Original publication: September 2018
Authors: José Francisco PAPÍ FERRANDO, Raffaele ALFONSI, Sabine LANGER, Miguel TRONCOSO.
Advisory and review team: Roland BLOMEYER, Kevin BORRAS, Haibo CHEN, Thierry VANELSLANDER, José Manuel VASSALLO.
Short link to this post: http://bit.ly/2Qd6OZD
This study focuses on the impact and consequences of a potential ‘no-deal’ scenario in the ongoing negotiations between the European Union (EU) and the United Kingdom (UK) in connection to the Brexit process. These negotiations are being conducted under the terms of Article 50 of the Lisbon Treaty with the deadline of 29 March 2019.
The no-deal scenario constitutes a hypothetical situation where no formal agreement between the EU and the UK is achieved, with the latter becoming simply a third country, without any specific provisions and regulation governing the future relations with the EU-27.
The economies and societies of the EU-27 and the UK and are deeply integrated through the existing freedoms of movements for people, goods, services and capital. The EU-27 is the main trading partner of the UK and plays an important role in relation to the UK’s trade with third countries; in fact, today the UK reaches such markets through international agreements signed by the EU.
In the case of freight, maritime transport plays a dominant role in the exchanges between the EU and the UK, followed by the exchange of goods executed through the Eurotunnel, which offers the possibility to carry products by road and by rail. In passenger transport, air is the most commonly used mode by both parties.
The relationship between the UK and the EU-27 in terms of tourism is quite intense, as the majority of the trips carried out by UK residents have an EU Member State (MS) as their destination and the majority of tourists visiting the UK are from the EU.
In the postal sector, the cross-border parcel deliveries between both parties are still quite under-developed although they are expected to increase, due to the raise of e-commerce.
A no-deal Brexit would imply losses for the two parties involved, although within the EU-27 the intensity of the impact would vary among MS.
In general terms, a no-deal Brexit would mean that the UK exits the EU internal market for aviation, road, rail and maritime transport. As a result, new customs, regulatory authorisations and license procedures, as well as border controls would impact operations and all current EU law-based rights and obligations would cease.
Regarding customs, it should be noted that the UK’s participation in the Customs Union allows operators to export and import goods free of declarations, as well as without the need to undergo health, veterinary and safety controls. Leaving the Customs Union would mean that the current (and simplified) system for trade of goods would no longer exist. This could lead to cancellations of shipments or lower revenue for freight operators, among others.
In order to ensure the best protection for the EU, the negative consequences of a no-deal scenario in all sectors could be mitigated, for example, by pursuing agreements.
In this sense, the European Council (EUCO) has highlighted that the main objective should be to ensure continued connectivity between the UK and the EU after the UK’s withdrawal. To achieve this goal, a series of transport, safety and security agreements should be concluded between (first) the EU and (should this not be feasible) the MSs, on the one side, and the UK on the other.
An option could be to gradually phase out agreements concluded by MS, such as the European Aviation Safety Agency (EASA), or those instruments having set up the European Maritime Safety Agency (EMSA) or the European Union Agency for Railways (ERA), as far as they concern the UK. Then some of the issues affected by those agreements could be negotiated for the purposes of enhancing collaboration between the EU and the UK (e.g. ensuring some sort of participation of the UK in EU agencies as third country after Brexit, so EU and UK policies in the fields covered by those agencies may remain aligned.
Regarding air transport, a no-deal scenario would mean no traffic rights for UK airlines and, consequently, no access to the Single European Sky. It would also require the application of renewed ownership and control rules that would include third country restrictions. Moreover, the mutual recognition of certificates and approvals would cease to apply as, formally, the UK would no longer be allowed to participate in the EASA. Indeed, to ensure basic connectivity between the EU and the UK in this context, special arrangements could be made so as to avoid leaving relevant issues unsolved, such as the operation of air routes between the EU and the UK by EEA and UK air carriers after a no-deal Brexit.
For instance, it would be necessary to agree on the conditions on which the UK will cooperate with the EASA. EU Regulation (EC) No 216/2008, under which EASA functions, states that EASA is open for participation to non-EU countries provided that they are contracting parties to the Chicago Convention (which is the case of the UK) and have concluded agreements with the EU whereby they adopt and apply the EU aviation safety rules. If the UK became an EASA member under this arrangement, it would not have voting rights in the EASA decision-making process and would need to comply with all EU law in the aviation safety field, unless negotiated otherwise.
Regarding passengers’ rights, Regulation (EC) No 261/2004 on air passengers’ rights would not be applicable to passengers departing from an airport located in the UK to an airport situated in the territory of the EU, unless the operating air carrier of the flight concerned is a Union carrier (i.e. it has a Union license). Thus, to secure the EU passengers’ rights in trips between the EU-27 and the UK, the EU should require carriers to obtain a Union license that is issued to non-EU carriers that fly passengers departing from the UK to an airport situated on the territory of a MS. This solution would, additionally, allow for the taking into account of the specific rights for disabled persons and persons with reduced mobility travelling by air post-Brexit.
In terms of maritime transport, the Regulation (EU) 2017/352 (the so-called EU Port Services Regulation) establishes a framework for the provision of port services and common rules on financial transparency, port services and port infrastructure charges. The Regulation (EU) 2017/352 requires ports to maintain separate accounts for any public funds they receive and report them to the relevant authorities in a bid to create a level playing field. These requirements are going to be reflected in UK national law before the country leaves the EU. After Brexit, the UK could decide to depart from these requirements In any case, as almost all UK ports are privately owned, unlike ports in mainland EU, the absence of these rules may not lead to significant changes.
As for maritime cabotage, according to Article 1(1) of Regulation (EEC) 3577/92 (the so-called Maritime Cabotage Regulation), the provision of maritime transport services within EU Member States is restricted to EU ship-owners. From the withdrawal date in a no-deal scenario, it would no longer be possible for UK nationals to provide maritime transport services in accordance with Regulation (EEC) 3577/92 if the conditions to qualify as an EU ship-owner are not fulfilled, unless EU or (alternatively) MS’ legislation allows access to cabotage for vessels bearing the flag of a third country. Currently, UK laws provide that a ship can be registered in the UK if it is owned by a qualified owner, including corporate bodies of an EEA State.
Regarding the International Maritime Organization (IMO), post-Brexit, UK vessels and shipping companies operating in EU waters would mostly still have to comply with EU regulations (through IMO). Firstly, because IMO and EU law share a harmonised regulatory framework in this area, and secondly, due to the fact that the EU would continue to apply its rules to vessels irrespective of their flag or ownership.
As for IMO’s membership, no major change may be expected as the UK and the MS are part of the organisation, while the EU as such only has observer status therein.
Concerning the EMSA, and maritime safety matters, in case no agreements between the EU and the UK were signed, the UK would not have to adopt and apply EU law in the field of maritime safety and prevention of pollution by ships, which is obviously of great importance. Thus, it would not participate in the functioning of the EMSA. To avoid this situation, it would be advisable that the EU and the UK signed an agreement to enable the UK to participate in the EMSA within the framework established in Articles 13 (5) and 17 of the Regulation (EU) 1406/2002.
There are many areas of rail transport that may be affected by a no-deal scenario, including border control checks and customs, which would impact trade of goods and services. As a result, the Community of European Railway and Infrastructure Companies (CER) has warned that Brexit must not be allowed to undermine the continuing development of the Single European Railway and called on the EU and the UK to ensure continued legal certainty for rail businesses. According to the CER’s statement, any restriction on the free movement of people could result in serious challenges for rail transport. For example, from a passenger’s perspective, these include uncertainty as to the controls and visa requirements passengers may need to fulfil. Also, access should be guaranteed for UK operators to the EU market and for EU operators to the UK market on the basis of symmetrical conditions, and the harmonisation of technical rules and mutual recognition processes in the Single European Rail Area should also continue.
In the road sector, the harmonisation of the rules on access to the market and access to the profession of a road transport operator between the EU and the UK could be conducted by following the 2017 EUCO Guidelines with (i) the UK applying all EU ‘acquis’ in the area (although this may not be easy to achieve without significant concessions in exchange) and (ii) having an integrated road transport area such as the EEA, where road transport operators of EEA States have the right to transport goods to and from EEA MS.
As for standards of vehicles, it should be noted that many of them are developed at the United Nations level and then followed by the EU. Therefore, it is likely that the UK will decide to follow international standards and, thus, be in line with EU rules on the matter.
With regard to rights of passengers travelling by bus and coach, after Brexit, in principle, Regulation (EU) 181/2011 would continue to apply to passengers travelling with regular services to or from the UK where the boarding or the alighting point of the passenger is situated in the EU, and the scheduled distance of the service is 250km or more. Thus, a priori, the EU would not be required to take action in order to secure EU passengers’ rights in these types of trips between EU and the UK.
In a no-deal scenario, the EU legal framework encouraging tourism flows between the UK and the rest of the EU would no longer be applicable and as a result the tourism industry would be jeopardised.
In a no-deal scenario, EU tourism would suffer the negative effects of the restrictions to the movement of people, goods and services. This would mean facing new customs checks, delays and possible unilateral controls on immigration. In addition, EU tourists visiting the UK would have no access to emergency medical care, in the terms they do today, may have no air passenger rights in cases of delays or cancellation of flights under EU law and would have limits on their roaming fees. Indeed, the tourism industry would also have to face the consequences of the breakdown of the aviation arrangements that, most likely, would result in an increase of flight prices. Moreover, the sector could be affected by the loss of the cross-border police and security cooperation. These inconveniences may also restrain the UK travellers from visiting the EU.
Consequently, it would be advisable to achieve a series of agreements between the EU and the UK to enable the continuity of the uninterrupted flow of tourists between the territories of both parties. Specifically, agreements are needed in key areas, such as visa systems and immigration controls, which might restrain the free movement of people or cause delays in travel times, thereby resulting in considerable disturbances of the tourists traffic.
Furthermore, health insurance coverage would be yet another important matter that would need to be regulated by agreements (probably between MS and the UK) as the European Health Insurance Card would be no longer be valid in the UK. Lack of a coordinated system for health insurance coverage of medical services for outgoing and incoming travellers between the EU and the UK would, inter alia, translate into an increase of travelling costs.
To ensure the smooth functioning of the post-Brexit postal services between the EU-27 and the UK, there are a series of points that could be discussed with the UK.
Firstly, certain aspects of Regulation 2018/644 (the so-called EU Cross-border Parcel Delivery Regulation which, with the exception of the provision on penalties, started to apply on 22 May 2018, may be worth considering.
A no-deal scenario would entitle the UK to depart from the rules established in the Regulation. This could mean, among others, that (i) Ofcom (the UK regulatory authority) would no longer need to send to the European Commission (EC)prices provided by Royal Mail (the UK universal services provider) or the details of any affordability assessment it conducts with regard to the latter’s tariffs; (ii) the national authorities of the remaining EU Member States would no longer be required to collect data regarding deliveries from their territory to the UK and this information would no longer be published by the EC on its website; and (iii) the national authorities of the remaining Member States would no longer be required to carry out affordability assessments on parcel deliveries to the UK.
Therefore, entering into an agreement so as to avoid or minimise the impact of these potential consequences should be considered.
Secondly, with regard to Directive (EC) 97/67 (the so-called EU Postal Services Directive (already transposed to the UK national legislation) in a no-deal Brexit, the UK may decide to change its national laws and not to:
- Guarantee that postal parcels below 20kg received from the MS are delivered within the UK’s territory;
- Notify the EC of the identity of the British universal service provider(s);
- Ensure that the British universal service provider(s) keeps separate accounts; and
- Collect this information and provide it to the EC upon request.
Moreover, in a no-deal scenario, the UK national quality standards would not be required to be compatible with the quality standards applicable to intra-EU postal services and would not need to be notified to the EC. Should this be the case, it could result in a malfunctioning of the postal services between the EU-27 and the UK. Guaranteeing that the rules and requirements established in the above-mentioned directive continue to be applicable in the UK is recommendable to ensure that the postal services between the EU and the UK work as smoothly as possible.
Additionally, to avoid rises in the prices of postal services and parcel deliveries, and to prevent an increase in the processing time of these services, an agreement on custom controls, on custom forms and on the VAT charges for this type of service or goods involved would also be necessary.
 Official Journal of the EU – OJ L 079 19.3.2008, pp. 1.
 The Convention on International Civil Aviation (also known as “Chicago Convention”) established the International Civil Aviation Organization (“ICAO”). This is a United Nations specialised agency competent for the coordination and regulation of international air travel. The Chicago Convention provides for rules on airspace, aircraft registration and safety, while it states the rights of the signatories with regard to air travel.
 Official Journal of the EU – OJ L 46, 17.2.2004, pp. 1–8.
 Official Journal of the EU – OJ L 57, 3.3.2017, pp.1-18.
 Official Journal of the EU – OJ L 364, 12.12.1992, p.7.
 Official Journal of the EU – OJ L 208, 5.8.2002, pp. 1–9.
 European Council Guidelines on the framework for the future EU-UK relationship, 23 March 2018.
 Official Journal of the EU – OJ L 55, 28.2.2011, pp. 1–12.
 Official Journal of the EU – OJ L 112, 2.5.2018, p.19.
 Official Journal of the EU – OJ L 15, 21.1.1998, p. 14.
Link to the full study: http://bit.ly/617-499
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