Brexit White Paper: a digital Brexit?

Hogan Lovells

Hogan Lovells

The UK Government's White Paper sets out detailed proposals for the UK's relationship with the EU following Brexit.

As described in our dissection of the document as a whole, the White Paper sees the digital economy as an area of global opportunity for the UK.   So what does the Government have to say about sector?

1.  The White Paper's distinguishes physical goods from the digital and services sectors.

Integrated supply chains and the challenges of the Irish border have driven an approach to physical goods which maintains a high degree of integration with the EU through agreement on a "common rulebook" and creation of a "facilitated customs arrangement" as well as broader issues such as continued coordination in relation to defective and dangerous products.

Given the scope of the goods regime it will impact manufacturers, retailers and distributors of everything from consumer electronics to telecoms equipment as well as the e-commerce sector and online retailers for whom continued coordination on consumer protection will be important.

The broad thrust of continued integration is likely to be an attractive prospect for most companies in this sector but the devil promises to be in the detail. Specifically, questions are already being raised about:

  • the operation of the unprecedented structure for customs which is intended to eliminate all customs checks, tariffs and rules of origin on goods moving between the UK and the EU
  • the scope of the common rulebook and specifically how far it will reach in a world where digitalisation, the internet of things and smart devices are increasingly blurring the boundaries between goods and services
  • the UK's input into the common rulebook and the effectiveness of protections against the UK becoming a "rule taker".

2.  By contrast, for the digital services economy the White Paper prioritises flexibility for the UK to enable it to innovate and respond nimbly to the fast changing digital world so the UK can tap in to the opportunities in the world's largest digital economies. The UK will not participate in the EU's Digital Single Market.

The White Paper identifies developing areas of technology – such as artificial intelligence and the internet of things – as being particularly exposed to non-tariff barriers something which is, no doubt, driving a desire for greater flexibility in negotiating with third countries in this area. What this is likely to mean in practice is that in a range of areas there will be potential for the UK to diverge from the EU position. Business will need to be alive to the opportunities and threats this could bring and, both in the run up to and following Brexit, to engage actively with policymakers and regulators in London as well as in Brussels. 

There is an important qualification to the White Paper's espousal of a desire to be able to diverge as it also recognises that new and emerging technologies such as AI raise challenges which the UK shares with the EU. In this context, the UK Government proposes unspecified "new models for regulatory cooperation" between the UK and the EU to "tackle these shared challenges and advance shared objectives in the future". It remains to be seen how the desire for cooperation and the desire for divergence will coexist in practice.

3.  Another key thrust of the White Paper is to preserve the UK's integration in the European "data economy". Indeed, in many ways the approach treats data as analogous to goods. Our separate blog post on data in the White Paper explores these issues specifically but the overriding theme is to preserve cross border data flows.

Many business, both in and beyond the digital sector, have told us that data is one of their biggest concerns about Brexit and the UK's proposals in this areas seem likely to enjoy a widespread welcome.

Beyond data the UK also proposes:

  • working with EU partners to ensure the internet is safe and open and
  • recognising equivalent forms of electronic ID and authentication (that can be used across borders).

Again, in principle close cooperation in these areas should be welcome. However, cooperation in these areas is not the same as operating a "common rulebook" so there is a real possibility of greater divergence in the future than in the past.

4.  The White Paper acknowledges the importance of telecommunications infrastructure.

The suggestion of continued cooperation to counter cyber-security threats is likely to prove uncontroversial. However, the suggestion that the UK and EU should jointly commitment to an open and liberalised telecommunications sector which allows for fair, equal and competitive access for UK and EU business to public communications services and networks may prove less benign. The suggestion that UK business should have the advantages of access rights within the EU whilst the UK is not a member could be seen as raising the spectre of the UK seeking to "have its cake and eat it" – a principle the EU has firmly rejected in the past.

5.  Broadcasting has been one of the key areas of concern for business in the sector and we explored some of the issues in an earlier blog post.

For the purposes of EU content quotas, the UK will remain a party to the EU Convention on the Transfrontier Television of Council of Europe and the EU has confirmed it shares the view that works originating in the UK will remain  classed as EU works and the UK can continue to treat audiovisual works originating from the EU as European works for the purposes of quotas.

By contrast, the White Paper accepts that the country of origin principle for broadcasting will no longer apply. Whilst it states that "the UK is seeking the best possible arrangements for this sector", there are no details of what those arrangements might look like. The White Paper therefore brings little prospect of ending the uncertainty faced by broadcasters at any time in the near future.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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