The Government has published legislation giving it wide-ranging powers to revoke or reform retained EU law. Among other things, it includes a proposal for the majority of retained EU legislation to expire at the end of 2023, unless expressly preserved in some form. Does this create another Brexit-related cliff edge for business?
As currently drafted, our view is that the Bill is likely to lead to increased uncertainty in 2 main areas:
As explained below, the Bill will also make a number of other changes, some of which may also lead to a degree of uncertainty, although for reasons explained below, our view is that these are less likely to have a major impact on the majority of businesses. Whilst a case can be made for moving faster on reform of retained EU law, for reasons explained in section 7, we are concerned that insufficient consideration has been paid to the potential negative impacts of the Bill. All that said, the legislation is likely to be amended during its passage through Parliament, particularly in the House of Lords, which may alter our assessment of its impact.
Retained EU law is a new category of UK law which was created primarily in order to avoid "gaps" opening up in the UK statute book following Brexit and to provide certainty; for more information, see our Q&A guide to retained EU law.
Following the end of the Brexit transition period on 31 December 2020, the UK Government has placed considerable emphasis on the potential opportunities presented by its freedom to diverge from EU rules. Earlier this year, it announced its intention to bring forward a "Brexit Freedoms Bill", designed to address concerns that reform of retained EU law was taking too long. It has now published that legislation, under the title "Retained EU Law (Revocation and Reform) Bill". A number of aspects of the Bill are at the more extreme end of what had been expected – for example, previous announcements had not suggested that an expiry or "sunset" date for most of retained EU legislation was likely to be included.
The sunsetting provisions
Section 1 of the Bill provides for all "EU-derived subordinate legislation" and all "retained direct EU legislation" to be revoked at the end of 2023. "EU-derived subordinate legislation" is likely to include many statutory instruments implementing EU Directives. "Retained direct EU legislation" is likely to include most EU Regulations which have been brought onto the UK statute book (such as UK GDPR). In practice, section 1 appears likely to apply to a very broad range of retained EU legislation (although there are important carve-outs relating to financial services and tax – see the end of this section). Examples of legislation likely to be in scope include measures relating to:
Section 3 of the Bill provides for all "retained EU law rights" to be repealed at the end of 2023. For example, although EU Treaty Articles do not form part of retained EU law, certain directly applicable rights have been preserved, such as the right contained in Article 157 relating to equal pay for equal work between men and women. This right would cease to exist at the end of 2023, unless action were taken to preserve it. For more detail on preserved EU rights of this type, click here.
Another Brexit cliff edge?
According to the Government's own database, there are over 2400 pieces of retained EU law. Had all of this law simply been revoked on the UK's withdrawal from the EU, it would have left significant "gaps" in the UK statute book, hence the decision (in 2018) to preserve much of it. Whilst some pieces of retained EU legislation could potentially be allowed to expire without catastrophic results (see below for possible examples), many will in our view still need to be preserved in some way (which the Bill allows for – see also below). Assuming the Bill becomes law in the course of 2023, businesses may not know which measures are being preserved – and which are not - until very close to the sunsetting deadline. This risks creating significant uncertainty, similar to previous Brexit "cliff edge" moments as deadlines approached for the Withdrawal Agreement and the end of the transition period.
If Ministers decide that they need more time, one option would be to reissue the legislation in a revised form, including one that (arguably) better reflects the UK's own domestic legal traditions (see section 3). However, given the number of measures in question, it seems unlikely that there will be time to do this by the end of 2023 for all of the relevant legislation.
Assuming that the Government does not wish to allow the relevant legislation to simply expire (see below), the only other option provided for in the Bill is to extend the sunsetting deadline; clause 2 allows for extensions for specified measures up to 23 June 2026 (the 10th anniversary of the EU referendum result). Presumably the idea is that by 2026, it will have been possible to amend or restate all the retained EU legislation that the Government deems it necessary to preserve (although if this has not been possible, a future Government could simply give itself the power to keep certain pieces of retained EU law on the statute book indefinitely). However, when it comes to retained EU law rights (as opposed to the other types of retained EU law covered by section 1 of the Bill), there is no ability for the sunsetting deadline of the end of 2023 to be extended.
How much legislation might be allowed to expire?
Having emphasised the number of retained EU legislative measures (over 2400), the Government has created an expectation that by the end of 2023, it will be able to announce that a significant number of these are being allowed to expire (or at the very least, have been reformed in some meaningful way - but as noted above, such reform may be difficult to achieve by the initial sunsetting deadline). This may encourage Ministers to allow as many measures as possible to expire, without consulting on whether it is appropriate to do so (since that will also take time). Two possible examples are outlined below (but there may well be many more):
It should not be assumed that all retained EU law listed in the Government's database will be within the scope of the sunsetting provisions (although a very significant number of measures are likely to be). In particular, note the following:
Sections 12 to 17 of the Bill give the Government a raft of new powers in relation to retained EU legislation. It will be able to do the following, in most cases with only limited Parliamentary scrutiny (which effectively allows the draft legislation to be fast-tracked):
These powers will also be available to the Scottish and Welsh Governments in relation to retained EU legislation within their devolved competence (and subject to various constraints which may, for example, require consent or consultation with the Westminster Government). A key question is how far the Government will conduct a public consultation before it goes ahead with any changes. Such consultation has been normal practice in the past where substantive changes are envisaged. However, the Bill itself contains no commitments on this point.
Section 6 of the Bill provides that after the end of 2023, the term "retained EU law" should be dropped in favour of the term "assimilated law". Other than perhaps disguising the origin of any EU-derived measures which have been preserved, it is not clear to us what this change is supposed to achieve. However, assuming that it becomes law, it will be important to be aware of it; for example, judges are likely to feel obliged to use "assimilated law" when discussing EU-derived law from 2024 onwards.
Section 4 of the Bill provides that, where there is any conflict, domestic law will take precedence over any retained EU law with effect from the end of 2023 (in most cases – see below for exceptions). This reverses the current position, which is that retained EU law takes precedence over any pre-2021 legislation which conflicts with it.
That position was adopted because when EU-derived measures were originally enacted, the Government could simply rely on the principle of supremacy of EU law to resolve any conflicts with domestic law. By preserving that principle after the end of the Brexit transition period, the Government avoided having to make clear in each individual case how conflicts should be resolved between retained EU law and domestic law. This is referred to in the Bill as the principle of supremacy of EU law, although as explained above, it has only been retained in qualified form.
If the Bill becomes law as currently drafted, the Government will have to consider whether certain parts of retained EU law should continue to take precedence over domestic law and make that clear in relation to those particular measures. The Bill allows for this and in our view the Government is likely to want to specify numerous exceptions to the proposed new rule that domestic law always takes precedence. However, it appears that – at least in relation to EU law which has been restated – there is no power to provide that retained EU law takes precedence over all other conflicting enactments; it can only take precedence over those which have been specifically identified in any restatement (see section 14(4)). This implies that the Civil Service will have to identify all potentially conflicting domestic measures and list them in any restatement, which would be a major task. The position would be far more straightforward if the restatement could simply specify that the EU-derived measure continued to take precedence over all other conflicting pre-2021 measures (as is the case at present).
If potential conflicts are not identified, the Bill's reversal of the current position could have unintended consequences. In relation to disputes, it may also mean that where a provision of retained EU law is unhelpful to a party's case, that party may look for domestic measures which potentially conflict with it (in order to argue that the domestic measures take precedence). This could lead to more disputes over alleged conflicts between domestic and EU-derived measures.
Declarations of incompatibility
The Bill also provides that where a court identifies a conflict between retained EU law and domestic legislation, it must issue a declaration of incompatibility (section 9). This seems to be modelled on similar provisions in the Human Rights Act, although the latter normally requires the courts to refer the matter back to Parliament for resolution. The Bill, on the other hand, appears to envisage that the declaration will be used primarily to set out the court's view on the appropriate way to resolve the conflict (presumably having regard to the Bill's reversal of the current principle of supremacy outlined above).
In addition to removing the principle of supremacy of EU law (see section 4), the Bill seeks to remove other general principles of EU law, such as proportionality. These can be important when interpreting EU law. The current position is that they have been preserved in qualified form with a view to ensuring that retained EU law continues to mean what it meant before the end of the Brexit transition period (11 pm on 31 December 2020). For more explanation together with some examples of these principles, see this briefing.
Unless similar interpretative principles can be found in UK law (which will not always be the case), UK courts may conclude that the removal of these principles leave them no option but to interpret retained EU law differently in future – even where it appears that no change was actually intended. Once again, there is a concern that this could create uncertainty and encourage disputes over the meaning of retained EU law.
The Bill allows the effects of general principles to be reproduced – so it should be possible, for example, to restate retained EU law in a way which makes clear that its meaning is not intended to change. But this seems to us to be a cumbersome solution to a problem which only exists because the Bill seeks to remove general EU law principles altogether. In this context, it is worth noting that the European Union (Withdrawal) Act 2018 has already removed the right to rely on general principles of EU law to bring a claim relating to matters arising after the end of 2020; as a result, their residual role in UK law is largely confined to matters relating to the interpretation of retained EU law.
One area where the Bill does not go as far as some had expected relates to retained EU caselaw. The current position is, broadly, that when interpreting retained EU law, rulings of the Court of Justice of the European Union (CJEU) are binding on UK courts where they were made on or before 11 pm on 31 December 2020. The Bill does not seek to change this, nor does it seek to extend the power to depart from such rulings to lower courts; currently, this power can only be exercised by the Supreme Court, the Court of Appeal and other courts at the same level as the latter. For more detail, see this briefing.
What the Bill does seek to do is to make it easier for cases to reach the Court of Appeal or Supreme Court so that potential departures from pre-2021 CJEU case law can be considered without the need for an appeal to reach those courts. It seeks to do this in the following ways:
In practice, a key issue will be how much persuasion the courts will need before agreeing that a point of general public importance is at stake; if the threshold is set too low, this may encourage some parties to seek references on points of EU law primarily as a tactic to increase delays and costs in litigation. However, our view is that the Bill's provisions in this area are preferable to other potential options, such as giving courts below the Court of Appeal power to depart from retained EU caselaw (which would have risked creating significantly greater uncertainty).
The Bill also contains additional factors for the Court of Appeal and the Supreme Court to take account of when considering whether to depart from retained EU case law. Among other things, the courts must have regard to "any [relevant] changes of circumstances" and "the extent to which the retained EU case law restricts the proper development of domestic law." It is not clear to us that these factors add a great deal to the current test, which permits departures from retained EU case law "where it appears right to do so"; this already leaves the courts with a broad measure of discretion. It could be argued that the new factors will make the courts more likely to depart in areas where, for example, the UK has clearly diverged from the EU's approach in legislation. But it is likely that the courts would have been sensitive to this in any event. As a result, we are sceptical that the revised test will make a significant difference in the majority of cases. That said, in more borderline cases it could tip the balance in favour of departing from pre-2021 CJEU rulings.
Supporters of the Bill argue that it will help to boost the Government's growth agenda by freeing business of the need to comply with burdensome or unnecessary retained EU law. Critics argue that it is now over 6 years since the EU Referendum, which should have allowed sufficient time already to undertake this exercise, and yet the Government has so far failed to identify a clear "hit list" of areas for targeted reform; instead, the Bill imposes arbitrary deadlines which leave the Civil Service with the choice of either offering up potential candidates for "sunsetting" without adequate consultation or Parliamentary scrutiny or devoting time and resources to the restatement of retained EU law which will ultimately change little in substantive terms.
There is clearly a case for speedier reform of retained EU law but there is a concern that the approach taken in the Bill risks creating significant uncertainty for business, especially as the initial sunsetting deadline of end of 2023 approaches. Businesses will need to plan for the removal of certain measures if they are allowed to expire (see section 2 above) and some would no doubt prefer to avoid this given the current economic uncertainty.
More information
For further coverage of Brexit-related issues (ranging from trade agreements through to topics such as business travel to the EU and the impact of Brexit on disputes), see our Beyond Brexit portal, which also includes an A-Z index by topic.
