Today the EU commission unveiled more detail on how it might respond to a no deal outcome to negotiations. The notices cover areas including financial services, air transport, customs, and climate policy, amongst others.

Many of the suggested actions are dependent on reciprocal actions from the UK from the UK to come into effect.

The Commission have produced a useful Q&A but here are the main points:

  • No EU wide guarantees for UK nationals - Rules to be decided at an EU member state level.
  • Distinct possibility of travel disruption: EU to grant temporary access for point-to-point flights into and out of UK (for example London to Paris). On trains, further approvals required by Eurostar to continue operations - not guaranteed.
  • Confirms that all new border checks (e.g. customs and animal health) will come into force immediately on 30 March.
  • Limited transitional support for derivatives and depositories but no temporary passporting.
  • No temporary 'cabotage' but 9 month agreement on access for UK hauliers.
  • UK businesses will be suspended from EU emissions trading from January 2019 until withdrawal agreement ratified. 

Below I have dug into a bit more detail.

People

In the event of No Deal it is up to individual member states to decide what protections they will put in place for UK nationals living and working in their countries.

  • Right to stay: the EU is asking all member states to ensure that all UK nationals living in a member state on 29 March 2019 will be considered as legal residents and that they are ready to issues permits to prove this right.
  • Social security: the EU is calling on member states to account for periods of work/insurance that occurred in the UK before the withdrawal (suggesting they inform citizens to keep all their documentation) and will continue to export pensions to the UK for those EU nationals claiming in the UK. So if you are an EU national in the UK your EU pension should be safe.

Financial services 

In the event of No Deal the Commission has decided that only a limited number of contingency measures are required to safeguard financial stability, they include:

  • 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 services provided by central securities depositories.
  • Two Delegated Regulations facilitating innovation, for a fixed period of 12 months, of certain over-the-counter derivatives contracts, where a contract is transferred from a UK to an EU27 counterparty.

Beyond the limited scope of these proposals the Commission reiterate that it is up to market participants to mitigate the risks. For example financial institutions that wish to provide banking or insurance services in the European Union should take all necessary steps to be properly authorised on withdrawal date, including by establishing presence in the EU27.

They also encourage firms to inform clients about the steps they have taken to prepare for changes.

Air transport

To avoid full interruption of air traffic between the UK and EU the commission plans to:

  • Provide temporary (12 month) licenses for certain air services between the UK and EU 27 member states. Airlines will be able to fly point-to-point (e.g. London to Paris) but it is not yet clear whether a UK airline could operate services within the EU (e.g. Lisbon to Rome).  
  • Extend temporarily (for 9 months) the validity of certain aviation safety licences.

Road haulage

  • The Commission has also adopted a proposal for a Regulation to allow UK operators to temporarily (nine months) carry goods into the EU. This is not cabotage but could delay need for ECMT permits.

Customs and exports

All relevant EU legislation on the importation and exportation of goods will apply to goods moving between the EU and the UK. Things to consider:

  • In case of no-deal, every consignment of live animals and animal products coming from the UK would have to undergo, as of the withdrawal date, checks in Union border inspection posts (BIPs) at the point of entry into the EU. The EU will establish temporary premises for inspections to handle extra demand.
  • Economic operators may apply for authorisations and access to customs IT systems in competent authorities.
  • Goods that started their journey before 11pm 29 March 2019 but arrive after will be treated as non-union goods when they enter an EU customs territory.
  • VAT: Imports from the UK to the EU will be due import VAT. Goods will be exempt from VAT if they are dispatched or transported to a destination outside the EU.

What next?

It is now up to the European Parliament and the Council to adopt these proposals so they are in force by March 29 2019.

Businesses should consider whether any of the proposals impact their own Brexit planning.