Did Brexit affect the UK’s treaties network?

FULL QUESTION

Did Brexit affect the UK’s treaties network?

ADDITIONAL WRITTEN ANSWER

Yes, Brexit significantly affected the UK’s treaty network, particularly in the areas of trade, tax, investment, financial services, and regulatory cooperation. Since leaving the EU, the UK has had to renegotiate, replace, or modify many treaties that were previously covered under EU agreements. Below are the key areas where Brexit had an impact:

 

1. Trade Agreements

(a) Loss of EU Trade Agreements

  • Before Brexit, the UK benefited from over 40 trade agreements the EU had negotiated with over 70 countries.
  • Upon leaving, these agreements ceased to apply to the UK (except where specific rollover deals were arranged).
  • The UK had to negotiate new trade deals or replicate existing EU agreements.

(b) New UK Trade Deals (Post-Brexit)

  • The UK has signed multiple free trade agreements (FTAs), including:
  • UK-EU Trade and Cooperation Agreement (TCA) – Governs trade between the UK and EU, but imposes new customs and regulatory barriers.
  • UK-Japan FTA – Modeled on the EU-Japan FTA but with additional UK-specific provisions.
  • UK-Australia and UK-New Zealand FTAs – First trade deals negotiated from scratch.
  • UK-CPTPP Accession – The UK has joined the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

(c) Loss of EU Single Market Benefits

  • UK-EU trade now faces customs checks, VAT complications, and rules of origin compliance.
  • UK firms lost passporting rights in financial services, affecting trade in banking, insurance, and investment.

 

2. Tax Treaties (Double Taxation Agreements – DTAs)

(a) UK’s Bilateral Tax Treaties Remain Valid

  • The UK has over 130 DTAs, which were negotiated independently of the EU.
  • Brexit did not terminate these treaties, as tax treaties are typically bilateral and not EU-wide.

(b) Loss of EU Directives (Withholding Taxes)

  • The UK lost benefits from two key EU tax directives:
  • Parent-Subsidiary Directive (PSD) – Prevented withholding tax on intra-EU dividend payments.
  • Interest and Royalties Directive (IRD) – Eliminated withholding tax on interest and royalty payments.
  • Impact: UK companies receiving dividends, interest, or royalties from the EU may now face withholding taxes unless covered by a bilateral tax treaty.

(c) UK’s Approach to BEPS and OECD Standards

  • The UK continues to align with OECD tax policies (e.g., Pillar 2 global minimum tax).
  • It actively participates in OECD’s tax treaty network through the Multilateral Instrument (MLI).

 

3. Investment Treaties (Bilateral Investment Treaties – BITs)

(a) UK Retains Existing BITs

  • The UK has over 90 BITs, mostly covering non-EU countries.
  • These BITs remained valid post-Brexit.

(b) Loss of EU Investment Protections

  • The UK no longer benefits from EU-wide investment agreements or protection under EU law.
  • Example: UK investors can no longer rely on EU law to challenge expropriation or discriminatory treatment in EU member states.

(c) UK-EU Dispute Settlement Mechanisms Changed

  • No access to the EU’s Investment Court System (ICS) – UK investors must now rely on bilateral BITs or WTO dispute resolution.

 

4. Financial Services and Regulatory Treaties

(a) Loss of Passporting Rights

  • UK financial firms lost automatic access to the EU financial market.
  • The UK had to negotiate equivalence arrangements, but these do not cover all financial sectors.

(b) New UK-Switzerland Financial Services Agreement

  • The UK signed a financial services treaty with Switzerland, allowing easier market access.

 

5. Dispute Resolution and Legal Framework

(a) No Longer Subject to the European Court of Justice (ECJ)

  • UK courts no longer recognize ECJ rulings.
  • However, EU law still affects Northern Ireland under the Northern Ireland Protocol.

(b) WTO Trade Disputes

  • The UK is now independently represented at the WTO, meaning it must defend its own trade disputes rather than relying on the EU.

 

6. Migration & Social Security Treaties

(a) No More Freedom of Movement

  • The UK ended free movement of people, affecting:
  • Work visas
  • Residence permits
  • Mutual recognition of qualifications

(b) UK-EU Social Security Agreement

  • The UK and EU signed a social security treaty, ensuring some coordination of pensions and benefits.

 

Summary: Brexit’s Impact on UK’s Treaty Network

Area Effect of Brexit
Trade Agreements UK had to replace EU FTAs; signed new deals (e.g., Japan, Australia, CPTPP).
Tax Treaties UK DTAs remain in force, but UK lost EU Parent-Subsidiary Directive benefits.
Investment Treaties UK BITs remain valid, but EU investment protections lost.
Financial Services UK lost passporting rights; now relies on equivalence arrangements.
Dispute Resolution UK no longer subject to ECJ rulings; must defend WTO trade disputes independently.
Migration & Social Security No more free movement; UK-EU social security coordination treaty in place.

 

Final Thoughts

  • The UK has restructured its treaty network, but Brexit introduced new barriers in trade, tax, and finance.
  • Tax treaties remain largely unchanged, but withholding taxes increased due to loss of EU directives.
  • Trade agreements were renegotiated, with a focus on global expansion beyond the EU.
  • The UK’s investment treaty protections weakened, as it lost EU-level legal backing.