European Commission and the United Kingdom have finally reached a draft on the “Withdrawal Agreement”, which after the obtention of the other 27 member states’ support during the Summit of the European council, will be voted on in the UK Parliament during a special session on Saturday October 19th; if accepted by the latter, the agreement shall be ratified by the EU Parliament, though no specific date has been set, it is expected to happen at the Strasbourg Summit next week.
On 29 March 2017, the United Kingdom notified the European Council of its intention to leave the European Union, pursuant to Article 50 of the Treaty on European Union. A month later, the European Council adopted the guidelines which defined the framework for the negotiations. After three years of negotiations, and three rejections to possible withdrawal agreements by the Members of UK’s Parliament, the EU and the UK Prime Minister, Boris Johnson, have reached what appears to be a possible agreement.
Queen Elizabeth II formally opened Parliament on Monday October 14th, for what, has been and still is, one of the most important weeks in modern UK politics, making special emphasis on the government’s priority to leave the EU by October 31st. Hence, the Parliament’s decision next Saturday will determine if Brexit is happening with or without an agreement with the EU or whether an extension is given past October 31st.
The doubts on the agreement’s failure have grown in just a few hours from its diffusion; Northern Ireland’s Democratic Unionist Party (“DUP”) has made it clear that they would not support the agreement as it stands. The party’s leader Arlene Foster and deputy Nigel Dodds have stated that the DUP would only support an arrangement if it was on Northern Ireland’s long-term interest.
The most controversial aspects of the negotiation, which could jeopardize the Withdrawal Agreement, revolve around customs rules and VAT implications in Northern Ireland. In accordance to this latest arrangement, the latter will be bind to the European Single Market and shall apply EU’s customs and tariffs rules, which will be overseen by the European Court of Justice; on VAT, the DUP has stated that the proposed agreement would only bound Northern Ireland into agreements that the rest of the UK will not, causing, in the long-term, VAT and customs discrepancies.
The eventual rejection of the DUP could lead to a lack of support in Parliament for the Agreement’s ratification.
Through the last three years, several studies have been done on the possible impact of Brexit on companies doing business in, with, and from the UK and, within the EU territory, amongst which the following should be taken into consideration.
Its separation from the EU implies that EU- derived regulation will no longer be binding, legal uncertainty will generate, in most sectors of the economy, serious doubts and conflicts, forcing its amendment, as well as the approval of new legislation.
The aforementioned, is foreseen to have a hard impact in the ICT industry, for both customers and users of ICT services provided from the United Kingdom or by British companies.
Notwithstanding the foregoing, UK’s government has assured that telecommunication industry would not be affected by this uncertainty since current applicable EU-derived rules are governing the way Ofcom (regulator and competition authority for the UK communications industries) regulates telecoms markets and are implemented in UK law, specifying that both telecommunication regulations and the on spectrum allocation will be corrected, if necessary, by secondary legislation.
As to the provision of telecommunication services, UK government has stated that “UK telecom operators will continue to be able to provide cross-border telecoms services and operate within the EU, under the World Trade Organisation’s General Agreement on Trade in Services (GATS)”.
In spite of the government’s declarations, some companies have expressed their concerns and announced they might be relocating their headquarters to other EU member states. The industry could be affected by a change in foreign investments which had chosen UK’s market as an entry platform to the European market, in addition to new tax regulations that could affect the companies’ financial performance.
Furthermore, possible consequences could be expected on sectors such as international trade related to industry, productivity and innovation, access to qualified professionals, as well as commodity prices.
Pursuant to providing certainty to citizens and companies, the agreement sets up a transitional period until December 31st, 2020, during which the EU law will be applicable to the UK, with exception of institutions and governance structures.
UPDATE ON THE CATALONIAN CONFLICT
On Monday, October 14th, the Spanish Supreme Court ruled against the Catalonian separatist leaders, sentencing them to nine to thirteen years in prison. These politicians were convicted of sedition, misuse of public funds and disobedience, for their participation in the unilateral and illegal referendum of declaration of independence that took place on October 2017.
All of the defendants were accused of the most serious charge of rebellion, crime that comes with a penalty of 25 years in prison. Nonetheless, the Court acquitted them of the most severe charge, stating that the events occurred in 2017 were “irrefutable acts of violence” in Catalonia, but the failed bid for independence did not have enough threatening impact as to “force a successful territorial independence and the derogation of the Constitution.”
Upon the Court’s ruling, pro-independence organizations and citizens reacted abruptly, beyond the anger over the trial and the accusations, independence’s supporters have held mass demonstrations, prompting clashes between separatism and unionism within Catalan territory.
The fallout of the Catalan conflict does not only affect the Spanish democracy and the respect of the Rule of Law but could also have a negative impact on the Autonomous Community’s economy, trade, business and investment.
With regard to new technologies industry, the Mobile World Congress (MWC) was held last February in Barcelona for the fourth year in a row. The world’s largest telecommunications trade fair surpassed one hundred thousand visitors, and aimed at showing the benefits on 5G, the fifth generation of mobile communications.
However, this technological event turned into a political forum; firstly, due to the presence of China's most important electronics producers, leaded by Huawei, and its American competitors; and secondly, as a result of the encounter of King Felipe VI and the current President of the Catalan Government, Quim Torra. . Despite Catalonia’s political conflicts, this high-tech event has kept and will keep taking place in Barcelona.
After the failed referendum, some multinational companies with headquarters in Catalonia, threatened to relocate their business and, as of today, 5.475 companies have moved out. The increasing instability and tense political situation could affect the technological industry, and consequently the MWC.
María Eugenia García
Abogada de Cremades & Calvo-Sotelo