The European Union (Withdrawal) Act 2018

05 July 2018

Richard Eccles

The European Union (Withdrawal) Act 2018 has been adopted by Parliament following multiple proposals and rejections of House of Lords amendments.  It received royal assent on 26 June 2018.  The Act is of constitutional significance because it aims to revise UK law in important ways in consequence of the UK's forthcoming exit from the EU. 

The Act repeals (as from the exit day) the European Communities Act 1972 ("ECA 1972"), the channel by which the EU Treaties, and thereby EU regulations and decisions, were given direct force in UK domestic law.  The Act contains provisions converting, into UK domestic law, directly applicable EU legislation, which would otherwise lapse on the UK exit.  This is subject to powers given to ministers to revise such laws by means of regulations to remove provisions concerning the EU, EU institutions and other member states, which will no longer be appropriate in the UK following Brexit.  This approach is designed to ensure the continuation of a functioning statute book in the areas covered by EU law, although the principle of widespread use of secondary legislation to achieve the necessary transposition of EU law into domestic law has been subject to criticism.

Repeal of the European Communities Act 1972

The ECA 1972 provided that all rights, powers, obligations and remedies from time to time created or arising under the EU Treaties which the Treaties require to be given direct effect "shall be recognised and available in law" and be enforceable in the UK "without further enactment" (section 2(1)).  This has been one of the most constitutionally significant provisions ever included in UK statutes. 

The Act provides that the principle of supremacy of EU law does not apply to any enactment or rule of law made on or after exit day, but continues to apply to the interpretation or disapplication of any enactment or rule of law made before exit day.  It also provides that the Charter of Fundamental Rights is not part of domestic law as from the exit date.

However, the Act also provides (in section 4) that any rights, liabilities, obligations and remedies that were recognised and available in domestic law immediately before the exit date by virtue of section 2(1) of the ECA 1972 will continue to be recognised and available in domestic law after the exit date.  The proper scope of this provision is unclear, because rights under the EU Treaties, which are given force in domestic law by that provision of the ECA 1972 (for example free movement) require reciprocity as between the UK and the EU Member States.  Such reciprocity will no longer exist once the UK exits the EU.  It therefore remains to be seen what interpretation and effect will be given to this particular provision.

Connections between the Act and the UK/EU withdrawal agreement and relationship agreement

The Act has been enacted in anticipation of a withdrawal agreement being concluded.  The Act requires that the withdrawal agreement be ratified after a copy of the negotiated agreement has been laid before each House of Parliament and that the agreement must be ratified by means of a resolution of the House of Commons.  If practicable, this resolution is to be debated and voted on by the House of Commons before the European Parliament decides whether it consents to the withdrawal agreement being concluded on behalf of the EU.  The Act further requires that a separate Act of Parliament be passed to provide for implementation of the withdrawal agreement.

The Act contains various provisions requiring ministerial statements to be presented to the House of Commons setting out how the government proposes to proceed.  Such written statements are required: (1) if the House of Commons decides not to pass the required resolution approving the withdrawal agreement; or (2) if, by 21 January 2019, there is no agreement in principal in negotiations with the EU on the substance of the UK's withdrawal agreement and the framework for the future relationship between the EU and the UK; or (3) if, by 21 January 2019, the Prime Minister makes a statement that no agreement in principle can be reached in such negotiations.  Specified time periods are provided for in each case for the making of the required statement.  Two of these statements can be combined into one statement.

The Act allows for a minister to make regulations providing for specific provisions of the Act to be brought into force on or before the exit date, where the minister considers this appropriate.  However this power is conditional on the prior enactment by Parliament of a statute approving the final terms of the UK's withdrawal from the EU.

The Act further requires that a minister must lay before each House of Parliament a statement outlining the steps taken by the government to seek to negotiate, as part of the UK's future EU relationship, an agreement for the UK to participate in a customs arrangement with the EU.  This statement is to be laid before both Houses before the end of October 2018.  However, no provision is made for the nature or scope of such customs arrangement.

The ongoing negotiations of the withdrawal agreement include provisionally agreed terms for a transitional arrangement whereby EU law (defined as including the EU Treaties) will continue to apply in the UK, and the UK will continue its membership of the single market and the EU customs union, until the end of 2020.  By contrast, the Act provides for the repeal of the European Communities Act 1972 with effect from a specific exit date which is stated to be 29 March 2019 (at 11.00 p.m.).  (This is when the UK's notice under Article 50 of the EU Treaty expires.)  However, although the Act provides for this defined "exit day", it also provides that this can be amended by secondary legislation if the date on which the EU Treaties cease to apply in the UK is changed in accordance with Article 50(3) of the EU Treaty.  This can be expected to be the position if a withdrawal agreement is concluded including the transitional arrangement terms.

Please see our report on the prospects of concluding a withdrawal agreement and a relationship agreement here.

The Northern Ireland/Ireland border

The final version of the Act contains specific provisions relating to the border between Northern Ireland and Ireland and the continuation of north-south co-operation.  The Act requires that in the exercise of their powers under the Act, a minister (or devolved authority) must act in accordance with the Northern Ireland Act 1998 and must have regard to the joint report of the EU and UK negotiators on progress during phase 1 of the Article 50 negotiations.  (Please see our report of those negotiations here.)  No regulations made under the Act may reduce any north-south co-operation provided for in the Belfast Agreement or create any Northern Ireland border arrangements involving physical infrastructure unless agreed between the UK and the EU.

Retention of existing direct EU legislation

The Act aims to safeguard in domestic law all directly applicable EU legislation, principally EU regulations and decisions, which are in force in the UK immediately before exit day.  Rather than attempting to do so by listing all specific regulations and other measures, the Act will achieve this by means of generic provisions (in section 2 of the Act). 

However, such EU laws were written in the context of the EU free movement rules and the reciprocity of obligations as between the member states of the EU, and in many cases conferred powers and obligations on EU institutions.  To deal with this, the Act provides (in section 8) for a power for ministers to make provisions by regulations (statutory instruments) to prevent or remedy all references to the EU, EU entities or other member states which will no longer be appropriate in the UK following Brexit.  Such "deficiencies" include provisions conferring functions on EU entities; reciprocal arrangements between the UK and the EU, an EU entity or an EU member state; and other arrangements which involve the EU, an EU entity or an EU member state which are otherwise dependent on the UK's membership of the EU.  All such regulations must be made within a two-year period following exit day.

The task of adapting the vast swathes of directly applicable EU legislation into domestic law will be complex.  It remains to be seen how this huge task will be progressed during the two year period following the exit day, taking into account the volume of the legislation, the significant amendments that in many cases will be needed and the limited time period.  In some cases, it will be difficult to see how certain EU law provisions can properly and effectively be transposed into domestic law having regard to the functions required by the EU legislation to be performed by various entities.  For example, certain provisions of the REACH Regulation involves steps being taken by the European Commission, a member states' committee and an EU agency (the European Chemicals Agency) making the transfer of the relevant functions to UK public authorities a challenging matter, to say the least. 

There is a broader issue of whether it is appropriate to delegate to ministers the task of such adaptation of directly applicable EU law, given that the normal purpose of ministerial regulations is to set out provisions of a relatively technical nature.  By contrast, some of the provisions that will be required for the transposition of directly applicable EU legislation into domestic law will require substantive decisions to be taken, which arguably should be made by Parliament and not at ministerial level.

EU Directives

The ECA 1972 allowed for statutory instruments to be made (under section 2(2)) to implement EU directives into national law.  Since such instruments would otherwise fall away on repeal of the primary legislation under which they were made (the ECA 1972), the Act adopts and retains such statutory instruments in domestic law.

There is no need for the Act to make provision regarding EU directives that have been implemented into UK law by means of primary legislation, because such primary legislation is already on the statute book and is outside the scope of the Act.  However, EU case law allows for the provisions of EU directives to be directly effective and enforceable against an EU member state in certain circumstances, where the relevant member state has failed to implement the directive into national law by the required date.  The Act expressly excludes such directly effective rights from domestic law following Brexit, except where such rights have been recognised by a judgment of the European Court or a UK court or tribunal before exit day (or are recognised by a UK court after exit day in a case begun before exit day).

Status of judgments of the European Court

The Act provides that European Court judgments made prior to exit day will continue to be binding in domestic law as to the meaning or effect of any retained EU law.  However, the Supreme Court will be free to depart from such precedent European Court judgments, in the same way that it is permitted to depart from its own previous judgments.  European Court judgments pre-dating Brexit will therefore in effect be given the same status as Supreme Court judgments in the domestic legal system.

As regards European Court judgments after exit day, the Act states that a court or tribunal is not bound by them, but that it may have regard to them.  It is likely that future European Court judgments will be very relevant and at least persuasive in interpreting existing EU law which will have been retained in domestic law by the Act, but the Act leaves it to the discretion of individual judges to decide what weight to attach to such post-Brexit European Court judgments.

The status of the European Court and its judgments following Brexit is an area where the UK and the EU have not yet agreed the relevant provisions in the draft withdrawal agreement.  The EU’s position is that the UK's withdrawal should not deprive the European Court of its competence to adjudicate proceedings which are pending on the withdrawal date, preliminary references that may be submitted by UK courts after the withdrawal date relating to facts that occurred before the withdrawal date, or infringement proceedings against the UK after the exit date relating to facts prior to the exit date.  If these principles are included or retained in the withdrawal agreement if or when it is finalised, then at least in these respects the Act would need to go further so as at least to allow for the relevant European Court judgments concerning pre-Brexit facts to be binding in the UK system.

The Act provides that retained EU law is to be interpreted in accordance with European Court case law pre-dating Brexit and the retained general principles of EU law.  (It also makes clear that no general principle of EU law is part of domestic law after exit day unless it was recognised as a general principle of EU law by the European Court before exit day.) 

Actions based on EU law

The Act expressly excludes any new rights of action in domestic law after exit day based on a failure to comply with any of the general principles of EU law.  The Act also expressly excludes the possibility of disapplying any enactment or declaring any conduct unlawful, after exit day, on grounds of it being incompatible with general principles of the EU law.  (There are exceptions in each case for court or tribunal proceedings commencing before exit day.  The Act also allows new actions after exit day for failure to comply with the general principles of EU law, provided that they are commenced within three years of the exit day, relate to prior facts, and do not seek directly or indirectly to disapply an Act of Parliament or other rule of law.) 

The Act also excludes any right in domestic law after exit day to damages based on the Francovich rule, i.e. the European Court precedents allowing for a member state to be made liable in damages to individual businesses for breach by the state of EU law.  However, by way of exception, such proceedings can be brought within two years of the exit day if they relate to anything which occurred before exit day.  

Conclusion

The Act is without doubt of huge significance.  The principle of incorporating existing directly applicable EU legislation into domestic law is welcome in principle as it will as a general matter provide a level of certainty for businesses in the aftermath of Brexit.  However, it remains to be seen how effective the proposed system of ministerial revision of EU legislation for purposes of domestic law will be, just as it is open to question whether this exercise should for all such pieces of EU legislation be left to ministers.  Arguably in some cases Parliament should deal with the necessary enactments. 

Many of the anticipated statutory instruments making these amendments are expected to be issued in draft in the near future.  Many of them are likely to take effect straight after Brexit (though this would have to be deferred to the beginning of 2021 if the proposed transitional arrangement comes into effect as part of the withdrawal agreement).  There will be an ongoing need for legal scrutiny of how the relevant measures affect businesses, and there will no doubt be potential disputes as a result of the transposition process under the Act.

This article is part of our Brexit series.

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