Brexit raises legal implications in almost every area. The UK's obligations under the Treaties raise issues of international law, while the role of Parliament in triggering Article 50 raises issues of constitutional law (currently the subject of a challenge in the courts). National law, especially that relating to immigration (especially in some sectors: for an example, see How to reassure and retain your EU Nationals), will need review. Above all there is the question of what will happen to the 43 years' worth of accumulated EU law which is, currently, deeply woven into UK law.
A common theme of much of the commentary on Brexit, not just in the legal area, has been the uncertainty of the path ahead. On the spectrum of 'hard' to 'soft' are a range of outcomes, depending on whether the UK seeks full separation, accommodates itself to an existing framework (such as the Single Market), or some sort of bespoke arrangement. The complexity of the issues, coupled with the Government's reluctance to disclose its negotiating position, makes it impossible to predict the final destination.
However, the Prime Minister's recent speeches at the Conservative Party Conference and, subsequently in Parliament, do add to our stock of knowledge. She has indicated a commitment to a bespoke solution – not based on existing arrangements such as the 'Norway' or 'Switzerland' models. She announced that Article 50 of the Lisbon Treaty will be triggered by the end of March, and a "Great Repeal Bill" will be included in the next Queen's Speech, to remove the European Communities Act 1972 from the statute book.
Will EU law cease to have effect and, if so, when?
This will not mean that all EU law will cease to apply immediately or, indeed, ever. EU law will continue to have effect during the Article 50 sunset period because we will still be a Member State of the EU. The repeal of the European Communities Act 1972 will not take effect until after the UK leaves the EU, which will happen after the Article 50 sunset period.
Even then, that will not mean that EU law will immediately cease to have effect. The proposal, as we understand it, is for the repeal to transpose all EU law that is then current into UK law, until it is amended by statute. The Prime Minister has made it clear that, from that moment, those laws will only be subject to adjudication in the UK's courts – and not in Luxembourg. She also said that the authority of EU law in Britain will end.
Impact on EU law in the UK
EU law consists of various strands, all of which have their basis in the Treaties.
Much of the focus in the media has been on tariffs. These are of course important – especially for goods. In some sectors, the structure adopted for the UK's future relationship with the EU could have a dramatic effect on the tariffs applicable to particular products.
The impact might be magnified in the case of products whose manufacture requires goods to be imported from the EU or elsewhere.
A big part of the forthcoming negotiations will of course focus on tariffs, and the outcome will vary depending on whether we stay in the Single Market, seek access to it only, remain in the Customs Union, i.e. behind the common EU tariff wall, or whether we seek sector by sector market access and hence a sector by sector approach to tariffs. A sector by sector approach is likely to be more complex, and perhaps more vulnerable to the play of individual Member State interests, given that any new deal needs approval from each of the remaining 27 Members.
But EU law is not just about tariffs. It has developed over decades with the aim of creating a level playing field in the EU through a number of other legal measures. These are intended to tackle so-called 'non-tariff' barriers, such as industry regulations and standards, and extend into other areas, such as intellectual property, consumer protection and employee protection. The primary objective of EU law in these areas is to prevent a Member State from creating irregularities in the Single Market that would obstruct trade or, worse, permit businesses in a Member State to benefit from unequal advantages in terms of lower costs or lower standards.
The laws dealing with these 'non-tariff' barriers include:
Harmonisation measures, whose aim is alignment of rules across the EU, to facilitate market access and reduce market differentiation. Examples include: IP laws, with EU-wide trade marks and designs. Brexit may mean doubling up on IP protection though transition arrangements may help (see our note on the impact on IP in the Commercial Forecast 2016: Brexit Edition). Other examples are: data protection, an increasingly vital area in the interaction with individual consumers (see: Information Matters: What does Brexit mean for the future of data protection); e-commerce and consumer protection (e.g. Unfair Commercial Practices Directive – 'UCPD'); and more specific measures such as food labelling and the rules on protected geographical indications or designations of origin such as "Champagne" (the UK has 73 protected food and drink names out of the approximately 820 registered across the EU).
General regulations, whose objectives may go beyond harmonisation, and are aimed at regulating activity across many sectors – data protection is an example, as are employment rules, such as those protecting employees on the transfer of businesses employing them (see our note Brexit: what are the implications for employment law?). Safety, environmental and product standards are other examples, as is the UCPD which strengthens consumer protection. These have a market equalisation dimension – to ensure that businesses in one Member State do not unfairly compete, but there is a social dimension as the restriction is on competition by virtue of practices seen as socially retrogressive.
Sector-specific regulations, falling into either of the above categories, such as financial services regulations (see: Brexit developments in the Financial Services Sector), regulations dealing with medicinal products, etc. Again the aim is to create a level playing field, but sector-specific objectives may also be involved.
Behind these regulations, whether general or sector-specific, are rules on competition law, public procurement (see: Brexit - Will it Affect Public Procurement?) and state aid, designed to prevent anti-competitive behaviour.
The specific impacts of these rules will vary sector by sector and possibly even business by business. It is therefore incumbent on each business to assess the impacts in detail, as they affect its own circumstances.
However, standing back, whatever market access the UK is or is not able to negotiate, it seems unlikely (save for a few exceptional cases) that the UK will find it advantageous for its regulations in the areas covered by EU law to diverge too dramatically. Businesses that view the EU as a major market will not wish to have to comply with one set of rules in the UK and another in the EU. The sheer size of the EU market, not to mention the quantity of legislation built up over 43 years, means that our rules are very likely to converge simply by force of gravity.
A question that remains open, for the time being, is the extent to which the UK courts, in adjudicating a point arising under a law originating as an EU Regulation, will at least have regard to EU rules in interpreting it. Decisions of the Court of Justice will, presumably, no longer be binding as a result of the Great Repeal, but they may retain persuasive authority (see: The UK courts after Brexit, an article by Richard Gordon QC).
While on the face of it the Great Repeal Bill presents an opportunity for a 'pick and mix' approach to EU legislation after the UK's departure, the reality is that changes are only likely to be made at the margins (though not necessarily with marginal consequences, especially if the Government perceives particular 'opportunities' for specific amendments). The Bill could just as well have been entitled the Great EU Law Preservation Bill.
If you require further information on anything covered in this briefing please contact Peter Wienand ([email protected]; or 020 3375 3375), Marie Bates ([email protected]; or 020 3375 7525) or your usual contact at the firm on 020 3375 7000. Further information can also be found on the Focus on Brexit page on our website.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, October 2016