As, today, companies are dealing, as a priority, with the impact of the COVID-19 crisis on their overall business, the question arises what impact COVID-19 will have on the Brexit timeline.
The UK formally left the EU on 31 January 2020. Unless an extension is requested before 1 July, the agreed transition period will end on 31 December 2020. During this transition period, which is a status quo period, the EU and the UK are bound to negotiate the terms of their future relationship. For more information, see our previous alert of 3 February 2020.
As a result of the COVID-19 outbreak, the scheduled timetable for the negotiations was revised, thus rendering the improbable negotiating timeframe almost impossible. Following the revised timetable for Brexit negotiations, a more formal round of negotiations already took place, with further rounds scheduled.
If the negotiations haven’t progressed sufficiently by June, one of the parties involved may ask for an extension of the transition period, on which agreement is needed from the other party. Meanwhile, the UK has already stated that it will not seek an extension, on top adding that they will reject any request for one from the EU. This means a hardening of the UK position and an increase in the probability that the negotiations will not be finalised by the end of this year.
The question then arises whether, from the perspective of the Withdrawal Agreement of 17 October 2019, the COVID-19 pandemic has an impact on the existing Brexit timeline.
Public health emergency measures, such as the restrictions on cross-border transport and additional export, may constitute a case of ‘force majeure’ in commercial contracts (e.g. supply agreements) and thus may be invoked in order to validly excuse contract performance. The Withdrawal Agreement, an international treaty, does not in any way refer to the ‘force majeure’ clause in general. Article 132 of the Withdrawal Agreement, which deals with the extension provision, clearly states strict deadlines for concluding any extension of the transition period, but at no point reference is made to the ‘force majeure’ clause.
As the unforeseen circumstance of COVID-19 dominated the last 9 weeks, only limited progress was made in the negotiation rounds. Yet, the Brexit timeline set in the Withdrawal Agreement will remain unaltered, meaning that, at this time, 30 June is still the deadline for requesting any extension.
To conclude, the EU and the UK still have the option to agree an extension of the Brexit deadline, but the way the cards are dealt right now, this seems unlikely to happen before 30 June 2020. For the time being, there is no possibility to extend the deadline after that date.
Therefore, while preparing your business to be COVID-19 proof, do not forget to keep the Brexit preparations on your agenda as well. If you have not started yet, now is the time to prepare and make sure you have the required registrations, licenses and compliance processes in place.