Trade in services between the UK and the EU will continue on the same basis as today until the end of the transition period (currently envisaged to end on 31 December 2020).
If the UK and the EU do not agree and ratify a Free Trade Agreement before the end of the transition period, trade between the UK and the EU would move to World Trade Organisation (WTO) terms. There is only a limited level of relief for trade in services under WTO rules. These are covered under the General Agreement on Trade in Services (GATS)
The UK has deposited a schedule with the WTO that sets out the services that can be provided to the UK under GATS and whether any restrictions apply to those services. The schedule is quite lengthy and broadly liberal in terms of the services that can be provided to the UK. Time will tell whether the same level of access or indeed more will be granted by the EU to the UK in any future FTA. Given that the delivery of cross border services rely in many cases on people being able to easily move to and work in the other country, the final arrangements may be influenced by treatment of EU Nationals under the UK’s future immigration policy.
It is worth noting that the political declaration on the future relationship between the UK and the EU states that:
“The Parties should conclude ambitious, comprehensive and balanced arrangements on trade in services and investment in services, respecting each Party’s right to regulate and deliver a level of liberalisation in trade in services well beyond the Parties’ World Trade Organization (WTO) commitments and build on recent Union FTA’s.”
“the Parties should aim at substantial sectoral coverage, covering all modes of supply and providing for the absence of substantially all discrimination in the covered sectors, with exceptions and limitations as appropriate. The arrangements should therefore cover sectors including professional and business services, telecommunications services, courier and postal services, distribution services, environmental services, financial services, transport services and other services of mutual interest.”
Turning these aspirations into reality is likely to be complicated if the UK wants, as the Government has stated, to be able to diverge from existing EU regulations. For this reason, many commentators have said that the chances of getting a comprehensive FTA in place before the end of 2020 covering both goods and services is remote. Hence, we recommend that businesses take the following actions:
|Brexit issue(s)||Action required|
|Services supply chain
Understand what services your business imports and exports to / from the UK.
|Review supply chain
It is essential for businesses to review their supply chains to understand the movement of services into and out of the UK and the potential for disruption as a result of the UK no longer being a member of the single market.
|Understand whether the services are regulated or unregulated and whether they are included in the UK / EU WTO services schedules.||
It is essential to understand that even though certain services may be provided between the UK and the EU freely on
WTO terms, other rules associated with EU membership may prohibit their import / export inthe absence of a comprehensive FTA dealing with Services. For example, consider:
|Can steps can be taken to mitigate some of the impacts of other rules on the movement of services?||Once it is understood what issues may give rise to difficulties in the import / export of services to / from the UK, consider whether there are specific actions that may be taken to mitigate these. For example, where a service involves the flow of data subject to EU GDPR, consider whether there are options / exclusions available within GDPR that would facilitate the transfer of data from the EU to the UK.|
The World Trade Organisation (WTO) General Agreement on Trade in Services (GATS) divides the provision of services into 4 modes – set out below:
Mode 1: Cross-border supply - Service delivered within the territory of the Member, from the territory of another Member, e.g. an Irish consultant provides a report to a UK consumer via post or email.
Mode 2: Consumption abroad - Service delivered outside the territory of the Member, in the territory of another Member, to a service consumer of the Member, e.g. an Irish individual travels to the UK for legal advice.
Mode 3: Commercial presence - Service delivered within the territory of the Member, through the commercial presence of the supplier, e.g. an Irish architect establishes an office in the UK.
Mode 4: Presence of a natural person - Service delivered within the territory of the Member, with supplier present as a natural person, e.g. an Irish consultant or health worker travels to the UK to provide their service to a UK recipient.
Mode 5: Over the last few years the concept of a new mode of supply of services (mode 5) has emerged, though this mode has not (yet) been formally adopted by the WTO. Mode 5 refers to services which are incorporated into goods which are then traded across international borders, e.g. a UK car manufacturer sells a car with inbuilt software, etc. into Ireland that will require the provision of future services as part of the contract.
Now that the UK has formally left the EU, the EU will commence as soon as possible thereafter the assessments required for a “data adequacy decision” to be adopted by the end of 2020 in respect of the transfer of personal data to the UK.
If granted either as part of the trade negotiations or independently, it would allow data to be transferred from the EU to the UK broadly on the same terms as today.
The UK has also indicated that it will reciprocate such procedures in respect of the transfer of data to the UK and in a similar timeframe.
Until it is clear that such decisions will be forthcoming (and in place by the end of the transition period), it is prudent to be aware of what will need to be done absent those decisions. In that context, we have set out the relevant information that businesses should take into account.
No Adequacy Decision:
In the event of no Adequacy Decision being adopted, the UK (including Northern Ireland) will become a “third country” for the purposes of GDPR after the end of the transition period, currently 31 December 2020 (the “Current Date”).
This means that the legal framework governing transfers of personal data from organisations established in the EU to organisations established in the UK will change as transfers of personal data to the UK will be subject to the rules on international transfers to third countries provided for in the GDPR and other EU directives and regulations.
Review Data Flows from EU to UK: Organisations established in the EU that are transmitting personal data will need to review their personal data flows and seek to isolate personal data that is being transmitted to and processed in the UK (“UK Transfers”).
Actions: Subject to the final wording contained in the agreement in relation to an orderly Brexit and an adequacy decision actually being adopted, no further actions would need to taken in relation to these UK Transfers.
To the extent that there is any doubt on the adoption of an adequacy decision, it would be recommended and most prudent for organisations, to insert model Standard Contractual Clauses (approved by the European Commission) in the contracts relating to the UK Transfers which would provide the appropriate safeguards to permit the transfer of personal data to the UK in any event and would provide as robust a protection as possible.
No Adequacy Decision:
Actions: Once UK Transfers have been isolated, there are a number of options available to organisations to lawfully transfer personal data to the UK:
Actions: Similar to the above, subject to the final wording contained in the agreement in relation to an orderly Brexit and an adequacy decision actually being adopted, no further actions would need to taken in relation to these data Transfers.
No Adequacy Decision:
It is not yet clear what the UK would do if it did not adopt an adequacy decision in respect of the EU as it has yet to establish its own independent data protection regime.