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EU-UK Trade and Cooperation Agreement: the impact on the transport industry

Four years after the Brexit referendum, the UK officially severed its ties with the EU on 31 December 2020. In the final moments of the transition period, and after more than nine months of negotiations, the EU and the UK reached an EU-UK Trade and Cooperation Agreement (TCA) on 24 December, outlining the terms of their post-Brexit partnership. The agreement provides for continued and sustainable air, road, rail, and maritime connectivity, albeit with limitations for UK companies when entering the EU’s Single Market. So, what are the main changes in the new relationship compared to the transition period? And what impact does the new agreement have on the EU-UK transport connectivity?

Air transport: providing a framework for EU-UK air transport connectivity  

The key takeaways of the agreement

The EU-UK Trade and Cooperation Agreement replaces existing EU legislation regulating the operation of UK airlines in the EU vice versa. The agreement states that British air carriers holding a valid license may continue to transport passengers and freight between the UK and the EU without limits on capacity or frequency. However, they are not allowed to operate between EU airports anymore. Onward carriage (‘5th freedom’) will be possible for the carriage of cargo to/from a third country (e.g. Paris-London-New York), if Member States agree this bilaterally and reciprocally with the UK.

To ensure a level playing field, both the EU and the UK agreed to eliminate all forms of discrimination which would safeguard fair competition between EU and the UK air carriers in each other’s markets. Moreover, the agreement includes ownership and control requirements to determine what airlines are considered ‘Community carriers’ and what airlines are considered ‘UK carriers’. To be considered as a ‘Community air carrier’, meaning an EU airline, the company must be majority-owned by EU interests. However, UK carriers which had a UK operating licence on 31 December 2020, may also be owned and controlled by EU/EEA/Swiss nationals.

The effects of the agreement

Due to the new ownership and control requirements, certain airlines have moved, such as EasyJet, Ryanair and Wizz Air, to stop UK investors from buying shares after 1 January 2021. The same airlines also announced that existing UK shareholders would see their voting rights restricted, and will not be allowed to attend, speak, or vote at meetings anymore.

Road transport: new border and customs checks result in administrative burden

The key takeaways of the agreement

As the UK has left the Single Market and Customs Union, border and customs checks have been reintroduced starting 1 January 2021. Haulers crossing the border from the EU to the UK or vice versa must ensure that they possess the necessary paperwork to cross the border with their goods. Passengers must also be in possession of the correct travel documentation. Regarding transport of private citizens, the UK continues to recognize EU driving licenses, but Member States no longer recognize driving licenses issued by the UK. Under the EU-UK Trade and Cooperation Agreement, haulers may continue to operate and transit between UK and EU territory without needing specific permits or additional certificates of professional qualification or licenses.

The effects of the agreement

In practice, road transport (especially transport of goods) has been highly disturbed due to the newly introduced border and customs checks. As a result of the increased administrative burden and longer waiting time at the border, increasing delivery times as well as the chance of spoiled goods, hiding of stowaways in vehicles, or other risks engaging the liability of haulers, many companies have decided to suspend their EU-UK service. This is for example the case of DPD or German company DB Schenker.

Maritime transport: no market access restrictions, but seaports will have to accommodate border and customs checks

The key takeaways of the agreement

The agreement maintains the principle of unrestricted access to international maritime markets and trades. This means that each party must grant access to ships sailing under any flag. Each party must also provide port services such as pilotage, towing or port assistance to international maritime transport service suppliers. Moreover, safety and environmental issues related to maritime transport are not regulated by EU law but by international treaties. UK companies and vessels will need to continue operating within the scope of this international regulatory framework.

The effects of the agreement

Although the agreement will require limited adaption from the maritime transport sector, maritime seaports will have to accommodate significant trade volumes that are transported by sea and facilitate haulers crossing the border from the EU-UK or vice versa by ferry. Around half of the UK exports and imports are heading towards continental Europe. Vice versa, for EU Member States, specifically those situated on the Atlantic coast, trade with the UK constitutes a big part of their overall trade numbers. As such, maritime seaports play an important role in facilitating the new border and customs checks as well as accommodating the subsequent traffic flows.

Rail transport: EU-UK cooperation continues on rail safety matters

The key takeaways of the agreement

The agreement itself does not include any specific provision for rail services. EU-based railway undertakings need to apply for UK licensing to run services in the UK, for which the UK has determined a deadline on 31 January 2022. UK-based railway undertaking running domestic services in the EU need an operating license issued by an EU Member State. The UK is no longer a member of the European Railway Agency (ERA) since 31 January 2020 and will not be seeking membership. However, the British Government encourages its rail industry to continue to work with ERA at technical and working levels, and has announced its intention to continue cooperating with the ERA on safety related matters.

The effects of the agreement

In practice, cross-border railway undertakings had prepared for the end of the transition period by requesting the relevant authorizations and licenses. Therefore, cross border rail services, such as the Eurostar, have continued with way less disturbance than road traffic. The Eurostar service was briefly suspended in December to limit the spread of the newly-identified COVID-19 variant, but not as a consequence of Brexit. Traffic has since then resumed, to the capacity allowed by the COVID travel restrictions in place on both sides of the Channel.

The limited impact of Brexit on rail freight, compared to road freight, can be explained by the much smaller number of goods transiting by trains compared to goods transiting by truck. If road customs check congestions are not reduced, however, this could trigger a reorganisation of supply chains to the benefit of the rail freight sector.

Next steps: ratification and implementation of the agreement

It is important to note that the EU-UK Trade and Cooperation Agreement and the rights and conditions it contains are not set in stone. Firstly, it is for now an “agreement in principle”, and will be provisionally applied from 1 January until 28 February 2021, pending the final consent of the European Parliament. Additionally, there are still some aspects unclear in terms of the enforcement of the agreement.

Once ratified, the agreement plans for the creation of a Joint Partnership Council, which will oversee the realization of the agreements’ objectives and facilitate its implementation. To fulfil this mission, it has the power to amend the substantive provisions of the agreement. The Joint Partnership Council will be composed of varying EU and UK ministers, depending on the topic that is discussed. It is not yet clear when the Joint Partnership Council will hold its session or at what frequency, and what the exact impact of its creation will be.

Dr2 Consultants has extensive expertise and network by providing support to stakeholders in the transport sector, ranging from rail and aviation to the maritime sector, and assists companies understand the consequences and implications of Brexit through its Brexit Office. We tailor our services, knowledge and expertise to support organizations in the most bespoke way and achieve tangible results. If you would like to know more and gain support in understanding the post-Brexit regulatory maze, please contact us via our website.

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