiations on the future Agreement, the UK applied in April 2020 to accede to the Lugano Convention, which would have offered the UK similar provisions on cross border litigation as when it was a member of the EU. But in June 2021, the EU rejected the UK’s application. Potentially this means that commercial parties and individuals, notably on family matters, will have to navigate the requirements of different national regimes on jurisdictional and cross-border enforcement issues. A number of Hague Conventions on Private International Law may facilitate cooperation but they do not replicate the terms of EU membership or of the Lugano Convention.
In asylum and migration, a Joint Declaration attached to the TCA ‘take[s] note of the United Kingdom’s intention to engage in bilateral discussions with the most concerned Member States to discuss suitable practical arrangements on asylum, family reunion for unaccompanied minors or illegal migration, in accordance with the Parties’ respective laws and regulations.’ But there has been no progress. Instead, the tensions between the French and British authorities over the Channel, the humanitarian crisis and the salience of the issue led to a ‘freezing out’ of the British Secretary of State for Home Affairs at a joint meeting of the Belgian, Dutch, French, German and European Commission representatives in November 2021. The French government is pushing for a common European approach to managing migration in the channel.
In foreign and defence policy however, there have been signs of more bilateral activity with the UK signing Joint Declarations with a number of EU member states in which cooperation on security matters is emphasised. There has also been continued cooperation between France, Germany and the UK in the E3 framework.
Unilateral measures
The UK also took a number of unilateral decisions to ease the continuity of trade following the end of the transition period. Most notably, the UK delayed imposing import controls for goods coming from the EU into GB, prioritising flow over compliance. It has set its own timetable for phasing in these controls. In September 2021, the UK Government announced a delay from 1 October 2021 to 1 January 2022 and, in the case of new controls for food and animal products, 1 July 2022. This was the third time the Government had delayed the introduction of import controls. In December 2021, the Government announced it was pushing back the introduction of checks on some EU imports, including fish. From 1 September 2022, checks will be introduced for all dairy products and from 1 November 2022, checks will be introduced for all remaining regulated Products of Animal Origin (POAO), including composite products and fish products. Since the EU has been operating full import control regime since 1 January 2021,UK exporters are at a disadvantage compared with EU exporters, particularly in the food and fishing industries.
These delays also put the UK at risk of a WTO challenge from trading partners. To comply with World Trade Organization (WTO) rules, the UK is required to apply import controls on goods arriving in the UK from the EU in a way that is no more favourable than it does on goods arriving from the rest of the world (the most-favoured nation principle). The UK government has explained that the further delays stem from exceptional circumstances and additional pressures on businesses due to the pandemic and disruption to global supply chains. Nevertheless, according to a report from the National Audit Office published in November 2021, there ‘is still uncertainty regarding elements of the government’s infrastructure programme’ for carrying out checks at the border between the EU and GB. A report of the Public Accounts Committee in February 2022 underlined that the systems, infrastructure and staff necessary for border checks still require considerable work.
The UK has also postponed the introduction of UK safety certificate labelling. In September 2020, the UK government announced it would unilaterally recognize the CE safety certificate mark until January 2022, leaving time for the uptake of the new UKCA safety certificate, due to replace the EU’s ‘CE’ mark on all products in the UK. However, under pressure from manufacturers and traders, the UK government announced in August 2021, that it would not replace the CE mark until January 2023.
In chemicals, DEFRA announced in December 2021 a two-year extension for UK-based companies to fully register chemicals with the UK REACH database. This gives an additional two years to implement a new post-Brexit safety regime for chemicals. The introduction of UK REACH has faced fierce opposition from manufacturing and business groups, who have complained about the high costs and the duplication with EU REACH, to which many UK companies had already contributed. The UK government has recognized their concerns. More generally, it is still developing its approach to chemicals regulation, and intends to open a consultation in 2022.
On the EU side, as well as the unilateral decision to grant two time-limited equivalence decisions on financial services, the EU has taken the decision to extend the period of validity of safety certificates and licences of railway undertakings operating through the Channel Fixed Link beyond the end of the transition period until 31 March 2022. The TCA does not cover the Channel Fixed Link.
Conclusion
In summary, the TCA has left many areas where discussions between the two sides continue. It provides for transitional arrangements in some, opens up the possibility for future cooperation in others, and includes time-limited provisions where the continuation of existing arrangements are subject to review. More broadly, the two sides interact in a committee system put in place by the Agreement. As the TCA is narrow in its coverage, arrangements for sectors outside its scope need to be negotiated by the two sides or are subject to unilateral decisions by the EU or UK. Furthermore, each side has taken unilateral measures to smooth the transition to the new status quo. Besides, not to forget the Withdrawal Agreement with pre-settled status in the UK that does not yet guarantee lasting rights for EU citizens in the UK. Or the Protocol on Ireland and Northern Ireland, notably the provision for a democratic consent mechanism where the Northern Ireland Assembly will vote on continued application of EU single market regulations by the end of 2024 and every four years after that. To that extent, Brexit is still not over.
[*] Developments are ongoing; the information is as up-to-date as possible at the time of publication.