Brexit and the Telecommunications and Technology Sectors
Graeme Maguire, Global Head of Tech & Comms
Bird & Bird LLP13th October 2016
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Outline
A. Constitutional position following the EU referendum
B. Alternative models for future relationship with the EU
C. Potential effects of Brexit on telecoms regulation in the UK
D. Potential effects of Brexit on technology markets/services in the UK
E. Conclusions
A. Constitutional position following the EU referendum
Withdrawal is triggered by 2 years' notice under Art. ("Art.") 50 of the Treaty of Lisbon: UK Prime Minister, Theresa May, announced on 2 October that she
intends to trigger the Art. 50 process in March 2017
Such notice must be issued in accordance with the Member State's constitutional requirements: there is a pending court action maintaining that Parliamentary
authorisation (legislation) is required for this
Theresa May has announced that she will introduce draft legislation to repeal the European Communities Act 1972 in early 2017: Section 2(1) of the 1972 Act allows for the application (and ultimately, the
supremacy) of EU law in the UKPage 3
B. Alternative models for future relationship with the EU
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1. WTO agreements 2. Negotiated bi-lateral free trade
agreement
3. Association or free trade agreement
4. European Economic Area ("EEA")
Agreement (so-called "Norway model")
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B. Alternative models for future relationship with the EU (cont'd.)Europe and the EU
EUROPEAN UNION
Euro Area
Cyprus
Austria
Finland
Greece
Lithuania
Netherlands
Slovakia
Belgium
France
Italy
Luxembourg
Portugal
Spain
Estonia
Germany
Latvia
Malta
Slovenia
Ireland
BulgariaRomania
Croatia
Czech Republic
Hungary
Sweden
Poland
IcelandLiechtenstein
Switzerland
Norway
Denmark
UK
EUROPEAN ECONOMIC AREA (EEA)
EFTA
B. Alternative models for future relationship with the EU (cont'd.)
1. WTO Primary rules:
Most Favour Nation ("MFN") treatment
Sector-specific arrangements are limited
Agreement on Basic Telecommunication Services: Annex to the Fourth Protocol of the General Agreement on Trade in Services:
seeks to improve market access for service suppliers
reasonable and non-discriminatory access to public basic telecommunications networks and services
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B. Alternative models for future relationship with the EU (cont'd.)
2. Negotiated bi-lateral free trade agreement
• A bespoke UK-EU trade agreement would be complex to negotiate:
the EU-Canada agreement, for example, has taken 7 years to negotiate and is still not in force
a UK-EU agreement could require the agreement of all 27 of the remaining EU Member States; the European Parliament would also need to give its approval
• No existing bilateral trade agreement would deliver the same level of access that the UK currently enjoys to the EU Single Market as a Member State:
none provide equivalent access for services, which accounts for almost 80 per cent of the UK economy Page 7
B. Alternative models for future relationship with the EU (cont'd.)
3. Association agreement Association agreements have typically been concluded between the EU and
potential future Member States
Typically, such arrangements provide for:
some degree of market access/enhanced trading relationship; e.g., the creation of a customs union
harmonisation of national laws with EU law
obligations to adopt and apply competition law
• The EU has entered into different types of agreements, including free trade, co-operation and partnership agreements:
a good example here is the Association Agreement concluded with Turkey
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B. Alternative models for future relationship with the EU (cont'd.)
4. EEA Agreement (so-called "Norway model") EEA Member countries: the EU Member States (+ Iceland, Lichtenstein
and Norway)
The EEA Agreement contains directly applicable EU rules for the whole EEA on:
free movement of goods, services, capital and persons (the so-called "4-freedoms")
competition
The EEA Agreement covers all of the single market measures, including free movement of persons:
participation in the EEA would involve little substantive change regarding the Single Market
although initially acknowledged as a plausible outcome, this type of arrangement now seems more and more remote as the position of the Prime Minister on free movement of persons becomes clearer
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EU Free Trade Arrangements
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C. Potential effects of Brexit on telecoms regulation in the UK
1. Applicability of EU telecoms regulatory rules in the UK UK legislator will now be free to amend/selectively repeal national laws
transposing core EU Directives of 2002 Regulatory Framework into national law:
unlikely to happen, at least not immediately following Brexit
however, depending on the exact timing of Brexit, "revised" EU Regulatory Framework may not be applicable in UK; this could make an important difference in areas including:
o spectrum management and assignment
o scope of regulation; e.g., new technologies and services (over-the-top ("OTT"))
o "more effective regulatory institutional framework"
Strong likelihood of gradual divergence between UK/EU regulation over time
• EU Regulations remain applicable until the UK leaves the EU:
however, uncertainty about the possibility of UK consumers to continue to benefit from current EU roaming arrangement
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C. Potential effects of Brexit on telecoms regulation in the UK (cont'd.)
• 2. Spectrum Management EU initiatives aimed at harmonising spectrum
management/allocation/assignment in the EU will no longer apply in respect of the UK: use of sub-700 MHz band
UK would also avoid "centralisation" of spectrum management competences: original proposals of Telecoms Single Market package (2013); current review of the 2002 Regulatory Framework:
o harmonisation of spectrum assignment processes, pan European rules for spectrum licensing etc.
Relevance of membership of international bodies including the CEPT
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C. Potential effects of Brexit on telecoms regulation in the UK (cont'd.)
3. Net Neutrality Regulation 2015/2120 on net neutrality and international Roaming will
no longer apply in the UK: BEREC Guidelines (draft version in June 2016) will also not apply
UK government free to decide whether/how to transpose the existing EU net neutrality rules into UK law: possibility of a return to a "lighter touch" approach?
o reliance on the market and intervention only where required
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D. Potential effects of Brexit on technology markets/services in the UK1. Market access
• The principles of freedom of establishment and free movement of services allow non-EU technology companies to use the UK as a "stepping-stone" into the Single Market:
this will no longer apply following Brexit, which may challenge the logic of non-EU tech companies establishing in the UK in the first place
• The free movement of persons as guaranteed under EU law means that skilled technology workers from elsewhere in the EU can easily relocate to the UK:
the re-introduction of visa requirements/labour market controls for EU workers coming to the UK may result in a scarcity of skilled technology workers which could increase the cost of providing technology services and projects
• The re-introduction of tariffs on trade between the UK and the EU would automatically make the export of technology goods and services from the UK to the EU more expensive and less competitive
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D. Potential impact of Brexit on technology markets/services in the UK (cont'd.)
2. Digital Single Market ("DSM") reforms
Brexit risks UK companies being shut out of the DSM reforms:
tech businesses see the DSM as a significant opportunity for the UK to promote common data protection laws, improve market access and increasing adoption/ acceptance of digital services
Following Brexit, EU Regulations to be adopted under the DSM will cease to apply in the UK; this includes:
cross-border portability of online content services
geo-blocking and discrimination in terms of customers' nationality/residence/place of establishment
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D. Potential impact of Brexit on technology markets/services in the UK (cont'd.)2. DSM reforms (cont'd.)
Directives expected under the DSM will not be binding on the UK if the date by which implementation is required is later than a UK exit date; this includes:
contracts for the supply of digital content
online and distance sale of goods
online platforms (revisions to the e-Commerce Directive)
revisions to the AVMS Directive
revision of the regulatory framework for electronic communications services and electronic communications networks (addressed earlier)
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D. Potential impact of Brexit on technology markets/services in the UK (cont'd.)3. Other relevant considerations
• A fall in the value of Sterling is good for overseas businesses importing from the UK or looking to acquire UK firms cheaply, but not for exporting to the UK
• Post-Brexit, the UK will cease to benefit from EU-funded science, technology, engineering and mathematics (STEM) projects: UK participation in EU projects and initiatives is also likely to decrease, meaning less opportunity for the UK to influence policy
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F. Conclusions• Constitutional issues remain concerning the Brexit process, but are unlikely
to affect the outcome
• The scope and content of the UK's future agreement with the EU is unknown at present
if the EEA model were used, there will be little substantive change, but for present purposes we cannot expect it will be
• In any event, there will not necessarily be immediate amendment/repeal of national laws incorporating Directives, but (absent EEA membership) the UK will be able to make such changes to its legislation
EU Regulations will cease to apply in the UK (absent EEA membership)
• Possibility of divergence between the UK and EU over time in sector specific regulation
• Brexit could also have profound implications on the UK technology sector, including in terms of:
market access
access to skilled labour and funding and
reaping the benefits of the DSM
BREXIT
More views on the impact of Brexit…
www.twobirds.com/en/hot-topics/brexit
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