The EU (Withdrawal) Act - What you need to know

05 July 2018

On 26 June the EU (Withdrawal) Act 2018 ('the EUWA') received royal assent. The purpose of the new law is to avoid a legal vacuum once laws which currently apply in the UK because of its membership of the EU fall away after Brexit.

Although its passage through Parliament was intensely controversial, the EUWA is now on the statute book and will touch upon every area that is currently affected by EU law. It grants Ministers power to reshape how current EU law will apply in the UK after Brexit, and draft regulations to be made under it are already being published by government departments.



The current position

EU law currently takes effect in the UK through the European Communities Act 1972. Under section 2(1) of the 1972 Act, certain types of EU rights and obligations, which are intended to be directly effective, are given effect in the UK without the need for any further domestic legislation. This includes rights in the EU treaties as well as EU regulations which contain detailed legal rules.

Other types of EU law are given effect through UK regulations made under section 2(2), or in some cases through separate Acts of Parliament. This includes EU directives which set out broad outcomes or frameworks but which leave it to each member state to make its own provision to achieve the required legal effect.

In terms of its application, EU law is 'supreme'. This means that where there is a conflict between EU law and UK domestic legislation, the latter can be disapplied - a principle which provides the only circumstance in which a UK court can disapply an Act of Parliament.

UK judges are also bound to follow decisions by the Court of Justice of the EU (CJEU) under section 3(1) of the 1972 Act.

The domestic legal problem caused by Brexit

The retention of the 1972 Act following Brexit would mean that directly effective EU law under section 2(1) would fall away, but regulations made under section 2(2) would remain. The Act also ties UK customs duties to those of the EU and makes provision for matters such as the common agricultural policy and the provision of information to EU institutions, which - subject to the terms of the transitional period and the final trade deal with the EU - will not be appropriate following Brexit.

If we are to leave the EU, the only sensible course is to repeal the 1972 Act.

However, upon doing so, both directly effective EU law and the secondary legislation giving domestic effect to other types of EU law, will cease to have effect. This will leave substantial legal gaps in relation to those areas from which the UK has traditionally derived its laws from the EU.

A new category of law

The EUWA seeks to deal with these issues by repealing the 1972 Act (section 1) on 'exit day' and simultaneously creating a new category of EU law - 'retained EU law'.

Retained EU law will be comprised of the four following components:

  1. EU-derived domestic legislation (section 2) - secondary legislation made under section 2(2) of the 1972 Act, and other domestic legislation which implements EU obligations, made prior to exit day.
  2. Direct EU legislation (section 3) - EU law that has direct effect in the UK prior to exit day, such as EU regulations and decisions. It will be the English language text of such legislation that will be authoritative.
  3. Any remaining 'rights, powers, liabilities, obligations, restrictions, remedies and procedures' which are available in domestic law through section 2(1) of the 1972 Act prior to exit day (section 4). This will include rights under EU treaties and directly effective provisions of directives. However, it will not apply to rights under directives which are 'not of a kind' recognised by CJEU or 'any court or tribunal' in the UK in a case decided before exit day (section 4(2)(b)). Quite what this means is open to debate and will almost certainly be tested before the courts.
  4. Retained EU case law (section 6(7)) - principles laid down by, and decisions of, CJEU in relation to the above three categories which have effect in EU law before exit day, except where excluded by other parts of the EUWA.

The intention therefore is to take a snapshot of (most) EU law as it applies in the UK on exit day and to bring that law within the UK's domestic legal framework.

However, there are exceptions. The most glaring of these is the specific exclusion of the Charter of Fundamental Rights (section 5(4)). We have previously discussed the omission of the Charter from retained EU law and the effect that this will have. Its omission is likely to give rise to litigation as claimants test their ability under section 5(5) to return to the sources of rights elsewhere in retained EU law from which the Charter drew.

Exit day

Much of the EUWA revolves around the concept of 'exit day'. When the Act was first introduced to Parliament, exit day was left to be defined by Ministers through regulations, with the ability to specify different dates for different purposes. In its final form, the Act defines exit day as 29 March 2019 - the day on which, subject to any extension, the EU treaties will cease to apply to the UK under Article 50 of the Treaty on European Union (section 20(1)).

However, there is also a power to amend the date for exit day where the EU treaties are to apply to the UK beyond 29 March 2019 (section 20(3) - (4)). This will allow the status quo - in the form of the 1972 Act - to continue if required under the terms of the transitional period, which will run from 29 March 2019 until 31 December 2020 when any future trade deal will hopefully come into full effect.

The status of retained EU law

The principle of supremacy of EU law will not apply to any legislation passed after exit day (section 5(1)). However, the principle will apply in relation to the interpretation or disapplication of any enactment or rule of law passed or made before exit day (section 5(2)). The latter applies even where that enactment or rule is amended after exit day, so long as the application of the principle is consistent with the intention of the modification (section 5(3)).

This means that if there is any conflict between retained EU law and domestic legislation made before exit day, the retained EU law will prevail. However, Acts of Parliament made after exit day will be able to override retained EU law. This sounds simple but does give rise to some important questions.

For example, when considering an EU directive, pre-exit day case law will need to be found to establish that the particular provision in question has been retained.

How too is retained EU law to be classified within the UK's hierarchy of laws - is it to be viewed as primary or secondary legislation? The EUWA provides only partial answers.

Under section 7(1), EU-derived domestic legislation will retain the same status that it did prior to exit day. So, for example, Acts of Parliament that currently give effect to EU law will remain primary legislation and regulations made under section 2(2) of the 1972 Act will remain subordinate legislation.

However, an already complicated picture is complicated further with respect to the other categories of retained EU law.

Sections 7(2) - 7(3) split direct EU legislation into two subcategories:

  • 'retained direct principal EU legislation' - EU regulations and annexes to the EEA Agreement; and
  • 'retained direct minor EU legislation' - decisions and tertiary legislation which have direct effect in the UK before exit day.

Provision is then made as to how laws falling within each subcategory - as well as EU law retained under section 4 - can be modified in the future. It is possible that Parliament will use these classifications in later Acts to grant wider or narrower powers to Ministers to make modifications through delegated legislation.

Once incorporated, retained direct principal EU legislation will be treated as primary legislation for the purposes of the HRA (para 30, Sch 8). This means that it cannot be quashed by UK courts on the basis that it does not comply with the European Convention on Human Rights.

However, apart from EU-derived domestic legislation, no provision is made in relation to the status of retained EU law in other circumstances, which begs the question of whether it can be challenged on public law grounds such as unreasonableness or lack of certainty.

The interpretation of retained EU law

Under section 6(1), UK courts will no longer be bound by any principles laid down, or decisions made, by CJEU after exit day.

However, a UK court may have regard to decisions and principles from CJEU - as well as anything done by the EU or any of its entities - after exit day if it considers it 'appropriate' to do so (section 6(2)).

Retained EU law is to be interpreted in line with any relevant case law from the EU and UK courts from before exit day (section 6(3)). However, the Supreme Court may depart from pre-exit day decisions of the EU courts where it considers it appropriate to do so (section 6(4)(a)).

It remains to be seen how the lower courts will interpret 'appropriate' when considering how to treat developments in EU law after exit. However, it is likely that judges will pay greater attention to post-Brexit developments in EU law in relation to matters on which our trade deal with the EU requires harmonious interpretation.

It will also be interesting to see how the courts will treat the principles of EU law. In EU jurisprudence these are intended to permeate the interpretation of EU law, but some of these principles have been carved out of retained EU law (para 2, Sch 1), with the remainder no longer being able to found a cause of action (para 3, Sch 1). It may be that the courts will simply base their decisions on common law principles which mirror EU principles - as the Supreme Court did in R (Unison) v Lord Chancellor. Where a common law analogue cannot be found, EU principles may come to be treated in the same way as customary international law - used as an aid to interpretation and a source of inspiration for the development of the common law.

Reshaping the law in years to come

As currently drafted, EU law is intended to create a shared legal order between member states - and the principles of the supremacy of EU law and its direct effect are intended to facilitate this. However, following Brexit, the UK will no longer be a member of the EU. It will no longer be subject to rules and decisions made by EU bodies, or to the web of mutual obligations which pertain between member states.

This means that, like the 1972 Act, much retained EU law will simply not make sense following Brexit. In order to function effectively after exit day it will need to be modified to reflect the fact the UK has left the EU.

Under section 8(1), Ministers are given the power to amend retained EU law by regulations which the Minister considers 'appropriate' to:

'…prevent, remedy or mitigate -

  1. any failure of retained EU law to operate effectively, or
  2. any other deficiency in retained EU law,

arising from the withdrawal of the United Kingdom from the EU.'

The explanatory notes to the EUWA state that the concept of a deficiency is intended to cover circumstances where a retained EU law 'does not function appropriately or sensibly'.

What constitutes a deficiency is set out in section 8(2), which was changed from an indicative to an exhaustive list during the passage of the Act through Parliament. It includes examples that one would expect, such as where a particular provision is redundant after Brexit or where it confers powers on EU bodies that can no longer exercise those powers in the UK.

However, it also indicates that the concept of deficiency will cover much wider circumstances, such as where the Minister considers that 'any reciprocal or other arrangements … are no longer appropriate, as a result of [Brexit]' (section 8(2)(e)).

Any clarity gained through the change of section 8(2) to an exhaustive list was eroded by the inclusion of section 8(3), under which a deficiency will also include anything that the Minister considers to be 'of a similar kind' to a deficiency under section 8(2). The list of deficiencies may also be expanded at a later date.

Regulations made under section 8(1) may make any provision that can be made by an Act of Parliament (section 8(5)). This means that they may also amend Acts of Parliament - providing what is sometimes referred to as a 'Henry VIII power'.

There are a number of limits imposed on the power to make regulations. It is time limited to two years after exit day (section 8(8)). In addition, section 8(7) contains a list of things that cannot be done through regulations, such as imposing or increasing taxation, making retrospective provision and creating new criminal offences for adults punishable by imprisonment of more than two years.

In terms of Parliamentary scrutiny, the default position is that most regulations made under section 8(1) will be subject to the negative resolution procedure, meaning that they will receive scant consideration by Parliament (para 1(3), Sch 7). A small number of regulations will be subject to affirmative resolution and thus will need to be positively approved by both Houses of Parliament (para 1(2), Sch 8). Committees in both Houses may also recommend that negative regulations should instead be subject to affirmative resolution (para 3, Sch 7). However, that recommendation does not have to be followed.

In the relative absence of Parliamentary scrutiny, much judicial ink will be spilled in defining the parameters within which Ministerial powers can be exercised under section 8(1). For example, where a process currently set out in an EU law is deficient simply because it refers to EU bodies, should a Minister be confined simply to replacing those bodies with UK equivalents? What if the Minister tries to rewrite the process more widely or concentrate power in the hands of one decision-maker where the original process involved input from several stakeholders?

When laying regulations before Parliament a Minister is required to make an explanatory statement (Para 30, Sch 7):

  • confirming that, in the Minister's opinion, the proposed amendments do no more than is necessary;
  • explaining why there is good reason for the amendments and why they are a reasonable course of action; and
  • drawing attention to any amendment, repeal or revocation of equalities law.

These statements are intended to aid the Parliamentary sifting committees in deciding whether to recommend greater scrutiny for particular regulations. However, they will also prove valuable sources of insight into Ministers' reasoning that can be considered by potential challengers and ultimately by the Court in deciding whether a particular use of section 8(1) powers has been lawful.

Conclusion

In a previous article we discussed the controversial issues with which the Lords would be faced once the EUWA completed its passage through the House of Commons. The Lords did indeed grapple with those issues, offering a raft of amendments - most of which were then rejected by MPs during the finalisation of the legislation.

The EUWA remains, and will remain, intensely controversial. In this article we have sought to focus on the more practical legal issues that will affect businesses and lawyers. In doing so we have set to one side wider issues, such as how the EUWA deals with devolution and Parliament's 'meaningful vote' on the withdrawal agreement and framework for the UK's future trading relationship with the EU (on which see the Exiting the EU Select Committee's recent report).

Much of the attention will remain on these larger political questions, with the immediate focus being on the Prime Minister's attempts this weekend to find a solution to the customs issue that is acceptable both to her cabinet colleagues and to the EU27.

However, behind the glare of publicity and speculation surrounding the ongoing negotiations, the Government Legal Department will be busy in the coming months and years churning out a raft of regulations under the EUWA to amend retained EU law. Some of the amendments will be relatively anodyne - such as amending references to the EEA. Others will see Ministers test the boundaries of their powers to make more wide-ranging changes to the law as it currently applies.

Businesses will need to keep a careful watch for regulations that affect their sectors.

Revisions to retained EU law will see legal provisions drafted in Brussels chopped out and replaced with provisions which follow the UK's legislative drafting style. The result will be a Frankenstein's statute book of mismatched parts. It will not be pretty, or easy to navigate.

The EUWA has passed from the white heat of political debate to the cool dispassion of legal analysis. Its meaning will now be decided, not by sweeping political rhetoric, but by detailed and rigorous judicial analysis. Both the ambiguities the EUWA contains and the controversial uses to which its powers will be put are sure to keep judges busy for a while.


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