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<blockquote data-quote="Abstruser" data-source="post: 5009" data-attributes="member: 260"><p>Hey guys, I thought I would take the liberty of adding my write-up on the draft withdrawal agreement, which is also featured in this week's commercial awareness update (you can check it out <a href="https://www.thecorporatelawacademy.com/forum/threads/commercial-awareness-update-november-2018.798/#post-5006" target="_blank"><u>here</u></a> if you haven't already). Hope you find it useful!</p><p></p><p><strong>The Brexit withdrawal agreement</strong></p><p></p><p><strong>The story:</strong></p><p></p><p><em><u>The political timeline</u></em></p><p></p><p>In a significant milestone, the UK and EU agreed the text of a draft Brexit agreement last Tuesday. The next day, Prime Minister Theresa May secured the support of her cabinet ministers after a five-hour emergency meeting. While the cabinet reached a collective decision, it was not unanimous – 11 members objected to the deal, with 18 supporting it. Work and pensions secretary Esther McVey and Brexit secretary Dominic Raab resigned from cabinet the following morning. Following this, Donald Tusk announced that an EU summit will be held on November 25, 2018 to finalise the provisional Brexit deal.</p><p></p><p>Still, the hurdles are far from over. After the summit, the EU Withdrawal Act 2018 requires the final text to be approved by an ordinary resolution of the House of Commons. Theresa May will need 320 votes to approve the withdrawal agreement, but the Conservatives have only 318 MPs in Parliament. Internal dissent from Conservative hard Brexiters (such as Jacob Rees-Mogg) and Remainers (such as Dominic Grieve) further threatens the Prime Minister’s ability to gather the necessary votes to cement the deal.</p><p></p><p>Growing unrest surrounding Theresa May’s premiership may further complicate matters, as a number of Conservative MPs have moved to trigger a vote of no confidence against her. A motion of no confidence is triggered when 15% of Conservative MPs (48 members) submit letters of no confidence to the chairman of the 1922 Committee. 25 MPs have publicly stated they have submitted such letters, but the total number may well exceed this. Should Theresa May be toppled as Prime Minister, it could severely delay the finalisation of the withdrawal agreement, increasing the risk of a no-deal Brexit.</p><p></p><p><em><u>The withdrawal text</u></em></p><p></p><p>Under the provisional deal, a 21-month transitional period will run from March 29, 2019 to December 31, 2020 during which all EU legislation “shall be binding on and in the United Kingdom”. This period is designed to allow the EU and UK to conclude a future trade agreement. This transition period may be extended, but any extension would be subject to further contributions to the EU common budget.</p><p></p><p>On financial contribution, the draft agreement requires the UK to honour all financial commitments to the EU as if it were still a member for the years 2019 and 2020. The UK Treasury estimates this ‘exit bill’ to amount to €40-45 billion, though by some estimates the figure is closer to €60 billion.</p><p></p><p>Crucially, until a future trade deal is agreed, the UK (including Northern Ireland) shall be the part of a temporary ‘backstop’ customs union with the EU. As long as the backstop remains in place, the UK shall commit to a “level playing field”, following EU competition rules and maintaining close alignment with labour, tax and environmental laws.</p><p></p><p>As to Northern Ireland, a hard border will be avoided and goods may be freely circulated across the island of Ireland. Checks on trade will instead take place within the UK mainland. However, the price to pay is steep – Northern Ireland will be bound by the EU’s customs and single market rules, thereby remaining in a much closer customs relationship with the EU than the rest of the UK.</p><p></p><p><strong>Impact on businesses: </strong></p><p></p><p>Businesses and investors alike will continue to keep a close eye on Brexit, as the pound continues to fluctuate as Brexit unfolds. The volatility of the pound has calmed somewhat, pending presentation of the draft withdrawal text before the House of Commons, but it is still trading 14% lower than on the referendum day. Analysts at Societe Generale and JPMorgan predict that the pound will benefit if a deal is accepted by Parliament, which will offset inflation as well as buoy wages and consumer spending. However, in the event of a no-deal Brexit, Standard & Poor estimates that the pound could fall a further 15% against the US dollar.</p><p></p><p>For companies planning their business operations, the withdrawal text presents a clear, if not altogether ideal, starting point from which to map future developments and possibilities. Three clear scenarios appear: no-deal, transition, and backstop.</p><p></p><p><em><u>Scenario 1: No-deal</u></em></p><p></p><p>If the withdrawal agreement is not accepted by Parliament, the chances of no-deal Brexit become alarmingly high. The EU has made it clear that the terms of withdrawal are more or less final, with Angela Merkel stating that “[t]he question of further negotiations does not arise at all”. If the UK fails to sign a formal treaty with the EU by early December, UK officials have stated that contingency plans for a no-deal Brexit will have to be triggered.</p><p></p><p>Without a withdrawal agreement, the UK would default to WTO trade rules on March 29, 2019, which would require the imposition of tariffs and checks at the UK border – including the Northern Ireland border. This would severely impact businesses and their supply chains. Health Secretary Matthew Hancock warned that deaths could result from medicine shortages in the event of a no-deal Brexit.</p><p></p><p><em><u>Scenario 2: Transition period</u></em></p><p></p><p>If the withdrawal agreement does pass through the House of Commons, businesses will be briefly comforted by the short-term certainty provided by the transition period. It should be noted that the draft text covers only withdrawal arrangements. The future UK-EU trade relationship will be subject to further negotiations once the UK has exited the EU. For businesses, this means that plans may safely be made up until the end of 2020, but long-term certainty will depend on the future trade relationship negotiated after Brexit.</p><p></p><p><em><u>Scenario 3: The ‘backstop’</u></em></p><p></p><p>If no trade agreement is reached by the end of 2020, the backstop regime will kick in. Even this possibility is worrying, as the threadbare backstop omits several arrangements crucial to business operations. These omissions are wholly intentional – Sabine Weyand, the EU’s deputy chief negotiator, has stated that the backstop was designed to ensure the UK could not rely on it indefinitely, giving the EU greater bargaining power in negotiations for the future trade agreement.</p><p></p><p>For example, the backstop does not include an agreement on road transport. British drivers will need to apply for new international licenses and regulatory certificates to travel in Europe, a time-consuming and bureaucratic process. The backstop also does not commit the UK to regulatory alignment with the EU on goods, which will likely lead to extensive product standard checks on goods crossing UK borders.</p><p></p><p>For UK financial services, the backstop only contemplates a basic level of access to EU financial markets based on the principle of equivalence. Equivalence assessments would commence as soon as possible after Brexit, with the aim of being concluded before the end of 2020. The EU currently grants equivalence to several other countries, such as Singapore and the US. However, the problem with the equivalence regime is that it largely focuses on wholesale activities such as securities trading. There is no such regime for retail activities such as commercial lending and insurance, which will affect British retail banks and insurers if a future trade agreement is not secured. This is likely to prompt more British financial institutions to set up shop in the EU in order to retain existing customers.</p><p></p><p><strong>Impact on law firms: </strong></p><p></p><p>Similar to businesses, the draft text allows law firms to begin analysing industry-specific implications of each Brexit scenario in order to advise clients accordingly. Many law firms have already begun this process – Simmons & Simmons, for instance, launched its Disputes Aviator tool to help clients conceptualise the impact of various Brexit scenarios on English jurisdiction and governing law clauses in future and existing contracts.</p><p></p><p>Law firms themselves may also begin consolidating their strategies for each possible scenario. For example, to prepare for a no-deal Brexit, Freshfields, Slaughter and May, and Eversheds Sutherland have registered several of their lawyers to the Irish Roll of Solicitors in order to retain rights of audience before the CJEU and professional privilege in regulatory probes by the European Commission. Similarly, Simmons & Simmons, Covington & Burling and Pinsent Masons announced their intentions to launch offices in Dublin following the Brexit vote.</p></blockquote><p></p>
[QUOTE="Abstruser, post: 5009, member: 260"] Hey guys, I thought I would take the liberty of adding my write-up on the draft withdrawal agreement, which is also featured in this week's commercial awareness update (you can check it out [URL='https://www.thecorporatelawacademy.com/forum/threads/commercial-awareness-update-november-2018.798/#post-5006'][U]here[/U][/URL] if you haven't already). Hope you find it useful! [B]The Brexit withdrawal agreement[/B] [B]The story:[/B] [I][U]The political timeline[/U][/I] In a significant milestone, the UK and EU agreed the text of a draft Brexit agreement last Tuesday. The next day, Prime Minister Theresa May secured the support of her cabinet ministers after a five-hour emergency meeting. While the cabinet reached a collective decision, it was not unanimous – 11 members objected to the deal, with 18 supporting it. Work and pensions secretary Esther McVey and Brexit secretary Dominic Raab resigned from cabinet the following morning. Following this, Donald Tusk announced that an EU summit will be held on November 25, 2018 to finalise the provisional Brexit deal. Still, the hurdles are far from over. After the summit, the EU Withdrawal Act 2018 requires the final text to be approved by an ordinary resolution of the House of Commons. Theresa May will need 320 votes to approve the withdrawal agreement, but the Conservatives have only 318 MPs in Parliament. Internal dissent from Conservative hard Brexiters (such as Jacob Rees-Mogg) and Remainers (such as Dominic Grieve) further threatens the Prime Minister’s ability to gather the necessary votes to cement the deal. Growing unrest surrounding Theresa May’s premiership may further complicate matters, as a number of Conservative MPs have moved to trigger a vote of no confidence against her. A motion of no confidence is triggered when 15% of Conservative MPs (48 members) submit letters of no confidence to the chairman of the 1922 Committee. 25 MPs have publicly stated they have submitted such letters, but the total number may well exceed this. Should Theresa May be toppled as Prime Minister, it could severely delay the finalisation of the withdrawal agreement, increasing the risk of a no-deal Brexit. [I][U]The withdrawal text[/U][/I] Under the provisional deal, a 21-month transitional period will run from March 29, 2019 to December 31, 2020 during which all EU legislation “shall be binding on and in the United Kingdom”. This period is designed to allow the EU and UK to conclude a future trade agreement. This transition period may be extended, but any extension would be subject to further contributions to the EU common budget. On financial contribution, the draft agreement requires the UK to honour all financial commitments to the EU as if it were still a member for the years 2019 and 2020. The UK Treasury estimates this ‘exit bill’ to amount to €40-45 billion, though by some estimates the figure is closer to €60 billion. Crucially, until a future trade deal is agreed, the UK (including Northern Ireland) shall be the part of a temporary ‘backstop’ customs union with the EU. As long as the backstop remains in place, the UK shall commit to a “level playing field”, following EU competition rules and maintaining close alignment with labour, tax and environmental laws. As to Northern Ireland, a hard border will be avoided and goods may be freely circulated across the island of Ireland. Checks on trade will instead take place within the UK mainland. However, the price to pay is steep – Northern Ireland will be bound by the EU’s customs and single market rules, thereby remaining in a much closer customs relationship with the EU than the rest of the UK. [B]Impact on businesses: [/B] Businesses and investors alike will continue to keep a close eye on Brexit, as the pound continues to fluctuate as Brexit unfolds. The volatility of the pound has calmed somewhat, pending presentation of the draft withdrawal text before the House of Commons, but it is still trading 14% lower than on the referendum day. Analysts at Societe Generale and JPMorgan predict that the pound will benefit if a deal is accepted by Parliament, which will offset inflation as well as buoy wages and consumer spending. However, in the event of a no-deal Brexit, Standard & Poor estimates that the pound could fall a further 15% against the US dollar. For companies planning their business operations, the withdrawal text presents a clear, if not altogether ideal, starting point from which to map future developments and possibilities. Three clear scenarios appear: no-deal, transition, and backstop. [I][U]Scenario 1: No-deal[/U][/I] If the withdrawal agreement is not accepted by Parliament, the chances of no-deal Brexit become alarmingly high. The EU has made it clear that the terms of withdrawal are more or less final, with Angela Merkel stating that “[t]he question of further negotiations does not arise at all”. If the UK fails to sign a formal treaty with the EU by early December, UK officials have stated that contingency plans for a no-deal Brexit will have to be triggered. Without a withdrawal agreement, the UK would default to WTO trade rules on March 29, 2019, which would require the imposition of tariffs and checks at the UK border – including the Northern Ireland border. This would severely impact businesses and their supply chains. Health Secretary Matthew Hancock warned that deaths could result from medicine shortages in the event of a no-deal Brexit. [I][U]Scenario 2: Transition period[/U][/I] If the withdrawal agreement does pass through the House of Commons, businesses will be briefly comforted by the short-term certainty provided by the transition period. It should be noted that the draft text covers only withdrawal arrangements. The future UK-EU trade relationship will be subject to further negotiations once the UK has exited the EU. For businesses, this means that plans may safely be made up until the end of 2020, but long-term certainty will depend on the future trade relationship negotiated after Brexit. [I][U]Scenario 3: The ‘backstop’[/U][/I] If no trade agreement is reached by the end of 2020, the backstop regime will kick in. Even this possibility is worrying, as the threadbare backstop omits several arrangements crucial to business operations. These omissions are wholly intentional – Sabine Weyand, the EU’s deputy chief negotiator, has stated that the backstop was designed to ensure the UK could not rely on it indefinitely, giving the EU greater bargaining power in negotiations for the future trade agreement. For example, the backstop does not include an agreement on road transport. British drivers will need to apply for new international licenses and regulatory certificates to travel in Europe, a time-consuming and bureaucratic process. The backstop also does not commit the UK to regulatory alignment with the EU on goods, which will likely lead to extensive product standard checks on goods crossing UK borders. For UK financial services, the backstop only contemplates a basic level of access to EU financial markets based on the principle of equivalence. Equivalence assessments would commence as soon as possible after Brexit, with the aim of being concluded before the end of 2020. The EU currently grants equivalence to several other countries, such as Singapore and the US. However, the problem with the equivalence regime is that it largely focuses on wholesale activities such as securities trading. There is no such regime for retail activities such as commercial lending and insurance, which will affect British retail banks and insurers if a future trade agreement is not secured. This is likely to prompt more British financial institutions to set up shop in the EU in order to retain existing customers. [B]Impact on law firms: [/B] Similar to businesses, the draft text allows law firms to begin analysing industry-specific implications of each Brexit scenario in order to advise clients accordingly. Many law firms have already begun this process – Simmons & Simmons, for instance, launched its Disputes Aviator tool to help clients conceptualise the impact of various Brexit scenarios on English jurisdiction and governing law clauses in future and existing contracts. Law firms themselves may also begin consolidating their strategies for each possible scenario. For example, to prepare for a no-deal Brexit, Freshfields, Slaughter and May, and Eversheds Sutherland have registered several of their lawyers to the Irish Roll of Solicitors in order to retain rights of audience before the CJEU and professional privilege in regulatory probes by the European Commission. Similarly, Simmons & Simmons, Covington & Burling and Pinsent Masons announced their intentions to launch offices in Dublin following the Brexit vote. [/QUOTE]
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