knowledge 20 December 2018 |

European Commission Begins Implementing No-Deal Brexit Contingency Action Plan

The CAP contains 14 measures to lessen the impact of a 'no-deal' scenario in a range of sectors including financial services, air transport, customs, and climate policy. These measures are largely subject to the UK reciprocating the same rights conferred by the measures and ensuring fair competition standards.

The Commission is calling on the European Parliament and the Council to ensure the adoption of the proposed measures in order for them to be in place by 29 March 2019.

Citizens' Rights

The CAP does not include any specific measure concerning the rights of UK citizens in the EU; instead the Commission is inviting Member States to take a “generous approach” to the rights of such UK citizens, provided that this approach is reciprocated by the UK. Specifically, the EU is requesting that Member States take local measures to ensure that the rights of UK citizens residing in those states at the date of withdrawal will continue to be considered legal residents.

The Commission has already adopted a proposal for a Regulation to exempt UK nationals from visa requirements, provided that all EU citizens are equally exempt from UK visa requirements.

Financial Services

As regards the risks facing the financial sector in the event of a ‘no-deal’, the Commission has found that only a limited number of contingency measures are necessary to safeguard financial stability in the EU27. Therefore, the Commission has adopted the following acts:

• A temporary and conditional equivalence decision for a fixed, limited period of 12 months to ensure that there will be no immediate disruption in the central clearing of derivatives.
• A temporary and conditional equivalence decision for a fixed, limited period of 24 months to ensure that there will be no disruption in central depositaries services for EU operators currently using UK operators.
• Two delegated regulations facilitating novation, for a fixed period of 12 months, of certain over-the-counter (OTC) derivatives contracts, where a contract is transferred from a UK counterparty to an EU27 counterparty.

Transport (Air, Land and Sea)

The European Commission has adopted two measures in order to avoid full interruption of air traffic between the EU and the UK in the event that there isn’t any relevant UK-EU deal by 29 March 2019. These measures will only ensure basic connectivity and are subject to the UK conferring equivalent rights on EU air carriers, as well as the UK ensuring conditions of fair competition.  The measures are:

• A proposal for a regulation to ensure temporarily (for 12 months) the provision of certain air services between the UK and the EU, but not permitting UK carriers to provide intra-EU air services.
• A proposal for a Regulation to extend temporarily (for nine months) the validity of certain aviation safety licences.

In addition, the Commission has adopted a proposal for a Regulation to allow UK operators to temporarily (for 9 months) carry goods into the EU, provided the UK confers equivalent rights to EU road haulage operators and subject to fair competition conditions.

Customs and Exports

In the event that no deal is reached between the EU and UK as regards their future trading relationship, all relevant EU legislation on the importation and exportation of goods will apply to goods moving between the EU and the UK. The Commission has today adopted the following technical measures:

• A delegated regulation to include the seas surrounding the UK in the provisions on time-limits within which entry summary declarations and pre-departure declarations have to be lodged prior to leaving or entering the Union's customs territory.
• A proposal for a regulation to add the UK to the list of countries for which a general authorisation to export dual use items is valid throughout the EU.

However, the European Commission has emphasised that Member States should take all the necessary steps to be in a position to apply the Union Customs Code and the relevant rules regarding indirect taxation in relation to the UK.

EU Climate Policy

The Commission has adopted the following three acts in the area of EU climate policy in order to ensure that the lack of a deal does not affect the functioning and the environmental integrity of the Emissions Trading System:

• A Commission decision to suspend temporarily for the UK the free allocation of emissions allowances, auctioning, and the exchange of international credits with effect from 1 January 2019.
• An implementing decision to allow an appropriate annual quota allocation to UK companies for accessing the EU27 market (until 31 December 2020).
• An implementing regulation to ensure that the reporting by companies differentiates between the EU market and the UK market to allow a correct allocation of quotas in the future.

Other Measures

In addition the Commission has also adopted a delegated regulation on the listing of the UK in statistics on the balance of payments, international trade in services and foreign direct investment.

Next Steps

The Commission is calling on the European Parliament and the Council to ensure the adoption of the proposed legislative acts so that they are in force by 29 March 2019, with an emphasis that delegated acts should enter into force as rapidly as possible.

For delegated acts, the normal scrutiny period by the European Parliament and Council is two to three months (two months for the Delegated Regulation on summary declarations and pre-departure declarations; three months for the Delegated Regulation on the listing of the UK in EU statistics; a maximum of three months for the Delegated Regulations on certain types of contracts, including OTC derivatives. Delegated acts can enter into force earlier if the European Parliament and the Council both inform the Commission before the end of the scrutiny period that they will not object to the relevant act.

For further information on this briefing please contact the key contacts below or your usual contact in McCann FitzGerald