What Has Happened So Far?

On March 29, 2017, the United Kingdom (UK) invoked Article 50 of the Lisbon Treaty, beginning the two-year process of leaving the European Union (EU), more commonly known as Brexit. Although the UK government and the EU first reached a deal on a withdrawal agreement in November 2018, British Members of Parliament (MPs) were not able to rally a majority to support a specific withdrawal arrangement until January 2020.

Because the government was, until recently, unable to secure parliamentary approval for a deal—and considering the UK was originally set to exit the EU on March 29, 2019, regardless of whether an agreement had been reached—MPs voted (and the EU agreed) to delay Brexit on three occasions between early March and late October 2019. Below, we provide an in-depth look into the events that followed the second of those extensions and examine the upcoming implementation period and its possible outcomes.

New Prime Minister

In late May 2019, having repeatedly failed to unite parliament (and her own cabinet) behind a Brexit deal, Theresa May announced that she was stepping aside as Conservative Party leader and Prime Minister, thereby triggering a race for leadership within the Conservative Party that would determine the next Prime Minister. Nearly two month later, Boris Johnson—a leading figure in the Brexit campaign and former Foreign Secretary in Theresa May’s cabinet who had resigned in protest at May’s Brexit approach—won the Conservative Party leadership ballot and was subsequently appointed Prime Minister by the Queen; shortly after, Johnson indicated that he intends to renegotiate both the binding and non-binding elements of the deal that Theresa May negotiated with the EU, and insisted that his government will leave the EU on October 31, 2019, regardless of whether a deal is approved.

Despite a lack of willingness among EU leaders to reopen the negotiation process on the binding withdrawal agreement and non-binding political declaration, Johnson defied expectations and managed to renegotiate both elements; on October 17, 2019, he and Jean-Claude Juncker, President of the European Commission, announced a new Brexit deal that is distinct from its predecessor in its treatment of the so-called Irish backstop and the political declaration, but not much else.

However, Johnson’s plan to secure parliamentary approval for the deal by October 19, 2019—which was the parliament- stipulated date (via the Benn Act) by which Johnson would be forced to request another extension from the EU if parliament hadn’t approved a deal—was scuttled when parliament voted to withhold its support for the new Brexit deal until the necessary laws to apply Brexit came into place in order to mitigate the risk of an inadvertent “no-deal” Brexit and provide MPs with more time to look into the new deal. This essentially forced Johnson’s hand to request an extension from the EU, making this the UK’s third Brexit extension request.

On October 22, 2019, while the EU was still considering the UK’s extension request, Johnson continued to attempt to pass a Brexit deal by the October 31, 2019 deadline. UK MPs voted in favor of Johnson’s Brexit bill in an initial debate on the overall principles of the bill (known as a second reading)—making this the first time that parliament has backed any Brexit deal—but rejected his fast-tracked timetable to finalize the deal by October 25, 2019 on the grounds that they did not have enough time to consider the specifics of the legislation.

Early Elections

In response, Johnson announced that he would place the legislation on hold until the EU responds to his extension request; yet, the EU indicated that it required more clarity surrounding the purpose and justification of an extension before granting one. On October 24, 2019, attempting to break the impasse, strengthen his party’s position in parliament, and provide justification for an extension, Johnson called for an early election on December 12, 2019, though it was uncertain whether he would be able to garner the requisite parliamentary support for an election, due largely to the opposition’s concerns surrounding the possibility of a “no-deal” Brexit.

However, on October 28, 2019, the EU agreed to another “flexible” extension until January 31, 2020, essentially satisfying the opposition’s request that the potential for a “no-deal” Brexit be eliminated. The following day, MPs supported Johnson’s call for an early election on December 12, 2019; subsequently, parliament was dissolved on November 6, 2019 in preparation for a general election.

The outcome of the election represented a major victory for Johnson and the Conservative party and provided them with a significant majority. Based on this majority, Johnson’s renegotiated withdrawal agreement was passed by Parliament on January 22, 2020 and received royal assent the following day. The approval of the bill ensures that the UK will exit the EU on January 31, 2020, eliminating the possibility of a “no-deal” Brexit on that date. The European Parliament, for its part, will also have to approve Brexit before the end of the month, which is expected to take place without any major obstacles.

Implementation Period

Now that the UK has approved a withdrawal agreement, an implementation period—during which the future trade relationship between the UK and EU will be finalized—is set to come into effect following Brexit. This period is effective through December 31, 2020, and while there was some speculation that this period could be extended if both parties agreed to such an extension by June 2020, the recently passed withdrawal agreement prohibits the UK government from seeking such a delay. However, should concerns surrounding the post-Brexit relationship between the UK and EU persist during negotiations, it is possible that this prohibition can be overcome through future legislation; whether this will take place over the coming months remains uncertain.

During this implementation period, Marketing Authorization Holders (MAHs) based in the UK will continue being able to access EU markets; manufacturing and distribution licenses and inspections will continue to be mutually recognized in both regions. Moreover, UK-based firms will still be able to apply for marketing authorizations.

Furthermore, both UK and EU markets will continue to rely on CE marking, and UK-based firms will not be required to have EU-based authorized representatives. Notified Bodies in the UK may continue third-party conformity assessments, which will be recognized throughout EU markets.

Significantly, because both the European MDR and the CTR are set to be implemented prior to the end of the planned Brexit implementation period on December 31, 2020, the UK government will implement both regulations in full, which will likely contribute to reducing the potential for disruptive regulatory barriers between the UK and EU once the implementation period has closed.

Possible Outcomes

Although the risk of a “no-deal” Brexit on January 31, 2020 has now been eliminated, the reality and full impact of Brexit will be entirely reliant on the outcomes of post-Brexit negotiations to determine the future relationship between the two parties and the extent of trade and regulatory harmonization that is desired on each side.

One of the early and primary outcomes of these negotiations is anticipated to be a UK-EU free-trade agreement; however, if negotiations don’t render such an agreement by the end of the implementation period (and the implementation period is not extended), this relationship would automatically revert to World Trade Organization trade rules—which would include tariffs and increased border checks—until a free-trade deal is reached. Because these outcomes remain unclear, however, no assumptions regarding the overall impact of Brexit have been factored into this assessment.

 

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