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Dutch Ministry of Health: Prepare for a "Cliff Edge Brexit"

Regulatory Updates | Medical Devices

EMERGO SUMMARY OF KEY POINTS:

  • After Brexit there will be a border, with the UK outside the EU.
  • Customs Union or EEA options are unlikely outcomes.
  • Prepare for a hard Brexit (‘Cliff Edge Brexit’) on 29 March 2019.
  • A hard Brexit will likely impact all organizations, even if you do not interact with the UK.
  • Disclaimer: This blog only gives a limited update on the current situation. We can only speculate as to what the final outcome will be.

Hard Brexit and its impact on European medical device companies 2018.On 5 July 2018 the Dutch Ministry of Health organized an informative meeting for the medical field about the possible impact the UK’s exit from the European Union (EU), Brexit, might have. This is considered a very important issue that may impact many aspects of the Dutch – and European – economy (and society in general). To emphasize this importance the Minister of Medical Care, Bruno Bruins, spoke personally. He had a very clear message: Brexit will happen, there will be border, and a “Cliff Edge Brexit” (or “hard Brexit”) is still a realistic scenario.

In the meanwhile the British government presented its plan for Brexit and the Minister of the Department for Exiting the European Union as well as the Foreign Affairs Minister resigned. Their resignations signal they did not agree with the “soft” approach Prime Minister Theresa May is taking. At this moment it is not clear what consequences will result from their resignations.

Brexit will happen

For now it is highly likely the UK will leave the EU on 29 March 2019, and the rest of the world should prepare for that. Leaving the EU implies the UK is no longer part of the Single Market, and they will no longer support the Four Freedoms on which the EU is based: free movement of goods; free movement of capital; freedom to establish and provide services; and free movement of persons. Whatever deal is struck, these current freedoms will be limited.

Will there be a border?

During the meeting, presenters displayed a spectrum of potential Brexit scenarios. On one side was the current situation with the UK remaining a full member of the EU, on the other side was the “Cliff Edge Brexit” or hard Brexit.

It is likely that any deal negotiated will be within the parameters of the UK’s aspirations; membership in the European Economic Area (EEA), a customs union or semi-internal market agreement are not likely to be the outcome. That would imply there will be a border, which will lead to border controls of some sort that will in turn require arrangements for VAT collection. What is currently considered to be distribution will become import or export.

Also, the European Court of Justice (ECJ) will no longer rule over British citizens. The ECJ represents the top of the European regulatory food chain. Removing that entity’s jurisdiction lessens authority of other parts of the regulatory structure, as well. The consequences will be that British Notified Bodies and Authorized Representatives will not be recognized in the EU and vice versa. Distributors may suddenly become importers. Your data stored in the UK might no longer be under the protection of EU law and there may be infringement with the General Data Protection Regulation (GDPR) and Privacy legislation.

If a deal is struck it is likely there will be a transition period of 21 months until 31 December 2020. During that transition period the future relation will be negotiated further. These negotiations will still have many potential outcomes and the negotiators rely on the principle that nothing is agreed until all is agreed. The final outcome is therefore still very uncertain.

Prepare for the worst?

The Hard Brexit/Cliff Edge Brexit/no-deal scenario would put an abrupt end to the current trade relations that are based on these freedoms. A hard-Brexit outcome will make it difficult to move products between EU and British markets, and complicate payment structures – if at all possible, customer support will be difficult to perform and engineers needed for maintenance may not be able to travel, or have to go through a complex border procedure for any equipment they are carrying.

Employees in the UK will no longer fall under the EU laws and vice versa. Clinical studies performed in the UK or in which UK citizens took part will be affected as well; UK companies may no longer be involved in studies in the EU under the hard-Brexit scenario.

Brexit could impact everybody, even if you are not directly trading with the UK—even if you are not based in Europe! Obviously, if you are moving products over the UK/EU border you will be affected. In case of a hard Brexit this will probably become very difficult. You may depend on raw materials or components made on the other side of this border. You may purchase raw materials or components made by a manufacturer depending on products made on the other side of the border. Or these supplier’s suppliers depend on goods moving across that border. Somewhere in this chain someone may depend on service agreements, or data managed on servers based on the other side of the border.

Some dates and how to prepare

Brexit will happen on at 11 pm, 29 March 2019 (that is at mid-night in Brussels). On 30 March the British will wake up, hopefully not suffering a huge hangover. In order to achieve that a clear deal should be struck before the EU summit on 18 October 2018. If they succeed in that, the European Parliament can vote on the proposal. There is a fall back summit on 13 December 2018, but that should only be used as a last resort as this would leave little time for input from the European Parliament.

In the meanwhile you should make an impact scan for the Cliff-Edge Brexit:

  • Direct trading
  • Indirect trading through suppliers
  • Services used
  • Data stored on servers
  • Service/maintenance agreements
  • CE Mark Certificates
  • Dependence on importers and Authorized Representatives

This scan may lead to actions, like moving to other suppliers. This may in the end not be necessary, but the alternative risk is much higher. As a side effect these actions may also make clear to hard-line Brexiteers what will be the result of a hard Brexit. So maybe the best tactic for keeping the UK in the EU is to fully prepare for a Cliff Edge Brexit.

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