Brexit is a fact – now deal with it

so-long-farewell-and-auf-wiedersehen-goodbyeFollowing the European Parliament’s vote, the Council as now also agreed to the Brexit with its decision on the conclusion of the withdrawal agreement on behalf of the EU. The EU Parlementarians sang off the UK members and celebrated that they never have to speak to Nigel Farage again. UK EU civil servants are clearing out their desks at the EU institutions.

This means that the UK will now, after a long and winding process, finally leave the EU by 31 January – which is tomorrow.

But will it really? In fact, the UK will become a third country in which EU law applies for possibly years to come, but that sounds a lot less glamorous of course.

I am getting questions from all directions again so let me reiterate for you how this thing works, on top of my earlier blogs on the subject or mentioning the subject. I will also put in some political analysis.

To understand the Brexit you have to realise that it’s a multistage thing:

Stage one: UK = 3rd country with EU law per 31 January

The withdrawal agreement will enter into force upon the UK’s exit from the EU, on 31 January 2020 at midnight CET. From that time on, the UK will no longer be an EU member state and will be considered a “third country”. But that does not mean they are “out” yet. Or in terms of the MDR: that they have ceased to form part of the Union for the purposes of the MDR and existing directives. This is not the case yet because EU law continues to apply.

By 31 January midnight the Brits can say that they escaped the tyranny of the EU because they are independent again and the British tabloids will run patriotic hyperboles about the UK having regained control over its own destiny again. Except the UK is not independent yet, likely not for years to come.

Stage two: transitional period from 1 February to 31 December

From 1 February to 31 December 2020 there will be a transitional period, to provide more time for citizens and businesses to adapt.

During the transition period, the UK will continue to apply Union law but it will no longer be represented in the EU institutions. In other words, nothing changes except that the UK continues to apply EU law and has even less to say about creating and interpretation of EU law than Liechtenstein or Iceland. Many companies will sit on their hands as usual and not prepare for the Brexit at the end of the year.

In the mean time, the EU and the UK will try to put their ‘future relationship’ in international agreements and law, along the lines of the political declaration of October 2019. The negotiations on the future partnership between the EU and the UK will start once the UK has left the EU.  These negotiations concern many difficult subjects, like fishing rights and free movement of persons, that may well not be resolved before the end of the year, most likely leading to stage two and a half (see below).

Anticipating phase 3 (see below) the UK will want to conclude all the fabulous trade deals with other third countries that it has promised its population. However, in practice it will find itself bullied by the US and the Chinese now that the UK is much smaller than it was as EU member while trying to stay connected to the EU market at the same time.

Being fiercely independent while securing maximum access to the EU internal market will be a complex game of chess on multiple boards that so far has not gone well for for example the Swiss, who are now ground up between their voters and the EU because these two cannot seem to align and find themselves in the by now completely realistic Swixit scenario in which Switzerland will (temporarily . They have been negotiating for six years almost about what the UK would try to do before the end of the year. Given the record of the UK internal chaos when even coming to a Brexit this will never happen in time. Also, these new deals cannot enter into force during the transitional period.

The transition period can be extended once for a period of up to one or two years, if both sides agree to this before 1 July 2020. This is the likely scenario, because the UK is way not ready to leave without a lot of open ends by end of the year and the EU has shown to be sensitive to a chaotic exit, so the scenario I expect this to happen unless the EU is done with the UK at some point and refuses to extend.

Stage Two and a half: extended transitional period

The most likely option therefore is extension of the transitional period. The UK will continue to apply EU law. It will be worse off than Norway, Iceland or Liechtenstein because just applies EU law without even sitting at the table without having nothing to say.

This will be a two year extension. Companies that were sitting on their hands will start to believe that it will never happen and sit on their hands even more.

After the two years, the UK will truly be out because EU law will no longer apply and the MDR/IVDR will not apply for the UK any more.

Maybe there will be a transitional regime at the end of the extended transitional period, but nothing’s certain. The UK may have implemented the MDR and the IVDR but the EU may not recognize UK MDR and IVDR absent a mutual recognition arrangement, of which we do not know what it will look like.

EU law may continue to apply because of an extension of the extension, as described in the following scenario two and three quarters. If that scenario does not happen, go to stage three.

Stage two and three quarters, four fifths, nine tenths etc

Theoretically, there is nothing to prevent the UK from not getting its act together in the additional two years. In fact, this is likely to happen given the track record of UK negotiating with the EU without internal mandate or a mandate that turns out not to be a mandate.

It may therefore be that the transitional period is extended, possibly repeatedly, as the UK and the EU prolong the transitional period to avoid a chaotic no-deal Brexit that nobody wants. However, EU law will still apply during this period.

Then, at some point, the UK and the EU will decide that enough is enough and that the exit is deemed manageable. The UK leaves and EU law ceases to apply in the UK. Companies that are still not prepared by then will suffer the consequences.

Stage three: the UK finds out its place in the world and who’s next?

This is the UK endgame that the whole thing was about in the first place, in which statues of famous Brexiteers show up on squares in the UK and Britain is made great again. The UK is alone in the world and will likely quickly find out that the smaller you are, the more likely it is that you are pushed around by richer and/or more powerful countries that are only your friend when it serves their own purposes.

The Chinese and oil money from the Middle East will buy most of the UK, while the Americans will bully the UK into great deals that are far less advantageous for the UK than thought originally. The UK will find out that China is a lot bigger than they thought.

The Chinese and US will increase their efforts to prying the next member state(s) loose from the EU, because the best EU for the rest of the world is a weakened non-unified EU. This process is already well underway but will be played out more in the open. The EU, for its part, will do its best to keep the remaining member states in a row and counteract external and internal forces of division that would weaken the EU. Being a citizen of one of the founding member states and having an international outlook, I of course hope that they prevail.

In stage three anything can happen, for example:

  • The UK is Union and applies the MDR and IVDR, UK manufactured or imported devices may circulate freely in the EU market; or
  • The UK is fully third country, and uses its own certification scheme. The UK and EU may mutually recognize certifications; or
  • The UK and the EU don’t get along very well, and there is no mutual recognition. UK manufacturers and importers will need to obtain additional CE marking for the Union market.

Scenario anyone?

As you can see, it’s not a binary process of leaving but rather a gradual one and as I have been saying you should prepare for this by having plans for various scenarios – including the ones I came up with in this blog and possibly others. Everything I have written on this blog in relation to Brexit (also here and here) is still relevant, unfortunately we just don’t know when. Read up on old and new guidance. Questions? Confused? Angry rants? Let me know.

 

 

 


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