Brexit Report: January 2019 update

STATES OF JERSEY

BREXIT REPORT: JANUARY 2019 UPDATE

Presented to the States on 15th January 2019 by the Minister for External Relations

STATES GREFFE

2019  R.5

REPORT

BREXIT UPDATE

This Report to the States Assembly provides an overview of developments to date, and the steps taken by the Government of Jersey to protect and promote Jersey's interests during the negotiations on the withdrawal of the United Kingdom ("UK") from the European Union ("EU") and the future relationship between them. It also provides an update on the Island's Brexit readiness preparations for the UK's exit from the EU on 29 March 2019.

MINISTER FOR EXTERNAL RELATIONS 15 January 2019

TABLE OF CONTENTS  Page FOREWORD BY THE MINISTER FOR EXTERNAL RELATIONS ......................................................  4 PURPOSES ..................................................................................................................................  6 SECTION I – THE POLITICAL CONTEXT ......................................................................................  7 SECTION II –ENGAGEMENT AND MEASURES IMPLEMENTED BY THE GOVERNMENT OF JERSEY 11 SECTION III – PREPARATIONS FOR POST-BREXIT DAY .............................................................  21 SECTION IV – LEGISLATIVE PROGRAMME ................................................................................  27 SECTION V – STAKEHOLDER ENGAGEMENT .............................................................................  29 SECTION VI – CONCLUSIONS ....................................................................................................  31

FOREWORD BY THE MINISTER FOR EXTERNAL RELATIONS

This Report is presented to the States Assembly shortly in advance of the meaningful vote', due to take place on 15th January, on whether the United Kingdom Parliament will agree to the finalised Withdrawal Agreement, accompanied as it is by a political declaration on the future relationship between the UK and EU.

If the vote is lost, next steps by either the UK Government or Parliamentarians are far from clear. Yet even if the vote is won, the need for implementing legislation in the UK Parliament means that the deal negotiated by the Prime Minister is not yet secured. In any event, therefore, Jersey must continue to prepare itself for a range of scenarios.

This is why the Government of Jersey's baseline Brexit planning has been developed on the basis of a day one no deal' or hard Brexit' scenario, since the UK referendum on EU membership took place in June 2016. We are aware of the potential risks to the Island presented by a hard Brexit and have engaged in contingency planning to ensure that all Government Departments are prepared for and able to manage those risks, and businesses and the public have the information they need through the provision of technical advice.

In March of 2018 the previous States Assembly passed the European Union (Repeal and Amendment) (Jersey) Law 2018. This legislation, which was approved by the Privy Council in May, ensures that the Assembly has the ability to make necessary changes to the Island's EU-related legislation, either through Regulations or by delegating power to Ministers to make Orders. This guarantees that, even in the event of a hard Brexit, the  Island  can  make  prompt  legislative  changes,  where  necessary,  to  ensure  the continued operability of our laws.

At the same time, we have recognised the importance of continuing to work closely with the UK government, to prepare for withdrawal under a range of negotiated scenarios, and to seek a positive outcome for our future relationship with the EU.

This has included quarterly ministerial meetings between the ministerial representatives of the Crown Dependencies and Robin Walker , MP, Minister at the Department for Exiting the European Union, as well as engagement at the British-Irish Council and other political and diplomatic fora. The Ministers I have met have made clear their commitment to representing the interests of Jersey and the other Crown Dependencies in the forthcoming negotiations.

We have also continued our direct engagement with EU institutions and Member States, meeting with the French, Swiss, Romanian and Latvian Ambassadors to the EU in Brussels, as well as the French, Polish, German and Italian Ambassadors in London. We have met, too, with MEPs, including Ashley Fox, Alex Mayer, Catherine Bearder and Dr. Wolf Klinz, as well as officials from the European Commission, including representatives from the Cabinets of Commissioners Vra Jourová and Sir Julian King.

Our Brexit Programme  has expanded and now covers  work across the following workstreams –

• Customs and Trade  Agriculture and Fisheries  Legislation; and
• Financial Services  Digital  Contingency.
• Transport  Immigration, Migration,

Security and Justice

This work continues through regular roundtable meetings with UK departments. Indeed, contact with the UK on these and wider policy areas impacted by Brexit is occurring on a more than daily basis.

On customs, importantly, we have now successfully concluded Jersey-UK customs arrangements, building on our long-established position under Royal Charters, and providing a modern relationship to guarantee the seamless flow of trade in goods, including essential supplies, between Jersey and the UK from Brexit Day.

On immigration, we have put in place the Jersey EU Settlement Scheme to meet the Government of Jersey's commitment to ensuring the rights of EU citizens living in Jersey after Brexit day.

On transport, we have made legislative provision to enable the United Nations' Vienna Convention on Motor Traffic to be extended to Jersey. This is necessary to ensure that, after Brexit in March 2019, Jersey residents can continue to drive their own vehicles and hire cars in the EU, as well as to meet international roadworthiness standards.

We have introduced a new Sanctions Law, providing for the proper functioning of our sanctions  regime  post-Brexit  and  ensuring  that  we  continue  to  robustly  and comprehensively meet our international obligations.

In the months ahead, the States Assembly will continue, quite unavoidably, to be required to manage a significant volume of legislation as a result of Brexit, and discussions have taken place to ensure that Scrutiny are aware of the expected flow of legislation. Much of this is dependent on the agreement the UK reaches with the EU. We will continue to work with Scrutiny and Members to ensure that they receive regular briefings and are engaged early regarding the preparation of draft legislation.

In parallel, I would also wish to emphasize the importance of Jersey's continued engagement  with  priority  Global  Markets  outside  the  EU –  which  is  a  critical component of the Island's overall response to Brexit. The Ministry of External Relations will continue to drive a cross-jurisdictional approach to delivering the Government of Jersey's Global Markets strategy. We will continue to build long-term relationships with priority  partners  and  to  expand  and  upgrade  Jersey's  network  of  international agreements. I am delighted that new Double Taxation Agreements ("DTAs") between Jersey and the UK, Liechtenstein and Mauritius should enter into force in 2019. I am also pleased to have led ministerial-level discussions on a Bilateral Investment Treaty ("BIT") – a brand new international agreement for Jersey – during my visit to the United Arab Emirates in November.

I  believe  that  our  ongoing  engagement  with  the  UK,  coupled  with  our  internal contingency planning, has placed Jersey in a strong position to manage the next stage of Brexit, whether that results in a negotiated or hard exit from the EU, and to take advantage of the opportunities that the future relationship proposals allow.

I thank officials from across Government for their ongoing commitment in preparing for Brexit, and I commend this report to the States Assembly.

Senator I.J. Gorst ,

Minister for External Relations

PURPOSES

The purposes of this Report are –

To provide States Members with an overview of –

• the political context in which the Government of Jersey has been working since the 2016 referendum (Section I), as background to the preparations that have been made of exit from the EU;
• the structures that were established across the Government of Jersey, and with the UK Government to handle Brexit (Section II);
• the activities undertaken over the last 2½ years by the Government of Jersey in its engagement with the UK (also Section II);
• the preparations for exit day with and without a Withdrawal Agreement in place by 29 March 2019 (Section III); and
• the legislative preparations that have been, and are still being, made for exit (Section VI).

The report aims to provide reassurance that the Government of Jersey is doing what it can to prepare Government, Jersey citizens and Jersey businesses for Brexit.

SECTION I – POLITICAL CONTEXT

AN OVERVIEW OF DEVELOPMENTS TO DATE

Jersey did not participate in the 2016 referendum because that was an exclusive matter for the UK electorate. However, Jersey is affected by the decision, and at this crucial juncture it may be helpful to provide an overview of the context in which Jersey Ministers and officials have been working with the UK since 2016. It aims to show that however uncertain the external political environment, Jersey has, throughout, focussed on the practical steps it can take to preserve and further Jersey's interests.

As this report is finalised, UK Parliamentarians are facing an important choice: whether to accept the Withdrawal Agreement and political declaration on the future relationship negotiated between the EU and the UK Government, or whether to reject it. This in turn could set the UK on a course to no-deal, or to a General Election, or to a second referendum or, indeed, to a range of other as-yet-unknown destinations. By the time of publication, the meaningful vote' – scheduled for 15th January – may have taken place. Whatever the outcome, however, uncertainty will continue over the shape and extent of the UK's, and by extension Jersey's, relationship with the EU in the years and decades to come.

The meaningful vote represents the next stage in a process marked throughout by uncertainty. The referendum in 2016 was dominated by passionate and bold claims on both sides, and whilst the ultimate decision taken by the British people was to leave, the form and method of departure and of the future relationship was a matter of debate even amongst the leading lights of the Leave campaign.

The resignation of Prime Minister David Cameron in the summer of 2016 led to a leadership campaign in the  Conservative  Party, at the  same  time  as a leadership campaign in the Labour party to Jeremy Corbyn. On her appointment as Prime Minister, Theresa May set out clearly her determination to deliver on the democratic will of the people as expressed in the referendum, but faced with continuing division in the Cabinet over how this might be delivered, and initially committed to little beyond Brexit means Brexit'.

The Jersey Government had prepared 2 reports in advance of the referendum, and 4 days after the result, published its objectives for Brexit. These objectives have remained consistent over the last 2 ½ years – namely to retain as far as possible the benefits that Jersey has enjoyed from its existing relationship with the EU. The objectives and progress against them are recorded in earlier reports to the States Assembly.

Speeches to the Conservative Party Conference October 2016, and at Lancaster House in January 2017, established that the UK was seeking an end to free movement, no more large financial contributions, an end to the jurisdiction of the European Court of Justice, and leaving the Common Commercial Policy and Common External Tariff. However, uncertainty remained over what the future relationship with the EU – the deep and special partnership' – might mean in practice.

Jersey and the UK kept up a close dialogue during this period, about the future relationship. However, the broader political context remained challenging: the EU ruled out negotiation prior to the triggering of Article 50 and insisted on a phased approach

to negotiations, which prevented UK–EU discussion of the future relationship before sufficient progress had been made on withdrawal.

When the EU set out its own agenda for withdrawal: citizens' rights, the financial settlement and maintaining the Good Friday agreement, and avoiding a hard border on the island of Ireland, it removed some negotiating leverage and, with the Northern-Irish border, introduced an issue into withdrawal which the UK believed could only be resolved through the future relationship. The Crown Dependencies were not directly part of these considerations, but these issues were reviewed in meetings of the British- Irish Council (see activities in Section II). Lastly, the EU's fundamental principle that there would be no cherry-picking within the "4 freedoms" of movement of goods, people, services and capital, made it difficult to progress market access talks, for example.

In the UK, the snap general resulted in a hung Parliament and the need to rely on a confidence and supply deal with the Democratic Unionist Party (DUP).

Formal negotiations began on the withdrawal phase on 26th June 2017, with the Irish border quickly becoming the principle focus of contention. In September 2017, the Prime Minister put flesh onto the bones of how a future UK/EU relationship might look, in a major speech in Florence, and a range of future partnership' papers were issued. Furthermore, she outlined in greater detail the need for an implementation or transition period. While the speech, at least in tone, was well received by some EU leaders, the high-level proposals for a customs  relationship –  based either on maximum  trade facilitations, or on applying different at-border treatment depending on whether goods were destined for the UK or EU markets – were deemed unworkable by the EU side.

After  several  months  of  negotiation,  however,  the  Prime  Minister  and  European Commission President Jean-Claude Juncker announced, on 8th December 2017, that sufficient progress had been made in the first phase of negotiations. Proposals in the draft  Withdrawal  Agreement  included,  in  relation  to  the  Irish  border,  regulatory alignment  between  Northern  Ireland  and  the  Republic,  and  also  guaranteeing  no obstacles to trade between Northern Ireland and the UK (though not, at this stage, detailing how this would be achieved). Jersey had ensured with the UK that the territorial  extent  of  the  provisions  covered  Jersey  and  indeed  the  other  Crown Dependencies, to the extent that Protocol 3 applied.

The  UK  Government also  sought  to  pass  its  European  Union  (Withdrawal) Bill, allowing  it  to  repeal  the  European  Communities  Act  and  ensure  the  continuing functioning of the UK statute book post-Brexit, and in the process the Government conceded that Parliament would be given a vote on the Withdrawal Agreement and the accompanying political declaration.

Concrete progress was made in March 2018, when it was agreed that the transition period would form a part of the Withdrawal Agreement, meaning that failure to pass the Withdrawal  Agreement  would  result  in  no  transition  period –  so-called  Day One No Deal.  It  became  clear  that  even  more  consideration  needed  to  be  directed  to contingency work in Jersey for a no deal scenario. This is covered in a later section of the report.

On 23rd March 2018, the EU set out its negotiating guidelines for the future relationship. This made clear that, whilst they were keen to pursue an ambitious and wide-ranging

free-trade agreement, the principle of no cherry-picking' continued to apply, the integrity  of  the  EU  would  not  be  compromised,  and  any  relationship  must  be underpinned by robust commitments to guarantee a level playing field (including appropriate alignment with EU and international standards in relation to competition, state  aid, tax,  social  and  environmental  matters). Jersey  and  UK  officials  started discussions about the level playing field. Meanwhile, negotiations continued to focus on withdrawal, dominated by the backstop' solution, essentially keeping Northern Ireland in the EU Single Market and Customs Union if no other solution was found.

In July, the Prime Minister gathered the Cabinet at Chequers. The Chequers proposals, as they became known, involved a facilitated customs arrangement building on the differential at-border treatment of goods set out in the earlier future partnership paper, underpinned by alignment with a common rulebook' on goods. It also explicitly brought an end to freedom of movement, with a future mobility arrangement to be introduced. Underneath this, it also proposed commitments to continuing high trade- related standards, covering state aid, competition, social and employment, consumer protection, environmental and climate change matters.

The difficulty in securing consensus within the Cabinet (let alone EU agreement to the proposals) led to the resignation notably of the Brexit Secretary David Davis and Foreign Secretary Boris Johnson . Remain-supporting MPs also criticised the proposals, with calls growing for a second referendum on the final deal.

Cabinet also agreed in July to increase preparations for a no deal outcome, which had previously been viewed as a second order priority. New Brexit Secretary Dominic Raab was placed in direct control of such preparations and immediately commissioned a series of technical notices to be issued throughout the summer, setting out practical considerations for businesses and individuals. Jersey, which had always envisaged the possibility of a hard Brexit in its planning, at this stage also stepped up planning for an exit with no deal. At this time, the UK and the Crown Dependencies were also holding discussions on customs arrangements for the future.

A summit of EU leaders in Salzburg in September was trailed as an opportunity for a show of support and to be the start of a glide-path towards a mutually acceptable deal. In the event, however, EU leaders criticised the proposals, with EU Council President Donald Tusk making clear that they would not work'.

A stalemate followed, but official-level discussions continued in October in an attempt to find a resolution to the Irish border issue. The solution in November was set out in a Northern Ireland Annex to the Withdrawal Agreement. This allowed for the extension of the transition period beyond December 2020 if a solution had not been found at that stage. However, the backstop provision would, if activated, in effect keep the whole of the UK inside the EU customs union. This was and remains politically contentious in the UK. Nevertheless, on 25th November, the Withdrawal Agreement and political declaration on the future relationship were agreed at a special summit of the European Council.

By virtue of amendments to the European Union (Withdrawal) Act, the UK can only ratify the Agreement following a Parliamentary vote. This meaningful vote', which had been due to take place in December, was deferred to 15th January 2019. This decision triggered an unsuccessful no-confidence vote in the Prime Minister.

The meaningful vote' on the Withdrawal Agreement has been preceded by 5 days of Parliamentary debate. During this, the extent of the reassurances and commitments won by the Prime Minister during her discussions with EU leaders in the approach to Christmas and in recent days will be revealed. It will then become apparent whether these are sufficient to win the support of deeply sceptical, if not outright opposed, Parliamentarians.

If the vote is lost, the way forward is far from clear. If the vote is won by the UK Government, the agreement brings to an end the first stage of Brexit negotiations. During the transition period, the more complex – and, for many people and businesses more important – talks, agreeing the practicalities of how the UK, and Jersey, will interact with the EU in the years ahead will take place.

The implications for Jersey are not yet clear, but can be characterised as follows:

If the Withdrawal Agreement or a close variation of it, is accepted by the UK Parliament, then Jersey enters a further period of orderly engagement with the UK Government over its forthcoming negotiations with the EU over the future economic partnership.

If there is no Withdrawal Agreement bringing in a transition period, then Jersey puts into effect its plans to ensure continuity in the short term. These include measures to ensure that certain legal provisions remain effective beyond exit day in Jersey law. In addition, Jersey's "Ready for Brexit" plans, including those set out in technical notices to the public and to businesses, will become the basis for an intensive period of preparation for 29 March 2019. There remain a range of possible outcomes still, and the Government of Jersey has therefore pre-positioned powers in the European Union Repeal an Amendment law ("EURAL") that can be used to deal with a range of scenarios.

SECTION II – ENGAGEMENT AND MEASURES IMPLEMENTED BY THE GOVERNMENT OF Jersey

BREXIT CO-ORDINATION AND MANAGEMENT

This section sets out the governance structures we established to prepare for Brexit. Brexit Ministerial Group (meets monthly)

Function: To oversee, co-ordinate and decide the Government of Jersey's preparations for all potential impacts and implications on the Island of the UK's decision to exit the European Union.

Brexit Working Group (meets monthly)

Function: To act as the main point of government-wide co-ordination among officials for all matters relating to Brexit; to respond to the political direction of the Brexit Ministerial Group (BMG); and to co-ordinate cross-departmental Brexit programmes and advice.

Brexit Programme Office

Function:  To  provide  programme  management  support  for  government's Brexit preparations.

Brexit Workstreams

Function: To co-ordinate Jersey's necessary work in specific areas that will be affected by Brexit. The 6 workstreams include: Agriculture and Fisheries; Customs  and  Trade;  Digital/Communications;  Financial  Services; Immigration, Migration, Justice and Security; and Transport.

Jersey-UK Partnership and Trade Group (meets monthly)

Function: To act as the forum for the consideration of Jersey and the economic partnership between the United Kingdom and the European Union; Jersey's future customs relationship with the United Kingdom; and Jersey's future trade policy.

ENGAGEMENT WITH UK GOVERNMENT Methods of engagement:

Ministerial meetings with Robin Walker , MP, Parliamentary Under-Secretary of State at the Department for Exiting the European Union (Quarterly)

Function: To enable Ministers, accompanied by senior officials from the UK and CDs, to take stock of progress at official level, to reflect on strategic implications  of  events  and  developments  and  to  raise  and  resolve  issues requiring political input.

UK/CDs Contact Group meetings (Fortnightly)

Function: To enable senior External Relations officials from the CDs and from the Cabinet Office/DExEU to take a strategic overview of ongoing Brexit work, to monitor events and developments, to raise and resolve issues in relation to

particular  projects  or  workstreams  and  to  facilitate  the  sharing  of  key information, including receiving updates from officials across Whitehall.

Workstream roundtables (Quarterly/Monthly)

Function: Bringing together senior policy officials in priority areas, supported by External Relations and Law Officers, to share information, to consider relevant  events  and  developments  and  to  commission  and  drive  forward projects.

Policy catch-up calls (Fortnightly/weekly)

Function:  To  provide  a  more  regular  forum  for  updates  and  discussion amongst policy officials.

Issue specific roundtables/meetings (As required)

Function: To introduce or progress specific issues, for example emergency planning, Customs Agreement, WTO membership and future trade agreements.

Ministerial contact (Ad hoc)

Function: For Ministers to share information or raise issues directly with UK Ministers outside the framework of formal meetings – driven by issues or events.

Official contact (Daily)

Function: Constant contact between Government of Jersey policy, legal and External Relations Officials and UK colleagues across Whitehall, sharing information, progressing projects and resolving issues.

British Irish Council Summits (Bi-annual)

Function: Bringing together Ministers and senior officials from across the UK and Ireland to discuss common issues, to reflect on events, to share best practice and to build relationships (strong Brexit focus since 2016).

ENGAGEMENT WITH STATES ASSEMBLY AND SCRUTINY States Member Workshops

Function: To brief and update States Members on specific areas of work within the Brexit programme, as well as providing Members with the opportunity to ask any questions they may have. Workshops have covered all 6 workstreams, EU Engagement, Global Markets, Contingency Planning and Legislation.

Brexit Review Panel

Function: To scrutinize Jersey's policy towards Brexit following the UK's decision to leave the European Union in June 2016. The panel was established on 19th June 2017 following the commencement of negotiations between the UK & EU.

Corporate Services Scrutiny Panel

Function: To look at draft policies, legislation or matters of public importance relating to the work of the Chief Minister (excluding Financial Services), Minister for Treasury and Resources and Minister for External Relations.

KEY ACTIVITY TIMELINE

SECTION III – PREPARATIONS FOR POST-BREXIT DAY PREPARATIONS FOR THE WITHDRAWAL AGREEMENT

The  draft  Withdrawal  Agreement  reached  between  UK  and  EU  negotiators  was published on 14 November 2018, alongside a short political declaration on the future relationship. This package will need to be agreed by the UK Parliament at its meaningful vote – and also by the EU. If agreed, it will apply to Jersey and to the other Crown Dependencies "to the extent that Union law was applicable to them before the date of entry into force of this Agreement" (i.e. Protocol 3). This means that the Implementation (or "Transition") Period will apply to Jersey, and that the status quo will subsist as long as the transition period. This is a positive outcome for Jersey, as this provides welcome certainty for the Island.

Although the transition period is expected to last until 31 December 2020, it could be extended for a further period, if, for example, a longer transition period is deemed by the  UK  Parliament  to  be  preferable  to  implementing  the  politically  controversial Northern Ireland backstop (these alternatives are provided for in the Protocol on Ireland/ Northern Ireland in the Withdrawal Agreement).

The States Assembly recognised, in February 2017, that the UK was on the point of giving notice of withdrawal under Article 50 of the Treaty on European Union, and endorsed the Council of Ministers' intention to repeal the European Union (Jersey) Law 1973. It is important to note that the Government of Jersey intends to repeal the 1973 Law only when the transition period finally ends. The extent of this Transition Period – and therefore the duration of the meaningful application of the 1973 Law – will therefore depend on the Withdrawal Agreement. Steps are therefore being taken to recognise,  through  Jersey's  European  Union  (Repeal  and  Amendment)  (Jersey) Law 2018, that the Withdrawal Agreement preserves the effect of Protocol 3 for Jersey during the Transition Period, as a stage in giving effect to EU exit in Jersey.

PREPARATIONS FOR A DAY ONE NO DEAL

The Government of Jersey continues to believe that a negotiated outcome on the withdrawal of the UK from the EU is in the interest of all parties. Nevertheless, from the outset we have planned on the basis of a Day One No Deal (D1ND), or hard Brexit.

Preparation stepped up a gear following the reaction to the publication of the UK Government White Paper The future relationship between the United Kingdom and the European Union on 12 July 2018.

This work, co-ordinated by the Brexit Unit, with input and the joint Channel Islands Emergency  Planning  Office,  has  involved  an  assessment  and  peer-review  of Departmental risks, resources, objectives and governance.

By the end of 2018 all Government departments have prepared individual Brexit Readiness Plans, setting out departmental objectives in the event of D1ND, risks and mitigations, and resource requirements, agreed and peer-reviewed with the Minister for External Relations.

The cross-government Brexit readiness discussions have also identified a need to establish clearly what is meant by contingency, business continuity and emergency planning, as indicated in the diagram below:

The individual Brexit Readiness Plans have, in turn, informed the development of an overall Government of Jersey Contingency Plan, aligned in format with similar UK Government  Contingency  preparations,  drawing  the  highest  impact  risks  from departmental submissions, setting out proposed mitigations and threats to mitigating actions.

Key risks for mitigation include those relating to supply chain disruption, impacts on our critical national infrastructure, and loss of information-sharing with the EU.

This document has recently been shared with the UK Government to ensure that it can inform both the ongoing contingency preparations across UK Government and our own extensive  discussions  with  individual  departments  across  Whitehall,  such  as  the

Department for Health and Social Care; the Department for Transport; UK Local Resilience Forums; transport, retail and wholesale organisations; and other Channel Island partners.

The Government of Jersey is working closely with the UK Government to ensure that our plans align and that, where there are UK linkages or dependencies, particularly those in relation to our supply chains, these are taken into account.

In response to the UK Government's own contingency preparations for and publications regarding D1ND, the Government of Jersey has now published over 100 Technical Notices since the UK summer Parliamentary recess, advising businesses and individuals on contingency preparations. We have also been keeping the Assembly's Brexit Panel appraised of recent developments.

As part of our programme of engagement on Brexit readiness planning with key stakeholders, a Brexit Business Toolkit has been co-produced with the Jersey Chamber of Commerce and Jersey Business to ensure businesses can be ready for Brexit. The toolkit will launch on the same day the Government of Jersey holds a Brexit table-top exercise at Mount Bingham to test our key planning assumptions.

PREPARATIONS FOR THE FUTURE RELATIONSHIP WITH THE EU

On 12th July 2018, the UK Government published a White Paper on "The future relationship between the UK and the EU" – the so-called Chequers Proposals'. The Government of Jersey welcomed the publication of the White Paper and the clarity that it brought to the UK position. References to the Crown Dependencies in the White Paper were helpful, stating for example, "The UK will be seeking specific arrangements for the  Crown  Dependencies,  Gibraltar  and  the  other  Overseas  Territories" (paragraph 1.1(8)).

In particular, the proposal in the White Paper for a Free Trade Area between the UK and EU in goods – designed explicitly as a solution to the Irish border issue – would have been consistent with Jersey's position to maintain, as far as possible, the substance of its trading relationship under Protocol 3. Whilst it was understood that the Chequers Proposals required the agreement of the EU, as a matter of prudence, the Government of Jersey worked closely with the UK Government to ensure that Jersey was in the best possible position to negotiate the Island's participation in the future relationship, based on these proposals and in line with our interests.

At a European Council Summit in September, however, EU leaders made clear that they did  not  believe  the  Chequers  proposals  were  an  acceptable  basis  for  the  future relationship.  They  were  particularly  sceptical  of  the  proposed  bespoke  customs arrangements, which would have allowed the UK to deviate from the EU's Common External Tariff for goods destined only for the UK. They also re-emphasized the need, in the absence of an agreement on the future relationship, for a backstop solution to prevent a hard border in the island of Ireland (see Withdrawal Agreement section).

At  a  further  emergency  summit  in  November,  EU  leaders  finally  approved  the Withdrawal Agreement, alongside a political declaration on the framework for the future relationship. This contained an over-arching commitment to build a relationship ambitious in its scope and depth, recognising the unique context of the UK's current

degree of integration with the EU. Many of the commitments on specific areas, however, remain high level.

On goods, for example, the declaration sets out the aim of the eliminating tariffs and the creating a Free Trade Area underpinned by provisions ensuring a level playing field for open and fair competition (which was also a feature of the Chequers proposals). It proposes that this should be supported by facilitative arrangements and technological solutions, alongside regulatory co-operation, to minimise friction. The declaration is clear, however, that no arrangement should compromise each Party's ability to protect its own financial and public policy interests, and that the extent of checks and controls required are likely to depend on the extent to which the UK is willing to engage in regulatory co-operation and align with EU rules.

On services, the declaration envisages an agreement on services liberalisation which goes well beyond WTO commitments and builds on existing EU FTAs, but which maintains each Party's ability to regulate as it deems appropriate. On financial services, it proposes a relationship based on existing third country equivalence frameworks, alongside extensive regulatory co-operation, with a view to concluding the equivalence process prior to the end of the transition period in December 2020. Similarly on data protection, the declaration envisages assessing the UK under the EU's existing adequacy framework, with a view to concluding this work by the end of the transition period.

The declaration also envisages a fisheries agreement between the UK and the EU covering both access and quota. The explicit intention is for such an agreement to be concluded by July 2020, to enable it to be in place immediately following the transition period.

From a Jersey perspective, the declaration – whilst high-level – is in line with the Island's objective to maintain, as far as possible, the substance of its relationship with the EU under Protocol 3. Work is ongoing with the UK to ensure that Jersey is in a good position to participate in this relationship in line with its interests, looking particularly at  ensuring  the  integrity  of  the  external  border  and  demonstrating  the  Island's commitment to open and fair competition.

It should be recognised, however, that the political declaration on the future relationship is based on the implementation of the Withdrawal Agreement, and both are subject to the  agreement  of  the  UK  Parliament  in  the  meaningful  vote',  on  15th  January. Furthermore,  were the Withdrawal Agreement to be accepted by Parliament, any agreement  on  the  future  relationship  must  resolve  the  Irish  border  issue  to  the satisfaction of both sides. In the absence of this, the Northern Ireland backstop would come into effect from the end of the transition period until a mutually acceptable agreement could be reached – though this does not preclude any third country market access arrangements or agreements on separate issues in the meantime.

As such, whilst it is right that the Government of Jersey continues to work closely with the UK to prepare for negotiations on the future relationship, in any scenario, the Island will continue to have to plan for a range of possible scenarios for some years to come.

PREPARATIONS FOR TRADE OUTSIDE THE EU

Following the 2016 EU Referendum, the initial priority for our future trade policy was to work towards the continuation of a customs union between Jersey and the UK, essential for the Island to trade under a number of different post-Brexit scenarios.

With the landmark Customs Arrangement having been signed on 26 November 2018, the next priority has been to secure extension of the UK's membership of the World Trade Organization ("WTO") to Jersey.

Territorial extension of the UK's WTO membership has been a longstanding objective of the Government of Jersey. Due to the UK Government reserving its right to extend WTO application to the Crown Dependencies and the precedent set by the extension to the Isle of Man in 1997, the potential for the UK to extend the territorial application of its WTO membership to Jersey remains an option.

Brexit has heightened the focus on the UK's WTO membership. Should the UK exit the EU without a negotiated settlement then the UK-EU trading relationship will fall back on the WTO rules, which are not as favourable as the EU preferential system.

The UK is a member of the WTO in its own right, but it must submit new goods and services schedules under the General Agreement for Trade and Tariffs ("GATT") and the General Agreement on Trade in Services ("GATS") to the WTO Secretariat in order to regain its status as an independent trading nation. It is in this context that the Governments of Jersey, Guernsey and the UK are involved in discussions regarding the extension of the UK's membership.

This heightened focus prompted by Brexit, whilst providing impetus for the WTO project, has also placed emphasis on the ability of the Channel Islands, Isle of Man and the  UK  itself,  to  comply  with  WTO  obligations  and  commitments.  As  a  result, Government of Jersey officials are assessing the 23 agreements underpinning the WTO and identifying potential areas that need to be addressed in order to secure extension of WTO territorial application to Jersey.

Throughout 2018 the Government of Jersey has hosted a number of inward visits from UK Government delegations to help increase understanding of Jersey WTO context; these discussions will continue into 2019, in both St. Helier and London.

High-level discussions have also taken place with the UK Department for International Trade ("DIT") on Future Trade Agreements, and future trade policy more generally.

For more than 40 years, the negotiation of trade agreements has been the exclusive competence of the European Union. Once the UK definitively leaves the EU and the Customs  Union, it will be  responsible  for negotiating its  own international trade agreements with the EU and others. The UK has already entered negotiations to establish over 40 continuity Free Trade Agreements ("FTAs") with existing EU FTA partners, and has entered into pre-discussions with further high priority partners with a view to establishing new FTAs.

With our recent agreement to form part of the UK Customs Union, and discussions ongoing to seek extension of the UK's WTO membership, Jersey could be impacted significantly by future UK trade policy if it decides to participate in future UK trade agreements.

Modern trade agreements cover a broad range of issues which could impact on a number of interests of Island businesses and residents. Jersey may decide it has specific interests or particular sectors of the economy it wishes to protect.

The working level Customs and Trade workstream, part of the wider Brexit Programme, manages this work, seeking strategic input from the Jersey-UK Partnership Trade Group whose remit has recently been extended to consider all aspects of future trade policy for the Government of Jersey.

Expanding on work engaging with non-EU markets currently underway through the Global Markets Strategy, the Government of Jersey will increase its work in this area in 2019 to continue to develop measures to create a sustainable, vibrant economy, and enhance our international profile and boost trade in global markets.

We are considering the strengthening not only of the intergovernmental arrangements with the UK and other Crown Dependencies, but also local consultation to help shape the Government of Jersey position itself. This includes how we work closely and consult with businesses and trade bodies, our elected representatives and civic society as a whole, to identify key challenges, risks and opportunities of FTAs.

Later in 2019 we will undertake public engagement on future trade policy, processes, and opportunities to help us better understand how Islanders think we should deliver this work.

SECTION IV – LEGISLATIVE PROGRAMME

As previously mentioned, the States Assembly voted by 40 votes to 3 to introduce the European Union (Repeal and Amendment) (Jersey) Law 2018 ("EURAL"), which provided the legal powers for Jersey to implement Brexit in whatever from it might take. The following is an update on more legislative work that has been, or is being, undertaken. Conscious that EURAL makes provision for Regulations that can in turn provide for Ministerial Order-making powers, particular attention has been given to engagement  with  Scrutiny  and  States  Members  to  keep  them  abreast  of  Brexit. Engagement with Scrutiny and the States Assembly is set out in Section II of this Report.

The Assembly has recently passed the Regulations to facilitate the implementation of the Vienna Convention on Road Traffic.

Regulations were made by the Assembly to amend the Customs and Excise (Jersey) Law  1999 to  provide  powers  to implement  the  Customs  Arrangement  signed  on 26 November. The Regulations will be followed by an extensive set of Orders, work on which is underway.

The Sanctions and Asset-Freezing (Jersey) Law 201- was passed on 6th December and makes essential provision to address the implications of Brexit. We will be aiming for Royal Assent in February 2019.

The following topics are in the process of being addressed by Regulations –

1. Financial  Services,  miscellaneous  amendments,  but  primarily  to  provide continuity as a result of UK ceasing to be an EU Member State.
2. Income Tax Law, to provide continuity as a result of UK ceasing to be an EU Member State.
3. Data Protection (Jersey) Law 2018, to treat the UK as an EEA Member State for the purposes of transfers of data to the UK.
4. Supply  of  Goods  and  Services  (Jersey)  Law  2009, to  ensure  the  legal obligations on the importers of goods from the UK remain the same after Brexit.
5. The protection of geographic indicators for wines and spirits to ensure that we maintain alignment with the requirements of the Convention on Trade-related Aspects of Intellectual Property Rights ("TRIPS"), which is essential if we are to agree to the extension of the WTO Agreements. Further amendments might then be required to IP Laws after Brexit.
6. Waste Management (Jersey) Law 2005 – instructions have been provided on amendments, mostly to change references to member states of the European Union to add "or/and the United Kingdom".
7. Animal Health, Welfare and Aquatic Animal Health – instructions have been submitted  to  provide  powers  for  Ministers  to  make  Orders  to  implement essential changes to EU-related animal welfare and aquatic animal health legislation. The detail of the changes required will not be apparent until 2019.
8. Restriction  on  Smoking  (Warning  Notices)  (Jersey)  Regulations  2011 – instructions have been provided to reflect the new warning pictures that will be used in the UK on tobacco products. The UK will switch from EU to Australian

images. Without an amendment to our Regulations, an importer of tobacco products bearing the new images will breach the 2011 Regulations.

Other pieces of legislation being addressed include –

9. the Food Safety (Labelling) (Jersey) Order 2005, which will be amended to preserve the policy effect after exit; and
10. the Immigration (Biometric Information) (Jersey) Order 2018; the relevant Proposition to extend the UK legislation to Jersey was debated and passed by the States Assembly in 2018; the UK Order in Council was approved by the Privy Council on 12th December 2018, registered by Jersey's Royal Court on 21st December, and came into force on 28th December 2018.

As mentioned at the start of Section III, an amendment will be brought forward to the European Union (Jersey) Law 1973 to reference the Withdrawal Agreement. The purpose of this technical amendment will be to remove any scope for uncertainty regarding the continuity in the direct application of EU Law during the transition period, if the Withdrawal Agreement is agreed between the UK and EU in its current form.

SECTION V – STAKEHOLDER ENGAGEMENT Let's Talk Brexit

The Let's Talk Brexit' stakeholder engagement campaign, launched in March 2017, has  secured  a  sustained  level  of  interaction  from  the  Public  through  social  and conventional media, and has been a useful vehicle to successfully socialise messages on Brexit developments.

The first stage of the campaign, running from March 2017 to March 2018, focused on socialising the Government's Brexit objectives and engagement with the UK and was the vehicle for the promotion of the Brexit Resident's Survey and Brexit Business Survey.

The second stage of the campaign, which ran from March 2018 to December 2018, fulfilled its stated objectives by –

1. successfully disseminating to the Public and media details of the progress of negotiations and the engagement between the Government of Jersey and UK government departments on priority workstreams;
2. communicating the inclusion of the Crown Dependencies in the  transition /implementation period within the proposed Withdrawal Agreement;
3. demonstrating  the  direct  implications  of  aspects  of  future  relationship arrangements  on  individual  Islanders  through  a  series  of  persona-based scenarios,  primarily  in  relation  to  the  implementation  of  the  Jersey-EU Settlement Scheme;
4. highlighting  the  progress  of  the  EURAL  and  communicating  subsequent secondary legislative changes; including changes required to ensure Jersey's compliance with the Vienna Convention, and the new Sanctions and Asset- Freezing (Jersey) Law 201-.

Ready for Brexit

Jersey: Ready for Brexit', is the title for the third stage of the stakeholder engagement campaign and was launched in January 2019. The campaign is designed to –

1. update stakeholders on the continued engagement between the Government of Jersey and UK government departments on priority workstreams;
2. provide  top-level  detail  on  the  contingency  planning  work  that  has  been undertaken by the Government of Jersey in preparation for a D1ND scenario;
3. encourage Islanders to take practical steps to prepare for the tangible impacts of either a negotiated of D1ND Brexit; and
4. highlight the opportunities for Jersey in the post-Brexit era.

Running from 14 January – 18 January 2019, Ready for Brexit week' is the launch-pad for the campaign. The Government of Jersey has partnered with the following arm's- length and independent bodies to provide a series of seminars, workshops and panel sessions –

• Digital Jersey
• Jersey Business
• Jersey Chamber of Commerce
• Jersey Finance
• Jersey Hospitality Association
• Jersey Overseas Aid.

The week will also see the launch of a business readiness toolkit; publication of top tips for travel and transport, import and export, and young people; and the appearance of the Minister for External Relations in front of the Brexit Review Panel.

SECTION VI – CONCLUSIONS

It has now been 2½ years since the referendum in which the United Kingdom voted to leave the European Union, and almost 18 months since the triggering of Article 50, setting that process in motion. Indeed, there are now fewer than 90 days before the formal date of Brexit, 29th March 2019. As noted throughout this report, however, the final destination of the Brexit process – whatever the outcome of the UK Parliament's meaningful vote' – remains uncertain. As such, Jersey will continue to need to prepare for a range of scenarios.

It is right and prudent in such circumstances that the baseline for our preparations must be a no deal Brexit. As set out in this report, extensive work has already taken place in this regard. It will continue to do so, and I am confident that we are as well-placed as we can be to manage the challenges we may face in such a scenario. However, it is important to bear in mind that a negotiated outcome in some form, on both Withdrawal, including an Implementation Period, and on the future relationship, remains a likely outcome of the Brexit process. As such, we must continue to engage with and prepare for this outcome, in tandem with our contingency work. We have been clear about our aspirations in this regard: looking to preserve the substance of our existing relationship with the EU and seize other opportunities should they arise, but in a way that is compatible  with  our  constitutional  position  and  proportionate  to  both  the  limited relationship we seek and the nature of our economy. We have been clear, too, that nothing must be done in the context of the future relationship between the UK and the EU to erect new barriers to Jersey's historic relationship with the UK.

As a Government, we recognise that such continuing uncertainty is unwelcome. That is why we have provided, and will continue to provide, as much information as we can at every stage. This week's programme of events is an important part of that, and we will continue to engage with members of the Public and with businesses in the weeks and months ahead, to address their concerns where we are able to do so and to ensure they can be as well prepared as possible for any changes that may come.

Yet despite ongoing uncertainty, it should not be forgotten that much has already been achieved in ensuring Jersey is prepared for Brexit across a range of outcomes. We have drafted and passed the EURAL and key implementing legislation, giving us the ability to ensure our domestic legislation works under any Brexit scenario. We have established relationships  throughout  Whitehall  and  agreed  platforms  for  unprecedented information-sharing that equip us, not only to feed into the negotiations, but also to make us well-placed to manage and address whatever emerges from them. We have confirmed the continuation of the Common Travel Area, preserving the ability of our people to move freely between the UK, Ireland and our fellow Crown Dependencies. We have finalised a settled status' scheme to preserve the position of our EU citizens, who make a huge contribution to our Island. We have conducted an in-depth assessment of all 23 of the WTO agreements, putting us in a position to take a final decision on WTO extension and the regularisation of our trading relationships. We have put in place a customs agreement with the UK, establishing a modern relationship through which goods can move freely between us. We have engaged extensively with EU Member States and the institutions to ensure our position and our interests are understood, and will continue to do so when the UK is no longer at the table. We have established a Global Markets team, who are building relationships with priority countries around the globe and putting in place the international agreements which will underpin trade and investment for years to come.

There is more to do, of course, and the remaining months before Brexit will undoubtedly require a great deal of Ministers, officials and States Members as they seek to prepare for and react nimbly to whatever may emerge from the current UK Parliamentary process.

With the appropriate resources, legislation and relationships in place, however, the Island is well placed to address these challenges, as well as to seize opportunities as they arise.