Confusion and Changes: 4.5 years and counting!

As of January 1, 2021, the UK is operating under the new ‘EU-UK Trade and Cooperation Agreement’, which was finalised on December 24 following lengthy negotiations. Although not yet approved by all 27 EU member states, the initial outcome seems positive, and the Agreement is already in the early stages of implementation.

Here, we clarify the Agreement’s key points, and take a look at which sector will be most affected by the changes.

EU-UK Trade and Cooperation Agreement Key Points

  • The Agreement provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin.
  • Both parties have committed to ensuring a robust, level playing field by maintaining high levels of protection in areas such as environmental protection, the fight against climate change and carbon pricing, social and labour rights, tax transparency, and state aid, with effective, domestic enforcement, a binding dispute settlement mechanism, and the possibility for both parties to take remedial measures.
  • The EU and the UK have agreed on a new framework for the joint management of fish stocks in EU and UK waters. The UK will be able to further develop British fishing activities, while the activities and livelihoods of European fishing communities will be safeguarded, and natural resources preserved.
  • On transport, the Agreement provides for continued and sustainable air, road, rail, and maritime connectivity, though market access falls below that offered by the Single Market. Provisions are included to ensure that competition between EU and UK operators takes place on a level playing field, so that passenger rights, workers’ rights, and transport safety are not undermined.
  • On energy, the Agreement provides a new model for trading and interconnectivity, with guarantees for open and fair competition, including offshore safety standards and renewable energy production.
  • On social security coordination, the Agreement aims to ensure various rights of EU citizens and UK nationals. This concerns EU citizens working in, travelling to, or moving to the UK as well as to UK nationals working in, travelling to, or moving to the EU after January 1, 2021.
  • The Agreement enables the UK’s continued participation in a number of flagship EU programmes for the period of 2021 to 2027 (subject to a financial contribution by the UK to the EU budget), such as Horizon Europe.

Who will be most affected?

While UK citizens once more require a visa to travel, work, or run a business in the EU, the average Briton will not see a dramatic difference to their daily routine.

However, the changes will be felt within the Financial Sector. Those who work in the finance will be required to take comprehensive steps to understand the implications of the new agreement whilst ensuring that all procedures are brought in line with the new legislations.

As the UK is now responsible for its own laws and regulations, it will no longer be following the AMLD (Anti Money Laundering Directives) set by the EU, and this means the UK’s post-Brexit sanctions regime will diverge from that of the EU.

Already, the UK has unilaterally enacted the Global Human Rights Sanctions Regulations 2020, immediately sanctioning 49 persons (including Russian and Saudi nationals allegedly involved in the deaths of Sergei Magnitski and Jamal Kashoggi) for human rights abuses.

Positive or negative?

Much of the information provided to those in finance remains ambiguous. Currently, information on the UK’s direction and whether the Financial Sector will follow international standards of regulation and supervision is vague; other areas (including the fight against financial crime, fraud, tax evasion, and money laundering) lack clarification.

So while the initial outcome of the post-Brexit changes does, indeed, appear positive, when it comes to the world of finance, confusion and uncertainty – two factors which often benefit the criminal underworld – abound.

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