The EU and the UK are major partners when it comes to trade in services and investment.
While the UK was an EU Member State, participating in the EU Single Market and benefitting from the free movement of persons and services, businesses could supply services freely across the EU. The UK benefitted from the EU’s Single Market ecosystem based on common rules, a single supervisory framework, and a common jurisdictional system.
What changes will occur on 1 January 2021?
As of 1 January, the UK will no longer benefit from the principles of free movement of persons, free provision of services and freedom of establishment.
As a result, UK service suppliers will lose their automatic right to offer services across the EU. They may need to establish themselves in the EU to continue operating. In any event, they must comply with the – often varying – host-country rules of each Member State, as they will no longer benefit from the ‘country-of-origin’ approach or ‘passporting’ concept, according to which authorisations issued by one Member State under EU rules enable access throughout the entire EU Single Market.
What is covered by the Trade and Cooperation Agreement between UK and EU ?
The Agreement provides for a significant level of openness for trade in services and investment, going beyond the baseline provisions of the WTO’s General Agreement on Trade in Services (GATS), to which both the EU and the UK are parties, and commensurate with the commitments taken by the EU with other industrialised third countries throughout the world.
As in all its free trade agreements, the EU fully maintains the right to regulate its own markets.
Which sectors are covered by the Trade and Cooperation Agreement between UK and EU?
As required by the WTO’s General Agreement on Trade in Services (GATS), the Agreement has substantial sectoral coverage, including professional and business services (e.g. legal, auditing, architectural services), delivery and telecommunication services, computer-related and digital services, financial services, research and development services, most transport services and environmental services. Furthermore, the scope of the Agreement applies to investment in sectors other than services such as manufacturing, agriculture, forestry, fisheries, energy and other primary industries.
As in any free trade agreement negotiated by the EU, there are a number of exceptions to the scope of liberalisation: namely, public services and services of general interest; some transport services; as well as audiovisual services.
Under what conditions will EU service suppliers be able to operate in the UK and vice versa?
The non-discrimination obligations of the Agreement ensure that service suppliers or investors from the EU will be treated no less favourably than UK operators in the UK, and vice-versa. This entitles them to receive more favourable treatment than that granted to service suppliers or investors of third countries without similar provisions in place.
Naturally, given that the UK will no longer be in the Single Market, all UK service suppliers and investors must abide by the domestic rules, procedures and authorisations applicable to their activities in the countries where they operate.
For UK service suppliers, this means complying with – often varying – host-country rules of each Member State, as they will no longer benefit from the ‘country-of-origin’ principle, mutual recognition or ‘passporting’.
The EU-UK Agreement also includes a forward-looking “most-favoured nation” clause that would allow the EU and the UK to claim any more favourable treatment granted by the UK or the EU respectively in their future agreements on trade in services and investment with other third countries – except in the area of financial services.
It also includes a review clause encouraging the parties to consider whether there are possibilities to improve trade in services and investment relations between the EU and the UK in the future – except in the area of financial services.
More information: https://ec.europa.eu/commission/presscorner/detail/en/qanda_20_2532