brexit presentation graeme maguire, hong kong 13 october 2016

Brexit and the Telecommunications and Technology Sectors

Graeme Maguire, Global Head of Tech & Comms

Bird & Bird LLP13th October 2016

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 UK

B. Alternative models for future relationship with the EU

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")

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


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


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


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

EU Free Trade Arrangements

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

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

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

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

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

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)

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

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

© Bird & Bird LLP 2016

http://www.twobirds.com/en/hot-topics/brexit

brexit presentation graeme maguire, hong kong 13 october 2016

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