The Brexit ‘deal’ – what’s (not) in it for the medical devices industry?
Spoiler: at the moment basically nothing except more paperwork and trade barriers. It’s still a hard Brexit with a little sugar on top, essentially.
Or, if you are a more glass half full kind of person: at least not all the way back to WTO rules but a just one step above that.
After a long, slow process with many twists and turns the Brexit deal finally dropped the day before Christmas. This ‘deal’ is nothing less than a somewhat controlled full reset of the entire EU-UK relationship because this was the best parties could achieve under the circumstances.
In my view this ‘deal’ and the negotiation process represent every problem that the EU was set up to solve, so in that regard it will be an interesting experiment to see what life is like on the outside for a former member state. Unfortunately history is too kind these days for people that stake their country’s economy on the roulette table of populism for short term electoral purposes (my strong personal opinion about root cause here), so I don’t expect this experiment to yield any reliable conclusion in the end because nobody is going to admit this was a terrible idea, even if everyone agrees that it was.
Mainly goods, mostly not services
The deal is mainly about goods, and almost not about services (a little bit about financial services though). If you provide services additional to devices, there’s basically nothing in it.
General principles about trade in goods have been agreed, but need to be firmed up over time. More specifc arrangements have been made for medicines for example, but not for medical devices. These facilitations for other specific products of mutual interest, such as automotive, wine, organics, pharmaceuticals and chemicals do not include medical devices. Medical devices are part of the ‘general’ arrangements for all CE marked goods, which means that as of 1 January (when the extended transition period after the UK’s leaving the EU on 31 January 2020 ends) medical devices trade between the EU and the UK is fully subject to the general goods regime in the new agreement.
What this means has been painfully clear from the very beginning: the UK may choose to accept CE marked devices on its market (and has announced it will do so because it has no choice), but the EU will not do the reverse. Consequently, all UK established devices businesses will be working with double regulatory standards as of 1 January, and with the formalities that go with that situation (see here for a rundown of the UK MHRA for regulatory formalities and transition on the UK side). In that sense the situation set out in the Commission’s January 2018 notice on trade in industrial products, restated in 2020, has now materialised.
In more detail – what could the future look like?
An important part of the Brexit negotiations were about who has the final word on (regulatory) standards. Positions taken in this regard will set the boundaries for future cooperation.
For the EU, mutual recognition arrangements are only possible if the European Court of Justice has the final word about the interpretation of EU law exported via the mutual recognition agreement. Since export of regulatory standards is a major source of power for the EU, this will not be negotiable. However, this is precisely not what the current UK government wants (‘take back control’), which means that the UK is far removed from a Switzerland-like mutual recognition agreement and even further from more seamless cooperation (like the EEA agreement). The UK seems to have landed on ‘Canada plus’ as a result of the specifics of the agreement on customs formalities (although no customs union) and tariffs.
Unless that changes, the future will be one of separate regulatory silos, with some basic rules on tariffs and customs formalities. For the moment, UK businesses (and international companies doing business in Europe via UK businesses) are stuck with having to accept standards in the EU that the UK has no more influence over and hoping that the UK does not diverge in its own standards to the point that it will become costly to comply with the additional regulatory system created by the UK for itself. Politicians will try to sell this as progress. Sure, diverging standards might give UK businesses an edge, but only for the UK market. In the end the devices developed will still need to meet standards outside the UK too: the UK will still follow international standards like ISO and IEC in order to be able to sell its products abroad. Also, diverging to the point that it would lead to unfair competition would lead to unilateral EU countermeasures.
For those that like to look for themselves: devices go in the ‘trade in goods’ bucket under Part Two, Heading One: Trade, Title One: Trade in Goods (there will be basic goods trade just above WTO standards), Title X Good Regulatory Practice (there will be regulatory cooperation on a voluntary basis) and Title XI Level Playing Field (subject to EU precautionary principle). As you can see, there is not much there compared to the acquis of internal market regulation.
For the remaining UK notified bodies for devices the Brexit now means that they lose their notification for the EU directives and new regulations and that their remaining certificates are invalid as of 1 January, unless timely re-issued by an EU-27 notified body. It also means that these bodies will not be able to do surveillance for directive certicates after the date of application of the MDR (and later IVDR) because the certificates have become invalid. This writing has been on the wall since early 2018.
Placing on the market
For companies in regulatory problems understanding the concept of placing on the market again becomes paramount.
Devices placed on the market in the EU by 31 December 2020 (which still includes the UK until that date) will be able to circulate in the internal market freely. Device placed on the market as of 1 January will be faced with the new situation: no free movement between the UK and the Union. Also this writing was on the wall for a very long time already and will be or have been relevant if your company has a supply chain running through the UK.
Data protection for data processing devices and services
For devices companies that process personal data in the meaning of the GDPR in the UK, note that the adequacy finding for the UK has been explicitly been excluded from the agreement. That means that by 1 January the UK is fully in the Schrems II boat as a non-EU jurisdiction: you will need a transfer basis like standard contractual clauses but with additional due diligence / upgraded standard contractual clauses or explicit consent for non-structural transfers.
Conclusion for the moment
The analysis in this blog is far from complete as I haven’t been able to read the complete package yet that forms ‘the deal’, so stay tuned for more (for example on the complex situation of Northern Ireland).
Also, the ‘deal’ is a deal between negotiators. This is a stage where we’ve been before just over a year ago and then the UK parliament decided that it had sent a negotiator without sufficient mandate, which set back the process enormously. This could happen again.
From the EU side, the whole formal ratification mechanism still has to take its course. So far I am very impressed by the degree of organisation and unity on the part of the EU and its Member States, which is usually very different in other dossiers.