International Trade Agreements during the transition period

This post, written by Professor Panos Koutrakos, explains the legal position for the application of the EU’s existing trade agreements for the UK’s benefit during the transition period.

International Trade post-Brexit under the Withdrawal Agreement

The Withdrawal Agreement (the “WA”) provides in Article 126 for a transition period that will last until 31 December 2020 (it also provides for its extension, if agreed upon by 30 June 2020, for a maximum of two more years). During this period, the WA introduces, for all intents and purposes, the principle of continuity regarding the application of EU law in the UK legal order and the UK-EU relations.

This principle applies to international agreements too: Article 2(a)(iv) WA confirms that the term “EU law” covers the international agreements to which the Union is a party and the international agreements concluded by the Member States acting on behalf of the Union. In other words, all trade agreements that, pre-Brexit, were binding on the UK pursuant to its EU membership are still binding under the Withdrawal Agreement.

Trade agreements during the transition period: maintaining the status quo

The application of existing trade agreements during the transition period is elaborated upon in Article 129 WA. Entitled ‘Specific arrangements relating to the Union’s external action’, it provides as follows in Article 129(1):

“Without prejudice to Article 127(2), during the transition period, the United Kingdom shall be bound by the obligations stemming from the international agreements concluded by the Union, by Member States acting on its behalf, or by the Union and its Member States acting jointly, as referred to in point (a)(iv) of Article 2.”

The underlying rationale for the maintenance of the status quo is provided in the preamble to the Agreement (8^th recital):

“[I]t is in the interest of both the Union and the United Kingdom to determine a transition or implementation period during which – notwithstanding all consequences of the United Kingdom’s withdrawal from the Union as regards the United Kingdom’s participation in the institutions, bodies, offices and agencies of the Union, in particular the end, on the date of entry into force of this Agreement, of the mandates of all members of institutions, bodies and agencies of the Union nominated, appointed or elected in relation to the United Kingdom’s membership of the Union – Union law, including international agreements, should be applicable to and in the United Kingdom, and, as a general rule, with the same effect as regards the Member States, in order to avoid disruption in the period during which the agreement(s) on the future relationship will be negotiated …”

The position of third countries

While the WA extends the application of existing trade agreements, continuity as a matter of international law is not a unilateral issue. This is acknowledged in the WA itself, as Article 129(1) WA is accompanied by an asterisked footnote which provides as follows:

“The Union will notify the other parties to these agreements that during the transition period the United Kingdom is to be treated as a Member State for the purposes of these agreements”.

From a policy point of view, given the scope and depth of the WA, it may be difficult to envisage third States raising obstacles to this course of action. First, the WA is of such broad scope that it may be argued that, in functional terms, and the UK’s formal withdrawal from the EU notwithstanding, nothing will change during the transition period as far as the application of EU law to the UK is concerned. EU law covers international agreements binding on the EU (Article 216(2) TFEU), including the UK. It would be reasonable, therefore, to assume that the continuing application of international agreements would not raise policy concerns for the EU’s contracting parties. Second, the transition period is of limited duration and, therefore, any concerns that the EU’s interlocutors may have about the unfolding uncertainty regarding their post-Brexit trade relations with the UK would be bound to be time-limited.

From a legal point of view, however, the arrangement envisaged in Article 129 WA requires the consent of the third parties which are the Union’s interlocutors in the context of each and every agreement concluded under Article 218 TFEU. To that effect, the Member States, including the UK, endorsed a note verbale which has been sent by the relevant Head of Mission to the EU’s partners. This short document sets out the WA arrangements and provides that the EU and Euratom ‘notify’ the contracting parties of agreements referred to in Article 129(1) WA that “the United Kingdom is treated as a Member State of the Union and of Euratom for the purposes of these international agreements”.

The EU does not have the power to state how third countries would treat the UK under international law. The above note verbal, therefore, is about how the UK is treated by the EU under the WA agreement. In this vein, the document does not suggest that the EU’s and UK’s contracting parties act in a specific manner in response. It merely informs them of the internal EU arrangement which is about ‘business as usual’ for a limited period of time.

Other issues about the continuing effect of trade agreements

The remaining provisions of Article 129 WA set out three main issues that arise from the continuing application of the EU’s trade agreements to the UK during the transition period.   

First, no UK representatives would be present at meetings of bodies set up under such agreements, unless the UK participates in its own right (that is, not pursuant to its prior EU membership) or it is invited by the EU to attend as part of the EU’s delegation on an ad hoc basis required, in particular, for the effective implementation of the WA (Article 129(1) WA). 

Second, the duty of cooperation, that is a hallmark of EU law, is adjusted to the specific context set out by the WA. In order to reflect the principle of continuity, the duty of cooperation applies during the transition period and imposes a duty on the UK “to refrain from any action or initiative which is likely to be prejudicial to the Union’s interests, in particular in the framework of any international organisation, agency, conference or forum of which the United Kingdom is a party in its own right” (Article 129(3) WA).

The application of the duty of cooperation is not without flexibility, and reflects the transitional nature of the time-limited period set out in the WA:  the UK may “negotiate, sign and ratify international agreements entered into in its own capacity in the areas of exclusive competence of the Union, provided those agreements do not enter into force or apply during the transition period, unless so authorised by the Union” (Art. 129(4) WA).

Third, Ad hoc cooperation is provided for “whenever there is a need for coordination, the United Kingdom may be consulted, on a case-by-case basis” (Article 129(5) WA).

What is the position after the expiry of the transition period?

The EU’s agreements that govern the UK’s trade relations with third countries under the WA will cease to apply when the transition period laid down in the latter expires. What happens then? Negotiating trade agreements takes time. In the light of this consideration, and in order to avoid sudden disruption in legal relationships, the UK has negotiated with third countries a number of roll-over treaties which are based on the EU’s existing agreements. These are known as rollover agreements and will be examined in a separate blog entry.  

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