Services

The EU UK Trade and Cooperation Agreement guarantees

• market access; requiring that service suppliers and investors should not face limitations such as economic needs test restrictions on corporate form and equity caps.
• national treatment; non-discriminatory treatments between UK and EU service suppliers and investors
• local presence; limited ability to require a local presence.
• performance requirements prohibited; to ensure investors are not subject to conditions such as domestic content requirements or export restrictions.
• senior management and boards of directors  not subject to nationality conditions

There are commitments to the free flow of capital payments for goods and services and to facilitate trade and investment.

The Agreement’s provisions on services cover a range of professional and business services (legal auditing architectural services, delivery and telecommunication services, digital services, financial services, research and development services, transport services and environmental services). It applies to investment in most areas including services, manufacturing, agriculture, fisheries, forestry, energy and other primary industries.

The fact that the TCA applies to these areas does not in any way mean that the existing EU single markets in those areas will continue to apply as between United Kingdom (including Northern Ireland) and European Union (including the Republic of Ireland).

The strong guarantees under EU law for the provision of services cross-border and setting up in the other country will no longer apply. New guarantees apply which are less detailed and precise and are not enforceable directly by traders. Single EU wide licences as in the area of financial services, transport and energy will no longer apply in the UK nor for UK providers in the EU.

Traders who are adversely affected by barriers to trade will have no direct right to compensation or remedy. A remedy usually lies by way of EU or the UK  applying countermeasures against the other state.

The right to provide services is one of the four fundamental freedoms in the EU Treaties. They are directly enforceable in national courts and its principles as developed by the European Court of the last 50 years must be applied by national courts to overrule any inconsistent national rules or practices.

In addition to enforcement by the courts, the EU Commission has sought to give real effect to the freedom to provide and receive services by enforcement action against states and by initiatives for legislation that give real effect to the rights. Both in relation to court action and Commission action, the permitted exceptions to the rights and narrowly defined.  States may put in place obstacles only where they are strictly and  demonstrably necessary and no wider than necessary to achieve legitimate policy objectives. In practice, this has meant that very few limitations,  restrictions  and conditions may be placed on the right and freedom to provide and receive services.

There is a comprehensive Services Directive which provides comprehensive specific rights to provide services throughout the EU. It applies to almost all types of services that save some limited categories of governmental activities. It emphasises the right of the service provider to provide the service and the right of the recipient to receive and avail of the service.

The directive placed positive  duties on states to review and remove barriers to the provision of services. Obstacles and hindrances to trade in services must be removed. Any remaining restrictions must be strictly and demonstrably necessary. There is an onus on the host state to prove the strict necessity.

States must provide a “single point of contact” electronic portal to deal with and assist queries by service providers in exercising the rights concerned. The host state must accord full and effective equal treatment. This includes the full social and tax advantages available to domestic providers.

The Services Directive operates in tandem with the Qualifications Directive which takes a similar approach. Generally, qualifications must be recognised. Where there is justification for non-recognition, there must be provision for recognition by way of further training and/ or aptitude testing.

There is a right both to provide services cross-border and a right to establish a presence in another state by way of a branch or subsidiary in order to provide services in the host state. The right to establish  is provided for under the EU treaties as a key freedom which the European courts have gone far to uphold.

Even fewer limitations are permissible in respect of the right to provide services cross border,  where the services are provided in the trader’s capacity as a home state provider. In this case, there is no requirement for establishment or infrastructure in the host state.

International trade agreements in the area of services are much less developed than in the case of goods. The 1995 General Agreement on Trade in Services (GATS)  was part of the last major update of WTO rules. It was the first multilateral (multi-state) agreement on trade in services. Although it follows the broad principles of the agreement in relation to goods (GATT), it is much less comprehensive and much more limited in its scope.

The WTO GATS would have represented the fallback position in respect of trade in services in the event of a no-deal Brexit. As in the case of goods, the EU UK  Trade and Cooperation Agreement in relation to services builds on GATS principles. While it represents a significant development of the basic default “third country” position, it is still limited and subject to many significant exceptions and is not directly enforceable by traders.

The WTO GATS agreement provides for the most-favoured-nation and non-discrimination principles that are found in the General Agreement in relation to trade in goods. However, unlike GATT, the principles only apply in the areas specified and agreed in the TCA.

Services schedules cover 155 different categories of services which are defined in the GATS agreements. There are four modes of supply namely, supply cross-border, consumption abroad, commercial presence and temporary business travel. 

Even within the areas specified, exceptions suspensions and withdrawal is provided for, although in some cases a countermeasure may be permitted in consequence.

The free movement of persons and rights to work and provide services under the Common Travel Area arrangements will assist the free movement of service providers and services in many sectors. The biggest barrier to the free movement of services in most cases are immigration rules. They will apply to EU 26 employees of Irish businesses, but not to Irish and UK citizens.

The Common Travel Area is an understanding or convention between the United Kingdom, Ireland, the Isle of Man and the Channel Islands. It does not have the force of law nor is it formally embodied in an international agreement. The Common Travel Area is recognised in EU legislation including the Withdrawal Agreement by way of an exception to the general principles of equal treatment that would be otherwise required to be afforded to other EU states.

In May 2019 the United Kingdom and Ireland signed a Memorandum of Understanding in relation to the scope of the Common Travel Area. This has fleshed out many important aspects of the arrangement which had been understood to greater and lesser extents but had not been explicitly documented.

“People” are usually one of the most important considerations in relation to services. UK immigration laws will apply to the EU 26 citizens after the effective date of Brexit. Citizens of Ireland will continue to have a right to travel to work in the United Kingdom and have immediate settled status. Equally, United Kingdom citizens in the Republic of Ireland will have the same rights to travel,  work and have immediate settled status.

The Common Travel Area is of immense practical importance in providing services and trading with the United Kingdom. Free movement of people is the most important issue in most services sectors. The Common Travel Area effectively gives Irish citizens’ rights almost as strong as those existing while the United Kingdom was part of the European Union. It creates the right to come to work in the other state or territory as an employee or as a self-employed person.

The CTA arrangements provide for free movement of persons without visas and the right to reside. The right to immediate settle status means that Irish citizens would enjoy extensive civil rights in the UK at the moment of arrival. In the case of the EU and other third countries, such rights might only be acquired after five years of residence under the immigration rules.

Citizens of Ireland and the UK are to have access to emergency and routine health services, access to education, employment and training supports on the same basis as citizens of the host country and on the same terms. They have the rights to vote in parliamentary and other elections.

The Irish and UK government signed a Social Security Convention in 2019 reinstating most of the EU rules providing for the accumulation of contributions and payment of benefits. Employees are subject to the social security system of one state in accordance with the relevant rules.

The Trade and  Cooperation Agreement provides that the EU and UK will not treat service suppliers and investors from the other territory any less favourably than equivalent national operators in their own jurisdiction.

Because services are less integrated on an EU level. there are varying national rules in many sectors. This is reflected in the EU UK Agreement by which individual EU members states countries have placed limitations in some sectors on free access for UK service suppliers to their state.

Under WTO frameworks the degree of access is defined with reference to the mode of supply. This may be

• cross-border basis from the home country of the supplier (Mode 1)
• supply to the customer in the country of the supplier (Mode 2)
• supplied via a local establishment in the host state owned by the home state supplier (Mode 3)
• supplied by  the temporary presence in the territory of the host state of the service supplier who is a natural person (Mode 4)

If the EU or UK grant any other country more favoured access to the other trade partner’s businesses, this treatment is  to be automatically extended to the other’s  businesses.

The EU system of automatic or near automatic recognition of qualifications no longer applies in the UK or for UK qualified persons within the European Union. Existing qualifications which have been already recognised, generally continue.  

In new cases,  automatic recognition in the sectors applicable will no longer apply. A specific application for recognition will be required. In other sectors, the high level of near c automatic or easy recognition will no longer apply.

The EU and the UK have agreed to cooperate in relation to the recognition of qualifications. In addition, the Common Travel Area memorandum of understanding between Ireland and the UK in May 2019 committed to the relevant qualifications and regulatory authorities in Ireland and the UK seeking to facilitate mutual recognition of qualifications insofar as possible.

The EU UK Trade and Cooperation agreement allows lawyers in the other territory to provide legal services in the host state under their home title designation. This does not extend to providing services in the host state services but rather providing home state services as a home state lawyer in the host state e.g., English legal services relating to an English matter provided in Ireland.

The EU has been active in legislating for the recognition of qualifications. This is necessary to give effect to the basic treaty freedom to work and provide services throughout the EU.

In some areas, there had been legislation providing for mutual recognition of qualifications for many years. A general Qualifications Directive was introduced in 2005 to provide a framework for recognition of qualifications. It applies to any profession or occupation which is regulated by law or under equivalent rules.

The EU Qualifications Directive applies to 160 listed activities in the commercial craft and industrial sphere. The directive lays down rules for professionals who want to establish themselves as an employed or self-employed person on a permanent basis in a country where they didn’t obtain their professional qualification.

In some areas, in particular, the medical and health professions veterinarians and architects there is effectively a single scheme of regulation with automatic recognition throughout Europe. In these cases, there are common standards on the underlying education and experience that are required.

In some areas such as law, there is no automatic recognition but there is a form of automatic recognition, such as recognition of what is effectively a “European” lawyer status with some of the benefits of host state qualification. As in other areas, there are rules facilitating the acquisition of host state recognition on the basis of training and/or additional aptitude testing.

In other cases, if there is no substantial difference between the home state and host states requirements, the former must be recognised. If there is a substantial difference, the opportunity must be given to make up the shortfall. There are exceptions for specific areas.

It is generally permissible to practice under the home state title as such.in providing services cross-border on a temporary or occasional basis in most sectors. It must be clear that the services being provided in a capacity as a home state provider. The provider must comply with the consumer protection rules of the host state. It may be required that the regulatory authority is notified in advance.

In the UK and Irish governments in a memorandum of understanding in May 2019 relation to the Common Travel Area agreed to instruct their qualifications authorities to seek to maintain arrangements for recognition of qualifications after Brexit on much the same basis as at present insofar as possible.

In the handful of areas that were subject to statutory licensing before EEC entry in 1973,  in particular in the medical professions Irish and UK legislation expressly recognised qualifications in the other jurisdiction as sufficient for domestic purposes.

In other areas, there has been very close cooperation between the regulators and educational bodies which recognise each other’s qualifications on a liberal basis, for example in the legal area. Some of the accountancy bodies are organised on an all-Ireland or Ireland and UK wide basis so that their qualifications are close to identical and easily or automatically recognised in the other jurisdiction.

Generally, trade agreements do not grant rights of residence or anything remotely approaching rights of residence. They do allow for rights to be present for business purposes, ancillary to exercising other rights, usually on a restrictive basis.

The position of existing migrants in the UK prior to the effective date of exit is preserved. They may continue to work lawfully and ultimately achieve settled status after five years of qualifying lawful residence. The settlement scheme allows them to establish the rights under a simple, minimal cost administration system. This is very much in contrast to the burdensome nature of standard immigration proposals. The rights of existing migrants and cross-border workers from the EU (including the Republic of Ireland EU 26 employees) are enforceable in the UK in the same way as under EU law.

The issues below in relation to immigration apply principally to Irish businesses insofar as they employ EU 26 nationals who travel to or enter the United Kingdom. EU 26 nationals form a significant proportion of the Republic of Ireland’s workforce.

There are special provisions for cross-border workers. They are treated the same as migrants in the other territory under the EU UK Withdrawal Agreement. Therefore, the Republic of Ireland resident EU 26 employees who work in Northern Ireland or Great Britain will be entitled to apply for settled status on the same terms as EU migrants resident in the United Kingdom. The withdrawal agreement gives them rights that are protected under EU law which cannot be undone by domestic UK law.

The UK government has introduced a new points-based immigration system from January 2021. When an EU citizen is granted permission to stay under the new points-based immigration system he or she has a route to settled status (indefinite leave to remain). 

The EU UK Trade and Cooperation Agreement makes some provision for the temporary entry of EU 26 (EU other than Ireland) nationals into the UK and UK nationals into the EU 26 (EU other than Ireland). Irish and UK nationals have full access to each other’s territory and extensive rights under the common travel area.

Each of the EU and UK is to allow short-term business visitors of the other party for the purpose of carrying out certain activities (establishment, intercorporate transferees, short-term business visitors), subject to conditions.  Short-term business visitors are not to engage in selling goods or supplying services to the public. They are not to receive remuneration from within the country where they are temporarily staying.

The terms under which short-term visitors may visit are set out in detail in the annex to the agreement. There are detailed conditions relative to various states. Certain provisions apply to all sectors. Other provisions apply to the sector specified.

Each of the EU and UK is to allow

• the entry and temporary stay of intercorporate transferees
• the entry and temporary stay of business visitors for establishment purposes without a work permit
• the employment in its territory of intra-corporate transferees from the other territory

Significant conditions apply to each category.

The extent of harmonisation of services within the EU is much less than in the case of goods. Neither Ireland nor the United Kingdom have traditionally put in place barriers to trade in most services. Ireland and the United Kingdom have had in effect a single labour market in many areas for many years.

Most sectors and jobs are not specifically regulated in  Ireland, the United Kingdom and most EU countries. This applies both at the level of the enterprise or business providing the particular service and at the level of the individuals who work in it. In these cases, there may be little in the way of formal obstacles to the exercise of the business or occupation in the United Kingdom (or vice versa for UK providers) after Brexit.

Although the EU has made significant attempts to liberalise and enhance the single market in services, host state regulation is the norm in most sectors. For reasons of culture, language, and history, it can be difficult for providers from other states to provide services in certain services sectors. In these cases, the difference between the position pose Brexit and after Brexit will not be dramatic.

In practice, most states provide a much more liberal position than those set out in their WTO schedules. States and their relevant authorities often apply more favourable rules. Where there is specific regulation of qualifications, the real issue is the ease of recognition.

For cultural, historical and political reasons, the Irish and UK markets in many sectors, have strong links. In the handful of areas that were regulated prior to both Ireland and the UK joining the EU, such in the medicine veterinary pharmaceutical and dentistry the relevant Irish and UK legislation effectively recognised qualifications of the other state.

In the field of accounting, several of the regulatory bodies have very close links to their UK equivalents. The accounting standards are very similar so that there is very strong effective freedom of movement notwithstanding the qualifications are not automatically recognised. In the area of law, solicitors and barristers may practice the other jurisdiction with minimal if any additional qualification requirements.

The most prominent examples of a single EU wide basis of regulation are those in most aspects of financial services. The EU rules cover the full range of wholesale and retail banking services, insurance, payments, investment services, and funds. The service providers can provide their services cross-border using their ‘passporting” rights. 

The host state undertakes the basic or “prudential” regulation and the entity must comply with the consumer protection rules of the host state. Many / most of the consumer protection rules have themselves been harmonised. 

These rules no longer apply in the UK or to UK established businesses in the EU. In a limited number of areas, a decision on equivalence allows for a measure of access for non-EU established businesses. A priority in parallel to the trade agreement negotiations, was decisions for the terms for recognition of equivalence whereby certain categories of UK financial services providers would be recognised and permitted to some extent, but in no way across the board,  to continue to provide some services in or into the EU.

The EU Commission announced in December 2020 that it had assessed the UK’s replies to equivalence questionnaires in 28 areas of financial services. Further clarification is still required. The EU is trying to ascertain to what extent the UK will diverge from the  EU frameworks. The assessment process will continue. The UK announced the acceptance of equivalence of EU measures in certain financial services sectors in November 2020.

The EU and UK agree not to discriminate against electronic signatures on documents on the basis they are in digital form. There are to be online consumer protections, antispam provisions and other measures to protect consumers online.

Pan European regulations apply in the communications and broadcasting sectors. The EU has been central in the regulation of services which were formerly state monopolies. 

The provisions in the TCA on telecommunications preserve the existing level of liberalisation in the UK and EU markets. There is a facilitated liberalised system of authorisation which seeks to give telecoms operators access to each other’s markets.

There are provisions to encourage cooperation on the promotion of fair and transparent rates for international mobile roaming. There are obligations in relation to net neutrality covering open Internet and providing safety of users online.

The EU and UK commit to open and fair markets in relation to delivery procedures. There must be effective rules and an independent regulatory body to prevent national suppliers from engaging in market-distorting practices.

Pan European regulations apply in the energy sector. The EU has been central in the regulation of services which were formerly state monopolies. In this context, the all-island energy market was established. It has been specifically preserved under the Northern Ireland protocol.

The EU and UK agree in the TCA  to develop and implement new efficient trading arrangements by April 2022 in relation to energy. They are to enhance cooperation on renewable energy.

There are new arrangements for extensive technical cooperation between regulators and systems operators in particular with regard to the security of supply, market abuse and network development. Both the EU and UK commit to principles of good regulatory practice.

The EU UK Agreement contains provisions in relation to transparency of regulation of the energy sector. In accordance with existing EU principles, there is provision for publication of laws, procedures and administrative rulings to the public and business. There is a mechanism for enquiries from the public. There is the possibility of review and appeal of administrative decisions.

There are single EU wide sets of regulations across the transport industries, which of their nature are pan-European. This includes passenger and freight transport by road sea and air. The regulations extend to the licensing of the entities which provide services EU wide as well as the regulation of the sector and the qualifications of individuals in the sector concerned.

The UK has joined the EU WTO government procurement agreement (GPA). This goes a significant way to securing continuing access to government and public utilities procurement opportunities for businesses in the other jurisdiction. The agreement builds on the  WTO Agreement allowing greater use of electronic means and taking into account environmental social and labour considerations.

The agreement provides an extension of market access beyond the WTO agreement. EU companies and UK companies and businesses may bid on an equal basis for procurement opportunities in the other’s jurisdiction. The agreement extends the non-discrimination provisions to  small value procurement below the threshold in the GPA agreement.