EU warns states to step up plans for no-deal Brexit

The document will be circulated to all EU institutions, including the ECB, and the remaining 27 member states

A stark and detailed internal EU document has warned all member states, companies and stakeholders to step up preparation for a no-deal Brexit scenario.

The 15-page draft, seen by RTÉ News, issues strongly worded guidelines to the 27 member states to deepen contingency planning for the UK crashing out of the EU in March next year without a deal.

It paints a picture of long lines of freight traffic at ports, and implications for pharmaceuticals, financial services and aviation.

It is understood the paper was drafted two days ago, ahead of the publication of the UK's White Paper on the future relationship yesterday, but after the three-page Chequers Statement on Friday 6 July.

It will be circulated to all EU institutions, including the European Central Bank, and the remaining 27 member states.

"Drawing up contingency plans for the worst possible outcome is not a sign of mistrust in the negotiations," says the document.

"The [European] Commission hopes for an agreement and devotes very significant resources and committed efforts to achieve this goal. Negotiations, on the other hand, can fail."

The paper notes that a number of issues relating to the Withdrawal Agreement are "still unresolved".

"No progress has been made in agreeing a 'backstop' to avoid, independently of the outcome of the negotiations of the future partnership, a hard border on the island of Ireland."

The document was drawn up by a new unit on "preparedness" set up within the European Commission and which operates parallel to the Article 50 Task Force under chief negotiator Michel Barnier.

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It will be communicated to ministers from the EU27 when they meet on Friday 20 July to give their first formal response to the UK's White Paper.

The paper warns that all member states must make their own preparations for a no-deal scenario across a range or areas, including customs, aviation, and controls on food, animal and plant products, and financial services.

"Although the withdrawal of the United Kingdom may appear to be playing out at a very high and rather abstract level between the United Kingdom and the EU," the paper states, "its consequences will be very real for citizens, professionals and business operators".

The paper sketches out two principal scenarios.

The first is where there is a deal on the UK's departure under a Withdrawal Agreement - due to be signed in October of this year - in which the UK formally departs the EU at the end of March next year, but remains subject to EU rules for a two-year transition period.

The second is where the UK withdraws without a deal.

Under the first scenario, the paper states, the UK will be a "third country" which will, however, continue to apply EU law during the transition period. However, "the United Kingdom would from 30 March 2019 no longer participate in EU institutions, bodies and agencies".

During the transition period, the document continues, the Withdrawal Agreement "as ratified would need to be applied and enforced".

The draft states that the EU should negotiate a deal on the future relationship "which should ideally be in place (agreed, signed and ratified) at the end of the transition period and apply as from 1 January 2021.

Under the second, "no-deal" scenario, however, "the EU must apply its regulation at all borders with the United Kingdom as a third country, including checks and controls for customs, sanitary and phytosanitary standards and norms verification, movement of persons (potentially including visa requirements) purposes".

The paper starkly points out: "When the United Kingdom becomes a third country, shipments of goods from the United Kingdom to the EU will be subject to customs procedures and controls.

"This represents a significant increase of procedures … the possibility to physically control in a designated area (at the border or in the vicinity) must always be ensured in order to properly implement the relevant legislation."

No indication of impact on Irish border

The paper does not spell out what would happen at the Irish border in the event of such a scenario.

The Government has stated that the UK has committed unconditionally to ensuring no infrastructure or checks on the border.

The EU has also committed to no hard border on the island of Ireland, but it is unclear as to how this commitment would be viewed in the event of the UK crashing out.

The paper warns that while the EU will "screen" its body of law to see what changes or adaptations it can make in the event of no deal, much of the response will have to be done by member states.

"Contingency measures … would primarily be the responsibility of Member States," according to the draft.

While the EU's rulebook on customs already provides for dealing with trade from third countries, "contingency measures would be necessary at national level to cope with the risk of long lines of vehicles for customs procedures to be fulfilled at the border".

The paper urges EU27 government and regional authorities to "provide support and guidance to clarify the legal regime that will govern relations between the European Union and the United Kingdom".

However, individual stakeholders will also have to make their own plans.

"Private actors, business operators and professionals therefore need to take the responsibility for their individual situation, assess the potential impacts of a cliff-edge scenario on their business model, make the necessary economic decisions and take all required administrative steps before 30 March 2019," the paper warns.

The document singles out the Irish, Dutch and Austrian governments as examples of member states making advanced contingency planning.

In particular, the European Commission cites the Irish prepareforbrexit.com website.

The website, states the paper, "[Allows] SMEs [to] assess their exposure to Brexit and find information on related events and support. Ireland also offers funding to small and medium sized enterprises of up to €5,000 for Brexit preparedness related expenses…"

The document sets out how the EU is making other plans in anticipation of Brexit.

The UK will have to be placed on a separate list of countries to which third country visitors may or may not need a visa, compared to the existing EU list, which includes the UK.

The European Commission will also prepare for the "disconnection and adaptation of databases to which the United Kingdom has access".

Also, the European Commission representation in the UK will be "replaced by a Delegation of the European Union in the United Kingdom on 30 March 2019".

The paper also spells out that the City of London will lose its right to sell products direct to the EU27.

"These passporting rights will cease to exist after withdrawal … There will be no Single Market access.

"Operators in all financial services sectors need to prepare for this scenario if they wish to ensure that there is no disruption in their current business model and the servicing of their clients."

The draft is entitled: 'Communication from the Commission to the European Council, The European Parliament, The Council, the European Economic and Social Committee, the Committee of the Regions, the European Central Bank and the European Investment Bank'.

The paper may undergo further changes before it is submitted to EU European and Foreign Affairs ministers next week, but sources suggest there will not be wholesale changes.