Retained EU law: Supreme Court clarifies law that applies to pre-Brexit causes of action

In the context of a pre-Brexit claim for compensation for a cancelled flight, the Supreme Court has given important guidance on the impact of Brexit on causes of action that accrued under EU law before the end of the Brexit transition period (ie 31 December 2020, referred to as "IP completion day"): Lipton v BA Cityflyer Ltd [2024] UKSC 24.

The Supreme Court unanimously rejected the Court of Appeal's view that, because the appeal was heard after IP completion day, the claim was not governed by the original EU version of the relevant EU Regulation, but by the version that had been amended to take effect under UK domestic law post-Brexit (which, for example, changed the amounts of compensation payable from euros to sterling). The Supreme Court held that, on the contrary, the relevant version was that in force at the time the claimants' flight was cancelled. The Court of Appeal's conclusion was, the Supreme Court said, contrary to the basic principle that the law in place at the time the material events occur applies, rather than some different version introduced at a later date.

The court was, however, split 4-1 in its reasoning as to why it was the unamended version of the Regulation that applied. In the majority's view, the European Union (Withdrawal) Act 2018 (the "Withdrawal Act") was intended to be a complete code to deal with the application of EU law post-Brexit, following the repeal of the European Communities Act 1972 (which imported EU law into domestic law) by s.1 of the Withdrawal Act. Its effect was to bring into domestic law not only those versions of EU Regulations that were amended specifically to facilitate their application to the UK post-Brexit, but also the original versions so far as they applied to pre-Brexit causes of action – and, indeed, the causes of action themselves. In the majority's view, with effect from IP completion day, all of this became "retained EU law" (now known as "assimilated law" under the Retained EU Law (Revocation and Reform) Act 2023).

Lord Lloyd-Jones disagreed with the majority view, finding that the Withdrawal Act incorporated EU Regulations (and other forms of EU law) with prospective effect only, and subject to the amendments designed to facilitate their operation in domestic law. It did not incorporate causes of action, and did not need to do so as pre-Brexit causes of action were simply unaffected by the repeal of the European Communities Act due to the presumption against retrospective legislation under s.16 of the Interpretation Act 1978 (and the common law). Accordingly, in Lord Lloyd-Jones's view, in considering pre-Brexit causes of action the courts are not dealing with "retained EU law" at all, but rather actual EU law as it applied at the date of the relevant events.

The question of whether pre-Brexit causes of action are to be determined under "retained EU law" (as per the majority's view) or actual EU law (as per Lord Lloyd-Jones's view) is significant because of the rules on interpretation under s.6 of the Withdrawal Act. In particular, when it comes to interpreting retained EU law, but not otherwise, the higher courts (principally the Supreme Court and Court of Appeal) have power to depart from CJEU decisions pre-dating IP completion day. In both cases, however, on the Supreme Court's view, the UK courts are not bound by CJEU case law post-dating IP completion day, although they can take it into account.

To summarise:

• The Supreme Court was unanimous that, in considering a pre-Brexit cause of action under an EU Regulation, it is the version in force at the time of the relevant events that applies (and not, as the Court of Appeal held, the version amended to take effect for the UK post-Brexit).
• In the majority's view, this unamended version of the Regulation forms part of "retained EU law" and therefore, in interpreting the Regulation, the Supreme Court and Court of Appeal can depart from CJEU decisions pre-dating IP completion day.
• In the minority's view, in considering a pre-Brexit cause of action, the courts are not applying "retained EU law" and therefore there is no power to depart from CJEU decisions pre-dating IP completion day.
• In both the majority and minority view, the UK courts are not bound by CJEU decisions post-dating IP completion day, regardless of whether or not they are interpreting retained EU law.

Although the Supreme Court's views are strictly obiter, as the question did not make any difference to the outcome of the appeal, its views are likely to be examined closely in future cases, both because of their source and because in expressing its views the court was deliberately giving guidance for the benefit of future courts and tribunals that it recognised would increasingly need to grapple with these issues.

Background

The underlying dispute was a claim for compensation relating to a flight from Milan to London in 2018 that was cancelled due to pilot illness. The claimants (Mr and Mrs Lipton) claimed €250 compensation under EU Regulation 261/2004, which gives a right to compensation for cancelled flights, subject to a defence if the airline can show the cancellation resulted from "extraordinary circumstances".

The Liptons' claim was dismissed by the County Court (both by a district judge and on appeal to a circuit judge) in 2019 on the basis that the airline had established the defence of "extraordinary circumstances".

In March 2021, the Court of Appeal allowed the Liptons' appeal, overturning the County Court's decision on the question of "extraordinary circumstances". However, since the appeal had been heard after IP completion day, the court held that the Liptons' claim was governed by the version of Regulation 261 that had been amended by UK regulations made under the Withdrawal Act 2018 (though the amendments made little difference).

The airline appealed to the Supreme Court, both on the question of whether pilot illness amounted to "extraordinary circumstances" under Regulation 261 and on the question of which law applied and why.

Decision

The Supreme Court unanimously dismissed the airline's appeal, agreeing with the Court of Appeal's decision on the question of "extraordinary circumstances". That aspect is not considered further in this blog post.

On the question of which law applied, it was common ground that the Liptons' cause of action had not been extinguished on IP completion day, despite the Withdrawal Act having repealed the European Communities Act. However, there was disagreement as to how that cause of action was carried forward post-Brexit. The competing arguments were:

• The Complete Code analysis: Under this approach, the Withdrawal Act was a complete code by which Parliament dealt comprehensively with the application of EU law post-Brexit, including to causes of action that arose under EU law pre-Brexit. On this view, a claimant's right to pursue such a cause of action was brought forward as part and parcel of the bringing forward of the EU law itself under the Withdrawal Act. This view was favoured by the majority of the Supreme Court, expressed in the leading judgment by Lord Sales and Lady Rose (with which Lady Simler agreed) and a concurring judgment by Lord Burrows.
• The Interpretation Act analysis: Under this approach, the Withdrawal Act brought forward only the instruments containing EU law but not the causes of action that accrued under those instruments pre-Brexit. This approach relies on s.16 of the Interpretation Act 1978 to prevent the repeal of the European Communities Act by the Withdrawal Act having retrospective effect. This view was favoured by Lord Lloyd-Jones who gave a separate judgment.

Despite the differing views of the majority and the minority as to the proper approach, the Supreme Court was unanimous in finding that the Liptons' claim was governed by the version of Regulation 261 that was in force at the time their flight was cancelled, and not the version amended to take effect post-Brexit as the Court of Appeal had held. As the Supreme Court described the Court of Appeal's conclusion:

"This is contrary to a basic principle of the rule of law which Parliament must be taken to respect, according to which it is the law in place at the time the material events occur which applies, rather than some different version introduced at a later date. To analyse the position as the Court of Appeal did would produce strange results and would undermine the important value of finality in litigation."

The majority view

As noted above, the majority adopted what they referred to as the Complete Code analysis, under which the Withdrawal Act should be seen as a complete code to deal with the application of EU law post-Brexit. Under their analysis, the mechanism for bringing forward a pre-Brexit cause of action was s.3 of the Withdrawal Act, which provides at s.3(1): "Direct EU legislation, so far as operative immediately before IP completion day, forms part of domestic law on and after IP completion day."

Section 3(2) defines "direct EU legislation" as including any EU regulation "as it has effect in EU law immediately before IP completion day". The majority noted that an EU Regulation would have effect in EU law in two ways: (i) by stipulating the law to be applied to new situations; and (ii) by requiring any causes of action that had accrued under the Regulation to be recognised and enforced by the domestic courts.

Accordingly, in the majority's view, both Regulation 261 itself and any causes of action that had arisen under Regulation 261 before IP completion day continued to form part of domestic law by virtue of s.3. They therefore fell within the meaning of "retained EU law", which is defined to include anything which continues to form part of domestic law after IP completion day by virtue of s.3 (and certain other provisions) of the Withdrawal Act.

It followed that, in considering such causes of action, the court should apply s.6 of the Withdrawal Act which is headed "Interpretation of retained EU law" and provides, relevantly, that:

• Under s.6(1), a court or tribunal "is not bound by any principles laid down, or any decisions made, on or after IP completion day by the European Court" and "cannot refer any matter to the European Court on or after IP completion day".
• Under s.6(3), and subject to the below, "any question as to the validity, meaning or effect of any retained EU law is to be decided" in accordance with (among other things) CJEU decisions pre-dating IP completion day.
• Section 6(4) gives the higher courts (including the Supreme Court and Court of Appeal) power to depart from such CJEU decisions.

The majority considered this conclusion to be consistent with the fundamental purpose of the Withdrawal Act, which was to provide comprehensively for the post-Brexit legal landscape. By repealing the European Communities Act and providing for the incorporation of all EU law into domestic law, it "signalled a break with the past and a wholesale shift of all relevant legal regimes into a purely domestic framework". The Interpretation Act analysis (as per the minority view outlined below) would mean that a "very extensive and valuable component of that new legal order" – the ongoing enforcement of pre-Brexit causes of action under EU regulations – was not covered by that regime, but was left to the application of a very different enactment (ie the Interpretation Act) which had nothing to do with Brexit.

The Complete Code analysis also had what the majority saw as the benefit of ensuring that all EU law accrued rights would be treated as "retained EU law" and therefore subject to the interpretation regime under s.6 of the Withdrawal Act. Under the Interpretation Act analysis, it said, in considering pre-Brexit claims the courts would not have power to depart from CJEU decisions pre-dating IP completion day (and could even be bound by CJEU decisions after that date, depending on whether the heading of s.6 was regarded as limiting the application of s.6(1) to the interpretation of retained EU law). That analysis would postpone for a considerable time the courts' ability to depart from such decisions, despite having lost the ability to refer matters to the CJEU for a preliminary ruling.

The minority view

Lord Lloyd-Jones disagreed with what the majority referred to as the Complete Code analysis. In his view, rights accrued under EU law pre-Brexit remained enforceable as such in the UK because the Withdrawal Act left such accrued rights undisturbed. They were not affected by the repeal of the European Communities Act, save where the Withdrawal Act said so expressly, because of the common law presumption against retrospective legislation and the effect of s.16 of the Interpretation Act.

Lord Loyd-Jones also disagreed with the majority view that the language of the Withdrawal Act was apt to transpose accrued causes of action, as opposed to rights arising prospectively under EU law, into retained EU law. The more natural reading, he said, was that it was intended to incorporate a snapshot of EU law as it stood on IP completion day with prospective effect and with no effect on pre-existing causes of action.

He also said it was highly significant that the Explanatory Notes to the Withdrawal Act did not suggest that its purpose was to keep pre-Brexit causes of action alive and actionable post-withdrawal. Further, where the Withdrawal Act was intended to operate with retrospective effect, it made express provision to that effect.

As for the effect on interpretation, Lord Lloyd-Jones agreed with the majority that the effect of his analysis is that the higher courts cannot depart from CJEU case law pre-dating IP completion day when applying EU law to pre-Brexit causes of action, as s.6(4) has no application to such cases. However, he considered that s.6(1) is of general application, rather than being restricted to cases where the court is interpreting retained EU law. Accordingly, the UK courts are not bound by CJEU case law post-dating IP completion day, whether they are considering pre-Brexit causes of action or otherwise.