Brexit and the Energy & Utilities Sector – Part 4: #EURATOM&CO

Written on 5 Sep 2018

This series will cover some of the most relevant sector-specific challenges arising from Brexit. Each edition will focus on one particular topic and highlight the current changes and opportunities in the energy and utilities sector.

Part 4 of the series will focus on the different energy agencies and committees and the UK’s participation in them. We have highlighted specific Brexit-related Energy topics in the previous posts of this series, which can be found here. Whereas it seems clear that the UK will leave some institutions, the pressure is high for the UK to stay in others.

EURATOM

When the UK triggered Article 50 it also initiated the withdrawal from EURATOM and the EURATOM treaty, which originates from 1957. EURATOM facilitates a single European nuclear market. It forms basis for developing nuclear energy and supplying member states with such energy, related nuclear resources and safeguarding equipment.

EURATOM, like so many other institutions, is subject to the ECJ jurisprudence. Since one of the key elements of Theresa May’s Brexit strategy was to “free” the UK from the authority of the European courts, it seemed only natural to leave EURATOM. Furthermore, Articles 96 and 97 of the EURATOM treaty require its member to ensure free movement of labour; yet another key element of EU the UK wants to avoid. Back in March however, the prime minister faced a set-back as the House of Lords voted in favour of staying in EURATOM as long as no other nuclear deal with the EU was in place. In May the next U-turn followed as the prime minister announced that the UK would fully associate itself with the research branch of EURATOM. In July, as Theresa May was announcing her Soft-Brexit approach, she admitted that should there be a free trade deal, UK courts would have to pay due regard to EU case law in areas where the UK applies a common rulebook. That this would include EURATOM is unlikely, nevertheless it shows the ceasing aversion within the government to avoid ECJ jurisdiction at all cost. Thus, the difficulties ahead are clear: Without leaving EURATOM there will be no escaping the authority of the ECJ, without an atomic agreement with the EU there will be no leaving EURATOM.

The risks for the UK are also clear. If they leave EURATOM the UK will be exposed to supply chain risks and lose their access European research and expertise. At least in the R&D sector the UK seems to be willing to negotiate an agreement with EURATOM. However, if the UK stays in EURATOM they will have to accept the ECJ authority in some form and are likely to have to accept free movement of labour for the scientist employed by the agency. Therefore, the natural solution seems to be a bilateral agreement on atomic cooperation that ensure the UK’s participation in EURATOM while the UK would have to accept the ECJ jurisdiction and free movement of labour only in regard to EURATOM.

Although the UK continues to promote a scenario in which the UK leaves the EU without agreement (a ‘no deal’ scenario) would be unlikely given the mutual interests of the UK and the EU in securing a negotiated outcome and, furthermore, stating, that negotiations are progressing well and both we and the EU continue to work hard to seek a positive deal, UK government recognises the duty as a responsible government to prepare for all eventualities, including ‘no deal’, until being certain of the outcome of negotiations. Hence, on 23 August 2018 the UK government published the first batch of Brexit “No deal” Technical Notes. They are supposed to give guidance how to prepare for Brexit if there is no deal with the EU. If the UK leaves the EU in March 2019 without a deal this would significantly affect nuclear safeguards, ownership and movement of nuclear material, equipment and technology management of spent fuel and radioactive waste reporting and notifications to the European Commission. UK government published its plans for the “No deal” time for civil nuclear regulation as follows:

  • Nuclear Safeguards: New legislation has passed so that the Office for Nuclear Regulation (ONR) oversees domestic safeguards instead of EURATOM and signed new international agreements with the International Atomic Energy Agency (IAEA) to replace the existing trilateral agreements between the IAEA, EURATOM and the UK. On exit from the EU, a new domestic nuclear safeguards regime will come into force.
  • Ownership of special fissile material: On exit from the EU, EURATOM ownership of special fissile material in the UK will end. Operators that hold the legal title to special fissile material in the UK will have full ownership from this date, and their associated rights will remain unaffected. For special fissile material on EURATOM territory, EURATOM rules will continue to apply until the material is exported from EURATOM territory.
  • Supply contracts for nuclear material: On exit from the EU, EURATOM Supply Agency approval will no longer be required for contracts agreed by UK-established operators, except where these involve an EU27-established operator. For EU27-established operators, EURATOM Supply Agency procedures will continue to apply as currently. The EU has set out its view that some existing contracts will need to be re-approved.
  • Export licence arrangements: The controls that apply to the export and transfer of dual-use goods and technology are implemented by the EU Dual-Use Regulation (428/2009). At present, an export licence is required to move certain sensitive nuclear materials, facilities and equipment between the UK and other EU countries. On exit from the EU, there will be a continued requirement for operators to obtain export licences for certain sensitive nuclear materials, facilities and equipment.
  • Import licence arrangements: The current import licensing regime set out in the Notice to Importers 2867 means that the import of relevant nuclear materials from EU countries does not require operators to obtain an import licence. The Notice to Importers 2867 will be updated in time for Exit Day to set out the arrangements that will apply following the UK’s withdrawal from the EU.
  • Nuclear Cooperation Agreements: EURATOM is currently party to a number of Nuclear Cooperation Agreements (NCAs) with third countries which provide the framework for the UK’s civil nuclear trade with these countries. Discussions to agree bilateral NCA arrangements with priority countries are on track to be completed before the UK leaves the EU, and the UK has already signed new bilateral NCAs with a number of third countries. This will ensure that civil nuclear trade can continue unimpeded. Civil nuclear trade and cooperation will continue under the UK’s bilateral agreements.
  • Management of spent fuel and radioactive waste: Under current arrangements, a number of EU countries have contracts in place for the reprocessing of spent fuel and the treatment and processing of radioactive waste in the UK. The UK government’s policy is not to accept overseas origin radioactive waste for disposal in the UK. The UK’s current arrangements for the reprocessing of spent fuel and treatment of radioactive waste will continue after the UK’s withdrawal from EURATOM. On exit from the EU, the process for authorising new shipments of spent fuel and radioactive waste from the UK to EU27 will change to reflect the fact that the UK will no longer be within the EU. The UK will engage with operators on any new arrangements that will apply for the authorisation of new shipments of spent fuel and radioactive waste from the EU27 to the UK, and will provide further guidance on these. Beyond this, arrangements for new shipments of spent fuel and radioactive waste from EU27 countries to the UK for the purposes of management will not be affected.
  • Reporting and notification obligations under Articles 37 and 41 of the EURATOM Treaty: Under Article 37 of the EURATOM Treaty, the UK government (on behalf of operators) submits information to the European Commission on plans to dispose of radioactive waste. Operators must receive a positive opinion from the Commission before obtaining domestic environmental permits or proceeding with a project. Under Article 41 of the EURATOM Treaty operators with plans for certain nuclear investments must report the details of these to the Commission. On exit from the EU, the requirement for the UK to notify the European Commission of plans for the disposal of radioactive waste will no longer apply. The EU Regulations defining the content of Article 41 submissions (Council Regulation 2587/1999 and Commission Regulation 1209/2000) as they apply in the UK will be repealed.

ACER and CEER

What does seem clear at the moment is that the UK would no longer keep its membership in the energy committees that are part of the greater European energy system. This includes the Council of European Energy Regulators (CEER) and the Agency for Cooperation of Energy Regulators (ACER). The impact on Brexit on the UK’s relation to ACER has been discussed in Part 1 of this series. However, the impact of Brexit on the UK’s participation in both bodies is similar. The UK would no longer have any voting rights in the bodies while the UK would no longer benefit from the information sharing systems.

ENTSO-G and ENTSO-E

The situation with the two transmission system operators’ networks is different. The EU membership is not a requirement for the UK to stay a member in ENTSO-G and ENTSO-E. Therefore, it is likely that the UK will seek to negotiate an agreement to stay a member of the networks to guarantee the conformity of EU and UK energy regulatory regimes. Also, the UK should be interested in keeping its influence in the development of the EU network codes after Brexit. Also, there are fewer negative side effects to the UK’s general Brexit approach than there are for example in regard to the EURATOM membership.

Outlook

The UK’s approach to EURATOM will remain one of the most interesting Brexit-related topics in the energy sector and overall. There have been so many twist and turns along the way that the exact outcome can hardly be predicted. Nevertheless, it appears to be unthinkable that Theresa May can or wants to convince all parties involved that leaving EURATOM without an atomic cooperation agreement is the favourable way forward. On the other hand, the UK’s participation in ENTSO-G and ENTOS-E is likely to continue after Brexit.