The Retained EU Law Bill: another Brexit cliff edge looms?

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:

• 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.

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.

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).

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.

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.

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.

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).

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.