- March 1, 2021
- Posted by: Florence
- Category: Uncategorized
At a Glance…
Since 1 January 2021, much has been written about the impacts, expected and unexpected, of the UK’s new trading relationships with the EU under the Trade and Cooperation Agreement (TCA).
Authors: Peter Ferrigno
In parallel, the UK and the EU have both had COVID-related travel restrictions in force during this period. This means that the impact of the TCA on the cross-border movement of services has been untested so far, and there may be one more surprise in store for UK companies when they do finally start wanting to send their staff to deliver a service to a customer in the EU.
The longevity of the European single market means that we take much for granted. And, when the TCA includes a sentence providing that “Each Party shall allow the supply of services in its territory by contractual service suppliers or independent professionals of the other Party through the presence of natural persons, in accordance with Article SERVIN.4.4 [Contractual Service Suppliers and Independent Professionals], for the sectors listed in this Annex and subject to the relevant limitations”, it’s easy to think that this must be fine and nothing has changed.
But dig a bit deeper, and that might not be the case. There are 37 different sectors listed, and the respective Annex lists, sector by sector, country by country, which countries retain the right to require an economic needs assessment before permitting a UK company to provide a service in their country.
Let’s be clear what we’re talking about here. This is separate from ‘business travel’. There are new rules for that, and there is a list of permitted activities, and maximum durations, for a business trip. This is when a company is delivering a service to a customer, but requires the presence of its staff onsite to deliver the service. And it’s at the company level that the test is made; it’s not something that can be assumed can be circumvented by using an employee who is an EU national.
The TCA uses the concept of a ‘contracted service supplier’ (CSS) that delivers a service through its employees. This would typically be a professional of some kind, whether lawyer, architect, medical professional, engineer, consultant (whether management, scientific or technical), etc. In addition, independent professionals – the self-employed equivalent – are also regulated in 17 of the 37 sectors. The full list of both CSS and IP restrictions is appended to this Alert.
The CSS needs to have “concluded a bona fide contract, not exceeding 12 months, to supply services to a final consumer in the other Party requiring the temporary presence of its employees” and the TCA goes on to specify the experience and length of service of those employees.
Looking at 37 services across the 27 EU member states, this gives us an unbelievable 999 possibilities. Fortunately, in nearly half of those combinations, the member state will permit the service without restriction. However, in over 400 scenarios, an economic needs assessment will apply. So, the member state will first need to check that there is no locally qualified person that can perform the service before a UK company is allowed to do so.
Some countries, typically the 2004/2007 EU entrants, require the most economic needs assessments, including the Czech Republic (34 of the 37 sectors), Romania (33), Slovakia and Lithuania (30 each). At the other end, Sweden has no restrictions, Belgium only one, recent joiner Croatia has two, whilst open trading countries like the Netherlands, Spain and Poland require assessments in only four cases.
Some sectors require more restrictions than others – for example, the medical, dental and veterinary sectors are restricted in 19 member states, whereas transport advisory and manufacturing advisory are only restricted in eight.
What format that needs assessment takes, and how it is obtained in the member state, will vary significantly. And, EU nationals would have free movement status under existing other rights.
Whilst international travel remains restricted, very few people are being denied boarding for a plane from the UK to the EU because their employer is caught by this restriction. However, individual cases have started to be reported (see here). Once travel restarts on a regular basis later this year, don’t be surprised if countries have woken up to this requirement and more questions are asked about whether the journey is permitted, particularly where changing planes between EU Member states.
If need be, the downtime before travel restarts can be productively spent reviewing contracts by country for your sector, to avoid issues later.
Appendix – List of sectors and sub-sectors
For more information, please download our appendix table.
This article was initially published on Reed Smith’s website, accessible, here.