Institute of Practitioners in Advertising (IPA) – Written evidence (FTS0030)
Introduction
The IPA is the professional body for advertising, media and marketing communications agencies based in the United Kingdom. We have approximately 300 agency brands within our membership.
As a membership body incorporated by Royal Charter, the IPA’s role is two-fold: (i) to provide essential core support services to our corporate members who are key players in the industry; and (ii) to act as our members’ spokesperson.
We are grateful that advertising services is recognised as one of the professional and business services of importance to this inquiry and we welcome the opportunity to contribute.
Summary of concern
Our main concern with the Trade and Cooperation Agreement (Agreement) is uncertainty. Considering the length of the Agreement, there is minimal content dealing with the provision of services, and what content there is, is difficult to understand. Although the Agreement, on the face of it, contains a number of positive commitments from both the UK and EU in order to facilitate ongoing trade in services, those commitments are heavily caveated.
In its Guidance for UK businesses on rules for selling services0F[1], the Department for International Trade explains that the Agreement ensures that UK firms in various service sectors can continue to access the EU market, while being treated no less favourably than either EU businesses or competitors from third countries. It goes on to say that while the Agreement sets out clear expectations of the treatment and level of access to each Party’s domestic market, there will still be some changes for business and that these changes are different for each sector and differ in each member state of the EU.
It is these changes that are at the root of our concern.
Cross-cutting issues
The export of advertising services from the UK to international markets is crucial to the success of our industry. Yet, the EU treaty provisions on free movement of services ceased to apply to UK businesses at the end of the transition period.
We were relieved, therefore, that the UK and EU entered into the Agreement, averting the cliff-edge feared by UK businesses. UK-EU trade in services is dealt with under Part 2,Title II (Services and Investment). Chapter 1, Art. 1 is encouraging:
“The Parties affirm their commitment to establish a favourable climate for the development of trade and investment between them.”
Yet (as we note above), although it facilitates trade in services between the UK and EU, the Agreement actually contains little in the way of services provisions, and what little there is, is not particularly clear. What we do know is that services provided by UK businesses into the EU will be regarded as originating from a third country, and that freedom of movement within the EU has ceased for UK nationals.
Of particular relevance to advertising agencies, Title II, Chapter 3 deals with cross-border trade in services and Chapter 4 with entry and temporary stay of natural persons for business. In addition, under Title III, Digital Trade, Chapter 2 deals with data flows and personal data protection, and there are some other articles that are potentially relevant to our industry within the specific provisions set out in Chapter 3.
In essence, the main impact on agencies (and other businesses, we would expect) is likely to be a loss of competitiveness for EU business, and the costs incurred in getting to grips with the new regime and ensuring legal compliance in a range of activities that could previously have been performed without restriction. That the government needed to publish its Guidance for UK businesses on rules for selling services into the member states of the EU and EFTA (see footnote 1 above), partly demonstrates the complexity now involved for UK businesses wishing to provide services into those territories.
Further, the fragmented applicability and operation of VAT for UK companies trading with EU member states is already causing frictions and additional costs where VAT is no longer recoverable or the mechanisms for recovery are so onerous that it becomes uneconomic.
It is too soon to be able to appreciate the full impact of the Agreement and the cessation of the free movement of services on agencies. Time will tell, but it is likely that cross-border trade in services will be more difficult now.
As we note above, the Agreement contains only limited provisions on trade in services. Whilst it does establish some general principles of market access, these are subject to a broad range of reservations. Hence, whilst on a first reading of the relevant provisions of the Agreement, UK service providers, such as advertising agencies, might assume that little has changed, the reality is likely to be very different. UK agencies wishing to operate in the EU will need to ensure that they understand the applicable reservations under the Agreement and, in addition, any national restrictions which might also apply to the relevant EU member state in which they wish to conduct business.
As noted above, Chapter 4 of Title II of the Agreement deals with the entry and temporary stay of natural persons for business. Under Chapter 4, the UK and EU agree to allow the entry and temporary stay of different categories of ‘natural persons’ for business purposes, including intra-corporate transferees, business visitors for establishment purposes, short-term business visitors, contractual service suppliers and independent professionals. They have also made additional commitments not to impose quotas or economic needs tests regarding the total number of these categories of persons that may be allowed entry, and not to discriminate against such persons compared with their own nationals.
At first glance, this all seems reasonable. However, Chapter 4 is subject to broad exceptions, conditions and qualifications, and there are further restrictions in Annexes Servin-3 and 4. In essence, there are now barriers to the delivery of services where the movement of people is involved.
Travel restrictions on individuals for work purposes could have an effect on UK agencies. For example, the activities that are permitted for short-term business visitors (STBVs) travelling from the UK to the EU without the need for a work permit, economic needs test or similar prior approval procedure (Art. Servin 4.3 and paragraph 8 of Annex Servin-3) are limited to only:
UK STBVs engaging in the above activities will be allowed to stay in the EU member-state for a period of up to 90 days in any six-month period, without a work permit. Even then, however, Annex Servin-3 lists restrictions for some EU member-states. Any short-term business trips for other activities will be subject to the restrictions of the relevant member-state.
For intra-corporate transferees (ICTs), each of the UK and EU must allow their entry and temporary stay. However, this is subject to the restrictions set out in Art. Servin 4.2 and Annex Servin-3, We understand that there is no uniform visa application process for all EU member-states, meaning that any UK agency wishing to use the ICT process would need to check the rules for the relevant country.
For contractual service suppliers (CSSs) and independent professionals (IPs), each of the UK and EU must allow their entry and temporary stay. Again, there are restrictions, here, set out in Art 4.4 and Annexe Servin-4,
The sectors in which both CSSs and IPs can operate and the activities in which they can engage, are set out in Annex Servin-4 (along with other restrictions). The permitted activities for CSSs include Advertising Services, though this is not defined.
The requirements for CSSs and IPs are even more onerous than for ICTs, with economic needs tests and other restrictions imposed by some member-states.
According to informal information provided to us by BEIS, CSSs and IPs will likely require visas and/or work permits if seeking to travel to the EU. However, BEIS also explained that some member-states will take commitments on Advertising Services, i.e. they promise to guarantee market access in that sector to CSSs coming over to fulfil a contract (as noted above). Furthermore, some make that promise, but subject to conditions, such as economic needs tests (again, as noted above).
We also understand from BEIS that no member-states (bar the Netherlands) take commitments on allowing IPs travelling to the EU to deliver Advertising Services (and Advertising Services is not listed as a permitted activity for IPs in Annex Servin-4). There is no guarantee, therefore, that the provision of these services will be allowed over time (though that does not mean that it is currently forbidden). BEIS have advised that agencies should always check the rules of the member-state in question before applying for a visa and/or work-permit.
Travel for business purposes from the UK to the EU would, then, appear more complicated now. Agencies wishing to send staff across to a member-state will need to consider various issues, such as the category of person they are sending, the activity in which they will be engaged, how long they will be travelling for and whether the work fits any of the permitted reasons given in Art 4 and Annexes Servin-3 and 4. There are numerous restrictions and caveats.
The UK’s departure from the EU has had little effect on UK intellectual property (IP) rights (i.e. rights that subsist or are registered as UK rights) or on the application to the UK of the various international IP agreements. However, although a largely national right, the law governing IP is, in the main, harmonised across the EU, with certain IP rights having pan-EU coverage. At the end of the transition period, the UK and EU IP systems separated, with automatic reciprocal arrangements ceasing. The position in respect of these unitary pan-EU IP rights has therefore changed, with the UK now excluded from that regime.
IP is dealt with under Part 2, Title II of the Agreement.
Under Art. IP. 1, the objectives of the Title are to:
(a) facilitate the production, provision and commercialisation of innovative and creative products and services between the Parties by reducing distortions and impediments to such trade, thereby contributing to a more sustainable and inclusive economy; and
(b) ensure an adequate and effective level of protection and enforcement of intellectual property rights.
The scope is: “to complement and further specify the rights and obligations of the UK and EU under the TRIPS Agreement and other IP international treaties to which they are parties.” Neither the UK nor EU are precluded from introducing more extensive protection and enforcement of IP rights, both confirm their commitment to comply with the various international IP agreements to which they are party and they agree to treat each other's nationals in the same way they would treat their own in relation to the protection of IP, subject to the exceptions already provided for under international treaties.
The Agreement, then, essentially affirms current standards for the protection of IP rights with which both the UK and EU agree to comply, and ensures consistency with current IP frameworks in both territories.
However, since reciprocal cross-border IP arrangements have ended, there may now be inconveniences for UK businesses. For example, EU Trade Marks (EUTMs) will only provide protection in the remaining 27 EU member states, not the UK.
Copyright, another IP right of significance to advertising agencies, is largely unaffected by the Agreement, primarily because of the existence of the various international treaties on copyright to which the UK is a party.
Financial Services
Questions 5 – 8: n/a.
Professional and business services
Question 9: n/a
10. What will be the impact of the Agreement’s provisions on the cross-border supply of services and rights of establishment, such as commitments on local presence and economic needs tests?
As noted above, the EU treaty provisions on free movement of services ceased to apply to UK businesses at the end of the transition period, with UK-EU trade in services being dealt with under Part 2,Title II of the Agreement. Chapters 2 and 3 of Title II set out various commitments that apply to cross-border trade in services and investment, including on market access, national treatment, establishment of a local presence, prohibitions on performance requirements and nationality restrictions for senior management and boards of directors, and a most favoured nation obligation on services and service suppliers. However, although the commitments appear to be extensive, they are subject to broad exceptions listed in the annexes to the Agreement.
Research and education
Questions 11 – 12 – n/a
Creative industries
13. How will the provisions in the EU-UK Trade and Cooperation Agreement affect the creative industries sector?
Although included among ‘Professional and business services’ in the list of services sectors of particular interest to the Committee, advertising is also, of course, part of the creative industries sector. Our concerns with the Agreement, as noted elsewhere in this response, therefore also apply here.
Our response to question 3 deals with mobility and the rights of people wishing to travel from the UK to the EU for business purposes. A particular concern for the advertising industry, is the need for people working on commercial productions to be able to move freely between the UK and EU for filming purposes and to transport equipment.
The right to hire individuals from EU member states (and, indeed, from outside the EU) to work in UK advertising agencies is also essential for ensuring that the best and brightest talent, wherever that talent may be from, is able to work within our industry in the UK. Agencies are concerned not only that it will now be more difficult to hire EU nationals to work for them, but that EU nationals who are already members of their staff may decide to return to their EU member states.
Data and digital services
14. The EU has granted the UK a six-month data adequacy ‘bridge’ to allow the free flow of personal data until the EU determines whether or not to grant a data adequacy decision to the UK. How would the absence of a data adequacy decision at the end of this bridging period affect trade in services?
The adequacy bridge has been welcomed by the advertising industry. The absence of a data adequacy decision would have hugely damaging consequences for advertising agencies and other businesses in our sector. Were that to happen, the UK would be treated as a third country with regard to the transfer of personal data from the EU into the UK.
DCMS and the ICO have recommended that UK organisations work with EU/EEA organisations which transfer personal data to them to put in place alternative transfer mechanisms to safeguard against any interruption to the free flow of EU to UK personal data, with standard contractual clauses (SCCs) likely to be the most relevant mechanism.
Arranging SCCs is complex and time-consuming, and would be an unwelcome burden for UK businesses.
15. What impact will the arrangements agreed have on digital trade and trade in digital services between the UK and EU?
The objective of Title III to the Agreement (Digital Trade) is “to facilitate digital trade, to address unjustified barriers to trade enabled by electronic means and to ensure an open, secure and trustworthy online environment for businesses and consumers.”
Both the UK and EU give various, welcome commitments. For example, Title III includes prohibitions on requirements for the localisation of data and the imposition of customs duties on electronic transmissions, commitments to ensure that contracts may be concluded by electronic means, that electronic documents and electronic signatures should be given legal effect and commitments to enhance consumer trust (including protections in respect of direct marketing communications).
Title III does not expressly address the EU's unilateral adequacy decision in relation to the UK receiving personal data from the EU, but it does maintain the right of the parties to adopt or maintain measures on the protection of personal data, including with respect to cross-border data transfers.
We note that the Title does not apply to audio-visual services.
Although the regulatory positions of the UK and EU are closely aligned because of the retention by the UK of EU law in UK domestic law, there is scope for divergence between the two regimes. This could affect UK businesses if, in future, they will need to address different laws in different territories.
4 February 2021
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[1] https://www.gov.uk/guidance/providing-services-to-any-country-in-the-eu-iceland-liechtenstein-norway-or-switzerland-after-eu-exit