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Good morning, and welcome to the third meeting in 2025 of the Constitution, Europe, External Affairs and Culture Committee. We have received apologies from Keith Brown and Patrick Harvie. Jackie Dunbar, who will be joining us shortly, will substitute for Keith Brown, and Gillian Mackay will substitute for Patrick Harvie. I give a warm welcome to everyone.
Our first agenda item is a continuation of our evidence taking in the second phase of our inquiry into the review of the European Union-United Kingdom trade and co-operation agreement, focusing on trade in services. This week, we are looking at the European perspective and we are joined online by Christophe Lam, who is a junior adviser at BusinessEurope; and Pascal Kerneis, who is the managing director of the European Services Forum. I welcome them both.
I will start with a couple of questions, the first one of which is for Mr Kerneis—I hope that I have pronounced your name properly; please correct me if I have not.
Your paper suggests that data flow and data protection are vital issues, particularly for the information technology sector and consultancy services. Could you elaborate on your concerns?
Thank you for the allowing the European Services Forum to speak to your committee.
Data flow is part of the day-to-day economy. Digitalisation of the economy is absolutely crucial. With regard to trade, there is no transaction between two countries that does not call for many computer-to-computer conversations and therefore data flow. That is absolutely crucial.
In the framework of the EU-UK TCA there is a digital trade chapter, which is one of the most advanced on the planet. One of the conditions is that, if we want to have a free flow of data, the two countries have to accept the data protection regulations. The fact that the UK has an equivalent of the general data protection regulation has allowed the EU to consider that the UK’s data protection legislation is adequate and that, therefore, there is no need for each individual company to have standard contractual clauses to ensure that data protection regulations are respected.
That is what is at stake now. On 27 June 2025, the data adequacy regime decision that was given unilaterally by the European Commission on the UK data protection regime will come to an end and needs to be renewed. We are pushing our European Commission colleagues to be sure that they are doing all the necessary work in advance so that it is ready by that date. If it is not, that would mean that the free flow of data will not be allowed any more, and UK companies will have to do the arduous work of providing standard contractual clauses. For the bigger ones, that is not a problem, but for small and medium-sized companies it will be much more difficult.
Mr Lam, do you have a view on that?
First, thank you for the opportunity to participate in this inquiry on the TCA—we appreciate it.
BusinessEurope is the pan-European employers organisation representing national business confederations in Europe. We very much agree with what Pascal Kerneis said regarding the need for regulatory co-ordination between the EU and the UK to facilitate the cross-border provision of services. Data adequacy is absolutely essential to allow for the digitally enabled cross-border provision of services.
If the current arrangement is not renewed, what would be the process of accrediting a British company as being of a standard that would enable it to be allowed to trade? Would that involve something like the equivalent of the British Standards Institution ISO 9001 system? Have you any idea how that might be accomplished?
My understanding is that companies from a country where there is no data adequacy regime have to look at the website of the directorate-general for justice and consumers, where there is a list of standard contractual clauses. That tells them that, when they do business with European companies and clients, they have to have a privacy and confidentiality policy to protect the data of European citizens. Previously, those clauses were not there and the position was not elaborated and was, therefore, a bit unclear. Now, however, it is pretty clear that they simply have to download that list and follow the procedure.
Thank you. Mr Lam, in your submission, you said:
“Facilitating the mobility of contract service suppliers between the EU and UK is a clear priority for the liberalisation of trade in services.”
How do EU service providers view the current mobility arrangements, and can you provide examples of professions where the arrangements are working well and those where the situation is more challenging?
I am happy to give you the general positions that are agreed upon in our text, which was the product of a survey among our membership. We represent all sectors of industry, so we would not be able to give you the point of view of specific interests, professions or industries, but the agreed position regarding the current arrangements is that they impose a degree of non-tariff barriers to the mobility of service suppliers.
In effect, the current arrangements disincentivise UK firms from hiring EU contract service suppliers, because the current visa sponsorship system creates a degree of administrative burden and costs that make it costly to hire EU service suppliers: the worker has to pay an application fee and the company has to go through the process of dealing with the visa sponsorship system, which also incurs certain costs. Our paper presents an agreed position that it might be beneficial for contract service suppliers to be handled by a different system or at least for there to be arrangements for the system to be aligned. That is our position regarding the corporate sponsorship visa system.
Mr Kerneis, have you any thoughts on that?
Yes. First, on mobility, if we try to identify who the people moving in and out are, we can see that the issue is linked to the massive trade in services between the EU and the UK. I would like your committee to understand exactly what we are talking about here, because that trade is really massive. The EU exports €264 billion of services to the UK, which represents 44 per cent of our total exports to the UK. The trade is even more significant the other way—not in cash terms, because the UK exports €211 million of services to the EU, but in percentage terms, as that represents 54 per cent of the UK’s total trade with the EU. That demonstrates that trade in services is really important.
There is a lot of cross-border trade in services, which we categorise as mode 1 and mode 2. Mode 2 involves, for example, UK students going to the EU, tourists on holiday and so on. Mode 1 concerns cross-border data flow and, for many of those contracts concerning two businesses, there is a requirement to have someone from the provider go and visit the client for one day, two weeks, one month or something like that. That means that cross-border trade is often supported by the movement of people, although that is not about migration; it is only temporary.
If you take the Eurostar, you can see thousands of people going in and out both ways every morning. We used to do that without even thinking about it. Now, however, for a European service provider to go to the UK client, the UK client needs to fulfil the requirements of the UK sponsorship programme, which is new and complex. Many small and medium-sized companies in the UK are not aware of the sponsorship programme and many of those that know about it do not know how long it will take to deal with or how expensive it will be, so, because of that, they will decide to find a UK service provider instead of a European one. That means that we are losing business. For us, the UK sponsorship programme is a real and new trade barrier.
We are calling on you and the UK Home Office to try to see whether it is possible to lift the requirements of the UK sponsorship programme for European service providers. We are not talking about the programme in general; we are talking about targeting service providers, not people in general. These people are going to the UK because they are service providers. They are not tourists, they are not students, they are not migrants; they are travelling to the UK for a very specific purpose.
Our proposal does not require a change in the law. It could be done via a unilateral decision by the UK Government. At this point in time, when there is a willingness to have a UK-EU reset, showing political will to remove a programme that, to our minds, is unnecessary, would be welcome.
I will make a link with the UK’s electronic travel authorisation process, which will be implemented for Europeans in three months’ time. That ETA system will allow the UK authorities to control and see who is going in and going out. The sponsorship programme is meant to control people in that way, so I point out that the ETA will provide the Government with digital means to maintain that control, which means that the burden of having to deal with the UK’s sponsorship programme will be unnecessary.
Good morning. The trade and investment relationship between the EU and the United Kingdom remains indispensable for businesses on both sides of the channel. What are your feelings about the impetus that has been provided by the elections that took place for the European Parliament and the election of a new Government in the United Kingdom? Do you think that that has created some opportunities to upgrade the relationship between the two economic areas and ensure delivery for business? Events that have taken place might have created a slight sea change that perhaps give us those opportunities and create that impetus. It would be good to get your views on how you see that relationship developing.
We are optimistic that there is a renewal in the atmosphere between the two, and we hope that the relationship will be able to improve.
To be honest, when we put the question to our members, which represent all the service sectors—transport, logistics, information and communications technology, professional services, tourism, distribution and so on—they said that they consider the TCA to be working well. However, we have to recognise that it is not the equivalent of the single market. At the moment, the only problem that we identify concerns the mobility of people. That is where we would like to see some progress.
The problems around mobility might be addressed through the TCA review, which is scheduled for 2026, at which point it might be possible to review some aspects of the agreement, particularly with regard to the so-called short-term business visitors, in relation to which where there is a list of people who can move in and out under some conditions.
We are asking for clarity on that list. Many of the people who I mentioned earlier—those who take the Eurostar in both directions—do not know whether they are covered by those categories and whether they need a visa. They are not sure whether their programme is covered or whether they have an exemption through the list.
09:15In any case, both sides and the immigration authorities will have to make some unilateral effort to give more clarity. However, we think that it is possible to improve the situation, because some professions are not covered by the short-term business visitor provisions or by the provisions on CSS—contractual service suppliers—and independent professionals. Those are in annexes 21 and 22 of the TCA. In particular for annex 21, we believe that the parties should review the approach and eventually remove some of the obstacles that are in there, because that is written in black and white in the treaty.
The situation in the EU is much more complicated for people in the UK to understand, because you have to go country by country. Some countries are open and some are not open for different categories. It is complicated and complex, and we hope that there will be facilitation through the review.
Mr Lam, do you want to add anything?
With regard to the importance of the relationship and whether current momentum can lead to an improvement, BusinessEurope is strongly in favour of any further engagement on the issue and we are optimistic about the possibility of a reset. We think that deepening our ties is essential to ensuring the continued competitiveness of both our economies. Therefore, when it comes to improvements in the implementation of the TCA, as laid out in our paper or as described by Pascal Kerneis, whether that is on regulatory co-operation, mobility or co-operation in other fields, we are in favour, but we want to see concrete action from both sides towards reaching agreements. We are optimistic about the rhetoric, but we will have to see concrete action in all of the areas that we have listed.
The mutual recognition of qualifications has caused some concern in relation to the ability for professionals from one country to practise in another. We have heard from stakeholders about the need for the UK and the EU to agree measures on the mutual recognition of qualifications. Do you have a view on that?
At the UK’s exit from the EU single market, the EU and the UK did not agree on mutual recognition. As foreseen by the TCA, professional bodies can jointly submit to the partnership council proposals for mutual recognition agreements but, as yet, that has not been done. There has been a proposal from the architect professional bodies, but that was rejected by the EU on the basis that it was considered prejudicial to EU architects. We are in favour of such agreements, which we think are essential in re-establishing the mobility in trade and services flows that existed previously. BusinessEurope supports further agreements on the mutual recognition of professional qualifications, as laid out in the TCA.
Mr Kerneis, do you have any views?
Yes, we have a very strong view—the architects are members of the ESF. We are a bit disappointed by that blockage. There is a misunderstanding between the EU and the UK on this front. The European architects felt that they did their best to find an agreement with the British Architects Registration Board. However, the UK is asking for additional training for European architects on safety and security, which is a new norm that was added following the Grenfell accident. The UK is asking that of UK architects and all architects who come from the EU, so it is non-discriminatory. However, de facto, it is true that that is an additional request compared to the previous situation. The architects say that, in that case, there is no need to sign a contract, because the current situation is easier than the new one would be.
We would like to calm the situation and ask people to be more pragmatic. However, the reality is that we are talking about maybe 10 people—in any case, it is fewer than 100—per year. We are spending a lot of energy on something that the sectors might not be much interested in. If you ask about it—I asked my lawyers, accountants and engineers—you find that the companies have found a way through, although there is more of an issue for nurses and some categories of engineers. If UK law firms want to do business, they will have an office somewhere in the European Union with European Union-qualified lawyers who will sign documents and go to court. The same applies to accounting and auditors. It is possible to circumvent the necessity to have the qualification of the country. Some sectors are still interested in mutual recognition, but that does not have a big political and economic value.
As you identify, companies have managed to cope and are adapting to ensure that their service, their profession and their business can continue. That shows once again the opportunities that exist to manage the situation. As you identify, some sectors have much more advanced requirements than others, which perhaps have only a small number of individuals who wish to go through the process.
That is not the case for the health sector. Most of the time, nurses are independent professionals. If they want to move to another country, they do not have the capacity that a big company has to circumvent the system.
Thank you.
I want to return to the data issue that the convener raised. You mentioned the sunset clause date of 27 June 2025. There is no reason to suppose that there cannot be a renewal of the European Union’s adequacy decision with regard to the UK, is there? Has there been much divergence at all in data protection laws? I am not aware that there has been much divergence at all.
I will go to Pascal Kerneis, as he is shaking his head.
It is true that, as of now, there is no divergence. However, under the previous Government and Governments before that, some people were saying that there was a need to scrap the GDPR and be much more flexible, and that might have led to a lack of adequacy. At present, I understand that the current UK Parliament has a script and that a new data bill will not be put on the table. However, to my understanding, that possibility has not been completely removed either, so it could come back. That is why I think that the DG will be careful in assessing the situation.
In effect, you are raising a potential issue rather than a real issue, because there has been no divergence. It is fair to say that what you have just said is very accurate, in that the political temperature in Westminster now means that it is very unlikely that the Government would be brave enough to seek divergence on that issue, or perhaps any other issue, to be frank. It is good to know that the bottom line is that you do not foresee any difficulty. Is that right?
We just want to be sure that, practically, the civil servants do their job in time, because the internal process in the EU means that the Commission has to make a proposal and then there is the comitology process, where committees have to meet and accept the proposals and so on. We know that time flies quickly, and we are doing our best to make sure that they do it in time.
That is helpful. I do not know whether Christophe Lam has anything to add, but it seems pretty clear cut from our discussion that this is not going to be an issue at all and that data flows will continue after 27 June.
Christophe, did you want to say something? I have interrupted.
No, thank you—that is fine. Our understanding is very similar to what Pascal Kerneis just set out. We know that there was some discussion regarding the previous Government’s bill, but the question now is more about ensuring that adequacy is reached in time for free flow of data not to be perturbed.
I think that adequacy is already reached, because we have complete compliance between the two regulatory regimes.
I mean the decision.
The decision—okay, I accept that.
In annex 21, which is on mobility, there is a long list of all the different business situations in which mobility is permitted. There is everything from meetings to research and design, marketing research, training seminars, trade fairs, sales, purchasing, aftersales, afterlease, commercial transactions, tourism personnel, translation and so on. Pascal, you say that you are seeking further clarification as to what activities are permitted under the mobility aspect of the TCA. What activities are you specifically talking about? By the way, I used to be one of those people who would be on the Eurostar going backwards and forwards to Paris. What activities are not covered in annex 21 that you feel should be included?
That is a good question. We would have to do investigation with the companies to see whether something has not been allowed. What is less clear in the list is, as you can see, the distinction between countries. Some EU countries have restrictions that are valid only for them. When someone is moving to another country, they need to understand what is accepted in that country.
Paragraph 8 of annex 21 is on
“The activities Short-term business visitors are permitted to engage in”.
It gives a list of paragraphs setting out what people can do. Normally, people are not allowed to perform a commercial transaction where they are paid on site by their client. I do not think that that is a problem because if, before taking the train, a person signs a contract and makes the payment online, that is a cross-border data transaction and therefore, when the person is in Paris, he will not get the money in his pocket. That is my reading of how commercial transactions—
That is not normal in business, from my experience. You do not normally go and get cash in your pocket; you get paid by invoice. Is that a real issue?
No, but there is a lack of understanding of that, and we need Government to clarify that. I have a UK business saying, “Well, we fly in and out, but that is part of an annual contract that we have with a client, so there is no commercial transaction.” However, some people in the Commission seem to believe that that comes under the provisions in annex 21 and that it is not completely certain whether it is a commercial transaction. It is a commercial transaction—the business is fulfilling something in the framework of a commercial transaction—but that has been done in the country of origin first, online. For me, that is not a problem, but maybe that requires an explanation.
It sounds like an argument about how many angels can balance on the head of a pin. If we create all these different points of angst about issues that may not even exist in the first place, we will never get anywhere. Let me be more direct with you about the activities that are listed. You have a large membership across Europe. Other than that rather obscure issue of cash in the pocket, what activities have your members raised with you that they would like to be added to annex 21 as permitted for short-term business visitors?
To be honest, so far, we have not gone that far, because our members have not expressed any difficulties.
So, clearly, as you said, the TCA seems to be working rather well, does it not?
Yes. However, I am a member of the domestic advisory group on the European side, and some of my members are also UK companies and associations such as TheCityUK, techUK and the Law Society of England and Wales, and they have established a sub-group of the UK domestic advisory group, which is on mobility, and produced a list of activities that they think should be clarified in annex 21. Therefore, I suggest that you also contact them.
That is not “added”; it is “clarified”.
It is “clarified”.
09:30
Okay. I hear what you are saying.
I want to ask you both about the mutual recognition of qualifications, although, for the moment, I will stick with Pascal Kerneis, if you do not mind. Pascal, I think that you described really well the dynamic of business and the pragmatism of business organisations, which will always find a way to make this work. It would appear, from your answer to Alexander Stewart’s question, that businesses and service organisations have found ways to get past the bureaucracy around mutual recognition of qualifications. Is that a fair statement?
Yes, it is, but it is also true that it is easier for big companies. Independent professionals and small firms might not have the same capacity or willingness to open a subsidiary in the EU, for instance, to be able to circumvent that sort of thing. A small architectural firm, say, or a small auditing or accounting firm might be willing to have some business in Europe, but the person involved will not be allowed to sign an audit report in Europe. As a result, he will need someone else, so he either creates a partnership or says, “I cannot take this contract.”
Given the frankness with which you have been presenting your evidence, can you tell us how many small architects—[Interruption.] I am sorry—not architects. We will come back to them. How many small accountants firms in Scotland, or in any region of the European Union, are likely to be in that situation? I see that you are shaking your head.
Very, very few. When I asked accountants in Europe whether they were interested in a mutual recognition agreement with the UK, the answer was no. I got the same response to the question when the UK was part of the EU. When we were putting in place the very first mutual recognition agreement on professional qualifications, which was between the EU and Canada, we put the question to the European lawyers and accountants, and they said no. Only the architects said yes. There are more small architectural firms than there are big.
But it has always been an issue that British accountants operating in Spain are unlikely to qualify to sign off accounts, regardless of British membership of the EU.
Except for big projects, for which there is a separate regime.
Indeed.
I just wanted to clarify your point about architects. The architects in the EU and the UK came to an agreement, if I understand correctly what you have said, but, just for clarity, is it not correct that that agreement between the architects as a profession was rejected as valid by the European Commission?
Yes.
And the reason that you gave was that it was biased against the European Union’s architects, who had themselves agreed to the agreement with the UK architects. It all sounds a bit banal—crazy—to me.
Yes. The way it works is this: in the member states—it is the same in the UK—the Government or devolved Government does not have the competence to provide licences to these professional bodies. However, the EU, and the UK Government, will say, “We give the power to the regulatory bodies of these professions to talk to each other and see whether they agree to have a mutual recognition agreement to recognise their qualifications.” If they agree, they are invited to make recommendations in writing to the two Governments. The recommendations come to the partnership council of the EU and UK TCA; both parties look at the texts and recommendations, and they say whether the proposal is appropriate. They will say, “This is a good agreement. We will both stamp it.” However, the EU, for the moment, has said, “No, we are not putting our stamp on it.”
So we could have an agreement, but the EU said no.
The mutual recognition of qualifications is a difficult issue, because even within the United Kingdom, there are professions in Scotland that are proudly independent of their professional status but which are not recognised in England, and there are those in England that are not recognised in Scotland. This is, therefore, not a new phenomenon; it is something that we currently live with and, truth be told, have probably lived with for hundreds of years.
This will be my final question, convener. You mentioned the review and the reset, but what is the appetite in that respect? I believe, Pascal, that you serve as a lawyer in the Commission and that you operate within that framework.
That was a long time ago.
What is the likelihood of any kind of major reset happening? What is the appetite in the European Union for it? After all, what we read and hear in the UK is that the EU has a bit of a shopping list before it will be prepared to consider any of the Labour Government’s requests for, say, sanitary agreements and things like that—food and drink agreements, as our cabinet secretary prefers to call them. For example, it would want all kinds of access to fishing grounds, youth mobility and so on. Has, as Alexander Stewart has suggested, a certain pragmatism been born out of the recent results of the European parliamentary elections? Is it looking to be pragmatic about these things and perhaps less adversarial in its dealings with the UK?
I think that we have to separate politics and the law here. On the political front, the fishermen are clearly going to have their own requests.
For the moment, there is, I think, a willingness to negotiate the sanitary and phytosanitary and veterinary agreements. I think that there is more willingness on the UK side with regard to the vets, but when it comes to the very deep details of the SPS agreement—which I do not know—I am not sure that the UK side is willing to go as deep as the EU wants. You might well have issues there, but they are technical and I do not know whether they will require any review of the TCA.
As for our side, when we talk to the Commission, it says that data flow is not part of the TCA; it is separate, so we cannot talk about it. We said, “No, we are going to talk about this, because if there is no data flow, there is no trade any more.” Therefore, it is 100 per cent a trade issue. It might not be part of the TCA, but we still want it to be considered.
With regard to shopping lists, I think that that is probably more on the UK side. Our UK colleagues have been asking for modification of not just annexes 21, 22 and 23 on mobility, but other aspects, whereas the European Commission has said, “No, no. For us, any TCA review will be much more about an overall assessment of whether it is working well. If it is working well, we will just put that aside, and there will be no need for a review.” I think, therefore, that there might be different readings of what a review means. It is not a revision. The reading—for European Commission officials at least—is that any review would be for only technical stuff, so there would be no need to go to the political level.
If the UK wants to push for a proper revision of the agreement, it will have to persuade the European Commission of that, and, therefore, the member states, too. I am not sure that this is true—it would need to be verified—but if there were a review that ended up changing the text, you would have to ratify the agreement again and, in turn, go through the whole process of political activity, which, as we know, might be a dangerous road. The Commission feels that there is no need whatever to go through the ratification process again. A technical review, if it were necessary and possible, could be done quickly, perhaps through the committee process—and that would be it.
That was very interesting. Thank you very much.
I want to ask about my previous industry—that is, the information technology industry. Quite often, it is made up of individuals who might well be firms in their own right, but a lot of it is also driven by people acting as contractors. Have you had specific issues raised with an IT or fintech company regarding the possible barriers for people acting as individual contractors?
As far as the IT and ICT sector is concerned with regard to the trade agreement, things are fully open—there are no barriers. The only problem that might occur is when you have a contract service supplier who is an independent professional.
The difference between these two categories is quite simple. In the case of a CSS—that is, a contract service supplier—it might be a person working for a company; the company agrees a contract with another company or another individual; and in that contract, there will be provision saying that one person will need to cross the border and come for a day, two weeks or six months to do some job and then come back again.
When it comes to independent professionals, the provision is the same, but it applies to two individuals. Things are therefore more complicated with independent professionals; it is a bit easier with contract service suppliers, because there are more activities for which they are allowed to come. That reason for this is that it is all linked to migration—or so they say.
With intracorporate transferees, however, it is very easy for both Governments to find out the company that has made provision for the person to come, and as a result, they can control things. With a CSS—that is, a company that has a contract with one person—the Government can control the company. The company will stay in its own country and sends the person, but that person will go back again. With two individuals, it is much more complicated to control things. That is why, with contract service suppliers, the requirement is that they have three years’ experience, while with independent professionals, the requirement is six years. The only reason for that is that is we believe—or they believe—that, if the person has six years’ experience, they will have set up in their home country already and will therefore not be willing to migrate, because they will have a family and so on. That is the difference. So, with IT, many of the movements come more from the CSS side of things than from individuals themselves.
The only fear of the immigration authorities is that a person with a real contract comes into their country and, when the contract finishes, there is nobody controlling things at their place of origin and nobody controlling things in the country that they have come to. The person will stay as an illegal immigrant before he finds a way to legalise the situation.
That was very helpful—thank you very much. If there are no further questions, I will ask Mr Lam whether he has any comments on the discussion we have been having.
With regard to the previous question, our reading of the Commission’s position is more or less that of Pascal Kerneis. As for the sensitivities around enhancing mobility, we have the same understanding, too. With regard to contractual service providers, though, we would argue that it is really not a question of migration if it falls within the parameters of the TCA.
On intracorporate transferees, something that is often brought up by our members is the question of social security co-ordination. We understand that there have been issues with employees potentially losing access to insurance coverage. According to the protocol on social security co-ordination, they remain within the social security system of the sending state, as long as the duration of the posting does not exceed 24 months or the person is not replacing a posted employee. In reality, though, those conditions are often not met, and because of a legal gap whereby they cannot contract voluntary insurance in the UK—if they are subject to compulsory insurance in the UK—they might lose access to certain benefits or to insurance coverage altogether. It is, therefore, a liability risk for our companies, and another area where BusinessEurope is supportive of a solution such as, for example, the possibility of concluding exemption agreements within the protocol. That was another point that I wanted to bring up.
That was very helpful, too.
I see no indication that the committee has any further questions, so I thank you both for appearing at this morning’s meeting and for contributing to our TCA inquiry. Again, I thank you for your written submissions.
I will now pause for a five-minute comfort break while we allow the panels to change over.
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