Regulatory Implications of Brexit on the UK and EU Aerospace Industry

The U.K.’s exit from the European Union may appear to be a fait accompli, but despite the monumental size of the Trade and Cooperation Agreement (TCA) agreed by the two sides, many details were left to be thrashed out at a later date. As a result, not a week goes by without one or another U.K. lobbying group highlighting the somewhat unsatisfactory position their sector of the U.K. economy finds itself in, compared to the period before 1 January 2021. The latest to voice concern is the U.K. aviation sector, specifically about the certification process for aerospace and defence (A&D) companies that sell products to, or have maintenance-repair-overhaul (MRO) operations in, the EU.

Background

Until the end of December 2020, the U.K. was a member of the EU Aviation Safety Agency (EASA) and other EU institutions. U.K. aircraft operators, manufacturers and their personnel benefitted from mutual recognition of licences and rights to operate throughout the EU. A company or individual holding a licence or certification issued by the U.K. Civil Aviation Authority (CAA) was permitted to carry on its licensed activities on any aircraft registered in the EU. Likewise, a licence holder from another EU member country could operate a U.K.-registered aircraft.

As a result of Brexit, and the U.K. government’s decision not to seek continued EASA membership, the U.K. is now considered as a third country and no longer has the status of an ‘EASA Member State’. In the U.K., the CAA has taken on EASA responsibilities, including certification of aircraft design and production.

Current Regulatory Position

To avoid the grounding of aircraft on the U.K.’s exit day, including because of the absence of mutual recognition of previously issued approvals, licences and certifications, the TCA included the Aviation Safety Agreement Annex (Annex AVSAF-1, or the Annex). The Annex applies to new aircraft and components as well as used aircraft.

The Annex focuses on a number of key issues, including:

• The acceptance or validation of each party’s manufacturing certificates and processes.
• The acceptance or validation of each party’s design certificates for aircraft or parts.
• The continued validity of existing approvals for aircraft and parts.

However, U.K. A&D industry participants have noted the apparent asymmetry in the mutual recognition of design certificates issued after 1 January 2021, and the absence of a corresponding maintenance annex from the TCA. The CAA has itself acknowledged that while the agreements reached in the TCA involve some elements of continuity, they do not constitute a replication of the U.K.’s regulatory arrangements as part of the EASA/EU framework.

Aerospace Production Organisations (The So-Called “Part 21 Subpart G Organisations”)¹

The TCA confirms (in Articles 21-27 of Annex AVSAF-1) that the EASA and CAA will accept each other’s production systems since they are considered sufficiently equivalent. This effectively means that:

• There will be mutual recognition of production approvals, and of the certificates issued by production organisations established in the U.K. and EU on or before 31 December 2020, although from 1 January 2021 U.K.-based organisations will no longer be able to issue EASA Form 1 certificates under their U.K. Part 21G approval.
• Products existing as of 31 December 2020 will continue to be accepted, but for new categories of products, the production method of each part will need to be approved by the CAA and EASA before they may qualify for mutual recognition. Such assessment shall be performed as detailed in the Technical Implementation Procedures (TIP). These procedures are not yet in place and are still being negotiated by the CAA and EASA. It is expected that they will be finalised within the coming months.

Aerospace Design Organisations (“Part 21 Subpart J Organisations”)

The parties have agreed in the TCA (Articles 8-20 of Annex AVSAF-1) that:

• Both the U.K. and the EU will continue to automatically accept design certificates, approvals and authorisations for products (parts, components, etc.) made on or before 31 December 2020 by Part 21J organisations.
• Any new category of product made for export after 1 January 2021 will be subject to a review and, if necessary, a validation process before being accepted for import by the other party, as follows:

MRO Organisations (“Part 145 Organisations”)

The TCA does not include any annexes regulating mutual recognition of approvals and certificates issued to MROs in the U.K. and the EU respectively. The CAA has taken a unilateral decision to continue to recognise such certificates and approvals current and valid on 31 December 2020 for an initial period of up to two years starting on 1 January 2021. 

This means that EU-based MROs will continue to be able to maintain U.K.-registered aircraft without having to seek a U.K. Part 145 approval from the CAA until the end of 2022. However, the EASA has not returned the favour, which means that U.K.-based MROs will need to apply for an EASA approval if they intend to maintain aircraft registered in EASA member states.

Bilateral Agreement With Third Countries

It should be mentioned that after 31 December 2020, the EU’s air safety bilateral agreements with third countries have ceased to be effective in the U.K. U.K. approval holders have access to other markets via the U.K. bilateral arrangements which are in place, including with the U.S., Canada, Japan and Brazil. Details of such agreements which are currently in force can be found on the CAA website. The aim of all these agreements is to establish working arrangements which would provide a similar framework as has existed in the U.K. under the EU bilateral agreements prior to 31 December 2020.

Conclusion

Many larger U.K.-based design and maintenance organisations have already obtained the relevant EASA approvals (taking advantage of the early applications process promoted by the EASA) in order to be able to continue their business activities in the EU after 1 January 2021. This, of course, requires such businesses to operate a dual-compliance regime, with associated increased costs. Some smaller U.K. operators have been waiting for the final agreed form of the TCA to become available before deciding on a course of action. However, some U.K. operators will have decided to refocus on U.K. (and non-EU) customers only and not serve their EU-based customer base, for the benefit of their EU competitors.

There remains a degree of uncertainty as to the mutual recognition of aeronautical organisations and their regulatory approvals between the U.K. and the EU, although some of the issues outlined above may eventually be streamlined in the TIP, once they have been agreed. There is a possibility (envisaged by the TCA) that further annexes on mutual recognition will be added in the future, including in respect of aircraft maintenance organisations. However, as things stand at the moment, EU aeronautical companies appear to have been put on a stronger competitive footing than their U.K. counterparts.

This is a complex and developing area of cooperation between the U.K. and the EU, and we will continue monitoring and reporting on it.