The Retained EU Law Act: cliff edge removed, but cloud of uncertainty remains

Originally, the REUL Act provided for a wide range of EU-derived measures to be revoked automatically at the end of 2023. This approach was heavily criticised, as Travers Smith Partner Ben Chivers explains:

That approach has now been jettisoned in favour of a list of just over 600 measures which will be revoked at the end of the year.  Our initial assessment is that the impact of those revocations will be limited – although see the discussion of environmental protection measures in section 10 below.  This is a very welcome move, which should remove the threat of another Brexit "cliff edge" as described above, together with the risk of measures being revoked by mistake - for an example of a measure which appears to have been overlooked in the Government's "dashboard" of retained EU law, see section 7 on contract and applicable law below.

The REUL Act removes the principle of supremacy of EU law. It also changes how the outcome of conflicts between certain EU-derived law and domestic law will be resolved and how EU-derived law will be interpreted in future. This could give rise to significant uncertainty over whether the meaning and effect of retained EU law will remain the same, once the relevant provisions come into force. 

The REUL Act also removes other general principles of EU law, such as proportionality, which can often be important when interpreting EU law (see section 7 of this briefing for more detail).  Since the end of 2020, these principles were preserved in qualified form, primarily with a view to ensuring that retained EU law continued to mean what it meant before the end of the Brexit transition period (11 pm on 31 December 2020). 

Our survey by practice area below clearly demonstrates that – despite this legislation – a significant volume of EU-derived legislation will remain on the UK statute book, so there is no shortage of raw material for disputes over alleged conflicts with domestic legislation or new interpretations following the removal of EU general principles. We have also highlighted a number of instances where the Government wishes to preserve the status quo and may therefore need to take action to effectively "negate" the impact of the REUL Act – see in particular section 13 on pensions.  

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 REUL Act does not change this, nor does it seek to extend the power to depart from such rulings to lower courts;  this power can only be exercised by the Supreme Court, the Court of Appeal and other courts at the same level as the latter.  However, the legislation does make it somewhat easier for cases to reach the Court of Appeal or Supreme Court so that departures from pre-2021 CJEU case law can be considered, without the need for an appeal to reach those courts.  It does 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
  
  
• In certain fairly limited circumstances (for example where the parties to litigation relating to retained EU caselaw did not appeal), Government law officers, such as the Attorney General, will be able to seek a reference to the Court of Appeal (or the Supreme Court if appropriate).   They will also be able intervene in cases where a court is considering whether to depart from retained EU case law to argue in support of a particular outcome.

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.

The REUL Act gives 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).
  
  
• 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 be used to effect changes intended purely to reduce or remove red tape (and not to achieve any of the other objectives listed above).

For an example of some of the issues that arise from revocation and replacement, see the discussion of consumer protection legislation in section 6 below. 

Most EU-derived company law is being left in place and the current company law reform proposals aim only to address economic crime and transparency, rather than wholesale replacement of EU law. 

The key statute is the Companies Act 2006, which – though primarily a creature of UK law – also incorporates many provisions derived from EU law.  Alongside this, there are many EU-derived statutory instruments which play an important role, such as the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, and the equivalent regulations for small companies and groups; these will continue to form an integral part of the financial reporting regime for UK companies.  In some areas, EU Regulations (which have been "copied across" onto the UK statute book, albeit amended so as to function properly following Brexit) also play an important role, as in the case of the Audit Regulation, which will continue to form an integral part of the audit regime for UK companies.  Whilst the Companies Act 2006 would not have been at risk under the original sunsetting provisions of the REUL Act, the other measures outlined above would have been.

Although no consumer protection legislation is on the list of measures to be revoked by the REUL Act, the Digital Markets, Competition and Consumer Bill (DMCC Bill) will make important changes to EU-derived legislation in this area.  Among other things, it will revoke and replace the Consumer Protection from Unfair Trading Regulations 2008 (CPRs), which set out the law on unfair commercial practices, such as misleading promotions.   

We had previously expressed concern that the Government might use the REUL Act to repeal the Commercial Agents Regulations. Among other things, these Regulations give 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.   This legislation is not on the list of measures to be revoked – but it's unclear whether the Government has considered it as part of its review of retained EU law.

The original draft of the legislation also raised a question mark – at least in theory - over the future of two pieces of retained EU law, UK Rome I and UK Rome II, which provide the English courts with a framework for determining the law applicable to contractual and non-contractual claims.  Whilst we would have expected the Government to take action to preserve these, we can now confirm that they are not on the list for revocation either and will therefore remain in place. That said, it's worth noting that both these measures are derived from EU Regulations and as such may be affected by the changes to the rules on interpretation outlined in section 2 above.

The original draft of the legislation raised a question mark – at least in theory – over the future of two cornerstones of the UK's data protection law framework, the UK GDPR and the Privacy and Electronic Communications (EC Directive) Regulations 2003, SI 2003/2426 (PECR).  It's now clear that they will be retained, as they are not on the list of measures to be revoked.  However, it was always expected that they would have to be preserved because the Data Protection and Digital Information (No.2) Bill (DPDI Bill), which is currently before Parliament, has been drafted on the basis that they will remain in place – although the DPDI Bill will make a number of important changes to them.   This is a further example of an area where retained EU law is being reformed outside the framework of the Act. 

Until now, the Government's scope to provide for exemptions to general rights and obligations under Schedules 1 and 2 of the Data Protection 2018 (DPA) has been governed by UK GDPR.  There have, for example, been two successful challenges where the courts have ruled that the "immigration exemption" in Schedule 2 to the DPA is incompatible with Article 23 of the UK GDPR.  The REUL Act's removal of the supremacy of retained EU law over domestic UK legislation means, however, that amendments to the DPA, including those made by the DPDI Bill, would by default take precedence over the provisions of the UK GDPR.  This technically gives the Government more scope to restrict data subject rights through the exemptions and makes challenges like the ones to the "immigration exemption" harder to mount in future.  In practice, the UK has a strong interest in not diverging too much from the EU in this area, as this would put its EU data adequacy ruling at risk (which would make it harder to exchange personal data with data controllers and processors based in the EEA).

Apart from a relatively minor measure relating to the working time of tanker drivers, no employment legislation is on the list of measures to be revoked.  However, in a separate initiative, the Government has recently proposed changes relating to holiday and business transfers.  As explained in this briefing, the changes are likely to be welcomed by many employers, but do not amount to a radical reform.   The Government also plans to consult on proposals to limit the maximum duration of non-compete restrictions in employment contracts to 3 months – although this is something that it could have done even if the UK had remained in the EU (for more detail, see this briefing). The upshot of this is that the vast majority of EU-derived employment law will remain in place, including measures relating to:

• Working time: minimum annual leave entitlement, maximum weekly working hours, minimum rest breaks and rest periods (Working Time Regulations 1998) – but see this briefing for details of the proposed changes regarding holiday for irregular hours workers.
  
  
• Business sales and outsourcing: automatic transfer of employees on the sale of a business or outsourcing of services, and information and consultation requirements (Transfer of Undertakings (Protection of Employment) Regulations 2006) – but note that some changes are proposed to the rules on informing and consulting employees.
  
  
• Part-time and fixed-term discrimination: rights of part-time and fixed-term employees to parity of terms when compared with full-time and permanent employees (Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 and Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002)
  
  
• Agency workers: right for agency workers to comparable pay and benefits terms when compared with directly engaged employees (after 12 weeks), and right of access to vacancy information and collective facilities (Agency Worker Regulations 2010)

In some cases, the UK regulations go further than the EU law which they implement, for example the UK provides for 5.6 weeks' annual leave which is greater than the 4 weeks' annual leave required by the EU Working Time Directive.  There are currently no plans to change this, even though the UK would in theory be free to do so.

A large number of the measures to be revoked (over 350) fall under the remit of the Department for the Environment and Rural Affairs (DEFRA). Whilst this total may appear somewhat alarming from an environmental protection perspective, several hundred of the measures appear to relate to fishing arrangements that the UK is no longer part of, having left the EU.  Most of the remainder appear to be measures which are similarly redundant or inoperable following Brexit.

That said, there are some surprising themes to those listed for deletion – notably the list includes legislation relating to air pollution control and climate change (specifically greenhouse gas and ozone depleting substance targets which implement international agreements and will presumably therefore need to be replaced). Similarly, several revocations relate to renewable energy and energy efficiency, which could also undermine the Government's net zero commitment if not swiftly replaced or strengthened.

From the outset, EU-derived financial services legislation was carved out of the legislation, and this has not changed.   Instead, the Government is looking to the Financial Services and Markets Bill (currently before Parliament) to reform the UK's post-Brexit financial services regime.

As explained in our briefing, the changes are likely to result in the UK diverging from the EU's approach in a number of important respects.  In addition, many EU-derived provisions will migrate from the statute book into regulators' rule books, with the possibly of further changes as part of this process.

Bodies including the UK Intellectual Property Office, the IP Federation, the Chartered Institute of Trade Mark Attorneys and the British Copyright Council had all expressed a high level of concern over the original sunsetting provisions in the legislation - so the Government's change of heart is likely to have been greeted with a sigh of relief in the world of IP.   Apart from a small number of measures which are effectively redundant, the list of EU-derived legislation to be revoked does not appear to include any material piece of legislation relating to IP. 

There are, however, various areas of IP where the Government has indicated previously that it may want to diverge from the EU, such as overlapping copyright and design protection for designs, as well as the complex system of protection for designs.  The IPO had told stakeholders that its work on the designs consultation was on hold while it conducted further work to ascertain the impact of the legislation – but it may now be able to return to potential reform of the designs regime.

A very large amount of pensions legislation, including – for example - on scheme funding and governance, derives from EU directives but no pensions law is on the list of measures to be revoked and we do not expect the Act to result in any changes in those areas.  The Act could, however, at least in theory have a significant impact on pensions law because – as explained above (see section 2 and section 3) – it changes the way that EU-derived legislation may be interpreted and applied and creates a new route to reopen European caselaw.  Examples of areas where this could arise include the following:

• TUPE and early retirement pensions: When the employees of a business transfer to a new employer (e.g. following an acquisition or on an outsourcing), the new employer is not required to replicate the old employer's occupational pension scheme retirement benefits.  However, CJEU caselaw has established that the new employer is required to replicate redundancy early retirement pensions.  It has never been decided by the courts whether this also applies to pensions paid early where the early retirement is voluntary but it is sometimes assumed that it does.  This could in theory now be subject to different interpretation by the UK courts.
  
  
• Pension Protection Fund (PPF) compensation regime: In the Bauer case in 2019, the CJEU ruled that pensions less than fully protected in an insolvency situation could not be reduced to the extent that it would put the individual below an "at-risk-of-poverty" threshold.  This has presented difficulties for the PPF, which does not know about the financial circumstances of those to whom it pays compensation.  The Government has previously indicated that it wishes to do away with this underpin (but only in respect of future insolvencies) – which suggests that it may legislate to clarify the point.  However, the REUL Act could open the way for a different interpretation of the relevant UK legislation or a decision to depart from the caselaw in Bauer, which could obviate the need for legislation.

The REUL Act received Royal Assent on 29 June 2023, but not all of its provisions come into force immediately.  In particular, the revocation of measures listed in the Act will not take effect until the end of 2023.  In addition, at the time of writing, a date still needed to be set for the provisions relating to interpretation of retained EU law (see section 2) and retained EU caselaw (see section 3) to be brought into force.  However, the powers to change retained EU legislation came into force on Royal Assent.