These are Spain's measures to prepare for a no-deal Brexit in the fields of employment, judicial cooperation, financial services and customs
The Spanish government has adopted a range of contingency measures to prepare for the event of the United Kingdom leaving the European Union without an agreement on March 30, 2019. They are temporary measures approved through Royal Decree-Law 5/2019, of March 1, 2019. In this article we discuss the ones relating to employment and social security, to judicial cooperation in civil and commercial matters, to financial services, and to customs.
On March 29, 2017, the United Kingdom gave official notification to the European Council of its intention to leave the European Union, invoking the procedure set out in article 50 of the Treaty on European Union.
The negotiators for both parties agreed on the wording of the Withdrawal Agreement on November 14, 2018. At a special meeting held on November 25, 2018, the European Council endorsed the agreement and invited the Commission, the European Parliament and the Council to take the necessary steps to ensure that the agreement would be able to enter into force on March 30, 2019.
The Withdrawal Agreement will have to be ratified by the United Kingdom, subject to its own constitutional requirements. On January 15 the British parliament voted against the Withdrawal Agreement, and there is no certainty that exit with an agreement is achievable before March 30, 2019.
Agreement or no agreement, on March 30, 2019, the UK will cease to be an EU member state, unless the UK notifies the EU that it withdraws its decision to leave, or the UK and the EU agree to extend the negotiation period.
In view of the uncertainty surrounding the ratification of the agreement, the European Council has repeatedly called on the Commission and on the member states to step up their work on preparedness for the consequences of the UK’s withdrawal in all areas and taking all possible outcomes into account.
Within the EU, the Commission has submitted three communications. The first, dated July 19, 2018, related to preparedness work for any scenario. The second, dated November 13, 2018, focusing by then on contingency plans, laid down the general principles and the areas that should underlie the European Union’s contingency measures. The third, dated December 19, 2018, specified the implementation of the Commission’s contingency action plan, listing the legal acts intended to be adopted at European level and specifying the scheduled timeframe for adopting them. Additionally, the Commission has published sector-specific notices designed to provide information to the member states, businesses and citizens on the consequences of the UK’s withdrawal.
According to the preamble to Royal Decree-Law 5/2019, of March 1, 2019, the Spanish government’s contingency planning pursues two key objectives. The first is to preserve the interests of Spanish and UK citizens who exercised their rights to freedom of movement before the withdrawal date. Followed by the aim to preserve business as usual in relation to Spain’s trade flows and economic interests. To achieve these objectives, the Spanish government has underlined that three lines of action have been defined: legislation, logistics and communication.
On the subject of legislation, it mentions that, in line with the guidance provided in the European Commission’s communications, the contingency measures adopted at all levels must comply with a number of principles. And goes on to say that the measures should be temporary, within varying time limits according to the specific sector concerned, that they should respect the division of powers provided for by the Treaties and that they should be compatible with EU law.
Within these guidelines, the measures set out in Royal Decree Law 5/2019, of March 1, 2019 are geared towards protecting the interests of citizens and businesses that exercised their freedom of movement rights as one of the freedoms conferred by the treaties in the described areas within national government powers and which could be impacted by the UK’s withdrawal. It needs to be underlined, however, that these are temporary measures, designed to help smooth transition to the new scenario created by the UK having third country status. The legislation will therefore cease to be valid at the end of the time limit specified in each case, or earlier, if the instruments called upon to govern relationships with the UK permanently in the matters envisaged in the decree-law are adopted, domestically or internationally. Additionally, in the cases so determined, the retaining of their legal statuses as envisaged in the royal decree-law will be conditional on the UK authorities granting the same treatment to Spanish citizens and businesses. This reciprocity condition will have to be verified after the royal decree-law has entered into force, through the mechanisms specially enabled for these purpose in the decree-law itself.
In any event, by its own provisions the royal decree-law will not enter into force until the EU treaties cease to apply to the UK in accordance with the provisions of article 50.3 of the Treaty on European Union.
Below is a summary and brief discussion of the main measures adopted in the fields of employment and social security, legal cooperation in civil and commercial matters, financial services and customs.
Employment and social security
In order to avoid UK citizens entering irregular status, a specific regime has been created for the documentation, as third-country citizens, of UK nationals and their family members who reside in Spain before the withdrawal date. Provision is also made for access by UK nationals resident in Spain and their family members to long-term residence permits where they have been legally resident in Spain on a continuous basis for at least five years.
UK nationals will also be allowed to continue exercising on a permanent basis in Spain any profession or professional activity for which their professional qualifications were previously recognized.
Companies set up in Spain which, on the withdrawal date, have workers on temporary postings in the UK should continue to apply the UK legislation transposing EU Directive 96/71/EC for the duration of the posting. This provision will only apply if reciprocal treatment is recognized.
European works councils or alternative information and consultation procedures created or agreed by Community-scale companies and groups of companies that involve UK companies or workers and that are centrally managed in Spain will remain in force.
The social security measures will apply for a period of 21 months following the withdrawal of the UK, unless an applicable bilateral or multilateral international instrument is adopted beforehand as regards coordination of the Spanish and UK social security systems. The most notable measures include:
- UK nationals who, following the UK's withdrawal date, legally reside and work in Spain and are subject to Spanish social security legislation will have the same rights and obligations as Spanish nationals. Equally, UK nationals subject to UK social security legislation, by application of EU social security regulations, will be able to retain that status until the end of the envisaged period, provided the competent UK authorities recognize a reciprocal arrangement for Spanish workers.
- Spanish nationals legally living and working in the UK or Gibraltar on the withdrawal date and subject to Spanish legislation by application of EU social security regulations will continue to be subject to Spanish legislation until the end of the envisaged period, if a reciprocal arrangement is agreed by the competent British authorities.
- UK pensioners under the Spanish social security system who are living outside Spain at the time of withdrawal will continue to receive their contributory pensions and, as the case may be, any related increases after that date.
- Equally, Spanish pensioners under the Spanish social security system who are living in the UK or Gibraltar at the time of withdrawal will continue to receive their contributory pensions and, as the case may be, any related increases.
- Pension aggregation mechanisms are also regulated, subject to a reciprocal arrangement, as well as rules on access to health care under the Spanish national health system by persons entitled to health care in the UK or Gibraltar.
Measures relating to judicial cooperation in civil and commercial matters
In the domain of judicial cooperation in civil and commercial matters, any procedures initiated before the entry into force of the royal decree-law, which will occur, as mentioned, on the date the EU Treaties cease to apply to the United Kingdom (or “withdrawal date”), will continue to be conducted according to the legislation governing them before that date. Following completion of the procedure, any effects arising from it will be governed by the international conventions in force between Spain and the UK and by any applicable domestic legislation. Any procedures initiated after the entry into force of the royal decree-law or withdrawal date will be governed by the international conventions in force and by the applicable national legislation.
Therefore, in matters relating to jurisdiction and the recognition and enforcement of judgments, the European regulations on these subjects, namely, Regulation No 44/2001 (Brussels I) and Regulation No 1215/2012 (Brussels I bis), will not be applicable, except for the completion of procedures in progress. In the absence of international conventions, domestic legislation will take over from them.
Which means that the jurisdiction of the Spanish courts will be determined in accordance with the Organic Law on the Judiciary (Ley Orgánica del Poder Judicial). Any choice-of-court agreements in favor of UK courts, however, will be governed, in applicable cases, by the Hague Convention of June 30, 2005.
Whereas the recognition of enforcement of UK judgments in Spain will be governed by Law 29/2015, of July 30, 2015, on international legal cooperation in civil matters. Accordingly, UK court judgments enforced in Spain once the royal decree-law is in force or after the withdrawal date will not benefit from the removal of exequatur (one of the major changes in Brussels Regulation I bis), and will be treated instead as judgments from a third country, having to be recognized and enforced in line with Law 29/2015, of July 30, 2015, on international legal cooperation in civil matters, under which an exequatur procedure will be required before their enforcement, with all the time and added costs that this involves. In the same way, the enforcement of Spanish judgments in the UK will be governed by UK domestic law.
Elsewhere, with the exception of any procedures in progress, the European legislation on the service of judicial and extrajudicial documents (Regulation 1393/2007); on the taking of evidence (Regulation 1206/2001); on European Enforcement Orders for uncontested claims (Regulation 805/2004); on European order for payment procedures (Regulation 1896/2006) or small claims procedures (Regulation 861/2007) will also cease to apply along with the resulting advantages these instruments provide in relation to the movement of documents and judgments or the use of standard forms.
Measures relating to financial services
The UK's withdrawal will mean that UK and Gibraltarian financial institutions (banks, insurance companies and investment services firms, in particular) lose their passports entitling them to provide their services in Spain, through branches established in this country or directly from the UK or Gibraltar under the freedom to provide services. After withdrawal, these institutions will no longer be able to benefit from authorization obtained in their country of origin and will only be allowed to carry on reserved activities in Spain if they obtain the mandatory authorization.
Aware of this situation, some modulations were made in article 19 to soften the far too drastic and automatic blow of losing the passport.
It clarifies, first, that loss of the passport does not render invalid the contracts for banking services, securities or other financial services signed by any of these institutions before March 29, 2019 and under which they provide services in Spain. So, for example, deposits placed by customers domiciled in Spain at Spanish banks before that date will not cease to be valid, so these customers do not have to recover them immediately.
The article does state, however, that after March 29, those contracts cannot be renewed, broadened to include new services, or amended in relation to their essential obligations, if the institution providing the service does not obtain the mandatory authorization for conducting reserved activities in Spain. No new contracts are allowed to be signed without the authorization either.
It also determines that the fact of contracts signed before March 29, 2019 remaining valid does not allow UK or Gibraltarian institutions to retain their status quo indefinitely or give them permission not to acquire legal status by filing the application and obtaining the appropriate authorization. Instead, the royal decree-law provides that institutions will only benefit for a limited time from the authorization obtained in their country of origin, namely for nine months running from the withdrawal date, in relation to the management of contracts signed before that date, for the purpose of:
a. Conducting an orderly termination or assignment of the contracts
b. Applying for authorization in Spain
And it adds that the Bank of Spain, the Spanish Securities Market Commission (CNMV) and the Spanish insurance and pension funds supervisory authority may send requests to institutions to legalize their operations through alternatives a) or b) mentioned above, and if they fail to comply with that request, the supervisory authorities will be able to render the transitional nine-month period invalid with respect to the institution concerned. The institution will then be subject to the relevant enforcement regime.
Measures in the field of customs
To prepare for the effects of the UK becoming a third country for customs purposes:
- The new legislation allows the Spanish customs authorities to handle customs applications filed by operators established in the UK or by operators established in Spain that perform transactions to trade in goods with the UK (i.e. authorized economic operator applications associated with trade between the two countries), although any decisions that are taken cannot be brought into effect until the actual withdrawal of the UK occurs.
- Simplified procedures are set up for applying for, handling and issuing the veterinary, health or plant-health documents needed to export products from Spain to the UK.
- Granted authorizations for exports and imports of defense and dual use material entering or leaving the UK remain valid.
The full content of the Royal Decree-Law can be found here: https://www.boe.es/boe/dias/2019/03/02/pdfs/BOE-A-2019-2976.pdf Royal Decree-Law 5/2019, of March 1, 2019, adopting contingency measures in preparation for the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union without reaching the agreement envisaged in article 50 of the Treaty on European Union