Retained EU law Bill - What do you need to know?

This post was first published on our Beyond Brexit blog. You can follow developments on the Bill and other significant UK policy developments on our Policy Matters blog. 

Much has been written about the Retained EU law (Revocation and Reform) Bill (the “Bill“), which is currently going through Parliament. This Bill is the latest in the line of legal developments since a majority of the UK voted to leave the European Union in June 2016. Approaching seven years later, what is clear is how difficult the process of unwinding our body of law from that of the EU has been. In this post we aim to keep things simple and focus on some key issues, namely:

1. What is the current position?
2. What is the Bill aimed at and what does it purport to do?
3. What has the reaction been?
4. Why does it matter?

WHAT IS THE CURRENT POSITION?

The UK left the EU on 31 January 2020. A transition or implementation period existed until 11pm on 31 December 2020 (known as IP completion day). However, to avoid a cliff edge in terms of legal certainty, the European Union (Withdrawal) Act 2018 (as amended by the EU (Withdrawal Agreement) Act 2020) created the concept of Retained EU law (“REUL“). This was a new category of domestic law, which possesses most of the features of EU law and essentially froze EU law at the point immediately before IP completion day.

REUL covers:

1. EU-derived domestic legislation (i.e. legislation that implemented EU obligations including those under EU Directives);
2. direct EU legislation e.g. Regulations; and
3. other rights, powers liabilities etc. that had effect under s. 2(1) of the European Communities Act 1972

This final category includes a wide range of EU law requirements that have affected the application of EU law and domestic law in the UK, including some aspects of the approach taken by UK Courts. Further, the interpretation of REUL should still take place in accordance with retained EU case law (i.e. such case law which pre-dates IP completion day, including that of the CJEU) and the familiar general principles of EU law such as proportionality and certainty.

The effect of this has been that, although the UK is technically and formally no longer bound by EU law or by decisions of the CJEU after IP completion day, the reality is that much EU law is still on our statute book. The current Bill is the attempt to finally sever those ties.

WHAT IS THE BILL AIMED AT AND WHAT DOES IT PURPORT TO DO?

The explanatory notes explain that the Bill facilitates the amendment, repeal and replacement of REUL by the end of 2023, and assimilates REUL remaining in force after that date by removing the special EU law features attached to it.

Sunset clauses

The headline point is a sweeping sunset clause in clause 1(1) of the Bill which would revoke all EU-derived subordinate legislation (but not primary legislation) and retained direct EU legislation at the end of 2023. However, there are some exceptions, most notably any instrument or provision specified in regulations or having effect under an instrument or provision so specified (clause 2(1)(b)).

There is also an exception for transitional, transitory or saving provisions (clause 2(1)(d)), which the Government has explained is aimed at a number of areas where REUL has already been reformed and transitional, transitory or saving provisions made, whereby some aspects of the previous legislation were saved to support implementation of or transition to the new regime. The aim of the Bill is not to undo or revoke REUL reform that has already been made. Thus, this exception to the sunset will ensure the continued legal operation of REUL that has been identified as necessary to serve a particular purpose.

The most important area of different treatment is REUL relating to financial services.  This extensive body of law is identified in Schedule 1 to the Financial Services and Markets Bill, also currently going through Parliament. That legislation is the subject of a Treasury-led project to create the UK’s own Financial Services regime and gives the Treasury control of the repeal of this body of REUL law.

Outside this and other limited exceptions, unless an instrument or provision is “specified in regulations” it will be revoked automatically at the end of this year (assuming the 31 December deadline is retained).

The theory is that each Government department will consider the REUL that affects its area and decide what to keep, which it will specify in regulations, and what to allow to be revoked. The Government has worded the exceptions to the sunset so as to remove the need to individually list large numbers of legislative instruments in order to preserve them, so for example minor instruments can be preserved by a broader description rather than individual specification, and once parent legislation is preserved, all subordinate instruments will also automatically be saved without needing individual review.

Even with these exceptions, this is clearly still a monumental task – in the House of Commons on 18 January the Government explained that 3,200 pieces of REUL had already been identified at that time and indicated that the number may rise to 4,000. In case a department is not able to complete its task by the end of this year, clause 3 does provide a power to extend the end date to any other date as long as it is no later than 23 June 2026, which is the ten year anniversary of the referendum itself. Perhaps rather ambitiously, the Government had originally indicated that this extension power was not intended for wide usage but only as a fail-safe in extenuating circumstances. In more recent briefings, it appears to be acknowledged that a good deal of the law will need to be extended in its current form. There will then be competition for legislative time to complete the transition to domestic law by the end of 2026.  As the Bill stands, it would require primary legislation to extend that final sunset date.

At present what will actually change remains largely a mystery outside the field of financial services. The government’s intention is to use their dashboard of REUL to notify the public and industry about what will change, and what is likely to remain the same. Each department is carrying out their review separately and reporting, and it is currently not expected anything will be published until the overall picture has been considered separately. This makes it difficult to know how to proceed on agreements expected to be completed in 2024, because it is uncertain whether relevant legislation, such as the TUPE legislation related to business transfers, for example, will still be in force.

Clause 4 provides the sunset clause for the other category of REUL – rights, powers, liabilities, obligations, restrictions, remedies and procedures derived from s 2(1) of the European Communities Act 1972 in force immediately before IP completion day.

Clause 5 makes it clear that the principle of the supremacy of EU law is not part of domestic law after the end of 2023, regardless of when any underlying provision in question was made. Any retained direct EU legislation should now be interpreted, so far as possible, in a way that is compatible with domestic law and where incompatible, is “subject to” domestic law. This means retained direct EU legislation is effectively trumped by any domestic enactment, even if the domestic enactment is older.

Continuing the theme, clause 6 applies the same treatment to the general principles of EU law, so interpretation should no longer take place in accordance with these general principles. Presumably, although this is not explicit, normal common law principles of interpretation will be applied going forward.

To add to the unfamiliar terminology, after the end of 2023, REUL will be renamed “assimilated law” (clause 7). This will cover, for example, primary legislation which gives effect to EU law in domestic law, which is not affected by clause 1(1), and everything that the Government decides to save from automatic sunset by making specific regulations under clause 2. The explanatory notes suggest that this change of name is to reflect that the interpretive effects of EU law will no longer apply to this body of law once these changes have taken place.

Notably, there is no possibility of an extension to the sunset in relation to clauses 4-6, meaning directly effective EU law, the principle of supremacy and all general principles, will definitely come to an end at the end of 2023 (assuming that date is retained), although the Government can decide to reproduce the effect of some of these principles in specific situations.

The Bill also clarifies that clauses 4-6 do not apply in relation to anything occurring before the end of 2023 (clause 23(5)), although the same is not made explicit for the sunset in clause 1, leaving some confusion as to the treatment of causes of actions or rights accrued under legislation which is then revoked under clause 1. The expectation, in accordance with the general presumption against retrospectivity, must be that such causes of actions or rights would also not be affected by the Bill.

Interpretation and effect of REUL

The Bill then contains a section on interpretation and effect of REUL which starts in clause 8 by greater facilitating domestic courts departing from retained EU case law. A new test is set out for the higher courts (Court of Appeal and above) to consider when deciding whether or not to depart from retained EU case law (where the previous test was the same as that used by the Supreme Court when deciding whether to depart from its own previous decisions). Now the higher court must have regard to:

• • the fact that decisions of a foreign court are not (unless otherwise provided) binding;
  • any changes of circumstances which are relevant to the retained EU case law; and
  • the extent to which the retained EU case law restricts the proper development of domestic law.

A similar, but slightly different, test is introduced for considering whether to depart from retained domestic case law.

Although these are simply factors the court has to consider, and do not explicitly point the court towards departing from retained case law, the explanatory notes make it clear that the Government considers that the UK courts should have greater freedom to develop case law on REUL that remains in force, in ways that are not unduly constrained by the continuing influence of previous EU case law. This clause has been described by commentators as a “nudge” to the courts to encourage greater departure from retained case law.

A new development under this clause is the introduction of a reference procedure, not dissimilar to references to the CJEU, whereby a lower court can refer points of law arising on retained case law to a higher court, if the lower court is bound by the retained case law and it considers that the point of law is of general public importance. The higher court will then decide the point of law only and the matter will be sent back to the lower court to apply that decision on the law to the facts before it.

This is an unusual process in the domestic field where normally our courts determine the dispute before them on the basis of the specific facts of the case. Now the appeal courts would be asked to determine questions of law in the abstract, leaving it to the lower court to then apply that ruling on the law to the facts. It is certainly interesting that in a Bill aimed at cutting all ties with the EU, in a legal sense we appear to be borrowing an established EU legal procedure.

If no reference is made during proceedings, there is the possibility of law officers making a similar type of reference within six months of lower court proceedings coming to a conclusion if there was a relevant point of law arising in the proceedings.  The outcome of such a reference would not impact the original decision, but would be binding on the point of law for future cases.

Another interesting concept which is familiar from the Human Rights Act is the idea of making an order where there is incompatibility. Clause 10 provides for these incompatibility orders, where REUL cannot be read compatibly with a domestic enactment, and the order can remove or limit any effect of the relevant provision as well as setting out the effect of the relevant provision in that particular case.

Modifying REUL

The Bill then includes various provisions about modifying and restating REUL. Essentially it will be easier for the Government to amend, restate or revoke large parts of REUL such as Regulations, often using only the negative resolution procedure in Parliament rather than the draft affirmative procedure, which reduces Parliamentary scrutiny. There is also an interesting question as to what counts as “restatement”, with the Government accepting that restatement should not substantively change the policy effect of legislation, but simply codify and clarify. However, since none of this restatement will be subject to any form of consultation or detailed scrutiny, if the drafters unintentionally change the meaning of a provision, or any mistakes creep in, those are not likely to be spotted until it is too late.

It is perhaps clause 16 of the Bill that has attracted the most attention, described as unprecedented from a constitutional perspective and dangerous. This creates a power to revoke and replace. Whilst on some occasions that replacement should be aimed at achieving “the same or similar objectives” as the measure being revoked (under 16(2)), that is not always the case. Clause 16(3) allows simply “such alternative provision as the relevant national authority considers appropriate” which the Government says is intended to cover similar ground to the REUL being replaced rather than creating new law in wholly unrelated policy areas. However this does not have to be used to achieve the same overarching objective but can be used for different objectives. There are some limits to this otherwise apparently unfettered power to “do whatever you like” as it has been called: for example, it cannot be used to create new criminal offences or levy taxes. The most unusual limit is that the clause 16 power can only be used where the national authority thinks that the overall effect of the changes in relation to a subject area does not increase the regulatory burden. Burden for these purposes includes cost, inconvenience and obstacles to innovation, trade, efficiency, productivity and profitability (16(10)). This is why clause 16 has been said to demonstrate that the Bill is one aimed at deregulation (in line with the Government’s message about “cutting red tape”), rather than improvement of standards.

WHAT HAS THE REACTION BEEN?

It is fair to say there have been significant concerns raised about the Bill.

Many prominent figures have voiced constitutional concerns about handing such significant power to the Executive and reducing the role of Parliament, including former Brexit secretary David Davis MP, describing the Bill as a “blank cheque” for the Executive. This was followed by a letter to the Times, from a cross party group of peers, also describing concerns over the Executive having power to change well established rights in numerous areas, and Parliament effectively being forced into rubber stamping proposals, for fear of the only alternative being no rules at all in a particular area come the end of the year.

The Law Society has raised fears about the Bill’s “devastating impact on legal certainty”. The director general of the Confederation of British Industry has also addressed the problem of uncertainty and confusion caused by this Bill, echoed by numerous other organisations.

Notably, the Regulatory Policy Committee was scathing about the Impact Assessment carried out for the Bill, concluding that it was “not fit for purpose” in that the Government had not sufficiently considered the full impacts of the Bill, particularly the impact on businesses.

By way of response to such concerns, DEFRA, the Department with the biggest job by far with over 1,700 pieces of REUL identified already, have indicated that their biggest priority will be to preserve what is needed before the end of 2023 and preservation will be the default approach for now unless there is good reason to revoke or amend REUL.

In this context, there are legitimate concerns over what will happen if a particular piece of REUL is simply not identified in time and therefore not specifically saved. In that situation it will be assumed to be revoked under clause 1, which highlights the risk that there will be unintended gaps in the legislative regime next year.

The Bill has now completed its Committee stage in the House of Lords with relatively few amendments, and has entered the report stage.  As anticipated, there were vehement objections raised in the Lords debate in Committee, with the Bill being described as “unacceptable” and noting that important rights may “disappear in a puff of smoke”. Others thought the Bill represented a “blatant attack on the powers of the UK parliament”. There are a large number of amendments tabled for the Report Stage, scheduled for 19^th April, and it is possible the Bill will be further altered before returning to the Commons, given the constitutional concerns expressed by the Lords, and the full house consideration at this stage.

In debate the Government has been robust in not accepting the characterisation that these powers are unprecedented or weaken the scrutiny of Parliament, suggesting that many of these laws were themselves brought into force with no scrutiny of any kind by this Parliament and were merely directly imposed by Brussels. This treats the process in which most modern EU laws in the form of Directives and Regulations are adopted in “cooperation” with the elected European Parliament, including UK representatives, as unimportant to their characterisation.

WHY DOES IT MATTER?

The constitutional concerns and uncertainty are far-reaching problems that will impact all sectors, given the way EU law permeated every aspect of our lives.

This uncertainty for businesses and their legal advisers is troublesome and only becomes greater as time passes without much indication of what will be preserved or replaced in similar terms. Those responsible for affected business areas should review the Government dashboard which lists REUL already identified, although it should be noted that it is not necessarily exhaustive and is updated only intermittently, currently on a quarterly pattern.

For organisations that operate in areas heavily dependent on specific EU law, there is certainly something to be said for engaging in specific correspondence or discussions with the relevant Government department to ensure that key pieces of REUL in your area have not been missed. It will also be important to review any new Regulations that the relevant department does produce. New secondary legislation made in this way will be subject to challenge if it is defective, in the usual way, and that may well lead to further delays and uncertainty that extend far beyond the end of 2023.

If you would like to discuss what the Retained EU Law Bill means for your scheme or organisation speak with your usual HSF adviser or contact one of our specialists:

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