WellTax Blog

Brexit: the last issues to solve

March 12, 2020

There are less than five weeks left to the end of the transition period that will deliver Brexit and give to the history a significant event that will lead to further changes between the European Union and the United Kingdom. As we know, at the countdown of 31 December, there are two possible scenarios: an agreement able to regulate commercial relations in the post-Brexit or the crash towards a no-deal.

The direction of the negotiations is still uncertain. However, the British government has left optimism towards reaching an agreement between the two parties.

The history of the negotiations between London and Brussels, which began in 2016 with the referendum result that decreed the process of the United Kingdom leaving the European Union, have seen various comparisons on particular issues, such as the backstop, intending to avoid the return of a rigid border between the Republic of Ireland and Northern Ireland. At the same time, we have been spectators of constant postponements on negotiations and often conflicting conversations that have created ups and downs in the relationship between the two sides.

Now the last issues to be resolved before 31 December are: fishing rights, competition and governance.

We have seen particular attention on the issue of “fishing rights”. The current rules for fishing fleets within the waters of the European Union involve full access to the waters of other EU countries, but within 12 nautical miles of the coasts, countries are authorized to limit the access to their waters. In this legislative context, the British government would like to discuss annually the maximum quotas of each species destined for European fishing fleets but within the 200 miles of exclusive economic zone, as Norway does. On the contrary, the EU would like to maintain the status quo because otherwise European fleets would be hit hard as they no longer have free access to British waters within 12 miles of the coast. This stance by the UK could be a pretext for trying to turn the dispute over fishing rights into a negotiating advantage. In fact, it must be added that fishing would have a marginal impact on the two economies, therefore reaching a compromise before 31 December seems possible.

Another stumbling block on which the London-Brussels axis must find an agreement concerns the “competition” in the short post-Brexit future. The EU says it is ready to offer an unprecedented trade agreement to the UK, free of customs duties, but at the same time cannot allow London to compete unfairly after the divorce. In the context of competition, the main argument concerns pollution, because the EU is limited by strict environmental standards to which the UK may decide not to comply. With this regard, the European Union would like the United Kingdom to continue to respect the same rules, also providing for a review clause that updates the minimum standards over time.

Furthermore, there is the risk that the United Kingdom could use state aid to finance businesses and the economy, while European rules are very strict on this matter: even in this case, unfair competition would happen. The solution could come from a consultation mechanism in which each would inform the other of their grant projects, or even the definition of common rules. In case of divergence, the EU would like to be able to use unilateral and immediate countermeasures such as customs duties.

London and Brussels have not yet reached an agreement on the “governance” of the future relationship, in particular on the mechanisms to be put in place in the event of a dispute. For the European Union, it is in fact, essential that the agreement between the parties is legally made official, to protect themselves in the event of unfair or improper conduct by the United Kingdom. An arbitral court may be set up for violations of the agreement with the European Union which may, on the other hand, have to give up its will to see the European Court of Justice, which is based in Luxembourg, play a role in any disputes with the United Kingdom. A firm “no” came from London in the name of its sovereignty.


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Sergio Schittone




Photo by Franz Wender on Unsplash

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