UK joining Lugano Convention is essential for EU Business and Consumers

There are many outstanding issues still to be negotiated as part of the future relationship between the EU and the UK, however one area where there shouldn’t be much disagreement is over the British government request to join the Lugano Convention.

There should be an overwhelming interest for both sides to keep the existing relations in this field. The consequences would be severe and very negative for businesses and consumers on both sides of the Channel should there be no agreement to continue enforcement of civil and commercial judgments.

The Lugano Convention covers cross border enforcement of civil and commercial legal judgements. It applies between the EU and Switzerland, Norway and Iceland and sits alongside the Brussels 1 Regulation rules for the EU member states.

Although the UK will not be an EFTA member, the Convention is also open to non-members, such as the UK. In addition, the existing ETFA members (Norway, Iceland and Switzerland) have all supported the UK’s accession.

The decision to support the UK’s application should not be overly controversial. It eliminates the need for multiple legal actions in different countries, and the risk that companies can’t get their assets that are in other countries. As a result, the system significantly reduces the risk of doing business with someone in another country. Once a judgment is reached under the system, enforcement is rarely contested.

Without this system in place businesses will need to calculate for potentially multiple actions in different countries, especially in cases related to assets that are in another country.

Without Lugano accession enforcement of judgments will no longer happen automatically and the result is likely to lead to the other business party challenging the judgment. This can open up multiple issues, such as whether the compensation that the first court awarded is acceptable or whether the original judgment is questioned by the enforcing court. All substantive laws as to how disputes are settled are different from one European country to another and the Lugano/Brussels system is the only way to smooth these differences over and ensure that a pan-Continental dispute settlement system can work.

Most businesses aim to reduce these risks by agreeing choice of court clauses. Brussels I and Lugano reduce the risk further by setting the rules under which the choice of court clauses are respected by all. As national laws differ on this point, without the overarching framework, there is still the risk of litigation surrounding whether the choice of court clause that you have negotiated and expected to be able to rely on, is in fact valid.

If a business ends up in litigation, much more expense is needed to solve what are essentially procedural issues (such as whether you are in the right court that has the power to solve issue). Litigation also lasts longer as there are more complex issues to be solved. In addition, the end result can still be questioned by another court, costing businesses even more money.

This significantly raises the cost of doing business and this will often have bigger impact on SMEs. Smaller companies, without large legal departments, would have to budget for costs that have not existed in Europe since the 1970s, when the first Brussels convention came into force creating the system which is now applied throughout Europe.

Consumers on both sides of the channel also risk losing out, as under this system the legal system used is based on where the consumer is based, allowing consumers to easily get legal remedy. Without this, consumers buying across borders will be at a serious disadvantage and will find it far harder to enforce their rights.

The damage will not just be inflicted on UK based businesses and consumers. Those based in the EU will also suffer significantly and needlessly if there is no agreement on this point.

All trade needs a secure legal system to underpin it. We have one which already exists, and which works well. This hugely benefits businesses and if the UK does not have access to it, it will significantly increase the cost and reduce the amount of trade that will take place between the EU and UK.

The British government has recognised the benefits which comes with staying in the system. Switzerland, Iceland and Norway want the UK in the system. We urge the European Union to recognise this and ensure that the UK can swiftly accede to the Lugano Convention. In doing so cross border trade, which already faces significant challenges post Brexit, will at least be underpinned by a common legal system for civil and commercial trade.

Daniel Dalton – CEO

Fiscal representative to become mandatory for UK established companies in Belgium

As part of the VAT consequences of the departure of the UK from the EU, Belgian VAT authorities have officially communicated to business their position as to the need for UK established companies, that currently are VAT registered in Belgium via a direct VAT registration, to appoint an individual fiscal representative as a result of Brexit.

The letter of the Belgian VAT authorities confirms that UK established taxable persons will have to fulfil the VAT obligations which are imposed on all VAT taxable persons who are not established in the EU. The most significant VAT obligation is the requirement to appoint an individual fiscal representative for VAT in Belgium.

Because of the general nature of this obligation, UK established companies will no longer be able to operate a direct VAT registration as from the date Brexit will be effective, in principle 30 March 2019.

To discuss this, please feel free to get in touch with Peter Empsten (details below) and ensure your business meets this new administrative formality. Peter will also be able to share a letter from the Belgian VAT authorities outlining the change.

Peter Empsten – Head of Indirect Tax

Crowe VAT Representation 

E-MAIL : peter.empsten@crowe.be

January in review – EU events

The chamber kicked off 2019 by discussing the state of play in three different areas, welcoming high-level and expert speakers.

With Kris Dekeyser, Director “Policy and Strategy” at DG Competition at the European Commission, we tackled merger policy.  As the trends have shown the number of merger notifications submitted to the Commission has been increasing over the last years, with 2018 witnessing the highest number of notifications ever. While those were concentrated in some sectors at first (e.g. pharma), they then expanded to other sectors and will continue to increase for the coming years. To read more about this event, click here.

 

Next, with Gunnar Hökmark MEP we looked at the conclusions drawn from the Banking Union. In response to the crisis, a number of initiatives were put in place (the Single Rulebook in particular) in order to strengthen financial stability, and ensure that the banking sector is safe, reliable, and better supervised for the single market. Our report on the event can be found here.

On a totally different note, we then tackled the curious case of the Border in the Case of a No Deal Brexit with an expert panel, and learned that in the UK alone, there are up to 250,000 companies that only trade within the EU. Each one of these companies will need to consult a customs specialist in order to ensure they have the right certification when the UK begins to trade with the EU from the outside. However, a key issue lies with the amount of customs experts that exist, as it takes up to 3 years to become a fully trained and operational customs specialist. To read more about this pertinent topic, click here.

 

To make sure you don’t miss out on an event in the future, visit our website to see what we have coming up.

Stay tuned for our next monthly overview!

Bernada Cunj

Head of Policy and EU Affairs

The British Chamber of Commerce | EU & Belgium

Fork in the road: Brexit and the choice facing Britain in March 2019

from Helena Raulus of the UK Law Societies

As the debate in the UK Parliament on the ratification of the draft Withdrawal Agreement begins, it is a useful time to analyse the consequences of the adoption (or non-adoption) of the Agreement from a legal perspective.

If the Agreement is not ratified, the main concern is that this could lead to a ‘no deal Brexit’, whereby the UK exits the EU without concluding any overarching deal (or deals) with the EU.

Due to the very different legal mechanisms governing international rules on trade and other areas of cooperation, both the UK and EU will face a distinct fork in a road at the end of March next year.

Ratification of the Agreement will ensure on the one hand that the UK leaves the EU on 29 March 2019 and, on the other hand, that its departure takes place in an orderly manner. The Agreement sets out the framework that provides for a transition period, during which time negotiations for a new EU-UK relationship can take place, in addition to new agreements with third countries.

The ratification also guarantees the package of rights for UK citizens in the EU and EU citizens in the UK, as well as the Northern Irish backstop after the transition period (the backstop will become applicable only if the new agreement requires specific measures to be taken).

A ‘no deal Brexit’, in contrast, will bring an immediate end to EU-UK cooperation and the existing legal framework. The trading and legal relationship will change abruptly and the UK will revert to a third country framework, where there are no special trade agreements to facilitate relations.

The pressing question in this situation is: what can be introduced quickly to help the continuation of trade and cooperation between the UK and EU?

The first question is whether the Withdrawal Agreement could be applied in parts in this situation. It would be useful to mitigate against the worst effects of a ‘no deal Brexit’. However, this is doubtful as in this situation Article 50 will have run its course and will not be applicable anymore.

In this scenario a new UK-EU agreement would need to be negotiated under the rules set out in the EU Treaties. This comes with the consequence in that if a matter falls under national competences, the new agreement will need to be ratified not only by the EU itself but also all of the member states. This would be case in particular with regard to the transition period, as it aims to replicate the full EU legal framework, and deeply covers both EU and member state competences. The Treaties are clear in that, for example, internal market rules fall under mixed competences, not under exclusive EU competences.

Consequently, any measures taken will need to be assessed through the prism of who has the power to adopt the initiatives agreed. This leaves three options.

The first is where the EU and UK can take unilateral measures to facilitate trade in a ‘no deal Brexit’. For example, the EU has the power to declare adequacy or equivalence with regarding to passporting for financial services and data flows.

However, where there is a requirement of reciprocity, things may not be so straight-forward. This is the case for example in relation to visas, where the EU declared that is willing to waive visas for UK citizens, but only if the UK does not require EU citizens to apply for visas.

Then there are areas where a specific agreement between the parties is generally required to provide for reciprocity.

It is possible to conclude an agreement between the EU and the UK, or between an EU member state and the UK. It is also possible to conclude a mixed agreement, where the EU, the member states and the UK are all parties to the agreement.

The quickest form of agreement to ratify is one where there is an agreement between the EU and the UK. This type of agreement requires a reading in the European Parliament and the member states to sign off in the Council. However, this process can be used only where the EU has exclusive competence – for example with regard to the trade in goods and services, but not internal market access, for example.

In all other cases, where the EU does not have exclusive competence, it is possible to work out bilateral agreements with the member states. It would be possible to make a mixed agreement with the EU and all the member states, but the negotiations of these agreements are complicated, not to mention the ratification which usually takes at least a couple of years. Therefore, bilateral negotiations may be the quickest route should the UK find itself in a ‘no deal’ scenario.

However, it must be kept in mind that any bilateral negotiations cannot breach or infringe upon the exclusive competences of the EU. Trade in goods and transport are of particular interest here, as one of the crucial priorities in a no deal situation would be to ensure that food and medicines can reach the UK market.

As a result, the consequences of a ‘no deal Brexit’ would set the UK on a very difficult and radically different path compared to that of the Withdrawal Agreement. This is a path from where it will take time to recover and reach the agreements needed to fully resume trade between both blocs.

A version of this article has also been published in the November edition of the UK Law Societies’ Brussels Agenda.

Task Forces, Brexit and the legal perspective with Helena Raulus

We talk to Helena Raulus of the UK Law Societies, Chair of our Single Market Task Force and member of the EU – UK Future Relations Committee

What are your biggest priorities at the moment?

As Head of the UK Law Societies’ Brussels Office, my daily work revolves mainly around Brexit right now. I have a particular expertise on the different forms of EU cooperation in judicial matters and the functioning of mutual recognition within the Single Market. Of course this has a special relevance now , as the UK and EU are currently in the act of re-defining the structure of their relationship.

The discussions in the Single Market Task Force support my work, as many of the EU internal market developments will still be of great relevance to UK lawyers and their clients who operate in the EU.

What single market issues are on the table now?

The tax transparency and fairness, and the anti-money laundering initiatives are of particular interest to the legal profession, and to businesses operating in a cross-border context. Both the EU and the UK will try to maintain an open and well-regulated digital economy, which means that there will be further proposals on data transfers, data localisation or blockchain technology.

What should we be looking out for?

Both sides will have to examine how to regulate the platforms of the sharing economy: are these really new forms of doing business? Or are they just extensions of a franchise-type of activity where the same mechanisms of employment or the provision of services for money take place? If so, how can the current regulations apply to these new businesses?

Given that these challenges are the same both for the EU and the UK, and that it is foreseeable that the EU and the UK economies will be linked for the coming decades (regardless of the shape of the ultimate deal), it is useful for me to participate not only in the Brexit discussions, but to be aware of the developments in the single market more generally. This is something that the Task Force provides me with, as I have access to its members’ broad expertise.

How do task forces work? How can members get the most out of them?

The job of the chair and vice-chairs is help ensure that the chamber’s meeting programme is really valuable to members. We advise on the priority issues for business, who are the key players and what are the key points in the decision-making process. That way we can say who members need to talk to, about what, and when.

Any member can influence our programme by letting us know what’s important to them. Drop us a line here, or talk to me or a member of the chamber team!

Preparing for Brexit

Preparing for Brexit 

It is less than 5 months until Brexit and the Article 50 deadline on 29 March 2019, and whilst rumours abound of deals, unfortunately – from a business perspective – the spectre of a non-orderly withdrawal outcome remains fully in view. With a few exceptions, it is a wide and deep business consensus that such a no-deal outcome would be an extremely disruptive negative outcome for economic operators on both sides of the Channel. It’s worth repeating – from a business perspective – no deal is the worst deal for everyone.

If there is no withdrawal deal, one might hope there will be side deals covering key issues such as aviation or data, but this cannot be guaranteed, particularly if negotiations break down badly. Consequences will be unpredictable, both politically and economically.

Irrespective of that, we can expect significant disruption at all UK/EU borders – notably with France, Belgium, the Netherlands and in main airports. This is a simple function of the UK leaving the Customs Union and the Single Market without a ready replacement legal framework and with the systems developed to take over.

The situation of the Irish Border in the case of no deal is also unclear – both sides have committed to no ‘hard border’, though both sides may have legal obligations under both EU law in the case of Ireland, and under the WTO in the case of the UK to undertake customs and regulatory checks. Once the UK has left the EU Customs Union and Single Market, there will have to be checks and formalities for goods, the only question is where these checks will take place and exactly what formalities will be applicable.

Preparedness notices from both the EU and the UK Government have flagged the respective legal provisions at the moment of the UK leaving the EU, but do not give a clear roadmap for affected businesses in the case of a collapse of the withdrawal negotiations or a non-ratification by the respective parliaments.

At a minimum, companies should be looking at the potential impact on their supply chains of a potential raising of regulatory and customs barriers, possible queues on both sides of the border as new systems and formalities are introduced, as well as the possible restriction of freedom of movement for staff. On a sector by sector basis, the cessation of regulatory arrangement and licensing may also create new barriers to market.

The British Chamber of Commerce | EU & Belgium will stay close to the UK Government, the EU institutions and the Belgian Authorities during this challenging period. We are the go to organisation that authorities are asking for feedback from on business concerns. Get in touch, use our platform and share your concerns, specific or otherwise so that we can get them to the right people.

Matt Hinde, Fleishman Hillard, and Morten Petersen, EPPA, Co-Chairs of the Future Relations Committee

If you have more questions about the prospect of a no deal Brexit, you can find more information on our website page – What to do if there is no deal?

Our next Brexit event – Brexit and Future Relations – An Update on the Irish Perspective – will take place on the 20th November. You can find more information on our website.

 

 

Autumn in Review – EU Events

Like every autumn in Brussels, this one didn’t disappoint with regard to its packed schedule, and we would like to believe that we didn’t either!

We kicked off with the discussion on Cartel Enforcement: Current Practice and Updates where we learned that since February 2018, companies breaching antitrust regulations by taking part in cartels has resulted in hundreds of million in fines, while ¾ of cartel cases originate from leniency applications.

On a different note, Kate Kalutkiewicz updated our members on the state of play with regard to EU-US Trade Deals. A special emphasis was put on China and the current state of trade relations with the US, as an increasing threat of a trade war looms between both countries, plus we discussed the reform of the Dispute Settlement System in the WTO and the view of the US on the Mutual Recognition Agreements (MRA). More specific trade sectors were also examined, such as chemicals, aluminium and car company regulations.

We also hosted a panel debate on eHealth – Engendering Health Systems’ Sustainability. The positive impact that eHealth can have on EU member States’ Health Systems was stressed throughout the discussion between the panellists and the participants. A wider implementation of digital health across the EU would allow, amongst others, tremendous savings resulting from the use of mobile health applications. A better pooling of data at the EU level would also have huge benefits, reducing for instance the time to diagnose rare disease. The main issue in this field arises from data privacy, record linkage and a lack of incentives from both doctors and governments to use digital technologies.

Under the Future Relations Committee, the chamber organised three events, starting with the roundtable debate with legal industry and the UK Justice Minister on EU-UK Civil Judicial Cooperation, Lucy Frazer. At this event we had the opportunity to discuss how the UK’s withdrawal from the EU has created many legal complications due to the intertwining of UK and EU law. It can be seen as one of the largest areas to negotiate in the agreement as companies wish for the legal protection to remain consistent, or at least to have a large enough transition period so that the adjustment is smooth. The second event saw Philip Rycroft, DExEU Permanent Secretary, give an Update of the UK EU Exit planning process, and finally we hosted the UK Ambassador to Belgium, Alison Rose, who updated us on the current situation in the negotiation process.

Our last event in September was organised with our members Digital Together, who took part in the workshop Digital Movers and Consumers. The objective was to initiate the creation of a dialogue between digital businesses, non-digital businesses, consumer associations, policy makers and other stakeholders to ensure that all viewpoints are shared to help formulate appropriate future regulation and legislation in the digital space in Europe.

Just two days before a crucial Parliamentary vote, we hosted a debate on Single Use Plastics , where many concerns and issues for industry were raised, in particular the issue on the Extended Producer Responsibility (EPR) and its lack of clarity.

Our FDI Screening Mechanisms event kept our members informed, helping us to understand that the EU has no single Foreign Direct Investment (FDI) screening mechanism, but several states in the EU have their own screening mechanism, which are strongly related to national security.

Finally, to finish the month of October, we organised a discussion on eCommerce after Coty and beyond, during which we heard about the Coty decision, which saw the European Court of Justice (ECJ) ruling that luxury good suppliers may prohibit the online sale of their goods by authorised retailers on third-party platform (such as Amazon) – a fascinating example of the intricacy of the enforcement of e-commerce rules.

If you want to learn more about our events, please visit our website, read our detailed event reports or join us at one in the future.

Bernada Cunj

Head of EU Events and Policy

The British Chamber of Commerce | EU & Belgium