Much of our Environmental law originates from the EU. This includes EU Regulations such as REACH which are directly applicable in the UK, without the need for any UK implementing legislation. Other examples relevant to chemicals are the Biocidal Products Regulation (BPR) and the CLP Regulation (Classification, Labelling and Packaging).
This briefing considers the potential impact of a vote to leave the EU (“Brexit”) from a UK Chemical Compliance law perspective.
What would happen immediately after a Brexit?
It is likely to be business as usual immediately after a vote to leave the EU.
The general consensus is that two years is the likely minimum period before the UK would actually leave the EU. The complex issues involved suggest that a longer period may be necessary. There is a mechanism in the EU treaty for a Member State to withdraw from the EU (Article 50 of the Treaty on European Union). Under this, the UK would give notice to leave followed by a period of negotiation to agree terms of withdrawal. Exit would take place at the earliest on signing the withdrawal agreement or two years after notice is given. David Cameron has stated that he would give notice to the EU the day after a vote to leave, though there is debate as to whether notice is served automatically in those circumstances.
Uncertainty therefore is likely to prevail for a period of some years. The status quo is broadly expected to continue during that period.
What type of relationship might the UK have with the EU if it leaves?
Different model examples for a future UK/EU relationship are being touted.
One example is the Norway arrangement, in which the UK could leave the EU but have a relationship with it through remaining part of the European Economic Area (EEA). In those circumstances, the UK would remain bound to implement and apply much of EU law, including regulations such as REACH, but would have lost its ability to influence it. Reports suggest Norway adopts as much as three quarters of all EU legislation.
In other circumstances, the UK would not be bound by EU law unless it agreed otherwise, maybe as part of a deal to secure continued access to the European Single Market. Other models include the Swiss model with the UK re-joining the European Free Trade Association (EFTA) and entering into a bilateral trade agreement with the EU. A further model is the WTO (World Trade Organisation) alternative, in which the UK would leave the EU and (like China and the US) rely on its membership of the WTO as a basis for trade with the EU.
The bottom line is that no-one knows, and it seems likely that a bespoke arrangement would be negotiated to provide for the terms of the UK’s continuing relationship with the EU upon leaving.
How would UK Chemical Compliance law be affected by exit from the EU?
A comprehensive review of all law, including relating to Chemical Compliance, will be needed to identify what is derived from the EU, and what should be repealed in whole or in part or changed. The UK’s scope for this will depend on the nature of the post-Brexit UK/EU relationship. This is likely to be a significant task. man_002\6410431\3 2 11 April 2016 shephee
Because Regulations work directly at EU level, not UK national level, there would be a regulatory gap following exit. This might look like an appealing opportunity to be rid of some burdensome regulation. However, UK companies exporting to the EU and their EU customers would still have to ensure that their products comply with existing EU regimes including REACH, biocides and CLP. In the event of a Brexit it may no longer be possible for UK companies to undertake certain compliance tasks (e.g. REACH registration). This may result in EU companies choosing an alternative supplier rather than facing additional burdens themselves under these regimes.
If the UK agreed an arrangement similar to Norway, practically not much may change e.g. under REACH UK companies would still have registration obligations.
Exit from the EU would not automatically undo UK laws which have been put in place to implement EU Directives. Those laws would remain in place until the UK decides otherwise, but without any opportunity to influence any changes at EU level going forward.
Much of UK law relating to waste, such as WEEE, packaging waste and the management, storage and disposal of waste falls into this category. Another example is the environmental permitting regimes of large industrial facilities in sectors such as energy, waste, water, manufacturing and mining. Equally, the requirement for comprehensive Environmental Impact Assessments (EIA) on the development of large or environmentally significant facilities derives from an EU Directive on EIA.
Careful consideration will be needed as to what the UK’s position should be in relation to the requirements under these Directives. For example, what about the EU ETS (Emissions Trading Scheme) – would the UK leave the EU ETS, and what measures would there be to ensure that the UK complies with its international and domestic climate change commitments?
What about rulings of the CJEU (Court of Justice of the European Union)?
Pre exit CJEU case law will remain part of UK law post exit, unless Parliament legislates otherwise. Post exit CJEU decisions will remain persuasive where decided on equivalent law. Any material difference between the interpretation of EU based laws by UK courts from interpretations of similar laws in EU jurisdictions could present challenges. For example, if the recent CJEU ruling regarding the threshold for substances of very high concern (SVHCs) in articles had been determined after a Brexit the UK would potentially be imposing different requirements from the rest of the EU. This will be particularly relevant to businesses operating on a pan-European basis.
The UK is a party to several UN environmental conventions which are currently implemented through EU legislation. In the event of an exit from the EU, the UK would have to consider how its obligations would be covered. These include matters such as climate change (the Framework Convention and Kyoto Protocol), access to justice in environmental matters (Aarhus Convention), habitat protection, and the protection of endangered species.
Others will not be affected, where EU legislation does not implement the UK’s obligations e.g. The OSPAR Convention (Convention for the Protection of the Marine Environment of the North-East Atlantic) whose implementation is coordinated by Defra (the Department for Environment Food and Rural Affairs).
What about EU-derived technical guidance, standards etc?
Technical guidance, research, and standards are coordinated by the European Commission. They underpin EU and current UK environmental policy and legislation and promote best practice. By way of example Best Available Techniques Reference Documents under the IPPC and the IED Directives are key reference documents used by UK environmental regulators when setting permitting conditions for UK installations. Following a Brexit, the UK may have to bear the cost of developing its own documents or potentially rely on EU policies/documents without having a seat at the table. man_002\6410431\3 3 11 April 2016 shephee
Where UK domestic law has not been enacted due to an EU requirement a Brexit is unlikely to significantly impact this legislation. The Contaminated Land regime is now so imbedded in UK law it seems unlikely there would be any impetus to change this.
Potential Impact of a Brexit on Chemical Compliance
- Any pan-EU business sourcing products from outside the EU which has organised its supply chain so that its UK legal entity is “importer” for REACH purposes (so holds the REACH registrations/pre-registrations for supplies to all group members in the EU), potentially has an immediate compliance problem. Once the UK leaves the EU, that business is not REACH compliant unless one or more of its EU group members re-registers under REACH. It is unlikely to be possible simply to transfer registrations from the UK entity to a non-UK entity unless this is permitted pre-Brexit in accordance with ECHA guidance.
This should be considered early, along with issues such as data access for any new registrations/registrations which can be transferred, and also overall 2018 registration strategy. This could result in additional costs, not only in terms of registrations, but also the costs of a different legal entity purchasing access to required data. Just because the UK legal entity has the right to refer to data does not mean it can grant access to that data to a third party. REACH registrations by Only Representatives (OR) based in the UK will no longer be valid. Supply chain discussions will be essential for any company in the EU which relies on an OR in the UK for its REACH compliance.
- A different regulatory approach in the UK from the EU could result in different compliance obligations for companies manufacturing, importing or using chemicals in both the UK and EU (and wider markets for which similar regulation to REACH is increasingly the trend). Meeting EU environmental and safety standards would in any event be a pre-condition for sales into the EU market. This will include ongoing provision of Safety Data Sheets, labelling and packaging in line with CLP, and the supply of information on SVHCs over 0.1% w/w to enable EU customers to comply with REACH.
- Will the UK adopt the equivalent of current EU Chemical Compliance law? Some requirements of those laws, for example Safety Data Sheets providing essential information on hazards, handling, storage and emergency measures, are essentially bound up with the UK’s own health & safety legislation, including COSHH. From a practical perspective, any reduction in standards of environmental and safety protection could meet with public opposition. It is possible that industry may choose to continue to voluntarily apply EU standards to avoid reputational issues.
- If the UK leaves the EU, businesses operating across the EU will not be able to include the UK in any EU-wide biocidal product permitting under the BPR. The approval process in the UK’s Control of Pesticides Regulations will continue to be relevant for biocidal products proposed to be advertised, sold, supplied, stored or used in the UK. Any UK business supplying biocidal products into the EU will still need to be mindful of BPR requirements to ensure compliant supplies of product into the EU (including Article 95 BPR).
- Any gaps in UK legislation due to EU requirements no longer being applicable are likely to be “plugged” as soon as possible.
One impact of a Brexit would be significant legal uncertainty, resulting from lack of precedent and the complexity of the UK and EU’s intertwined legal regimes. Some Brexit models present an opportunity to reappraise and possibly simplify environmental regulation following a Brexit, which might make the UK an attractive place to do business. Any reduction in environmental standards is unlikely to be accepted by the public and NGOs. Set against this is a concern that a different regulatory approach in the UK from the EU might present other challenges.
A Brexit would not result in change overnight. The negotiation of the UK’s relationship outside the EU would commence and could last for years. In the meantime, the UK may come under pressure to abide by EU regulation in return for ongoing access to the European Single Market.
What is clear is that fully appraising and responding appropriately to the situation will incur considerable time and money, with a long period of uncertainty.