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As part of our ThinkHouse Brexit webinar series, Kieran Laird provides a short overview of how EU law will apply in the UK both during and after the transition period, as well as flagging the risks of regulatory divergence over time.

The ThinkHouse Brexit webinar series


Kieran Laird: Hello my name is Kieran Laird and I am one of the Partners in the Public Law and Regulation team here at Gowling WLG. In this presentation I am going to talk to you about how EU Law applies in the UK after Brexit.

First of all I will talk a little bit about how it applies during the transition period and then I will talk a little bit about what happens afterwards and will conclude with some actions that you might want to take.

So firstly the transition period.

Before Brexit, EU Law applied through the European Communities Act 1972 and this was a domestic mechanism through which all of the EU Law that we had to apply because we were a member state was able to take effect here in the UK.

Now if you think back to your law degree or your GVL, EU Law comes in two different forms. Firstly there is directly effective law and that is things like regulations, EU decisions from EU bodies and the EU treaties and that kind of stuff, whenever it is made in Brussels it simply applies to each of the member states automatically without the need for each of those member states to implement it in their own territories through their own domestic legal framework.

The other sort of EU Law is indirectly effective and this is stuff like directives, for example. So in a directive the EU will set a broad policy framework setting out the outcomes that each member state has to achieve. It will then leave it to each member state to bring forward their own domestic legislation working out the details of how they are going to do that within their own country.

So all of that EU Law applied to the UK because it was a member state of the EU, but of course on 31 January 2020 the UK left the EU and that meant that it no longer had to apply EU Law by virtue of being a member state.

These days our relationship with the EU is governed by the withdrawal agreement so the withdrawal agreement provides for a transition period and the idea in the transition period is to provide a legal standstill under which all of the EU Law that currently applies in the UK will continue to apply giving a bit of breathing space for the UK and the EU to negotiate a future trading deal.

At the moment the transition period is due to end on 31 December 2020. However it can be extended for either one or two years. The Government has said very clearly that it does not want to extend the transition period and it has actually written it into the law that it cannot agree to an extension, but of course the laws can always be changed by Parliament and one wonders if the current public health crisis due to the Corona Virus will give the Government a bit of a ladder to climb down, in terms of being able to justify some form of extension to transition.

Anyway for whatever period the transition lasts for, the idea in the withdrawal agreement is that EU Law must apply in and in respect of the UK as if it were still an EU member state. So that means we have to continue to apply EU Law here, but it also means that all of the other EU member states need to still treat us as if we were a member state.

It does mean the EU agencies, so for example the Commission and the Court of Justice of the EU, still have supervisory and enforcement powers over the UK. So we can still make references to the Court of Justice and the Court of Justice can still issue decisions that bind us.

Now for the most part this means that pretty much all of the EU Law that you are used to applying before Brexit will continue to apply. However there are some exceptions. So for example UK bodies will no longer be able to act as the lead authorities, lead regulatory authorities for certain approvals, particularly in the food, medicines and chemical sectors.

So even though chances are what we are used to doing will still be the case, it is worth checking that that still remains during the transition period, just because there are rules etc.

So that is the withdrawal agreement but how does that take effect in UK law?

Well it takes effect to the European Union Withdrawal Act 2018 as amended by the European Union Withdrawal Agreement Act 2020. In this presentation to keep things simple I will just refer to the 2018 Act.

So the first thing that the 2018 Act does is to repeal the European Communities Act 1972 and if you remember that is the mechanism that allowed EU Law to apply in the UK.

However as we have just seen we still need to apply EU Law for the duration of transition, so even though it is repealed the 2018 Act says that the effect of the 1972 Act is preserved with certain clauses. So what on earth does that mean?

Well it means that even though it is technically gone, we all still kind of pretend that the 1972 Act is still in force. However we need to read it through the lens provided by the 2018 Act which provides that we need to read it in an amended form.

So the preservation of the 1972 Act is the way in which directly effective EU Law continues to apply in the UK for the duration of the transition period, so all of the regulations, EU regulations and all of the decisions by EU bodies for example.

What about indirectly effective EU Law? Well one of the other things that the 2018 Act does is to retain all of the domestic legislation that gives indirectly effective EU Law, so for example primary legislation like the Competition Act as well as all of the statutory instruments that were made under section 22 of the 1972 Act, to implement indirectly effective EU Law.

By those two mechanisms, the 2018 Act seeks to preserve the position that we had before Brexit for the duration of transition.  However, it is important to realise that the withdrawal agreement also has within it new rights, powers and remedies, things like citizens' rights for example, which through the 2018 Act are then given direct effect for the duration of transition.

So what happens after transition then? Well, as we have just seen the 2018 Act preserves the effect of the 1972 Act together with domestic legislation implementing indirectly effective EU Law for the period of transition. However if we were to do nothing else after the end of the transition period, directly effective EU Law would fall away because the effect of the 1972 Act would fall away and lots of statutory instruments implementing indirect EU Law would also disappear, all of those made under the 1972 Act.

So we would be left with quite a large black hole in our domestic legal framework and that is just because so much of our domestic law is derived from the EU over the last number of decades.

So what are we doing about that? Well, the idea is that we are going to transpose pretty much most of the EU Law that applies at the point of the end of the transition period into our domestic legal framework.

We will do that by creating a new category of domestic law called Retained EU Law and we will do that through sections 2 to 6 of the European Union Withdrawal Act 2018.

Retained EU Law will be comprised of four different categories.

Firstly there will be EU derived domestic legislation and that is all of the domestic law that we have just talked about, primary and secondary that gives effect to indirectly effective EU Law, things like the Competition Act, things like the section 22 statutory instruments made under the 1972 Act.

The second category is direct EU legislation and again this is all of the directly effective EU Law that we have been talking about, so things like EU regulations and EU decisions that applied in the UK at the end of the transition period.

The third category is all of the remaining rights, powers, liabilities or obligations, restrictions, remedies and procedures that were available under section 21 of the 1972 Act. So these are things like the EU treaties, together with directly effective rights and directives. Now if you remember directives are indirectly effective EU Law and that means that the directive itself would not normally be preserved, although its domestic implementation will be preserved as EU derived domestic legislation.

But under this third category certain rights under directives will be preserved. However, we need to be careful here because preserved rights under directives are only those of the kind recognised by a Court before the end of the transition period. But what does that mean?

Well it means that if you want to try and rely on the directly effective right in a directive you are going to have to go and find a case, either from the domestic Courts or from the European Court of Justice which says that either that right itself or a similar sort of right in another directive or the same directive is directly effective.

The fourth category is Retained EU Case Law so this is all of the decisions of the Court of Justice of the European Union that were handed down before the end of the transition period.

So we bring all of that EU Law into our domestic legal framework as Retained EU Law, but how does it sit within the hierarchy of our own domestic legal framework?

Well like EU Law before Brexit and during the transition period, it benefits from the principle of supremacy. That means Retained EU Law will trump domestic legislation made before the end of the transition period, in circumstances where EU Law would have trumped the same legislation. However it will not trump domestic legislation made after the end of the transition period.

What about the Courts? Well, Retained EU Law has to be interpreted in line with the decisions of the Court of Justice of the EU made before the end of the transition period. The Supreme Court can diverge from that pre-transition case law where it views it appropriate to do so and there is a power in the 2018 Act for the Government to bring forward regulations that would allow lower Courts to also diverge from Retained EU Case Law.

Now the Government is a little busy at the moment and it has not actually brought forward those regulations so we have yet to see what type of tests it will be expecting Judges to apply in order to decide whether or not to depart from Retained EU Case Law.

It is pretty certain that the Judges would, however, use those powers sparingly.

So that is the position with regard to the case law from the Court of Justice before the end of transition, what about the case law that the Court of Justice will continue to churn out after the end of the transition period?

Well under the 2018 Act a domestic Court may have regard to post-transition case law from the Court of Justice if the domestic Court views it as appropriate. We have yet to see how Courts will decide whether or not it is appropriate to have regard to see due case law after transition but that will depend presumably on the type of trade deal that we have with the EU and how we want to preserve the position that maintained before the end of transition going forward.

I have flagged there on the slides that, and there are some cases where post-transition case law from Europe will still have to be followed in relation to directly effective rights under the withdrawal agreement and we will come onto that in a few moments.

So we bring all of this EU Law into our domestic legal framework but the problem with it is, so it has all been drafted on the basis that the UK is a member state of the EU and therefore has all of the rights and obligations that attain to EU membership.

So for example, lots of it refer to EU agencies and regulatory authorities that had jurisdiction in the UK before the end of the transition period, for example the Court of Justice is one of the main ones.

So it is not all going to work effectively once we actually no longer have to apply EU Law and once other EU member states do not have to apply EU Law to us.

So the 2018 Act gives the Government a wide power to go back and comb through all of that Retained EU Law and make whatever amendments ministers feel appropriate to fix any problems that arise from it. So there is a power to go back and make statutory instruments to remedy any failure of Retained EU Law to operate effectively or to cure any deficiency in Retained EU Law and this is intended to be a very wide power.

So for example the explanatory note to the 2018 Act says that the deficiency is intended to cover circumstances where Retained EU Law does not function appropriately, or even sensibly.

Now there would be lots of EU Law that the UK Government will not view as operating sensibly after the end of the transition period. Whether or not that quite means that it does not operate effectively or just does not work at all is a good question.

So these sorts of statutory instruments, these regulations may do anything that can be done by an act of Parliament. That means that they are a so called Henry VIII power, they can themselves actually amend the acts of Parliament without going back through the full legislative process.

There are however some restrictions, so for example these types of regulations cannot create a new public authority nor can they create a new criminal offence, among other restrictions.

So EU Law has built up over numerous decades. It is all pretty complex stuff and there is an awful lot of it, but over the past two years the Government has been going back through the EU Law that will be retained and trying to figure out how it wants to amend some of it after the end of the transition period.

To date there have been over 600 statutory instruments brought forward in order to make these amendments and the problem is that the complexity of the EU Law together with the speed with which this is trying to be done, means that there are lots of issues with the statutory instruments, but businesses will need to keep on top of them to make sure that they know what the legal position is going to be after transition.

There have, for example, been 65 so-called wash up SIs (Statutory Instruments) which have been made in order to correct some of the errors that have crept in during this process.

So what are these types of issues? Well firstly, some of these regulations weaken standards, for example, one set of regulations removed a blanket ban on hormone disrupting chemicals and pesticides. That ban was reinstated once it was pointed out to the Government that that probably was not the best thing to do.

Some of these amendments delete administrative functions, again, one set of regulations removed a requirement to monitor the consumption of food additives. And some of these regulations give the Government powers that seem to go beyond just fixing some of the problems that would arise from Retained EU Law.

So for example, in the energy sector, one particular set of regulations gave the Government power to amend a particular network code in the energy sector. Now that does not seem very important, but the way this has been done previously under EU Law was that the EU regulator, the independent regulator, could propose a change to that network code following wide consultation with the industry.

One would think that in order to fix any deficiency in that once the transition period has ended because we can no longer refer to the EU regulator that that reference would just be swapped out for OFGEN, for example. But instead of doing that the Government chose to just give itself a very blunt power to amend the member code itself following quite limited consultation and that point kind of extends back to all three of those categories of issues.

There is the issue that the Government uses the power under section 8 of the 2018 Act to bring forward policy amendments to Retained EU Law and that is not really what the section 8 power was intended to do, it was just meant to be bringing in technical fixes, so we need to be aware of that going forward.

So what other types of issues are there?

Well, some of these regulations are just plain wrong. So one particular example that I quite like was the set of regulations that in one provision amended a network code and then in the very next provision said that that particular network code was repealed. So we do not really know if the network code is maintained in its amended form or if it no longer applies.

Some are just plain wrong. Some are just plain illegal.

Again the greatest example of this was a particular set of regulations that gave tax officials a power to actually just change tax law and VAT law by simply publishing a notice on the website, so without any Parliamentary scrutiny at all. Now that power was removed once a judicial review was threatened.

So those past couple of slides were all about Retained EU Law, about how we try and preserve the position in terms of the EU Law that applied to the UK before the end of the transition period. However again it is also important to realise that the withdrawal agreement itself has certain new rights, powers and remedies and that these will remain in force and directly effective in the UK, even after the end of the transition period. The 2018 Act gives these particular categories direct effect in the UK and these categories are citizens' rights and Northern Ireland protocol, which are the two most relevant for businesses, together with provisions around the financial settlement and that is the money that the UK has to pay to the EU over the next few years.

As I say, the provisions in the withdrawal agreement are creating rights and obligations but remain directly effective after the transition period and now that means that the UK Courts will have to follow Court of Justice case law even after the end of transition, in relation to those categories.

So, we have covered an awful lot there and it is quite a complex area, hopefully together with these slides you will have been sent a couple of white papers that we have prepared guiding you through what is in the withdrawal agreement, together with providing more detail about how EU Law applies in the UK after Brexit.

But, before you get stuck into all of that nice light bedtime reading, what kind of actions can you take in view of everything that we have just talked about?

Well I think the first thing to do is to just check whether the EU Law that you are used to applying does actually apply during transition. It probably will because the vast majority of it does, but particularly if you are in the food, medicines and chemicals sectors it is just worth checking. You should also use the transition period to prepare for the world after transition, so and to the extent you have not already done so, consider what changes you might need to make to continue to trade into the EU after transition.

For example, sometimes under the EU regulatory framework, regulatory approvals or registrations have to be held by a member in the EU itself. Some of those might need to be moved where they are currently held in the UK and that might mean sometimes establishing a presence in the EU where you have not got one already.

Secondly, where you are going to continue to trade in the UK, keep an eye on all of those statutory instruments that are relevant to your sector which might lead to changes in relation to how you operate here at home.

Thirdly remember that there are some things in the withdrawal agreement that will extend beyond transition.  So the most relevant would be citizens' rights and will apply to some of your employees, for example, or where you are trading goods in and out of Northern Ireland, the Northern Ireland protocol.

As time goes on also be prepared for further regulatory divergence. The Government has been quite clear that one of the main reasons for Brexit is to allow the UK to plough its own furrow, to make its own decisions in relation to standards for example.

So we are going to see changes over the coming years. Now on the one hand that means that businesses will need to be aware of what those changes might be, but on the other hand it also provides business and sector groups with an opportunity to help talk to the Government to lobby for changes that they might like to see.& So there are opportunities out there to help the Government shape the regulatory framework going forward.

Our Regulatory team here at Gowling is happy to help in any way that you need in relation to regulatory changes or in relation to the rules around lobbying the UK Government and lobbying the Government in the EU if you still work in Brussels.

I hope that has been useful, thank you very much for listening.