Baker McKenzie Statement on the Triggering of Article 50
- Time to move on and as the UK Prime Minister said be bold and ambitious. However our clients want as much clarity as possible as soon as possible.
- Neither a comprehensive free trade agreement nor a customs agreement on this scale are straightforward.
- Achieving a withdrawal agreement as well as a free trade agreement and a new customs agreement within two years of the triggering of Article 50 today is a very ambitious UK goal.
- Important that our clients and our Firm will be able to continue to benefit from employing EU workers in the UK and UK workers in EU-27.
- Pleased that the UK Government will convert existing EU law into UK law to ensure continuity and legal certainty in the UK post-Brexit.
Paul Rawlinson, Global Chair and Alex Chadwick, London Managing Partner of Baker McKenzie, say:
Much of what the UK Prime Minister has said in recent months about pulling out of the European Single Market and her desire for a Free Trade Agreement (FTA) with the EU-27 was confirmed by the passing of the European Union (Notification of Withdrawal) Bill into law earlier in the month and the triggering of Article 50 today. We have been advising our clients for some time that such an outcome was inevitable once the freedom of movement question became a red line that the UK Government was unwilling politically to cross.
Putting aside personal opinions about whether the nature of the Brexit that the UK government is now seeking was what the British people voted for last June, we now have to move on and, as the UK Prime Minister said, be bold and ambitious. Above all, our clients will want as much clarity as possible as quickly as possible and we want to see a stable and strong Europe.
The UK aims to negotiate a unique and comprehensive free trade agreement with the EU to try and square the circle of maximum access to the European Single Market without signing up to freedom of movement. As the UK leaves the EU customs union, business will also need a new customs agreement between the UK and EU-27 that will ease the associated burden and bureaucracy of hard borders. Neither is straightforward.
The changes involved will require significant additional bureaucratic mechanisms and will add cost to the business of many of our clients, particularly those who move goods between the UK and EU 27. This is a particular issue for complex supply chains in areas like technology and car manufacturing.
One of the key hurdles with an FTA, as opposed to a customs union or Single Market arrangement, is that only goods which 'originate' in either the UK or the EU-27 will benefit from lower tariff rates. Understanding and proving this can be complex and time-consuming for businesses. In addition, a customs border will be reintroduced with the possibility of burdensome customs requirements. Obviously we want to see the lightest touch possible but even so it may be painful.
As a Firm, we believe that the UK's desire to achieve an FTA and a new customs agreement within two years from today is very ambitious and we welcome the acknowledgement by the British Government that a transitional period is likely to be required.
More clarity on this point would be welcome. We hope that the UK and EU-27 are able to agree a considerable transition period - a soft landing - of more than 2 years to allow this complex change to take place. Smooth Brexit is definitely the preference of our Firm, along with the UK Confederation of British Industry and many others.
80% of the UK economy is services based. The UK-EU FTA will need to offer a much more comprehensive solution for services than any previous FTA between the EU and a third country has done. The recent Canada-EU FTA has had the greatest coverage of services to-date – but even that does not go far enough for what the UK and EU agreement should aspire to.
That agreement - CETA - also took seven years to negotiate. It is in the interest of both the UK and the EU-27 to do better than this.
Although the EU will remain the UK's largest trading partner, the UK is anxious to sign free trade deals with other key markets such as Australia, Canada, India, New Zealand and in particular the United States. This will be seen in the UK as a way to compensate for any reduction in trading levels between the UK and the EU.
On immigration, it is important that post-Brexit our clients and our Firm will be able to continue to benefit from employing EU-27 workers in the UK and workers in EU-27. In particular, the UK has benefited significantly in economic terms from immigration in recent years.
We are pleased to see it has been confirmed that, in the UK, existing EU law will remain in operation post -Brexit through a law that will convert EU law into UK law. It would cause serious legal problems if everything changed overnight. Longer term, UK and EU law will no longer be harmonised and the extent to which they diverge will depend on a suite of policy and industry-wide regulatory issues.
And then of course there is the political dimension. The UK Government will put the final deal before both Houses of Parliament in the UK and similar approvals will be required by the EU27 member states. Given the political surprises we have seen around the world in the last 12 months, no one would want to assume that this is going to be straightforward.