The end of retained EU law?
Under the European Union (Withdrawal) Act 2018 (the Withdrawal Act), the process of dynamic alignment of all EU laws with UK domestic laws was broken on 31 December 2020 (the end of the transition period), with the result that no new EU law made after that date applies in the UK. But, contrary to government pronouncements in 2017 of a “Great Repeal Bill” of EU laws, most existing substantive EU-derived law was in fact preserved and defined as a new category of UK domestic law called “retained EU law”, which encompasses EU direct and derived legislation, directly effective provisions of EU law as well as most EU and domestic case law handed down before the end of the transition period. This will be referred to as EU-derived legislation. Although ministers gained extensive powers under the Withdrawal Act to amend or repeal retained EU law, to date they have exercised these powers sparingly.
As a result, retained EU law largely mirrors the EU law that was in force immediately before the end of the transition period. EU law therefore continues to exert considerable influence over UK domestic law.
The UK Government is now taking renewed steps principally by means of secondary legislation, the parliamentary scrutiny of which is significantly downgraded or in some cases removed, to “shake off” this continued legacy of EU law through the new Retained EU Law (Revocation and Reform) Bill (the Bill). If enacted, the Bill will (with some exceptions – see below) revoke all EU-derived legislation by the end of 2023 using so-called “sunset provisions”.
The Bill would also abolish the principle of the supremacy of EU law and remove the general principles of EU law (such as the principles of effectiveness, fundamental rights and non-discrimination) from UK domestic law (although UK domestic constitutional law tends to incorporate many of these already). Finally, the UK courts will gain greater freedom (and encouragement) to depart from retained EU case law.
The Bill would give ministers and the devolved governments wide-ranging powers to preserve, restate or replace EU-derived legislation. But the default position would be that a large amount of EU-derived legislation falls away at the end of 2023, except where ministers take specific steps to preserve it.
We turn first to look at the Bill in more detail before considering its potential practical impact in a number of key areas. We would note, however, by way of general comment that the Bill has been the subject of considerable criticism and may be the subject of significant amendment during its passage through Parliament. The Regulatory Policy Committee in its formal opinion on the government’s Impact Assessment of the Bill said that the Department for Business, Energy and Industrial Strategy (BEIS) had not undertaken any substantive analysis to support the Bill and described BEIS’s impact assessment as “not fit for purpose”. Such scepticism was recently echoed by the President of the Law Society who observed that, if the Bill were enacted in its current form, its potential impact would be “devastating.” This scepticism appears to also be shared by many in Parliament. According to a report in The Times on 3 January 2023 strong opposition to the Bill in the House of Lords will force the Prime Minister to delay the proposed implementation date of the end of this year and despite a spokesman for BEIS stating that there are “no plans to change the deadline for any government departments” a number of key departments are according to The Times expected to extend the end of year deadline.
Abolition of (most) EU-derived legislation
The parts of the Bill that have garnered the most attention are the “sunset clauses” in clauses 1 and 3. These would revoke most (although not all) EU-derived legislation at the end of 2023. This will include the following.
- EU-derived subordinate legislation. This is UK secondary legislation (i.e. statutory instruments) that gives effect to the UK’s EU obligations (for example, to implement EU directives in UK domestic law). This includes, for example, the Working Time Regulations, which implement EU directives regulating the amount of time employees can be asked to work.
- Retained direct EU legislation (RDEUL). This includes mainly EU Regulations, decisions and tertiary legislation which had direct effect in UK domestic law.
The sunset clauses do not apply to EU-derived primary legislation. These are Acts of Parliament or acts or measures of a devolved legislature that give effect to EU law in UK domestic law. An example is the Equality Act 2010, which implements (among other things) Article 157 of the Treaty on the Functioning of the European Union.
Importantly, the Bill (in clause 22(5)) would also exclude financial services and markets legislation from the sunset clauses. (This is intended to be dealt with separately by the Financial Services and Markets Bill and future finance bills). VAT will be dealt with separately in finance acts, according to a press release issued by BEIS on the day the Bill was published (although the Bill contains no provisions to this effect). However even these exclusions give rise to potential uncertainties. As noted by the Regulatory Policy Committee, given that any future finance bills are yet to be introduced with only a finite window of time before the sunset date, BEIS “cannot guarantee that such changes will occur via the legislative vehicle and therefore may still remain in scope of this Bill and the sunset clause”.
A fundamental aspect of revocation of EU derived law under the Bill is that all such EU legacy law is revoked across the board unlike earlier legislation revoking EU derived law, which has only been applied in specific policy contexts. The starting point for business is therefore that any applicable derived EU law governing an activity will be subject to the sunset provisions at the end of 2023.
The Bill would also allow ministers to postpone the date on which specified instruments expire to any time up to or including 23 June 2026, and ministers and devolved governments would have the power to exclude specified instruments from the sunset provisions altogether. These powers would need to be exercised through statutory instruments under the negative resolution procedure, which provides for the minimum degree of Parliamentary oversight. There are also some limitations on the general use of sun-setting provisions in respect of certain Northern Irish legislation which may be treated as akin to primary legislation.
Any surviving EU-derived law will be automatically re-categorised as “assimilated law. As noted above, the principle of the supremacy of EU law (which still applies in a limited form in UK law) will be abolished (although UK government ministers will be able to recreate an equivalent effect between specific RDEUL and identified domestic enactments). The requirement to interpret EU-derived law according to general principles of EU law will disappear from the end of 2023, and the principle of “direct effect” (which still applies in a limited form) will also end.
This seesawing status of EU law in UK domestic law produces an extraordinarily complex and uncertain outcome. First, there is the sheer scale of work involved in converting so much secondary legislation into assimilated law or postponing the conversion process up to June 2026. It was originally estimated that some 2,400 laws would require review and conversion. However, the Financial Times recently reported that ministers, together with the National Archives, have “discovered” a further 1,400 pieces of legislation (although the government has not at the time of writing confirmed this figure). The scope and scale of such changes will require a high degree of vigilance on the part of business to track the status of legislation which may affect them, which is further complicated by the fact that the sunset provisions apply only to EU derived secondary but not primary legislation. So, to take one example, as already noted the Equality Act 2010 as primary legislation will not expire under Clause 1 of the Act but subordinate legislation made under it will be “sunsetted” and revoked unless sunsetting of the subordinate legislation is extended by the Government until June 2026. There is also a lack of clarity as to how this Bill may interact with the provisions of the Northern Ireland Protocol, which itself may depend on the progress of the Northern Ireland Protocol Bill.
Senior civil servants have warned that reviewing each piece of legislation to decide whether it can be improved, domesticated in some way or maintained in current form up to 2026 will be an enormously complex task. The process will likely require external legal advice and consultation with business groups. The fear is that the government may wait until shortly before the end of 2023, then use the “cliff edge” created by the Bill to present to Parliament a mass of new statutory instruments changing existing retained EU laws under a procedure that commands minimal scrutiny by Parliament. (This has been described as the use of Henry VIII powers “on steroids”.)
The Bill permits different sunset dates for different parts of the same EU-derived legislation. The result is that, at the end of 2023, there could be a confusing mix of legislation which has been converted only in part and which may apply in different ways in different parts of the UK. This could in turn raise some interesting issues as to whether the approach of one jurisdiction may be compatible with the Internal Market Act which is intended to limit trade barriers as between the different parts of the UK.
Finally, alongside the conversion to assimilated law described above, clauses 12 to 17 of the Bill would give ministers and devolved administrations the power to “restate any secondary EU Retained law and to do likewise with any assimilated law (including producing an effect equivalent to the principles of supremacy and any general principles of EC law)”. This contemplates a kind of “double conversion” so that assimilated law assumes a more “UK” character. However, in our view, “double-conversions” are likely to lead to identity crises and reduce confidence in the coherence or clarity of assimilated law.
Retained case law
At present, CJEU case law handed down before the end of 2020 continues to be binding on the lower courts. The Court of Appeal (and other equivalent courts) and the Supreme Court can depart from CJEU decisions where “it appears right to do so”. (The Supreme Court applies the same test when deciding whether to depart from its own previous decisions.) Retained case law also includes decisions of UK courts on (what were then) EU law issues. The normal rules of precedent currently apply to those decisions.
The Bill would substantially overhaul this system.
- It would introduce a new mechanism for first-instance courts and tribunals (such as the High Court of England and Wales) to refer points of retained EU case law to the appellate courts, which will then rule on whether the retained case law should be followed (using new tests discussed below). The case will then return to the lower court to decide the dispute, applying the higher court’s finding on retained case law. This is an unusual approach in the English legal system: normally, findings of law are made against a background of findings of fact (or at least a detailed set of agreed facts).
- If no such reference is made, law officers (senior legal advisers to the UK Government and devolved administrations) would be able to make a similar reference up to six months after proceedings have concluded. The outcome of the reference will not affect the proceedings themselves but will be binding in future cases. Law officers would also be entitled to intervene in proceedings where an appellate court is considering whether to depart from retained EU case law.
- The Bill creates new (non-exhaustive) tests that apply when appellate courts are considering whether to depart from retained EU case law. The tests are slightly different depending on whether the courts are considering a judgment of the CJEU or a judgment of a UK domestic court. But, on any footing, the tests are less restrictive than those that apply currently and could be seen as encouraging appellate courts to depart from retained case EU law. For example, the test for whether to depart from a CJEU decision requires the appellate court to have regard to “the fact that decisions of a foreign court are not (unless otherwise provided) binding”.
Powers to preserve and amend
As noted above, the Bill creates powers to preserve or postpone the sunset provisions for specified legislation and to reproduce an effect equivalent to the principle of supremacy. As also noted above, a further “suite” of wide-ranging delegated powers appears in clauses 12 to 17 of the Bill. These powers enable ministers or devolved authorities to restate, revoke, replace and update EU derived legislation.
Perhaps the most striking example of these powers is found in clause 15 of the Bill, which would enable ministers or devolved authorities to revoke any secondary retained EU law and (clause 15(2)) to “replace it with such provision as the relevant national authority considers to be appropriate and to achieve the same or similar objectives” or (clause 15(3)) to “make such alternative provision as the relevant national authority considers appropriate”. One commentator has described this as a “do anything we want power”.
These are, on any footing, very wide powers, which are already proving controversial. There is a concern that the Bill would give the executive too extensive a power to change law by way of statutory instrument and without proper Parliamentary scrutiny (or any public consultation). It remains to be seen whether these aspects of the Bill survive unamended as it passes through the House of Commons and, in particular, the House of Lords.
Supporters and opponents of the Bill all agree that it is of considerable constitutional and practical importance. The body of retained EU law potentially affected by the Bill is enormous and applies across numerous aspects of everyday and commercial life. The explanatory notes to the Bill say that it “facilitates the planned reforms to over 2400 pieces of [retained EU law]” (but, as noted above, the figure may be higher than this). Businesses, in particular, will be interested to see the Bill’s impact on employment law, environmental protections, consumer protections, tax (especially VAT), and data protection, although the potential reach of the Bill extends far beyond those areas.
The purpose of implementing retained EU law was to ensure legal certainty and continuity at the end of the transition period. The inability to predict specific changes resulting from the Bill creates a risk that these objectives will be undermined. At the time of writing, the Government has provided very little guidance as to what extent or how the powers to preserve, revoke, amend and replace retained EU law will be exercised. Given the large amount of retained EU law potentially affected by the sunset provisions and the short timescales involved, there must also be a risk that some retained EU law will escape full review by Government departments and simply lapse without proper consideration of the consequences.
Even where retained EU law is preserved, there is considerable scope for it to be re-interpreted and applied differently. The new rules, allowing greater scope for UK courts to depart from retained EU case law, increase the potential for revisiting principles that were previously considered settled. The prospect of the UK courts taking a different approach from that previously taken by the CJEU is increased by the fact that the UK courts will apply different rules of interpretation to EU-derived legislation (in particular, because the general principles of EU law will no longer apply).
The abolition of the principle of supremacy of EU law means that domestic enactments would take priority over RDEUL (including where the relevant domestic enactment was implemented before the RDEUL in question). This would effectively “reverse” the current position and, again, may result in RDEUL being interpreted and applied differently as a result of its “reduced” status. However, the fact that ministers or devolved administrations would be able to reproduce an effect equivalent to supremacy for specific pieces of legislation has been described by a government paper as a power “to set legislative hierarchies” and to “mitigate unintended consequences associated with the end of supremacy”. It is difficult to know what a court may make of this power!
Many of the powers conferred by the Bill would be exercisable by both ministers of the UK Government and by devolved administrations (in areas within their devolved competence). This means that there is potential for executive bodies across the UK to take different approaches, creating divergence between the constituent nations of the UK.
Finally, it is worth noting that the Bill could have an impact on the UK’s international obligations. In particular, the UK’s trading relationship with the EU is now governed by the Trade and Co-operation Agreement (the TCA). Some of the UK’s obligations under the TCA are implemented through retained EU law. For example, the TCA contains non-regression commitments in relation to employment and environmental law. If the Bill results in changes to these areas of law, the UK could find itself in breach of its “level playing-field” commitments in the TCA, which may in turn trigger a response from the EU.
The scale and scope of the Bill is such that its potential impact on UK business will be significant. As already noted the essence of the Regulatory Policy Committee’s criticism of the Bill is that there has been to date a complete absence of any meaningful attempt by the Government to assess or quantify the Bill’s practical impact. While every business will have to self assess the impact of the Bill on its activities, there are a number of key areas that can be immediately identified.
The future of both the General Data Protection Regulation and Privacy and Electronic Communications Regulations, as the central sources of data protection law in the UK and both pieces of retained EU law, has been uncertain for some time and these regulations will fall within the sunset provisions of the Bill. The UK government’s various iterations have each made statements indicating a desire for reforming “UK GDPR”, but the current government is yet to state their intended path forward in this regard. The Retained EU Law Bill increases the urgency to determine the new scope of the UK’s data protection regime and with it, significantly, the future of the UK’s adequacy decision from the EU Commission facilitating cross-border data transfers between the UK and EU.
The UK relies on retained EU law in the form of the Network and Information Systems Regulations 2018 (implementing the EU Network and Information Systems Directive 2016) to provide its comprehensive framework in relation to cybersecurity and resilience, applying to operators of essential services, including utilities, healthcare, transport and digital infrastructure sectors. The UK Government undertook a consultation in 2022 with the view to improving legislation in this area, in part in response to more comprehensive measures being proposed by the EU. We are still awaiting the outcome of the consultation, but in view of the Bill the Government’s preference may be to repeal the 2018 Regulations and entirely reframe the UK’s legislation in this area.
Although the UK’s central consumer rights law (the Consumer Rights Act 2015) is unaffected as an Act of Parliament, there are some notable pieces of retained EU law that will need to be addressed in response to the Bill, including the Consumer Protection from Unfair Trading Regulations and the Consumer Contracts Information Amendment Regulations, which do provide a significant part of the UK’s current consumer protection framework. It remains to be seen whether the Government will seek to weaken consumer rights or substantially restate these rights in UK law through this process.
Whilst much of the UK’s intellectual property regime is derived from EU directives, the core legislative framework is generally entrenched as Acts of Parliament. Significant exceptions include the Copyright and Rights in Databases Regulations 1997 which establishes sui generis database rights in the UK, and the Registered Designs Regulations 2001 which substantially amend the Registered Designs Act 1949. Other areas of EU retained law relating to intellectual property rights include in respect of registered design rights, supplementary certificates for pharmaceutical patents and geographical indicators. The Bill raises uncertainty as to what the future scope of these rights may be. In relation to database rights, the Government announced earlier this year a new exception for text and data mining which will weaken database rights (and copyright) in the UK to a greater extent than under EU law.
Pre-Brexit, EU law necessarily governed the UK’s VAT regime, but UK direct taxes - particularly corporation tax - have also been shaped by the requirements of EU law. While much UK tax legislation is contained in Acts of Parliament and is therefore unaffected by the sunset provisions of the Bill, substantive tax law and tax collection mechanics are not infrequently set out in secondary legislation. Identifying whether such subordinate legislation constitutes retained EU law for the purposes of the Bill is not going to be an easy exercise, but we can be confident that the government’s Retained EU Law Dashboard that purports to identify tax-related retained law is incomplete. Where large amounts of tax are at stake, the lack of clarity over the status of legislation as well as the interpretation of any retained EU law that survives the sunset process might well motivate taxpayers to argue that a particular tax provision can no longer be enforced or that a UK court should re-hear argument on points of law that had been thought finally decided by the CJEU.
It is clear that some significant pieces of tax legislation are at risk of falling away unless the government takes action. The main VAT Regulations (SI 1995/2518), which operate the UK VAT regime, will expire in 2023 unless saved by the UK’s new ‘bespoke approach’ for retained EU law and VAT in a future Finance Bill. Conversely, some domestic tax charges that were eliminated by EU law could return. CJEU case law, for example, establishes that the UK’s 1.5% stamp duty reserve tax (SDRT) on the transfer of securities into a clearance service or depositary receipt system is incompatible with the directly effective EU Capital Duties Directive. The UK government has indicated that it does not intend to re-impose this aspect of SDRT, but it has not amended the UK legislation to reflect this. If the Bill becomes law without UK legislation on the point, SDRT charges will revive on the transfer of securities in such circumstances as the EU law directly effective rights fall away.
The public procurement regime in England & Wales is currently contained in secondary legislation. However new primary legislation in the shape of the Procurement Bill is currently before Parliament and may be enacted before the sunset provisions take effect. Scotland has a separate procurement regime. Some of Scotland’s procurement legislation is contained in primary legislation however the bulk of the legislation is secondary legislation which it seems would be impacted by the sunset provisions absent any measures by the Scottish government to preserve the regime.
When originally introduced in 1981 by a hostile Conservative government, the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) were extremely controversial. They are now part of the normal M&A landscape, and purchasers of assets are well used to the idea that they will inherit in-scope employees as part of their acquisition. Equally, service providers understand that they will inherit employees from the preceding contractor in most cases. This default position is now relatively well understood, and factored into pricing and bidding structures. Commercial clients still often resent the fact that transferring employees move across on their existing terms and conditions, which are difficult to alter post-transfer, and occasionally find the information and consultation obligations imposed by the Regulations problematic. The Bill would repeal the Regulations, at least as they apply to business and asset transfers. It is less clear that the service provision change parts of the Regulations would fall away, however, as they were “gold plated” when the legislation was overhauled in 2006, and are not directly taken from the Acquired Rights Directive on which the rest of the regime is primarily based. Repealing TUPE (in full or in part) would be likely to have significant impacts on commercial contracts. In particular: (a) experienced personnel will be lost unless purchasers/incoming contractors negotiate individually to retain them, adding additional time, and the risk of losing key staff; and (b) bidders might seek to undercut one another to take advantage of the lack of any automatic transfer provisions which currently give a relatively level playing field.
Given the hollowing out of the retained UK version of the EU regulation on insolvency proceedings (recast) (EUIR), full revocation of this EU-derived legislation might not be considered significant by some. However, although reciprocity no longer underpins the opening and recognition of insolvency proceedings in the UK and EU member states, if the EUIR “centre of main interests” (COMI) test as to where main insolvency proceedings should be opened was to be fully removed from UK law this could result in more difficulties for UK insolvency practitioners seeking recognition of insolvency proceedings in EU member states. Consistent with the treatment of other legislation relevant to financial services and markets, certain insolvency legislation directed at financial institutions is outside the scope of the Bill (but likely to be inside the scope of the allied Financial Services and Markets Bill).
Under the Agency Workers Regulations, agency staff enjoy a number of relatively inconsequential day-one rights, plus the very significant right to parity as regards their basic terms and conditions after a 12-week qualifying period. The Regulations have long been a target for some Conservative MPs and commentators, although undermining protection for a relatively low-paid and precarious cohort may not sit well with the Government’s stated commitment to maintaining existing protections, such as the recent extension of the ban on exclusivity clauses from those on zero-hours contracts to the low-paid more broadly.
The Working Time Regulations contain a number of rights that employees and workers have probably come to take for granted. Paid annual leave, daily and weekly rest breaks and (for those that have not opted out) a maximum working week have become standard across all UK sectors. Litigation in this area has focussed on the correct method of calculating holiday pay, particularly whether commission and overtime should be taken into account, and has seen a large number of ECJ decisions shifting UK law away from a plain reading of the legislation. That has made the Regulations a target for some, and materially increases the likelihood that they will not be saved from repeal under the Bill. Most commentators assume that some form of replacement, dealing at least with the right to paid holiday and rest breaks, will need to be enacted in that situation.
As noted above, the UK’s anti-discrimination regime is already in primary legislation in the form of the Equality Act. We also note that the Act substantially implements the rights set out in Article 157 of the TFEU. It is worth highlighting that the rights as regards equal pay are not identical, however, so that the impact of the Bill, in removing claimants’ ability to rely on ECJ jurisprudence and on the Treaty itself, risks reducing the coverage of the equal pay sections. The wider concepts under the Treaty have, to take a recent example, allowed female supermarket shopworkers to compare themselves with male colleagues in distribution warehouses. This is, therefore, not necessarily just a minor academic point only of interest to employment lawyers.
Certain aspects of health and safety legislation (the Construction (Design and Management) Regulations 2015) and rules governing construction products are set out in secondary legislation which will potentially be impacted by the sunset provisions. It is, however, possible that the existing regimes will be retained and supplemented as part of the government’s package of reforms for the construction industry following the Grenfell Tower fire (the framework for which is set out in the Building Safety Act 2022). Some aspects of the building control regime and the regulation of architects also derive from EU law and we suspect that the government will seek to carve these out from the sunset provisions.
The Energy Performance of Buildings (England and Wales) Regulations 2012 is retained EU law and will fall within the sunset provisions of the Bill. It is unlikely that these will fall away due to the UK’s commitment to reduce carbon emissions. The Energy Efficiency Standards are EU derived subordinate legislation and will also fall within the sunset provisions of the Bill. The UK government is set to amend the minimum energy efficiency standards for domestic and non-domestic private rented property in England and Wales (perhaps because of Brexit but also to improve energy efficiency) but no draft legislation has been put forward at this point in time. The Bill increases the urgency to determine the UK’s new minimum energy efficiency standards for private rented property, both domestic and non-domestic property in England and Wales.
The Bill will also impact environmental and planning retained EU laws including those relating to matters such as preservation of habitat and protection of biodiversity, requirements for environmental assessments (in connection with NSIPs and certain plans and programmes), planning procedures and environmental impact assessments, control of greenhouse gas emissions and improvement and protection of the water environment. Recent domestic legislation such as the Environment Act 2021, may mitigate the impact of the ‘sunsetting’ of certain of these environmental protections.
The Commercial Agents Regulations 1993 impose certain protections in favour of self-employed commercial agents who negotiate the sale or purchase of goods on behalf of their principal. These protections include, amongst other things, minimum termination notice periods and a right for the agent to receive post-termination payments reflective of the goodwill they have generated. Revocation of these regulations will reduce protections for commercial agents and, absent specific provision, has the potential to lead to uncertainty in respect of the treatment of contracts entered into whilst the regulations were still in force. The fate of these regulations has not been the subject of political commentary to date but they have been the subject of judicial and academic criticism in the past which may mean the government comes under pressure for reform in the context of the sunset provisions.
While the devil will be very much in the detail as to how these and other areas will be impacted by the Bill, the wide ranging and penetrative nature of the reforms envisaged by the Bill leave little doubt that there will be significant changes in many key areas of business activity. Given the current transparency and timing deficiencies in the current draft of the Bill, and the considerable uncertainty as to what can be achieved politically during the course of 2023, great vigilance will be necessary in tracking its progress over the coming months.