CHAMBERS Global Practice Guides. Legal Brexit. Agriculture & Rural Affairs Contributed by Agri Advisor Solicitors

Transcription

1 CHAMBERS Global Practice Guides Legal Brexit Agriculture & Rural Affairs Contributed by Agri Advisor Solicitors 2017

2 AGRICULTURE & RURAL AFFAIRS Contributed by: Agri Advisor Solicitors p.3 The practice area-based chapters provide easily accessible information on the impact of the UK s vote to leave the European Union. CONTENTS 1. Current Legislative Framework p.3 2. Transitional Framework p.4 3. Post EU Exit p The UK leaves the EU but remains a part of the EEA p The UK leaves the EU but joins EFTA p The UK leaves the EU and trades with the EU p.5 Agriculture & Rural Affairs Contributed by Agri Advisor Solicitors

3 LEGAL BREXIT AGRICULTURE & RURAL AFFAIRS Agri Advisor Solicitors began trading in October 2011, quickly building to a team of 21 personnel, including legal specialists in property, private client and trusts, planning, environmental law, Welsh law and policy, and in the field of CAP (the common agricultural policy) disputes. Head of practice Dr Nerys Llewelyn Jones is known for her specialism in bringing appeals and judicial reviews against the government in the field of agriculture. Her knowledge of agricultural policy at regional, national, European and international levels makes her the perfect person to inform and develop the new British agricultural policy going forward. Agri Advisor is actively involved in policy discussions and its personnel regularly speak at professional and stakeholder meetings on the subject. Agri Advisor also advises on rural property transactions, farm business tenancies, Agricultural Holdings Act tenancies, licences and land occupancy arrangements, planning law and applications, agri-environment schemes, SSSIs, property disputes, lifetime planning and succession for farm businesses, farm business structures and partnership disputes. Since 2011, the firm has had a CAP team which offers support and assistance to farmers on all aspects of implementation and enforcement of CAP schemes. This has now been developed into a Brexit team which will help with the transitional aspect of moving away from CAP and towards a new British agricultural policy. Author Nerys Llewelyn Jones is head of Agri Advisor Solicitors, having set up the practice in Before that, she was an associate solicitor at JCP Solicitors in Swansea, where she also undertook a training contract. Nerys practice and expertise includes dispute resolution in agricultural tenancies, the Common Agricultural Policy, partnership disputes, land occupancy arrangements, nature conservation agreements and property disputes. She also advises on lifetime and succession planning for farmers and landowners, including the provision of holistic advice and considerations of wider implications of decisions taken on a farm. Nerys has been a Fellow of the Agricultural Law Association since Her other memberships include council member of the Agricultural Law Association, member of the Education Committee for the Agricultural Law Association, UK delegate on the Council for Comité Européan de Droit Rural and secretary for the Future Farmers of Wales. In addition, Nerys is the Recommended Professional for the Tenant Farmers Association, and was runner-up for Farm Adviser of the Year in Farmers Weekly Awards She is also a qualified mediator. 1. Current Legislative Framework The Common Agricultural Policy (CAP) is the mechanism by which farmers in the UK obtain direct support for protecting and enhancing the countryside and supporting the development of rural areas. It is based on a seven-year programming period, the current period having been implemented in the UK in Although the UK is a Member State, implementation of the CAP takes place at a regional level, with each of the devolved administrations adopting their own interpretation and application of the EU CAP rules. The two-pillar model provided by the CAP allows direct support under pillar 1 and rural development-focused measures under pillar 2. The second pillar includes support for diversification and competitiveness as well as environmental schemes on farms. A current affairs investigation into farming subsidies in the UK revealed that, across the UK, 889 landowners received more than GBP250,000 in This reporting of substantial direct payments was met with public criticism but these headline figures mask the reality of the position of the majority of farmers across the UK, many of whose farms can still be regarded as family-run farms. This led to the EC capping subsidies at an EU level, something which was implemented rigorously by the UK in the latest round of reform, in order to show the public that farming subsidies are proportionate and justifiable, especially in a society which is facing significant cutbacks in all areas of expenditure. This will form an influential backdrop to the development of new agricultural policy in the UK going forward. From the point of view of a key industry stakeholder, due to the last-minute decisions on key policy and legislative aspects, and the failure of IT systems, the practical implementation process in 2015 was very difficult. It is to be hoped that any new agricultural policy will seek to avoid a repetition of this situation. 3

4 AGRICULTURE & RURAL AFFAIRS LEGAL BREXIT However, it is not just the CAP that influences the agricultural industry in the UK. The EU also runs a number of schemes which promote and support high-quality agricultural products. One such scheme is the Protected Geographical Indicators Scheme which has been crucial in denoting the significance of certain agricultural products in the UK, such as Welsh lamb and Welsh beef. There are also EU regulations on animal health, hygiene and welfare. There are rules on the control of disease, the welfare of animals during transportation and at slaughter, and the export and import of live animals and animal products. The impact of these rules, and those relating to the regulation of trade across the Single Market, have enabled UK agricultural products to benefit from trade agreements with such countries as South Africa. International trade deals are currently negotiated by the EU and include tariff reductions and import quotas providing preferential trade agreements. 2. Transitional Framework For rural practitioners, there are inevitably periods of uncertainty, given that the CAP works on a seven-year programming period, and each time the CAP is reformed the ensuing discussion and debate about its implementationand, more importantly for practitioners, how they will be affected. Farmers are thus resigned to weathering the uncertainty of policy changes. This transitional period is, however, somewhat different; it allows for a completely new book to be written, which is an exciting challenge that UK policy makers in this field must fulfil if the agricultural industry to continue to thrive. The majority of EU agricultural law and policy is implemented by regulations which appear at Member State (MS) level, although they are simply implementing aspects which have been given discretion at MS and regional level. This means that the majority of CAP legislation at MS level will need to be reviewed and replaced. Matters implemented at EU level by directives will have been written fully into MS legislation and thus may not require as much amendment or replacement to ensure that they are workable for the future. As a significant proportion of the UK s legislation (including that made by devolved legislatures) is made under Section 2(2) of the European Communities Act 1972, withdrawal from the EU will require this Act to be repealed, which will lead to the automatic loss of all secondary legislation made under that Act and leave a significant hole in the UK s agricultural and environmental law. It is possible that transitional provisions will be enacted that keep most existing EU law in place until a full review is made of what to retain and what to discard. A consistent approach in this review is crucial, as any policy or rules without statutory support are certain to be questioned through the courts. The increasing divergence between the interpretations of the implementation of EU regulations in agriculture adopted by the devolved administrations is also of note. Agriculture, fisheries and rural affairs, animal health and welfare, food and environment are devolved competencies and this has resulted in significantly different approaches within the various administrations. The current constitutional legal structure requires this to continue after Brexit, but the capability and wisdom of producing four different sets of agricultural policy which differ widely may be questioned. In short, will there be a UK-wide agricultural policy with regional differences or will there be separate agricultural policies for each region. The second of these will inevitably lead to further divergence. It is envisaged that the process of withdrawal from the EU will conclude in 2018/2019. This means that the last Basic Payment Scheme payment for UK farmers will be 2018, possibly 2019, depending on whether the use of Article 50 is before or after 15 May Having said this, a recent announcement by the Treasury has confirmed that direct payments to farmers will continue until 2020 and, although the exact detail of those payments is not known, it is to be hoped that they will be similar in nature. Agreement will also have to be reached on the funding of that claim, as payments are normally made from December 1st through to the following June. Provisions will also be required to deal with appeals and disputes relating to payments or applications made before Brexit, and to determine who is to fund the resolution of these disputes if they fall in favour of the farmer. The advice given to farmers on their land occupation arrangements even now requires significant thought: the terms of occupation being granted, how they will be brought to an end and how the ownership of entitlements in the interim period will be dealt with. Discussions as to whether they should be transferred absolutely or leased will be important, working closely with those who are trading the assets. Determining a fair rent for a holding is also difficult in the current climate and any Entitlement Rent, or similar, in tenancies will need to be reviewed. It will be interesting to see if an increasing number of rent review notices will be served by tenants who see this as an opportunity to negotiate reduced rents on their holdings. With a possible further two rounds of Basic Payment Scheme applications to be made, it will be interesting to see whether new entitlements will be allocated via the National Reserve a category made available for young farmers and new entrants to gain access to the industry and to this payment in each year of the Basic Payment Scheme. The emphasis on young farmers and new entrants in the current CAP is something to build on when developing the new policy. 4

5 LEGAL BREXIT AGRICULTURE & RURAL AFFAIRS In the interim, farmers will have to continue to adhere to cross-compliance and greening to avoid incurring penalties. This is certain to cause dissatisfaction amongst farmers, and may result in an increase in issues being identified at inspection. During this interim period, farmers will want to get on with the job in hand to make their businesses more robust, ready for the implications of Brexit, but doing so whilst having to adhere to what they regard as unnecessary red tape from Europe is for them frustrating. However, most of the legislation concerning environmental requirements are often embedded in directives at EU level but are, in fact, UK regulations. These are the areas of law that are unlikely to disappear under Brexit, eg the Birds and Habitats Directives, which have been implemented fully into UK law. Furthermore, to trade with other countries in and outside the EU, it is likely that certain standards for animal welfare and food traceability will be required and are therefore unlikely to change and will be retained in the new legislative framework. It is more likely that the cross-compliance requirements of good agricultural and environmental conditions and the recently introduced greening requirements will disappear in their current form and will be replaced with conditions that are more suitable for the UK s agricultural geographic area. Under pillar 2, a number of agri-environment schemes exist which, it is understood, will be honoured by the government and will continue for their contracted terms (usually five years). The granting of new schemes seems to be on hold at the moment, pending decisions on the source of funding for such schemes. Care should be taken in dealing with the transfer of these schemes in the interim period and any related undertakings given. 3. Post EU Exit It is difficult to comment definitively on the impact the UK s formal exit from the EU will have on agricultural practice. given that there are many forms this exit can take, and there is still uncertainty as to how the new relationship between the EU and UK will be characterised. Presumably, jobs, growth, investment and competitiveness will be examined, not least to justify further the role that any agricultural support plays within the UK s rural economy. The volatility of market prices will inevitably influence this discussion and lead the direction of any new agricultural policy towards food security. Consideration must be given to what is occurring at the international World Trade Organization (WTO) level as, whichever model is chosen by the UK, the Agreement on Agriculture will still need to be followed. There are a number of possible options. 3.1 The UK leaves the EU but remains a part of the EEA Often referred to as the Norway Model, this model is most integrated with the Single Market and comprises the 28 EU Member States plus Norway, Iceland and Liechtenstein. This model would require the UK to follow most of the Single Market rules, without having a vote on how these rules are made, which could cause issues for farmers in the UK who are already concerned about the impact that certain rules which have their derivation in the EU could have on the profitability of their farming enterprises. Under this model, the UK would make no contributions to, nor receive, CAP funding. The UK may, however, qualify for some cross-border and transnational programmes, and the EEA Agreement would ensure participation in other EU programmes, such as Horizon 2020 (research and innovation) and Erasmus+ (education and training). These may have some limited benefit for agriculture. In addition, under the current EEA Agreement, Iceland, Liechtenstein and Norway provide funding in 16 Member States to strengthen bilateral relations and reduce economic and social disparities in the EEA. It is unclear whether this option, which was designed for smaller countries to have some access to the EU so that the overall balance of power would not be affected, is a real option for the UK. Crucially, from an agricultural point of view, it does not provide any equivalent CAP funding and only allows access to the EEA internal market provided that free movement of persons, goods, services and capital is guaranteed in return. 3.2 The UK leaves the EU but joins EFTA EFTA (European Free Trade Association) is an intergovernmental organisation established to promote free trade and economic integration amongst its member states: Norway, Iceland, Liechtenstein and Switzerland. Switzerland, the only member state that is not a member of the EEA and thus not able to participate in the Single Market in the same way, has negotiated a direct bilateral agreement with the EU whereby, in return for partial access to the Single Market, it accepts free movement of persons, contributes to EU spending and complies with most of the rules of the Single Market. Switzerland cannot vote on or veto the rules of the Single Market, which is also likely to cause concern for farmers. 3.3 The UK leaves the EU and trades with the EU This would see the negotiation of a bespoke bilateral trade agreement between the UK and the EU. It is possible that a Free Trade Agreement created in this way would allow market access, tariff levels and quotas to be agreed between the EU and UK. The UK would have no say in how the Single Market rules were made or amended, but the crucial difference for UK taxpayers would be that there would not 5

6 AGRICULTURE & RURAL AFFAIRS LEGAL BREXIT necessarily need to be a contribution to the EU budget, or free movement of people except under certain agreed circumstances. Canada has just negotiated such an agreement with the EU, which took seven years to complete and is still not yet in force. Assurances as to the negotiation and implementation timeframes of this option is therefore needed. From an agricultural point of view, the UK s membership of the WTO is relevant. The UK could fall back on its access to the Single Market being on the same basis and tariffs as all 161 members of the WTO which have not negotiated their own arrangements. This would require minimal obligation to the EU and limited access to the Single Market. There would be no contribution to the EU budget or free movement of people without consent. A farmer trading with the EU would normally be expected to comply with its rules, but that would be a decision for those individual businesses and dependent on UK law and policy on that matter. There is confusion amongst UK farmers in terms of the red tape they may not necessarily avoid under Brexit if they still want to trade their agricultural produce in Europe. Whichever of the above models is chosen, a new British Agricultural Policy (or several devolved policies or regional variations) will be developed. At present, there is no indication whether there will be anything comparable to the Basic Payment Scheme post Brexit, so following policy discussions closely on this will be vital for farmers and their teams of advisers, including those supporting farming businesses financially. It is to be hoped that creating a sustainable agricultural policy going forward will result in policymakers focusing the early discussions on what objectives the UK s new policy should have for a long-term viable agricultural industry in the UK. Agri Advisor Solicitors Henllan, Pumsaint, Llanwrda, Carmarthenshire SA19 8AX Tel: Fax: advisor@agriadvisor.co.uk Web: 6