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Timestamp: 2020-04-10 13:20:56
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The European Union (Withdrawal) Act 2018: Ten Key Implications for UK Law and Lawyers
By James Segan
On 26 June 2018, after nearly a year of deliberation by Parliament, the European Union (Withdrawal) Act 2018 (the “Act”) received royal assent. It is a statute of profound importance to the legal systems of the UK. It will become familiar in just the same way as did the European Communities Act 1972 (“ECA 1972”) before it (which the Act will repeal). This article seeks briefly to summarise the purpose and architecture of the Act; to identify some key themes of change; and to outline ten key implications for UK law and lawyers. It then concludes with a brief observation about transitional arrangements and thereafter.
The purpose and architecture of the Act
The basic purpose of the Act, as readers will know, is to repeal the ECA 1972 but then retain in effect after “exit day” almost all UK laws which have been derived from the UK’s membership of the European Union since 1 January 1973. “Exit day” is defined as 29 March 2019 at 11pm (section 20(1)). The central architecture of the Act is simple and will be familiar to many readers:
(i) Section 1 repeals the ECA 1972 on exit day;
(ii) Section 2 continues in force all “EU-derived domestic legislation”, which is principally delegated legislation passed under the ECA 1972 to implement directives;
(iii) Section 3 converts all “direct EU legislation”, being EU regulations, decisions and tertiary legislation, into domestic law; and
(iv) Section 4 converts all other “rights, powers, liabilities, obligations, restrictions, remedies and procedures” recognised and available by reason of section 2(1) ECA 1972 into domestic law.
The purpose and message are therefore ones of continuity. The effect of the key provisions set out above is that the content of EU law as it stands at 29 March 2019 is going to be a critical piece of legal history for the purpose of UK law for decades to come.
The legal reality will not, however, be one entirely of continuity – far from it. The Act will instead bring with it some very major changes. Three key themes can be highlighted in particular:
First, although the existing body of EU law will be retained, the machinery for operating it will be significantly changed: as we shall see, many of the remedies or techniques used to give full effect to EU law (Francovich damages, direct effect, validity challenges, fundamental rights, references to the CJEU) are either not being retained or at least seriously curtailed.
Secondly, future developments of those laws which are being retained are, as we shall again see, excluded. EU law is therefore being retained, but not as a living body of law. It is instead being preserved in aspic as at 29 March 2019.
Thirdly, very many of the laws being retained only make sense as part of a supra-national legal order. To work as domestic laws confined to the UK they will require, as explained below, either immediate amendment or an extremely purposive reading by the Courts. This includes some of the most important and fundamental Treaty provisions which will be incorporated into UK law by section 4 of the Act.
The truth, therefore, is that “retained EU law” is going to be a very different beast from the continuing body of EU law proper, and increasingly so as the years go by. There are many articles and books which could and will be written on each area affected by the Act. But at this early stage, ten particularly important implications for UK law can be identified.
Ten key implications for UK law
(1) Farewell to Francovich – but a two year grace period for accrued claims
First, the Act removes, with some very limited exceptions, any action for Francovich damages. One of the distinguishing features of EU law, since the famous Francovich decision of the ECJ in 1991, was that if the Government broke EU law then a claim in damages would lie if the breach had been sufficiently serious and had caused loss. This is not, however, going to be a feature of retained EU law. Schedule 1, paragraph 4 of the Act provides that “[t]here is no right in domestic law on or after exit day to damages in accordance with the rule in Francovich.”
Moreover, this applies even to “anything occurring before exit day (as well as anything occurring on or after exit day)” (Schedule 8, paragraph 39(1)). So even existing causes of action for breach of EU law are likely to be extinguished unless either (1) proceedings have been “begun, but not finally decided, before a court or tribunal in the United Kingdom before exit day” (Schedule 8, paragraph 39(3)), or (2) proceedings are “begun within the period of two years beginning with exit day so far as the proceedings relate to anything which occurred before exit day” (Schedule 8, paragraph 39(7)).
So there will be, in effect, a two-year grace period up to March 2021 for Francovich claims which accrued before exit day. But after that we will be back to the pre-1991 position.
(2) No future direct effect of directives: such effect must have been recognised before exit day
Secondly, retained EU law will have no doctrine of direct effect of directives. Directives are supposed to be given effect by Member States in their domestic law. But if a Member State has not done so by the end of the implementation period then a given directive itself may be enforced against that Member State if sufficiently precise and unconditional. The Act specifically excludes the operation of this doctrine, by the following provisions:
Directives are not in themselves “retained EU law”: only the domestic legislation made to implement them (section 2) and any directly effective rights under such directives already existing before exit day (section 4(1)). (This is because directives are supposed already to be part of UK law by virtue of implementing legislation.)
Section 4(2)(b) prevents any rights arising “…under an EU directive (including as applied by the EEA agreement)” if those rights are “not of a kind recognised by the European Court or any court or tribunal in the United Kingdom in a case decided before exit day (whether or not as an essential part of the decision in the case).”
So any directives which the UK has transposed inaccurately or inadequately as at exit day will be incapable of giving rise to directly effective rights after exit day unless the right has been already recognised by the EU or UK courts. That is so even though if the UK had properly implemented the directive then the rights would already form part of the law to be continued in effect by section 2.
(3) No future validity challenges: such invalidity must have been recognised before exit day, subject to further delegated legislation in the future
Thirdly, retained EU law will not – at least absent future delegated legislation to make provision for this – incorporate any doctrine of invalidity. The scheme of EU law proper is, as with most systems of law, a hierarchy or pyramid. The Government set this out quite neatly in its Explanatory Notes to the Withdrawal Bill as it was originally introduced to Parliament (see paragraph 42):
Each level of law in the pyramid prevails over the lower levels. So if a regulation (level 2) is contrary to a general principle of EU law (level 1), then it is invalid. This is not, however, going to be part of retained EU law. The Act achieves this by the following mechanism:
Schedule 1, paragraph 1(1) excludes validity challenges, providing that “There is no right in domestic law on or after exit day to challenge any retained EU law on the basis that, immediately before exit day, an EU instrument was invalid.”
Schedule 1, paragraph 1(2)(a) then makes an exception to this rule “so far as the European Court has decided before exit day that the instrument is invalid.”
So the basic position is that EU law is continued or converted into UK law by section 2, 3 and 4, but with no mechanism for giving effect to the hierarchy of provisions within this structure of EU law. Retained EU laws will indeed remain part of domestic law even if the CJEU subsequently recognises them to have been invalid.
The only exception to this unusual state of affairs will arise if the Government decides to make regulations under Schedule 1, paragraphs 1(2)(b) and 1(3), which permit delegated legislation allowing invalidity challenges to retained EU law if they are “of a kind described, or provided for, in regulations made by a Minister of the Crown”. Such regulations may “provide for a challenge which would otherwise have been against an EU institution to be against a public authority in the United Kingdom”. The Government therefore has the power to decide the circumstances, if any, in which the corpus of retained EU law might be capable of being declared invalid. Absent such regulations, no such challenges will be possible unless invalidity was recognised before exit day.
If such regulations are made, then the Courts will be required by section 6(3) to decide any question as to the validity of retained EU law “so far as they are relevant to it— (a) in accordance with any retained case law and any retained general principles of EU law, and (b) having regard (among other things) to the limits, immediately before exit day, of EU competences.” The Government has made clear that the reference to “EU competences” here was inserted with a view to the issue of national security: paragraph 106 of the Explanatory Notes to the Bill as introduced refers expressly to Article 4 of the Treaty and notes that national security is outwith the scope of EU law.
(4) No more references to the CJEU, and no more absolute supremacy for CJEU decisions: not bound by any after exit day, and the Supreme Court and High Court of Justiciary are not bound at all (the test for departing is the test applied to their own decisions)
Fourthly, our relationship with the CJEU is set to change dramatically. Most obviously, section 6(1)(b) provides that: “A court or tribunal … cannot refer any matter to the European Court on or after exit day.” So there will be no references to the CJEU after 29 March 2019.
Furthermore, future CJEU decisions will be simply a discretionary consideration for the UK courts. Under section 6(1)(a), a court or tribunal “is not bound by any principles laid down, or any decisions made, on or after exit day by the European Court”. Such principles and decisions will simply be a discretionary consideration, section 6(2) providing that “[s]ubject to this and subsections (3) to (6), a court or tribunal may have regard to anything done on or after exit day by the European Court, another EU entity or the EU so far as it is relevant to any matter before the court or tribunal.”
By contrast, past CJEU decisions on retained EU law – known as “retained EU case law” – are binding on all courts below the Supreme Court/High Court of Justiciary. Under section 6(4), the Supreme Court/High Court of Justiciary are “…not bound by any retained EU case law …”, and in deciding whether to depart from any retained EU case law, each “must apply the same test as it would apply in deciding whether to depart from its own case law” (section 6(5)).
(5) The status of retained EU law: “retained direct principal EU legislation”, “retained direct minor EU legislation” and “retained EU law by virtue of section 4”
Fifthly, we must become used to some new categories of domestic law. The Act divides retained EU law into three main classes, being:
(i) “Retained direct principal EU legislation”, which consists, broadly, of EU regulations and Annexes to the EEA Agreement referring to or adapting such regulations (section 7(6)).
(ii) “Retained direct minor EU legislation”, which consists, broadly, of all other retained direct EU legislation e.g. decisions, tertiary legislation (section 7(6)).
(iii)“Retained EU law by virtue of section 4” (section 7(4)).
The importance of these categories lies in what the Government can do to amend them, and when, without specific primary legislation. In very broad terms, the first and third categories are made akin to primary legislation: they can be modified by delegated legislation only if made under the Act itself, or an existing recognised Henry VIII power (section 7(2), (4)). By contrast, the second category can be modified by any existing or future powers to make, confirm or approve subordinate legislation (section 7(3) and Schedule 8).
(6) Supremacy of EU law, but only over pre-exit day laws
Sixthly, the doctrine of supremacy of EU law will have no application to laws passed after exit day. Under section 5(1), the “…principle of the supremacy of EU law does not apply to any enactment or rule of law passed or made on or after exit day.” So post-exit day laws will take precedence over retained EU law – although which kind of post-exit day law is necessary to “trump” retained EU law depends on which class of retained EU law it is, as explained above. As to pre-exit day domestic laws, the “…principle of the supremacy of EU law continues to apply on or after exit day so far as relevant to the interpretation, disapplication or quashing of any enactment or rule of law passed or made before exit day” (section 5(2)).
(7) Continued Treaty Articles on free movement, state aid etc – but how will they work?
Seventhly, the courts will have to try to make sense of many laws which are difficult to construe or apply as domestic UK laws. As explained above, section 4(1) provides that “[a]ny rights, powers, liabilities, obligations, restrictions, remedies and procedures” recognised and available by virtue of section 2(1) ECA 1972 “continue on and after exit day to be recognised and available in domestic law”. The Government’s Explanatory Notes to the Bill gave a non-exhaustive list of some 28 such directly effective rights which the Government considers will thereby be converted into provisions of domestic UK law, including Articles 34 (free movement of goods), 101-102 (the competition rules) and 107-108 (state aid) TFEU. The non-exhaustive list of 28 rights includes some of the most important rights under the Treaties, which are indeed the conceptual underpinnings of the entire scheme of EU law: non-discrimination, free movement, the competition rules, state aid and the suchlike.
The problem is that very few if any of these rights, read straightforwardly and on their face, make much sense as provisions of UK law applicable only within the UK. How will these work as domestic laws of a country which is no longer a Member State? Take as an example Article 107 TFEU, which is the prohibition on state aid. It provides that:
“…any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.”
This provision will, by operation of section 4(1) of the Act, become a domestic law of the UK with a status equivalent to primary legislation. But as can be seen from the emboldened words, it makes little sense as a law of a state which is not a Member State of the EU or part of the internal market. Read literally, this law would have achieved something akin to Sir Ivor Jennings’ famous example of Parliament legislating to outlaw smoking on the streets of Paris. The UK will have legislated to make it unlawful as a matter of UK law for France to grant a state aid to an undertaking in a way which affects trade within an internal market of which the UK is no longer a part.
The instinctive response of a court might well be to say that one should simply read “Member States” as meaning the UK, “trade between Member States” as meaning “trade within the UK” and “the internal market” as meaning “the market in the UK”. But this would have a dramatic effect on the law of state aid as it currently applies in the UK. As things stand, there is no EU law prohibition on state aids which have a purely internal effect (see e.g. R v MAFF [1997] 1 CMLR 250 at ¶33 per Laws J). A small local authority grant to improve a privately-run local amenity is unlikely to engage EU law. On the alternative reading of this provision which might be required to make sense of it as a UK law, this may no longer be the case.
The problems become even more acute when one turns to the Treaty provisions on free movement. What are the Courts to make of a piece of UK legislation which provides that “[q]uantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States” (Article 34 TFEU, which will be carried into UK law by section 4)? There are no doubt all sorts of possible solutions, but the Act in itself offers no guide to the Courts in making the delicate policy decisions which arise.
In truth, the only solution to this problem is likely to lie in delegated legislation. And so we turn to the powers to make delegated legislation conferred by the Act.
(8) The critical importance of delegated legislation, and the role of judicial review
Eighthly, delegated legislation will be of critical importance. Section 8 of the Act is entitled “Dealing with deficiencies arising from withdrawal”. It enables a Minister of the Crown, by regulations, to:
“…make such provision as the Minister considers appropriate to prevent, remedy or mitigate—(a) any failure of retained EU law to operate effectively, or (b) any other deficiency in retained EU law, arising from the withdrawal of the United Kingdom from the EU.”
The sheer breadth of this provision becomes apparent from the extremely long definitions of “deficiency” in sections 9(2) and 9(3) of the Act:
“(2) Deficiencies in retained EU law are where the Minister considers that retained EU law— (a) contains anything which has no practical application in relation to the United Kingdom or any part of it or is otherwise redundant or substantially redundant, (b) confers functions on, or in relation to, EU entities which no longer have functions in that respect under EU law in relation to the United Kingdom or any part of it, (c) makes provision for, or in connection with, reciprocal arrangements between— (i) the United Kingdom or any part of it or a public authority in the United Kingdom, and (ii) the EU, an EU entity, a member State or a public authority in a member State, which no longer exist or are no longer appropriate, (d) makes provision for, or in connection with, other arrangements which— (i) involve the EU, an EU entity, a member State or a public authority in a member State, or (ii) are otherwise dependent upon the United Kingdom’s membership of the EU, and which no longer exist or are no longer appropriate, (e) makes provision for, or in connection with, any reciprocal or other arrangements not falling within paragraph (c) or (d) which no longer exist, or are no longer appropriate, as a result of the United Kingdom ceasing to be a party to any of the EU Treaties, (f) does not contain any functions or restrictions which— (i) were in an EU directive and in force immediately before exit day (including any power to make EU tertiary legislation), and (ii) it is appropriate to retain, or (g) contains EU references which are no longer appropriate.
(3) There is also a deficiency in retained EU law where the Minister considers that there is— (a) anything in retained EU law which is of a similar kind to any deficiency which falls within subsection (2), or (b) a deficiency in retained EU law of a kind described, or provided for, in regulations made by a Minister of the Crown.”
These definitions of a “deficiency in retained EU law” are likely to be engaged by many pieces of retained EU law. The possibilities will range from entirely banal situations such as needing to change the names of particular institutions or organisations right the way through to needing entirely to recast an important Treaty provision which simply makes no sense as a provision of UK law.
In principle, delegated legislation is capable of being subjected to judicial review on ordinary public law grounds: see e.g. R (Javed) v Secretary of State for the Home Department [2002] QB 129. Given the scale of the delegated legislative exercise likely to be necessary to make retained EU law work, judicial review may have an important role.
(9) – General principles of EU law
Ninthly, the operation of the general principles of EU law will be very different. The general principles are first frozen in time: Schedule 1 paragraph 2 prohibits the recognition of any general principle of EU law after exit day “if it was not recognised as a general principle of EU law by the European Court in a case decided before exit day”. The operation of the general principles is then severely curtailed. Whilst the interpretation and effect of retained EU law is to be decided in accordance with the “retained general principles of EU law” (section 6(3)(a)), the Act also provides that:
There is no right of action on or after exit day “based on a failure to comply with any of the general principles of EU law” (Schedule 1, paragraph 3(1)).
No court or tribunal or public authority may disapply or quash any enactment or rule of law or decision, or decide that it is unlawful, “because it is incompatible with any of the general principles of EU law” (Schedule 1, paragraph 3(2)).
The general principles are therefore being frozen in their development and then reduced, in effect, to an interpretative aid.
Tenthly, the Charter of Fundamental Rights will not be part of retained EU law (section 5(4)). This is so despite the fact that the purpose of the Charter was, as the Supreme Court has recognised, “the assembly in a single instrument of those fundamental rights which European Union law had previously identified in legislation or in decisions of the CJEU” (RFU v Viagogo [2012] 1 WLR 3333 at ¶26 per Lord Kerr). The exclusion of the Charter does not, however, “affect the retention in domestic law on or after exit day in accordance with this Act of any fundamental rights or principles which exist irrespective of the Charter” (section 5(5)). The question whether a particular right exists irrespective of its recognition in the Charter is therefore likely again, as it was before the Lisbon Treaty, to become important.
What about the transition period and thereafter?
The keen reader will have noted that many of the ten topics covered above appear challenging to reconcile with the agreed transitional deal and the Government’s proposals for the long-term relationship with the EU. As to these:
On 19 March 2018, it was announced that the UK and EU had reached agreement on a transitional deal which would continue the UK’s adherence to significant parts of EU law until 31 December 2020, with the CJEU having continued jurisdiction over those parts of EU law as they will apply in the UK.
In a White Paper published on 12 July 2018, the Government proposed the continuation after this initial implementation period of “a common rulebook for goods including agri-food”, with a continued role for the CJEU via a duty on UK courts to pay due regard to its rulings.
It is not always easy to square these agreements and proposals with many of the express provisions of the Act, which are tied to an “exit day” defined by the Act itself as 29 March 2019 at 11pm. The Act provides clearly for EU law to be frozen as at exit day, for the jurisdiction of the CJEU to cease as at exit day and for the overall relationship between the two legal systems to be severed as at exit day. But both the transitional and end-state arrangements do not appear likely to embody such a clean severance as that.
It is therefore likely that the Government will either have to refrain from bringing parts of the Act into force, or will have to amend them before they have even come into effect. The Government has already begun bringing some of the Act into force: see the European Union (Withdrawal) Act 2018 (Commencement and Transitional Provisions) Regulations 2018 made on 3 July 2018. There is, furthermore, a specific power to make regulations to “…make such provision as the Minister considers appropriate for the purposes of implementing the withdrawal agreement if the Minister considers that such provision should be in force on or before exit day, subject to the prior enactment of a statute by Parliament approving the final terms of withdrawal of the United Kingdom from the EU” (section 9(1)). It seems likely that some of the provisions of the Act will require amendment in order to be reconciled with whatever is ultimately agreed with the EU.
One possibility, of course, would be to alter “exit day” itself: there is a specific power in section 20(4) of the Act to make regulations altering exit day to “ensure that the day and time specified in the definition are the day and time that the Treaties are to cease to apply to the United Kingdom”. If the UK has, as part of the transitional or end-state arrangements, agreed that parts of the Treaties will continue for a time to apply in the UK, this power would appear to be engaged. But it seems unlikely that this course would be politically palatable, and so other amendments seem more likely.
Previous articles on Brexit by James and Tom de la Mare QC include:
The European Union (Withdrawal) Bill: constructive ambiguity or a political choice not yet made?
The Great Repeal Bill: What will happen to accrued rights to claim Francovich damages?
James Segan QC
QC:2020