Overview (Hard Brexit Scenario)

Context of Hard Brexit Scenario Articles

The “Hard Brexit Scenario” articles in this section set out some consequences that would arise unless other arrangements are made between the UK and the EU,  in the event of a no deal “hard” Brexit in which the United Kingdom automatically leaves the EU on 31st October 2019 (may also apply to new exit date on 31st December 2020).

As of mid-August 2019, the default position under EU law and UK law is that the UK will cease to be a member of the EU on 31st October 2019 (may also apply to new exit date on 31st December 2020). Under EU law, the date can be extended by decision of the EU Council (Governments). Under UK law the date can be extended by Ministerial Order under the relevant UK legislation.

The new UK Government led be Boris Johnson has announced a from policy of leaving the EU on 31st October 2019 (may also apply to new exit date on 31st December 2020), in the absence of significant changes to the Withdrawal Agreement, agreed by the EU and UK Government , but rejected and not ratified by Parliament on three occasions.

The unratified Withdrawal Agreement is intended to  provide for a transitional or “implementation” period by which the UK would not effectively leave the EU until the end of 2020 at the earliest, which date could be postponed by at least one further year under its terms. It is intended that a new comprehensive trade agreement, dealing with many of the future relationship would be entered in the transitional period.

What is set out in the “Hard Brexit Scenario” articles applies to a hypothetical sudden exit of the United Kingdom from European Union as scheduled on 29th March 2019 (may also apply to new exit date on 31 December 2020) . Rationally, there is a strong incentive for the UK and EU to conclude a withdrawal agreement in order to avoid a so-called hard Brexit. However as of mid-August 2019 there is a standoff between the UK and the EU, largely about the so called Northern Ireland Backstop. No formal negotiations are ongoing, nor do they appear imminent.

There is a possibility that the UK Parliament will try to prevent a no-deal exit, either by passing law or replacing the UK Government, with a temporary Government mandated to seek an extension, pending a general election.

A no deal scenario is likely to be a very severe disruption to the Irish, EU and UK economies. It was long considered so catastrophic an event that its probability was widely considered to be very low. However, as of mid August 2019, the betting odds for a no deal exit imply a 40-50% probability.  This is in no way scientific, but does give some sense of risks and possibilities.

No Deal Issues

The Common Travel Area has been pledged to be upheld by the EU and UK, even in a no deal Brexit.

The EU and the UK have published several hundred No Deal Notes by way of guidance for their respective citizens and businesses. They are produced on other parts of this website.

These “Hard Brexit Scenario” articles seek to give a broad overview of no deal issues in some areas , with particular reference to Irish circumstances. The articles are selective and in no way comprehensive.These articles   rely to some extent on measures published by the UK and EU authorities in relation to the previous scheduled dates for exit, 29th March 2019 (may also apply to new exit date on 31 December 2020) and 12th April 2019. Circumstances change quickly and there may be more up to date material on other parts of the site.

A hard Brexit would be a sudden ‘Big Bang” which would change legal relations and arrangements across a range of sectors. It would be an overnight change to the terms on which business in conducted in many sectors.

There may be an economic shock which causes a  recession, which might not otherwise have occurred in Ireland and/or the UK. There may be a currency depreciation of Sterling against the Euro, which combined with an imposition of tariffs, customs and other procedures, may affect certain businesses sectors severely.

These and other factors occurring together may have effects which may unwind in an unpredictable fashion. Businesses may contract, make employees redundant or  close. There may be  multiple knock on consequences which have further effect. The longer the no-deal scenario endures and the less that is done to mitigate it, the more severe and unpredictable this “feedback” loop may become.

Possible Relief

It might reasonably be expected that in relation to some or many issues that either the EU (or possibly Ireland on a bilateral basis) may make temporary arrangements with the United Kingdom on a reciprocal basis to negate some of the effects that would follow, even in the event of a “hard Brexit. There may be, for example, continued recognition or derogation at least on a temporary basis to mitigate adverse consequences that would be in neither’s interest. There may be unilateral waivers by one or both of the UK in relation to particular matters.

Relieving measures or actions in the event of a hard Brexit assumes a mutual willingness to do so. In the worst case scenario , that there may be trade war or a quasi-trade war in which the relieving actions are themselves used as bargaining chips.

It is necessary to consider and follow the political developments in the lead up to Brexit to assess both the prospects of a hard Brexit and in that event, the likelihood of measures which may ease some of the issues mentioned. The process is utterly dependent on unfolding political decisions and event.

Customs Relief in UK

The UK  published notes in relation to the March 2019 deadline for Northern Ireland trade with the Republic of Ireland and for UK imports generally. The notes indicate some temporary measures on the UK side. They include a very wide waiver of customs tariffs and controls in almost all cases for RoI to NI trade. There is a temporary tariff with a much wider range of non-agricultural goods being subject to zero duty.  There is a wavier of the import security notice for a period.  Most smaller and medium size UK businesses may avail of a simplified customs regime for a period, which does not involve pre-entry custom declarations. It is not available to customs service providers such as freight forwarders and other customs agents.

There is no equivalent on the EU side, to the UK waivers and reliefs. Ireland is bound as matter or EU law to apply the EU Customs code which overrules domestic law. Therefore full import controls will apply on every Export from Ireland to the UK and on every import into Ireland from the UK.   As every Ireland to UK and UK to Ireland movement of goods involves import and export declarations, the UK reliefs, if they are available in a particular case, can only ease customs formalities on the UK side.

WTO Issues

The UK or EU might be subject to adverse consequences under the World Trade Organisation Agreement, in the event of failure to apply mutually, a customs code and tariff, equivalent to that now applied by the EU to third countries.The matter of customs,  tariffs and non-tariff barriers for goods  are subject to international treaty obligations on the part of the European Union and the United Kingdom.

If either offers the other more favourable terms, than those offered to other third (non-EU) states, without a new comprehensive trade EU -UK trade agreement, then any third party state may require under the  WTO rules that its businesses be given the same treatment on a non-discriminatory basis.There are some exceptions, which may apply or may arguably apply, more likely on a temporary basis, if at all.

Similar but less exacting WTO considerations apply in relation to the provisions of services and the basis on which the EU and UK allow each other’s businesses and nationals to provide services in the other’s territory.

There are mechanisms for complaint and assertion of these rights principally by states through the WTO dispute resolution mechanism. There are some exceptions, which may arguably be available, at least to a limited extent.  It should not be assumed that the UK or the EU would wish to  leave itself open to the consequences of a breach of these WTO obligations.

There are timing and logistical consideration in making agreements and arrangements between the EU and UK. Some relieving measures would require legislation and consent of other organs of government in both the UK and the EU. This may take time.

Authorisations Cease

From an Irish perspective, Brexit would mean that a range of authorisations recognised and standards accepted in the United Kingdom which are based on European Union law, would cease at the moment of Brexit on 31st October 2919, or later, because the United Kingdom will no longer be an EU member. The exact position would depend on the interpretation of the wording of the relevant legislation.In many cases, the regulatory regime requires ongoing membership by its terms. Existing authorisations may continue to be valid until expiry in some cases.

The European Union (Withdrawal) Act 2018 in the United Kingdom will carry over most European Union laws with provisions for adjustment by ministerial order. It may take and in some cases, the UK indicates that it will take steps to mitigate certain acute issues.

The United Kingdom has indicated in its ‘No deal Notes’ in several instances that it will waive compliance in relation to some matters, where this is necessary for an operative transition. The EU has similarly afforded some waivers, in its equivalent notes. However, the EU’s published waivers have been much more limited.

Bilateral Arrangements?

It might reasonably be expected that the UK  will not make unilateral waivers and concessions for EU and Irish-based traders and businesses selling into or trading with the UK unless the EU (or Ireland where possible on a non-EU basis) makes equivalent and reciprocal waivers and concessions.

There are limits under EU law to Ireland’s powers to make emergency bilateral arrangements with the UK in many areas which are wholly governed by EU law. They may be direct because the areas of law is one where the EU has sole power (such as customs and trade policy ).It may be indirect where the actions would be inconsistent with Ireland’s other EU obligations.

Even outside these areas, there are obligations not to discriminate under EU law and WTO agreement which bind the state and may limit its ability to act on a unilateral or bilateral basis with the United Kingdom. Moveover, there are political issues of solidarity, which make it unlikely that there would be express Ireland- UK bilateral arrangements.