Giulio Kowalski

After four years of turbulent discussions and 1,400 pages of complex provisions, the EU and the UK (the “Parties”) signed the Trade and Cooperation Agreement (TCA) on 24 December 2020. Now that the much-feared risk of a no-deal Brexit seems to have been avoided, it could be high time to start digging into the details of the TCA and critically assess whether it is an effective and all-encompassing regulation or just a “platform” created in view of future negotiations and developments in the EU/UK (trading) relationships.

The Institute for the Study of European Law (ISEL) at City Law School hosted a roundtable on the TCA, focusing on provisions regulating investments, international economic law, EU Law, intellectual property, digital trade, competition law and fisheries. Chaired by Professor Panos Koutrakos, Jean Monnet Chair in EU Law at City Law School, City Law School researchers discussed the contents of such provisions, highlighting possible gaps in the agreement and potential uncertainties along with opportunities and positive outlooks stemming from the TCA. In the following, this post aims to consider the central matters discussed by the City panellists and sum up their views on the TCA provisions analysed.

Intellectual Property Law

The first speaker, Dr Enrico Bonadio, Lecturer in IP Law at City Law School, focused on IP aspects of the TCA. First, Dr Bonadio highlighted that in the TCA the Parties commit to comply with IP international agreements they both entered into (e.g., the Berne Convention on Copyright). Second, Dr Bonadio moved to the core of the IP discipline conceived by the TCA, namely the provisions on standards concerning IP rights (Trademarks and Designs, Copyright and Patents). Dr Bonadio remarked that the TCA does not specifically regulate Trademark and Design rights. This is probably why the UK has taken unilateral steps to “clone” the existing EU Trademarks and Design rights into UK comparable rights. The UK has also adopted a similar approach regarding food and drink products, implementing provisions that mirror the previous EU legislation protecting geographical indication and traditional speciality.  Moreover, Dr Bonadio noted that the TCA does not significantly affect patents. Both the Parties signed the European Patent Convention, which is not an EU instrument and will continue to apply in the UK. Regarding copyright, Dr Bonadio observed that, more important than the specific provisions included in the TCA, is the significant risk of a potential departure by the UK Courts from the EU case law on fundamental copyright-related concepts (e.g., originality, communication to the public).

Another IP right included in the TCA is the resale right for works of art (i.e., royalties paid to visual artists on any resale of their works by professionals such as auction houses). Dr Bonadio noticed the relevance of this right for British visual artists who since 2006 have received £94 million in artist resale right royalties by collecting societies (e.g., DACS). Finally, Dr Bonadio highlighted a gap in the TCA that, unlike the recent EU Copyright directive, does not include provisions on publishers’ rights (i.e., royalties paid to publishers by news aggregators for the use of their news). Also, he continued, this omission could provide the UK with a competitive edge over the EU, making the former more attractive for news aggregators than the latter.

Investment

The Second Speaker was David Collins, Professor of International Trade Law at City Law School, who focused on the investment provisions in the TCA. Professor Collins noted how the TCA is designed more to liberalise (i.e., eliminating barriers to) new investments than protect existing ones. Accordingly, numerous gaps in the TCA relate to investment protection. A fairly glaring omission in the TCA is that of a guarantee against expropriation without compensation, a classic feature of an investment treaty. Moreover, an investor-state dispute settlement system (i.e., a procedural mechanism allowing investors to bring direct claims against states) is also missing from the TCA. Professor Collins suggested that this omission might also reflect the Parties’ faith in each other’s jurisdictional systems and their confidence that a specialised mechanism is not necessary.

Conversely, Professor Collins stressed several positive indications coming from the liberalization provisions of the TCA. Among others (e.g., a most favoured nation provision and the prohibition on performance requirements), Professor Collins focused on the national treatment obligation (i.e., non-discrimination against investors from the other Party based on nationality). Such obligation extends to the pre-establishment stage of investments, namely the moment before the investment has entered the specific country. Therefore, Professor Collins observed, it is almost as if investors from the UK and from the EU have a right of establishment in the other Party’s territory, similarly to the pre-Brexit scenario. However, Professor Collins pointed out that the non-discrimination clause suffers from “reservation exceptions”, namely a list of ‒ “reserved” ‒ sectors where the obligation will not apply. Finally, Professor Collins touched upon the level playing field obligations and the rebalancing mechanism provided for in the TCA insofar as they apply to investments. Interestingly, Professor Collins noted that the rebalancing mechanism has been framed in incredibly narrow language. For instance, the standard of “materiality” (“material impact”) on investments is a very high one, especially because it requires evidence (not conjectures) of a material impact. Therefore, the Parties, Professor Collins concluded, do not seem to intend to use such mechanism with much regularity.

Fisheries

The third speaker was Dr Jonatan Echebarria Fernandez, Lecturer in Law at City Law School. Dr Echebarria Fernández outlined fisheries and its regulation under the TCA, a very specific sticking point during the EU/UK negotiations. The EU wanted to maintain the previous system based upon reciprocal access to “shared” territorial waters while the UK wanted to impose annual negotiations for the allocation of fishing quotas. Under the TCA, Dr Echebarria Fernández explained, the Parties essentially recovered sovereignty rights and powers over their waters (i.e., access, exploration, exploitation, conservation and management), which are no longer shared. However, both Parties agreed that this sovereignty should be exercised in accordance with principles of international law. Practically, the reacquisition of sovereignty for the EU means that EU Member State flag vessels have no rights to fish in UK waters until a fishing licence is issued to them and vice versa. However, from 1 January 2021 until 30 June 2026 (so-called “adjustment period”) the Parties will maintain continued reciprocal access to their respective waters even though such access will be subjected to total allowable catches (“TACs”) established through annual consultations between the Parties.

Furthermore, Dr Echebarria Fernández illustrated the role of the Specialised Committee (“Committee”) on Fisheries established by the TCA. The main objective of the Committee is to provide a forum for the Parties to discuss and cooperate on a variety of fisheries-related affairs (e.g., coordinate the annual consultations to determine the TACs). Finally, Dr Echebarria Fernández touched upon the dispute resolution system and remedial measures provided for by the TCA to deal with cases of non-compliance. Essentially, based on the economic and societal impact of the alleged non-compliance, the complaining party may adopt remedy measures that can range from suspending access to the Party’s waters to suspending compliance with Heading One of the TCA (i.e., “Trade”).

Digital Trade

The fourth speaker was Professor Elaine Fahey, Jean Monnet Chair in Law & Transatlantic Relations at City Law School, who focused on the regulation of digital trade and data pursuant to the TCA. Professor Fahey highlighted that the digital trade section of the TCA ‒ similarly to its model text, namely the 2018 EU horizontal strategy on data flow ‒ not only deals with digital trade but also with data matters. Such aspect shows the strict link between digital trade, data flows and, particularly, personal data protection. Then, Professor Fahey looked at possibly controversial issues concerning cross-border data flows and data protection between the Parties.

Professor Fahey queried whether the EU has departed from the Schrems II decision by agreeing to avoid data localisation in the other Party’s territory for processing activities. The question is even more important considering privacy provisions in the TCA. In particular, one such provision allows the Parties to adopt measures on privacy assuming “conditions of general application” apply to the data transferred. However, such conditions are vaguely defined in a footnote. This has generated a fierce pushback by some Member States, concerned that the EU Commission might be backtracking from the Schrems II decision. On top of this, Professor Fahey also noted that, pending the adoption of a UK adequacy decision by the EU Commission, the European Parliament has recently passed a resolution, asking the EU Commission for a careful assessment before definitely deciding that the UK offers an adequate level of data protection. According to the EU Parliament’s resolution, the UK would have mass surveillance laws in place. Professor Fahey added that the UK seems to have greatly diverged from EU privacy standards in the UK-Japan Comprehensive Economic Partnership Agreement (CEPA), adopting a more economically oriented approach to privacy. In short, privacy remains a thorny issue also for trade relationships.

Competition Law

The fifth and final panellist was Dr Ryan Stones, Lecturer in Competition Law at City Law School, who focused on the implications of the TCA for EU and UK antitrust enforcement (i.e., anticompetitive agreements and abuses of market dominance) and merger control. In particular, Dr Stones highlighted that, despite the Parties’ commitment to coordinate the enforcement activities concerning the same practices or transactions, the risk of divergent antitrust enforcement and merger review in parallel investigations is still present. The implications of such divergence are likely to relapse on competition agencies, in terms of increased caseload, but also on businesses, due to the administrative and economic burden to comply with two (the EU and UK) different systems of competition law. More specifically, Dr Stones observed how the TCA could potentially address “divergence risk”. Conversely, it includes quite vague obligations to grant a system of undistorted competition and to coordinate ‒ also through information exchange ‒ investigations on the same practices or mergers. Dr Stones particularly emphasised that the TCA loosely commits the Parties to a future agreement to ensure coordination and cooperation in parallel antitrust and merger control investigations.

Dr Stones emphasised that coordination between competition enforcers is all the more important considering the divergences in competition enforcement that we already see between the EU Commission and the CMA (e.g., in tackling competitive harm caused by big-techs acting as gatekeepers, with the EU Commission working on the DMA proposal and the CMA setting up its own Digital Markets Unit tasked with issuing a code of conduct for gatekeepers). Dr Stones’ conclusion reflects the lights and shadows of the competition policy section of the TCA. Certainly, the agreement contains several very admirable commitments to competition policy and cooperation. However, in terms of laying out the details of how that coordination and cooperation will operate, competition authorities and businesses will have to wait for another, future agreement.

Such a finale can be also read as the conclusion of the event. With its lights and shadows, divergences and convergences, the TCA resembles more a platform than a finished legal framework for trade and cooperation.

Do also consult the recording of the Webinar.

For more information about research related to Brexit and EU Law, visit the Institute for the Study of European Law, the Jean Monnet Chair in European Law and Jean Monnet Chair in Law and Transatlantic Relations.

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