On 29 March 2019, at midnight, the United Kingdom (the “UK”) will leave the European Union (the “EU”). If by then the UK and the EU have reached an agreement setting out the arrangements for the UK’s withdrawal from the EU (the “Withdrawal Agreement”), the UK will leave the EU in an “orderly” manner. As a result, there will be a transition period, running at least until the 31st December 2020, during which the UK will remain bound by all EU international agreements, including EU-third-country agreements such as the Swiss-EU bilateral agreements.
On the other hand, where no Withdrawal Agreement is concluded in time (“no-deal” scenario), there will not be such a transition period. Consequently, all EU-third-country agreements such as the Swiss-EU bilateral agreements would immediately cease to be applicable to the UK on 29 March 2019 at midnight.
In view of the above, Swiss-UK trade relations, mostly based on the Swiss-EU bilateral trade agreements, will also be affected by the conclusion (or not) of the Withdrawal Agreement. This is the reason why, on 11 February 2019, Switzerland and the UK signed a bilateral trade agreement that will enter into force as soon as the Swiss-EU bilateral agreements will cease to apply to the UK : in a “deal” scenario, it will enter into force only after the transition period, while in a “no-deal” scenario, it will enter into force, on a provisional basis, on 30 March 2019 at 00:00 CET.
The signed agreement is extremely important, since it should secure, for both Switzerland and the UK, the possibility to trade also after the Brexit based on most of the (preferential) terms currently applicable between the two countries. Indeed, most of the Swiss-EU trade agreements currently governing Swiss-UK trade, i.e. the 1972 Free Trade Agreement (the “FTA”), the Agreement on certain aspects of government procurement, the Agreement on the fight against fraud, part of the Agreement on mutual recognition in relation to conformity assessment (the “Swiss-EU MRA”) and part of the Agreement on trade in agricultural products (“Agreement on Agriculture”), are largely replicated under the new Swiss-UK bilateral trade agreement.
For instance, the Swiss-UK trade agreement provides for the existing mutual rights and obligations under the 1972 FTA (e.g. regarding customs duty) to continue on a bilateral level also after the Brexit, through the incorporation of the 1972 FTA provisions into a Swiss-UK bilateral agreement.
However, minor “practical” changes may occur in Swiss-UK dealings also where the Swiss-UK trade agreement allows for the replication of Swiss-EU bilateral trade agreements. For instance, in respect of Protocol 3 of the 1972 FTA regarding the rules of origin, the Swiss-UK trade agreement provides for the continuation at a bilateral level of the rules of origin of the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin. However, in a “no-deal” scenario, from 30 March 2019 already, the EU and other parties of said convention will be considered third countries in the Swiss-UK relationship. This will result in some differences with the current situation for instance in respect of cumulation and direct shipment rules.
Finally, it has to be noted that there are Swiss-EU bilateral trade agreements that it has not been possible to (completely) replicate in the Swiss-UK trade agreement so far, said agreements being (partially) based on harmonization or recognition of the equivalence of rules between Switzerland and the EU. This concerns the Agreement on the simplification of inspections and formalities in respect of the carriage of goods and on customs security measures, and parts of the Agreement on Agriculture and of the Swiss-EU MRA. For instance, 17 product sectors covered by the Swiss-EU MRA (e.g. including machinery, telecommunications terminal equipment and medical devices) are not covered by the signed agreement. In said sectors, in order to avoid double conformity assessments, new (traditional) MRAs will have to be concluded.
It is now time for businesses that are active between Switzerland and UK to anticipate the situation and to prepare to take all benefit of this new agreement. The trade team at MLL in Geneva and Brussels shall be happy to assist you.