On 23 June 2016, the UK public voted to leave the EU. The Prime Minister subsequently announced an intention to serve notice of withdrawal under Article 50 of the Treaty on European Union no later than March 2017. Based on Article 50, the EU Treaties shall cease to apply to the UK:
- from the date of entry into force of the withdrawal agreement that the UK negotiates with the Union, acting through the Council; or
- more likely, two years after the UK has notified the European Council of its intention to withdraw, unless the European Council, in agreement with the UK, unanimously decides to extend this period.
The current expectation is that the whole of the two year period will be needed to negotiate the exit provisions, therefore, in practice the British exit (Brexit) date cannot be before 2019, i.e. March 2019 if notice is given in March 2017. This timetable is, however, uncertain following the English High Court's decision on 3 November 2016 that "the Government does not have the power …to give notice pursuant to Article 50" and therefore parliament must legislate to trigger Article 50. The government has said it will appeal the ruling and is intending to stick to the March 2017 timetable.
This briefing note advises readers on the immediate considerations and anticipates how a Brexit will impact on the laws, rules and regulations governing product compliance & liability in the UK, which are heavily dependent on EU legislation. The impact of Brexit in this area is of considerable concern, particularly given that product development and manufacturing lead times mean that many companies are already working on products to be placed on the market after Brexit has happened.
Impact on our trade with the EU after Brexit
Nothing is yet known for certain about how the regulatory landscape will change after Brexit. Current indications from the government are that a 'hard Brexit' approach is favoured by certain key figures, with a significant loosening of ties with the EU. However, an official position remains to be adopted, and various other options are also possible.
- A Norway-style model: if the UK opts for a 'Norway' style relationship with the EU, and joins the European Economic Area (EEA), then the day-to-day reality should be unchanged – EU legislation will continue be applied and implemented in the UK. However the UK would no longer be involved in creating EU legislation, meaning that future EU product safety law may not take into account UK businesses' concerns. There are some avenues for EEA members to influence the development of regulations, for example through participation in expert working groups and the EEA ministerial council, however in reality this influence is limited.
- A Switzerland-style model: Switzerland's relationship with the EU is currently governed by a series of bilateral agreements, one of which is a treaty of mutual recognition, and Switzerland has brought some of its product safety laws into conformity with the EU laws to facilitate the sale of goods in certain sectors in both countries. If the UK adopts this approach, then it seems likely that UK laws would continue to closely mirror EU laws, in order to maximise the potential for mutual recognition of product safety assessments, and product safety standards. However the UK would also likely have scope to carve out some areas of product safety and producer responsibility law should it so choose. For example, Switzerland is not part of the REACH regime for governing the safe use of chemicals, which applies throughout the EU and EEA states. In such a scenario, UK manufacturers who want to sell into the EU, or those importing UK products, will need to take steps to ensure the products can still satisfy the EU requirements.
- Free Trade Agreements ("FTAs"): During the Brexit campaign, various references were made to the need for FTAs such as the Canada-EU Free Trade Agreement (referred to as CETA). Leaving aside the difficulties with negotiating such agreements, this is likely to be less popular with many product manufacturers hoping to trade with the EU than the above two models. Differing product safety and producer responsibility requirements are a key example of a non-tariff trade barrier. While FTAs are increasingly seeking to address such barriers by exploring concepts such as regulatory convergence, and equivalence, so far such attempts have met with limited success. FTAs attempts in this area currently tend to be limited to improving recognition of conformity assessment between parties (so that, for example, an EU certified body could apply a third party state's rules to certify that the product complies with those rules). This is still an advantage, however, in that it can help prevent double-testing to satisfy different markets, and reduce compliance costs. It also is something that should be relatively easy to achieve, given that the UK's certification bodies are already set up in accordance with EU law.
- WTO rules: Often referred to in the context of a 'hard' Brexit, relying solely on WTO rules is likely to result in duplicate certification procedures. However, it is worth noting that the WTO rules on technical barriers to trade (set out in the Technical Barriers to Trade Agreement, and in the Sanitary and Phytosanitary Agreement) also encourage the use of concepts such as mutual recognition and equivalence, as well as promoting the use of international standards, in order to assist with the removal of non-tariff barriers to trade. As such the EU has entered into mutual recognition agreements with countries with which it has no other trading agreements, allowing certification bodies within those countries to carry out assessment of compliance with the EU's rules. Such an option could therefore be available to the UK even absent broader agreement on a Free Trade Agreement.
Whichever option is ultimately adopted by the UK, the cost of compliance to product manufacturers in the UK seeking to continue trading with EU and EEA countries is likely to rise; the question is by how much. Even under the much-vaunted Norway'-style model, companies based in Norway have additional compliance costs compared to companies in the EU, due to a need to satisfy rules of origin requirements, and complete customs paperwork.
Impact on trade in the UK after Brexit
But not all UK manufacturers wish to sell into the EU, and those that do are likely to continue selling products in the UK as well, so it is important to consider what domestic post-Brexit regulations may look like.
- Initial Post-Brexit position: In announcing the "Great Repeal Bill", the UK government has confirmed that it will ensure that current EU law continues to apply in the UK post-Brexit, at least for the short term. This should ensure the initial impact of Brexit from a product compliance point of view is relatively muted, although long term uncertainty will remain. However, even in the short term, questions remain about the continued role of EU agencies and regulators, and the UK may lose access to some helpful market surveillance aspects of EU law, such as the RAPEX rapid alert system for dangerous products, which currently only applies between EU and EFTA/EEA members. There are also likely to be some increased hurdles to continuing to sell into the EU market, such as the need to appoint a certification body or authorised representative from within the EU.
In terms of product liability, save for potential governing law or jurisdiction issues, there is unlikely to be much change in relation to claims brought in contract, tort or strict liability (at least in the short to medium term). The strict liability regime arose out of EU law, was implemented in the Consumer Protection Act 1987, and is widely regarded as a success. As an accepted part of the UK consumer landscape, it is difficult to envisage this disappearing any time soon.
For now, those looking to continue to trade in both the UK and EU post-Brexit can feel reassured that there is likely to be little in the way of immediate change to the current product compliance requirements, apart from some potential additional administrative steps required to sell into the EU once Brexit occurs. However, uncertainties remain. Economic operators throughout the product supply chain should therefore ensure they understand how their obligations are currently implemented into UK law, and be vigilant in monitoring both EU and UK regulators so that they can ensure continued compliance and minimise the impact of potential changes.