On 23 March 2018, the European Council approved the text of the Draft Agreement on the UK’s withdrawal from the EU as proposed by the Commission on 19 March 2018 (“Withdrawal Agreement "). At this stage, the most relevant points of the Withdrawal Agreement relate to the transition period. It shall run from the date of its entry into force until 31 December 2020. The following agreed elements are worth noting regarding the transition period:
Subject to certain limited exceptions, EU law will be applicable to the UK so it will continue to benefit from the rights and be bound by the obligations arising from EU law governing the internal market, meaning also that the UK financial services sector will be under the continued supervision of the EU supervisory authorities.
Subject to certain limited exceptions, the UK will no longer benefit from its institutional rights under the treaties and, in particular, will no longer be able to nominate, appoint or elect members of EU institutions, bodies and agencies, participate in their decision-making or attend their meetings.
Although the UK remains bound by obligations stemming from existing international agreements entered into by the EU and by the duty of sincere cooperation, it is explicitly allowed to negotiate international agreements in areas of exclusive EU competence, such as international trade. The UK thus receives the right to start negotiating future trade agreements with third countries.
The Court of Justice of the European Union will have continued jurisdiction in relation to the UK, including as regards the interpretation and application of the Withdrawal Agreement.
Also important is the agreement on the continued application of the Rome I and Rome II Regulations regarding, respectively, contracts concluded before the end of the transition period and events giving rise to damages which occurred before the end of that period.
Finally, on the same day, the European Council also adopted Guidelines for the negotiations on the framework of the future relationship between the EU and the UK, i.e. for the period post-December 2020. After recalling the indivisibility of the four freedoms, the European Council confirmed its readiness to work towards an ambitious free trade agreement with the UK, subject to sufficient guarantees for a level playing field. This agreement would also address trade in services, with the aim of allowing market access to provide services under host state rules, including as regards the right of establishment, but to an extent consistent with the fact that the UK will become a third country and will no longer share a common regulatory and supervisory framework with the EU (which means that there will be no more passporting rights).