03 Jul

Less than a year to Brexit: what’s next?

The following article was written by Neil Baylis, Partner, K&L Gates in Travel Law Today, 5th Edition which can be read here.

On 29 March 2017, Theresa May notified the UK’s intention to withdraw from the EU and triggered the two-year process to define a new relationship between Britain and its 27 co-members of the European bloc. The UK Government’s red lines on Brexit negotiations include ending the jurisdiction of the Court of Justice of the EU (CJEU) and leaving the EU single market. This article sets out the future consequences for the transport sector.

The negotiations are following three phases: an initial stage focusing on citizens’ rights, a financial settlement and the status of the border with the Republic of Ireland. A second phase relates to a transition period after Brexit and thirdly, the agreement on the shape of a future EU-UK relationship. Last December the negotiators reached an agreement in principle across the three main topics initially under consideration and moved to the second phase of talks.

On 19 March 2018, EU and UK negotiators announced the terms of a Brexit transition phase. The transition period will start on the date of entry into force of the agreement setting out the terms of the UK’s withdrawal from the EU and end on 31 December 2020. During this time, all EU rules will continue to apply to the UK as if it were a Member State, even though it no longer participates in the EU decision-making process. Therefore, the UK will remain in the single market and the status quo would be maintained for this time.

On 23 March 2018, the European Council (Council) adopted its guidelines on post-Brexit relations and agreed to start trade talks with the UK. A proper free trade agreement (FTA) can only be signed once the UK withdraws from the EU on 29 March 2019. However, the Withdrawal Agreement should ideally be finalised by October 2018, in order to allow enough time to obtain the endorsement of both EU and UK Parliaments before the UK’s withdrawal.

Consequences, existing models and future options in the transport sector

Leaving the single market will have wide-ranging implications, for most economic sectors; transport is no exception.

From 1 January 2021, community licenses for the international carriage of passengers by coach and bus, as well as certificates of professional competence for drivers issued in the UK, will no longer be valid in the EU.

For rail, Brexit means the end of open market access to rail services and of mutual recognition for operating licences. On leaving, licences issued by the UK will no longer be valid in the EU-27 and railway enterprises wishing to continue operating in the EU would have to apply for an EU-27 licence.

With regard to maritime transport, British services will no longer benefit from the current EU law-based rights. These include cabotage, the transport of goods or passengers between two places in the same country by a transport operator from another country, and non-discriminatory access to provision of public maritime and port services. Moreover, operators providing transport services to passengers on inland waterways in the EU will have to be based in an EU Member State and make use of vessels registered in a member country, which has profound implications for river cruise providers.

Finally, the UK would cease to be covered by air transport agreements of the EU, e.g. the air agreement with Switzerland and to benefit from the European Common Aviation Area (ECAA) currently comprising EU members, plus Norway, Iceland, the Balkan countries and Lichtenstein. The UK will cease to participate in the European Aviation Safety Agency and UKlicensed airlines will no longer enjoy traffic rights to the EU market.

If we do not reach agreements on all of these issues, the solutions provided at international level are both fragmentary and inadequate. The WTO General Agreement on Trade in Services (GATS) applies to 12 sectors, including transport, tourism and travel. However, for road, rail and maritime transport, the EU has assumed limited obligations under the GATS and mainly allows the establishment of commercial presence in some FTAs, except for cabotage. As regards air transport services related to traffic rights, the GATS does not provide any international fall-back and the access to the EU market is regulated through bilateral agreements negotiated by the Commission within the framework of the EU external aviation policy. The GATS would be more favourable for tourism and travel-related services. The supply of these services within the EU is generally free from limitations and the presence of natural persons is unbound, although with specific requirements for tour managers.

Other international instruments that would offer a rather thin legislative framework include the 1949 Geneva Convention on Road Traffic, the Convention concerning International Carriage by Rail (COTIF), and the Maritime Labour Convention. It is also worth mentioning that a hard Brexit will not affect the management of the Channel Tunnel, since it operates under the terms of an intergovernmental agreement between France and the UK.

It seems highly unlikely that the regulation of the cross-border EU-UK transport will rely upon the international instruments set out above; British and European players have stressed several times the need to secure an agreement in this field. The negotiations will be tough but the guidelines of the Council on the future relationship adopted on 23 March leave the way open to an FTA covering goods and, to an extent, services. Furthermore, the guidelines suggest that any future FTA should include ambitious provisions on movement of people, as well as a framework for the recognition of professional qualifications.

The good news is also that transport and tourism are sectors where it is in both parties’ interests to reach agreement that will limit disruption and allow for the continued flow of tourists and business across both sides of the border. Thus, the Council has urged for the preservation of the current levels of EU-UK connectivity and envisages a new framework for transport relations after Brexit. Specifically, it emphasises that a bilateral air transport agreement, combined with an aviation safety agreement, must be reached soon. However, concerning the future participation of the UK in the EU agencies, already undermined by the UK rejection of the CJEU jurisdiction, the Council reiterates that the EU will preserve its autonomy as regards its decision-making. Therefore, the UK will be bound by EU laws and regulations but will have no say in how they are framed.