On 13 July the U.K. Government published its legislative plan for the country to leave the European Union while still accepting all its current rules and regulations (at least initially).
The EU (Withdrawal) Bill—known more widely as the “Great Repeal Bill”—will formally enact Brexit and bring EU law into domestic U.K. law to create legal continuity and certainty from the day after the country leaves the European Union.
The Bill will create temporary powers—known as “Henry VIII clauses” because they enable the Government to make secondary legislation with or without further Parliamentary scrutiny—to tweak laws, transfer powers to existing domestic bodies, and create new institutions and regulators where rules are currently enforced by EU institutions that will no longer have jurisdiction after Brexit.
Ministers will be able to use these powers for up to two years after exit day, reflecting the government’s fear that it could face a bottleneck of legislation as it battles to make the necessary changes in time.
Furthermore, case law of the Court of Justice of the European Union (CJEU)—as it exists at the moment the United Kingdom leaves the European Union—will be given the same status as the case law of the U.K. Supreme Court (and the High Court of Justiciary in Scotland) to maintain a coherent approach to interpreting the law once the United Kingdom has left the European Union.
“The main aim of the ‘Great Repeal Bill’ is to provide reassurance to business that our break-up from the EU will not result in legislative chaos,” says parliamentary agent and government affairs expert Richard Bull of law firm Pinsent Masons. “The body of EU law currently in force will largely apply as now,” he adds.
According to an opinion on the government’s Brexit impact assessment released on 11 July by the Regulatory Policy Committee—a supposed independent body that provides the government with external, independent scrutiny of new regulatory and deregulatory proposals (but which is sponsored by the Department for Business, Energy & Industrial Strategy)—there are currently over 12,000 EU regulations and over 6,000 EU directives in force across the European Union. In addition, there are around 7,900 statutory instruments made in the United Kingdom. that have implemented EU legislation. The impact assessment states that a large proportion of this legislation—between 800 to 1,000 statutory instruments—will not function effectively after the United Kingdom leaves the European Union unless action (even “minimal modifications”) is taken to correct it.
The impact assessment states that transporting EU legislation into U.K. law will mainly affect businesses and public services, but it adds that “the nature of the changes will be such that businesses should not need to radically alter their processes or behaviour as a result of the corrections made to the statute book.”
Yet the process may look easier on paper than it will be in reality and, within a week of the Bill’s publication, there are doubts as to how simple it might be for the United Kingdom to untangle itself from EU law, as well as oversight and accountability.
The European Commission has said that the European Court of Justice (ECJ) should have the power to rule on British infringements of EU laws that occurred at any time before the March 2019 withdrawal date, and the ability to levy financial penalties. The Commission wants the ECJ to be able to hear a case if “facts relating” to it occurred at any point before Brexit day. EU officials have put no statute of limitations on potential lawsuits.
“The main aim of the ‘Great Repeal Bill’ is to provide reassurance to business that our break-up from the EU will not result in legislative chaos. The body of EU law currently in force will largely apply as now.”
Richard Bull, Partner, Pinsent Masons
There are currently 84 infringement proceedings against the United Kingdom at different stages of being finalised. The average duration of cases is 36.9 months, or just over three years, according to Commission figures. The most recent high-profile infringement procedure opened against the United Kingdom by the Commission is for repeatedly failing to meet EU air pollution standards. Experts point out that since the United Kingdom does not have a regulatory body to oversee such infringements yet, the Commission may still be a regulator and enforcement body of last resort.
Elsewhere, the U.K.’s financial watchdog, the Financial Conduct Authority (FCA), has already been shut out from certain Brexit-related discussions with its European counterparts on future regulatory issues. The FCA’s chief executive, Andrew Bailey, told the Financial Times at the beginning of July that the regulator was now excluded from some talks at the European Securities and Markets Authority—the umbrella group that oversees regulators from across the EU—on sensitive topics such as the future relationship between the United Kingdom and the European Union, or what ESMA expects of U.K. companies looking to establish a presence in the European Union. ESMA has confirmed Bailey’s remarks, but has refused to comment further.
The regulatory uncertainty that lingers over Brexit is bad for business, says the U.K.’s leading pro-business lobby group. According to a Confederation of British Industry (CBI) survey of 357 businesses released on 16 July, over 40 percent of businesses say that Brexit has affected their investment decisions. Of those, 98 percent say that the impact has been negative.
The CBI believes that the United Kingdom should remain in the single market and a customs union during any period of transition and that remaining in the single market until a free trade agreement is in force is the simplest way to secure continuity for business operations (including certainty over regulations).
The CBI points out that with no seat at the Commission’s table any longer, or Members in the European Parliament, U.K. businesses are at risk of being disadvantaged by future rules and regulations that favour EU member states. There are, however, it says, many ways in which the United Kingdom can ensure a form of continued—though reduced—influence over the rules affecting it. One way forward is for the government to seek to ensure that the United Kingdom can maintain maximum representation of regulators and agencies possible in European bodies. For example, ensuring the British Standards Institute can maintain its membership of the European standards bodies, and that the U.K.’s Information Commissioner’s Office represents the United Kingdom on the European Data Protection Board.
Another possibility is to agree to mechanisms by which the United Kingdom could challenge any legislation it felt was designed to disadvantage the United Kingdom. Additionally, the CBI suggests that “the U.K. business community should take its own steps to increase its influence in the European Union—investing increased resource in private sector responses to new EU regulations, directives, and processes throughout the legislative cycle.”
The CBI believes that if the United Kingdom remains in the EU single market for the period of transition, there will still be opportunities to review existing regulation from the European Union and its effect on the U.K.’s competitiveness. “Once the new U.K.-EU free trade agreement is in place, the U.K. business community will be able to help the government seek opportunities for more domestic flexibility in regulation, particularly in domestically focused sectors,” it says.
Embattled Prime Minster Theresa May no doubt hoped that the publication of the Great Repeal Bill would have calmed the waters and brought certainty, but other high-profile public servants have done their best to deflate the mood, citing concerns that some key current regulators—notably HMRC—may not be adequately equipped to deal with the changes.
The European Union (Withdrawal) Bill
The following excerpt from the European Union (Withdrawal) Bill explains its scope.
The European Union (Withdrawal) Bill will repeal the European Communities Act 1972 and convert EU law (as it applies in the U.K.) into domestic law on the day the United Kingdom leaves the EU, which is set to be 29 March 2019. This means that, as far as possible, the same rules and laws will apply immediately before and immediately after Brexit, thereby ensuring a smooth transition.
The Bill will not make substantive changes to policy or establish new legal frameworks in the U.K. “beyond those which are necessary to ensure the law functions properly,” says the U.K. Government’s Department for Exiting the European Union.
However, despite the Bill’s conversion of EU law into U.K. law, many areas of law will not function effectively once the U.K. leaves the EU, because they refer to EU institutions that would no longer be relevant in U.K. law. The Bill will therefore give the Government a power to correct the law in these circumstances. The power can only correct deficiencies that come out of the U.K.’s withdrawal from the EU: the Government cannot change existing laws merely because it disliked them before exit. Changes will need to pass through the appropriate parliamentary scrutiny.
To maximise certainty, the Bill will ensure that any question as to the meaning of EU-derived law will be determined in the U.K. courts, by reference to the case law of the Court of Justice of the European Union (CJEU)—the chief judicial authority of the EU—as it exists on the day the country leaves the EU. The Bill will provide that historic CJEU case law be given the same binding, or precedent, status in U.K. courts as decisions of the U.K. Supreme Court (or, in relation to criminal cases in Scotland, the High Court of Justiciary). It is very rare for the Supreme Court to depart from one of its own decisions and the Government would expect the Supreme Court to only rarely depart from CJEU case law.
Source: Department for Exiting the European Union
Experts have pointed out that, even though EU regulations may be transposed into U.K. law relatively easily and that the Bill allows for the creation of new institutions to oversee these regulations, the fact remains that regulatory oversight and administration requires more money and trained staff—neither of which are currently in abundance.
Sir Amyas Morse, head of the National Audit Office, the U.K.’s public spending watchdog, called the government’s Brexit plan “vague,” and compared it to a “chocolate orange” that would fall apart “at the first tap,” like the segments of the chocolate treat.
Sir Amyas waded into the Brexit debate over concerns that the United Kingdom would not have a new customs system in place by the time it left the European Union. The move to the updated Customs Declaration Service (CDC) was planned before the EU referendum vote last year. But following the referendum result, its completion date was brought forward to January 2019—just two months before Brexit is due to happen.
As a member of the EU’s customs union, the U.K. does not impose taxes or require customs declarations on goods from other member states—but as part of Brexit, ministers plan to leave the customs union and negotiate a new arrangement in its place instead. As a result, HM Revenue & Customs (HMRC), the U.K.’s tax enforcement body, estimates that the number of annual customs declarations will rise from 55 million to 255 million after March 2019, with an estimated 180,000 traders making customs declarations for the first time. The current system that is set to be replaced can cope with only 100 million declarations, according to the NAO, so any delay in implementation and roll-out would be embarrassing at best—catastrophic at worst.
The NAO head has said it would be a “horror show” if officials were forced to manually process imports and exports. Sir Amyas told reporters at a briefing in London that there was “very little flexibility” in current plans and not enough support for officials trying to put a back-up plan in place. He added that “active energetic” support for government departments dealing with the consequences of Brexit was needed, but suggested that they were being left to their own devices to see how they got on.
“There has to be strong integration [between departments on implementing Brexit] and I am not seeing evidence of that,” said Sir Amyas.
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