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It has been a little over a year since the vote for Brexit and there are still a lot of unknowns with regards as to how exactly the United-Kingdom will leave the European Union. The House of Lords recently voted to leave the single market but there are still several Post-Brexit trading models in play and it is unclear at this stage as to which one will be chosen.
At the outset of negotiations on the terms of the United Kingdom’s withdrawal from the European Union, insights as to the consequences of the Brexit for companies who send employees abroad through intragroup mobility.
From a legal and insurance law point of view
On the 29th of March 2017, the United Kingdom notified its intention to withdraw from the European Union in accordance with Article 50 of the Treaty on European Union and with the vote expressed on 23rd June 2016 by the British people.
The United Kingdom and the European Council, acting by a qualified majority, after obtaining the consent of the European Parliament, now have two years maximum after this notification to set out the terms of the United Kingdom’s withdrawal from the European Union, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period. Failing that, the Treaties shall cease to apply to the United Kingdom, including all provisions constituting European law.
Unless otherwise agreed with the European Council, the United Kingdom will therefore cease to be bound – and to benefit from – all guiding principles attached to European citizenship at its exit from the European Union, including which the principle of free movement of persons.
Recognized since the Treaty of Rome, the principle of free movement of persons has enabled the European Union to legislate in the area of international mobility: determination of the applicable law to the employment contract, coordination of social security schemes, tax status, immigration, … as many topics that are regulated by EU law and that may cease to apply to British people or people residing in the United Kingdom in the context of an international mobility.
To anticipate and put into perspective the consequences of the Brexit, it is worth recalling that many of these topics have been addressed or are still regulated by bilateral or international conventions between the United Kingdom and the European Union State Members and/or of the European Free Trade Association countries (EFTA), including Switzerland.
Such conventions would precisely become applicable again to the United Kingdom if no other agreement is substituted to them by agreement with the European Union and/or the EFTA countries on an individual basis. Among the agreements that would become applicable again to the United Kingdom, one may namely mention the Rome Convention on the law applicable to contractual obligations and the Lugano Convention on jurisdiction and enforcement of judgments in civil and commercial matters – which have been very influential on EU law, and that the United Kingdom, Switzerland and the European Union State Members have all ratified before being resumed by EU law.
From Switzerland’s perspective
In anticipation of the United Kingdom’s withdrawal from the European Union, Switzerland may also wish to ensure that the existing mutual rights and obligations in its relationship with the United Kingdom will continue to apply after it leaves the European Union and to develop these rights and obligations where necessary (“Mind the gap” Strategy).
At present, the bilateral agreements with the European Union are the essential basis for relations between Switzerland and the United Kingdom. When the United Kingdom leaves the European Union, these agreements will no longer apply to relations between Switzerland and the United Kingdom, especially the Agreement with the European Union on the Free Movement of Persons which sets out the provisions governing the coordination of the social security system of Switzerland and the EU Member States (Regulation (EC) No. 883/2004 and No. 987/2009).
Swiss authorities may wish to achieve this transition by:
- Negotiating a future relationship Agreement between Switzerland and the United Kingdom that replaces the current bilateral agreements with the European Union,
- Putting in place potential transitional solutions to cover the period between the United Kingdom’s withdrawal and the coming in force of the new Agreement between the United Kingdom and Switzerland.
The Federal Council will take the interests of insured persons into consideration when negotiating the future relationship between Switzerland and the United Kingdom. Prospective entitlements are not under threat. The Freedom of Movement Agreement explicitly states that rights already acquired by individuals will be unaffected by termination or non-extension of that Agreement.
As regards social insurance law, the 1969 Bilateral Agreement on Social Security between Switzerland and the United Kingdom, which was suspended by the entry into force of the Freedom of Movement Agreement, remains valid. This Agreement will apply, if – contrary to expectations – no new regulations are agreed upon and the existing provisions are no longer applicable.
In conclusion, based on the prior agreements entered into between Switzerland and the United Kingdom, the Brexit should not impact at this stage the posting of workers from Switzerland to the United Kingdom from a contractual labour and social insurance point of view.
From an HR point of view
International companies who currently have Swiss or European Union nationals working in the United Kingdom, may want to ascertain from the British authorities that no changes will be made to their employees’ current resident status.
At this point in time, nothing precludes companies wishing to recruit or send Swiss or European Union expatriates to the United Kingdom. Triggering the Article 50 of the European Union Treaty could however lead the British government (through future negotiations) to impose new restrictions, even though Theresa May’s speech of the 29th of March 2017 indicated the Government’s wish to maintain the rights of European Union nationals already living in the United Kingdom as well as for United Kingdom nationals living in the European Union. The unknown factor should therefore reside essentially with European Union and United Kingdom nationals migrating as from the 29th of March 2017, as this will have to be discussed during Brexit negotiations.
Furthermore, UK immigration authorities have announced that as from the 6th of April 2017 a number of changes will be made to immigration rules particularly for Tier 2 migration categories. It is still unclear as to what system the immigration office will put in place but international companies could be facing tougher immigration processes in the future.
Certain aspects such as searches for a specific candidate in the UK Labour Market, technicality and seniority may need to be proven as is presently the case for non-EU workers. Finally companies who have subsidiaries in the UK will probably want to be looking at local talent management with a view to sticking to strategic scenarios.
The information enclosed within the present newsletter are not exhaustive and do not cover necessarily all legal aspect of the subject. This in no case can replace a legal professional advice particularly regarding the considered case under any particular situation. Copyrights are reserved, except with prior written consent.