Brexit: an overview of the immediate and long term effects of the UK's decision to leave the EU on public procurement regulations in the UK.
All public procurement policies, procedures and standards applied in member states are governed by EU procurement laws and principles which aim to promote fair competition between EU businesses in securing public sector contracts in EU countries.
Until yesterday’s momentous referendum decision on the UK's membership of the EU, it was clear that UK procurement policies were going to be governed by EU procurement laws. The question that now needs to be addressed is: how will UK procurement be regulated following Brexit?
The legal position
The European Communities Act 1972 (ECA) provides the statutory authority for EU Treaty provisions and directly applicable secondary legislation to have legal effect in the UK without the need for further enactment in the form of national legislation. EU legislation which does not have direct effect is enacted in the UK either by statute or by secondary legislation. The EU procurement regime is contained in numerous EU Directives which largely require implementation by UK or devolved governments as UK law. In England and Wales they have been implemented through regulations, including the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016 and the Concessions Contracts Regulations 2016 (the “Procurement Regulations”).
Depending on what happens next, the Government could repeal the ECA. If the government chooses to repeal the ECA, UK statutory instruments made under the ECA will lose their justification for implementation in the UK. Even though they will not automatically be repealed, this potentially raises an issue as to their legal status. Once the UK leaves, further (future) changes to the European procurement regime will not be able to be implemented through the ECA. It is also worth noting that a significant part of procurement regulations do not themselves derive from EU law and are driven by UK policy.
The near term
The general consensus amongst practitioners is that the current Procurement Regulations will continue to act as the UK’s framework until the terms of Brexit are known. How long this will be is anyone’s guess – but over the next few weeks and months it is unlikely much will change. In particular, it is unlikely that there will be any immediate repeal of the ECA as government will have to consider how the laws enacted through it are to be dealt with. Given the way in which UK and EC law is intertwined this will be a very significant task and is dependent on the future.
This is dependent on what route is chosen by the UK.
It has been suggested that the UK could adopt a similar approach to countries like Norway and Switzerland, opting to join the European Free Trade Association (EFTA) which promotes the free trade of goods and economic integration amongst its members. The UK may also consider joining the European Economic Area (EEA) in order to gain access to EU free trade agreements. As a member of the EEA the UK is likely to need to implement EU procurement rules, resulting in little change to the current system.
As an alternative, the UK may look to enter other agreements with countries outside of the EU, like the recently established CETA agreement between Canada and the EU, or rely upon membership of the World Trade Organisation (WTO). Such arrangements are based on similar procurement arrangements to the EU and so there may well be less change in practice to the application of procurement regimes than anticipated.
A key element of recent procurement law has been the increase in challenges, partly linked to the implementation of the EU's remedies regime. Would this be reduced by a removal of the remedies regime? It is not clear that it would. With more sophistication and alertness to breach among bidders and authorities, challenges are likely to remain a part of any procurement regime the UK ultimately adopts. In one respect this is a necessary part of policing the compliance by all parties with the terms of the obligations.
Alternatively, challenges may be possible through Judicial Review. At present the courts take the view that Judicial Review should not generally apply to cases where remedies exist under the procurement regime. Were the regime to be removed then it is likely that Judicial Review would form an available route for legal challenge going forward.
Procurement is unlikely to be at the top of the policy makers agenda in the initial aftermath of the referendum and it will be some time before decisions about this area are made. Changing national legislation is likely to be a highly complex process, involving consultation. Consequently, it is unlikely that there will be immediate changes to UK procurement laws – indeed it is not necessarily clear that there would be significant change in practice.
We shall have to wait and see…….