Brexit: What is the significance of 30 June 2020?

The UK left the EU on 31 January last. Since then, for example, the UK no longer has members of the European Parliament, ministers attending EU council meetings or the right to nominate judges or commissioners to the EU Court of Justice or the Commission respectively. However, the UK has still agreed to be bound by some of the EU's rules during the so-called "transition period" – a sort of EU Lockdown when it was not allowed to go outside the EU legal regime.

Under Article 126 of the Withdrawal Agreement between the EU and the UK, there is a "transition period" from 1 February 2020 (i.e. the day after the UK left the EU) until 31 December 2020 (inclusive). In essence, during the transition period, the UK agreed to abide by many of the EU's rules while the EU agreed to effectively treat the UK as if it were still a member state for many (but not all) purposes despite it now being a "third country". So, for example, while the UK is no longer a member of the EU's institutions, the EU agreed that the UK's businesses and citizens would continue to enjoy various rights and freedoms (e.g. the free movement of goods, persons, services, capital and payments).

Under Article 126 of the Withdrawal Agreement, the transition period is due to end on 31 December 2020. However, Article 132 of the Withdrawal Agreement provides for a possible extension of the transition period. The transition period may be extended by up to one to two years but this is dependent on the UK agreeing to an extension before 30 June 2020. If the UK decides to ask for an extension then the transition period would continue "by up to one to two years". This would allow the EU and the UK more time to reach a new agreement to legislate for the period after transition. 

It would appear sensible and logical to have an extension because, for example:

  • trade agreements take a long time to negotiate and it is very unlikely that a deal could be agreed between the EU and the UK in eleven months (e.g. negotiations on the unfinished EU-China trade agreement started seven years ago while the EU-Singapore trade agreement which entered into force on 21 November 2019 was based on a mandate given to the EU 12 years earlier)
  • COVID-19 has been a necessary but enormous distraction and diversion for the UK and EU
  • the first four rounds of negotiations between the EU and the UK ending on 5 June 2020 have proved somewhat unproductive
  • the final agreement will govern relations between the EU and the UK for many so it is important to get it right

However, the UK has stated categorically that it will not seek, before 30 June 2020, an extension of the transition period. Indeed, section 33 of the UK's European Union (Withdrawal Agreement) Act 2020 prohibits the UK from seeking an extension – it states quite simply: "A Minister of the Crown may not agree in the [EU-UK] Joint Committee to an extension of the implementation period.” So extending would not only be an important political decision by the UK Government but would require the Westminster parliament to change the law.

So, is a No Deal Brexit inevitable if there is no extension sought and granted before 30 June 2020? 

The simple answer is no. There are five main outcomes (but other possibilities could emerge over time):

  1. a deal is concluded between the EU and the UK – the odds are currently against that but it is certainly possible (the experience of the EU is that deals can be done but they are often long and late)
  2. the UK changes its mind and seeks, before 30 June 2020, an extension – the odds are currently even more against that occurring but it is possible
  3. near the end of 2020, the EU and UK agree to extend the 31 December 2020 deadline on the basis that both sides "are almost there" and it is necessary to extend the deadline so as to close the deal – this is certainly possible but both sides lose some face
  4. there is a hard no-deal Brexit – this is possible. "Trading on WTO terms" – the phrase used by many Brexiteers – would not resolve matters because there are many issues called out by the UK as important (e.g., fisheries) which would not be addressed by "WTO terms" so there would be a great deal of uncertainty and confusion
  5. there is no agreement between the EU and the UK but each side decides unilaterally to extend certain privileges to the other and agree informally to continue as they are. So, the UK Government might well say that it has not sought an extension (as a matter of formality) and could continue to operate the transition regime as if nothing happened. That is not easy but could be used as a "sticky tape" solution and if there is no agreement then a great deal of "sticky tape" would be needed to cover the cracks and the gaps

So, the 30 June 2020 date is significant. The EU would probably agree to an extension because it is saying that the talks are not going well and there is very little time left – as Michel Barnier says, the clock is ticking. If the UK sought an extension before that date then it could facilitate the negotiation of a better and more robust deal. However, the UK Government appears to be banking on the benefit of an impending deadline to bring the parties to a deal but if no deal is forthcoming then the current UK Government appears more willing than its predecessors to walk away and take its chances on a No Deal Brexit. Hold on, there will be bumpy times ahead!

For more information on this topic please contact Dr Vincent Power, Partner or any member of A&L Goodbody's EU, Competition & Procurement team.

Date published: 10 June 2020