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?
The Retained EU Law Bill: another Brexit cliff edge looms?
Summary of key points
As currently drafted, our view is that the Bill is likely to lead to increased uncertainty in 2 main areas:
- Sunset date for majority of EU legislation: The Bill sets a "sunset" date of the end of 2023 for a large number of EU-derived measures (although there are some carve-outs – see below). Assuming the Bill becomes law as currently drafted, we may not know which measures are to be "saved" and which ones revoked until very close to that deadline. As a result, the Bill has the potential to create yet another Brexit-related cliff-edge for business. More generally, the Bill also confers very broad powers on the Government to change EU-derived legislation on a fast-track basis with only limited Parliamentary scrutiny (and no obligation to undertake public consultation). See section 2 and section 3.
- Removing key principles of EU law: The Bill removes key principles of EU law which were retained in a limited form because they helped to ensure that retained EU law would continue to be interpreted and applied in the same way. In particular, it gives domestic legislation priority over EU-derived measures where there is a conflict, reversing the current position (which aimed to preserve the hierarchy established while the UK was still in the EU, under which EU measures could normally be assumed to take precedence). This may have unintended effects in some areas and is likely to lead to more disputes over alleged conflicts between retained EU law and "home grown" measures. See section 4. For discussion of the impact of removing other principles, see section 5.
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.
- How did we get here?
- Is most retained EU legislation really going to expire at the end of 2023?
- New fast-track powers to change retained EU legislation
- Domestic law to take precedence over retained EU law
- Removing general principles of EU law
- Making it easier to depart from retained EU caselaw
- Will the Bill help to drive growth or just create uncertainty?
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.
What does the Bill do?
- Sets a "sunset" date of 31 December 2023 for the majority of retained EU legislation to expire – see section 2
- Gives Ministers extensive new powers to amend or revoke retained EU law swiftly, with only limited Parliamentary scrutiny – see section 3
- Reverses the current approach to conflicts between retained EU law and domestic law – see section 4
- Removes general principles of EU law, including the requirement for courts to interpret retained EU law in accordance with those principles – see section 5
- Introduces new measures designed to make it easier for UK courts to depart from retained EU case law – see section 6
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:
- Employment law, including legislation on working time and holiday pay, agency and part-time workers, TUPE and national works councils
- Data protection (although see under "Scope of sunsetting: points to watch" below)
- Company law, including regulations on company accounts and reports and audit, and other company law measures.
- Environmental law, including measures which – if removed in their entirety – could put the UK in breach of commitments made in the UK-EU Trade and Cooperation Agreement and other international conventions and agreements
- Product standards, including measures imposing limits on harmful chemical substances in food and hundreds of measures implementing internationally agreed standards and safety requirements across a very broad range of other products.
Retained EU law rights
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.
What if more time is needed?
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):
- Commercial Agents Regulations: among other things, this legislation gives commercial agents the right to claim post-termination payments designed to reflect the goodwill that they have built up on behalf of the principal during the agency. Until the EU introduced a Directive requiring this, agents in the UK did not have any such rights. The Government might take the view that, since we managed without it before, the measure could be allowed to expire without leaving a major "hole" in the UK's legal framework. Such a move would, however, lead to uncertainty over agents' rights in relation to existing agreements, entered into when the Regulations were in force. Ideally, there would be a consultation on how best to minimise any uncertainty and on whether in fact, removing the measure would make it less attractive to become an agent in the UK (possibly making it harder for overseas principals to enter the UK market, thus reducing competition).
- Article 157 of the EU Treaty: as mentioned above, this right provides for equal pay for equal work between men and women. However, the UK already has a statutory provision in the Equality Act 2010 which provides similar protection. Whilst the right contained in Article 157 goes further in some respects (e.g. covering a wider range of payment arrangements), the Government could take the view that UK domestic law already provides adequate protection. However, it would be preferable to consult on whether this is the appropriate course of action – and that has been the Government's normal approach to most changes in the law in the past (so a failure to do so would represent a break with that long-established practice).
Scope of sunsetting: points to watch
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:
- Primary legislation: Acts of Parliament which implemented EU obligations are out of scope.
- Financial services: section 22 of the Bill provides that sunsetting does not apply to anything referred to in Schedule 1 to the Financial Services and Markets Bill (currently before Parliament) or any rules made by the FCA, PRA or the Bank of England or, broadly, any generally applicable requirements or directions imposed by the Payment Systems Regulator. This is because the Government is already in the process of revoking and reforming financial services legislation (as set out in the Financial Services and Markets Bill).
- Tax: whilst there is no comparable carve-out for tax measures in the Bill, the Government's press release stated that "all required legislation relating to tax and retained EU law will be made via a Finance Bill," implying that a different approach may be taken to this area of law.
- Data protection: UK data protection law is currently based on a modified version of the EU General Data Protection Regulation (GDPR), generally known as UK GDPR. The Government previously indicated that it wished to make various changes to the current regime through the Data Protection and Digital Information Bill, but the Bill's progress through Parliament was paused in the wake of Liz Truss' appointment "to allow ministers to consider the draft legislation further". The Government has very recently hinted at plans to make more fundamental reforms but its position is currently unclear. The Bill's progress is likely to have an impact on what the Government decides to do about the sunsetting of UK GDPR.
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):
- Restate: this may mean using different words or concepts from those used in the original EU-derived measure, although this should not involve any significant changes beyond wording intended to "resolve ambiguities", "remove doubts or anomalies" or improve "clarity or accessibility". The power could also be used to reproduce the measure "as is". Any restated law will no longer be regarded as retained EU law (even where no change has been made). Restatement would therefore seem to offer an easy way for Government to claim that it has significantly reduced the number of retained EU law measures – although it is likely to result in very little meaningful change for business, other than to increase uncertainty (see section 4).
- Revoke or replace: this could involve significant changes, as the broadest power here allows for replacement with such alternative provision as is considered "appropriate" (which appears to give Government a broad discretion). Government must also be satisfied that any replacement does not increase any regulatory burden (so it is unlikely to be possible to use the powers to impose higher standards, for example).
- Update: there is an express power to update EU-derived measures in response to "changes in technology" or "developments in scientific understanding".
- Remove or reduce burdens: there is also an express power to make changes to retained EU legislation which involve removal or reduction of regulatory burdens (as defined in the Legislative and Regulatory Reform Act 2006). This route would most likely to be used to effect changes intended purely to reduce or remove red tape (and not to achieve any of the other objectives listed above).
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.
"Retained EU law" to become "assimilated law"
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.
Opening a can of worms?
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.
Opening another can of worms?
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:
- Lower courts will be able to make references to the Court of Appeal (or the Supreme Court if appropriate), asking them to reconsider a pre-2021 CJEU ruling where they believe that a point of general public importance is at stake; and
- Government law officers, such as the Attorney General, will be able to make similar references and will also be able to intervene in cases where a court is considering whether to depart from retained EU case law.
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).
Departing from pre-2021 CJEU rulings: new factors to consider
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.
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