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26 Jul 2017

Brexit: The Great Repeal Bill

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On 13 July 2017, the UK government published the European Union (Withdrawal) Bill, known as the “Great Repeal Bill.” This major piece of constitutional legislation sets out the government’s proposals for transforming existing EU laws into UK laws and ending the supremacy of EU laws in the UK after Brexit.

A referendum was held on 23 June 2016, which resulted in a vote for the UK to leave the EU. The European Union Referendum Act, which authorized the holding of the referendum, was silent as to any further steps to be taken in the event of a “leave” vote. Earlier this year, the European Union (Notification of Withdrawal) Act 2017 empowered the Prime Minister to notify the EU of the UK’s intent to withdraw from the EU. This notification was made on 29 March 2017, starting an extensible two-year negotiation period, at the end of which the UK will cease to be a member of the EU. The proposed Great Repeal Bill is one of several pieces of legislation that the UK government has recently proposed in order to give effect to the result of the referendum.

Background

The European Union is based on several international treaties between its member states, most notably the Treaty on European Union and the Treaty on the Functioning of the European Union.[1] These treaties provide for the creation of various European institutions, and set out the areas where the EU has legislative competence. EU legislation is given primacy over the legislation of member states, so that where there is a conflict between the laws of a member state and of the EU, the laws of the EU prevail.

Under the UK’s common law, the provisions of an international treaty are not automatically incorporated into domestic law. Therefore, the UK’s accession to the European Communities (the forerunner to the EU) was enacted by the European Communities Act 1972 (the “ECA 1972”). This legislation stated that all UK legislation would be subject to directly applicable EU law.[2] This was interpreted by the House of Lords as enshrining the primacy of EU law and requiring all UK legislation to be interpreted in light of EU law. Domestic legislation is therefore disapplied to the extent that there is a conflict with EU law.[3] The ECA 1972 also enabled ministers to legislate so as to transpose EU directives and rulings of the Court of Justice of the EU (“CJEU”) into domestic law. The ECA 1972 therefore establishes the authority of EU law in the UK and the supremacy of EU law as a matter of UK law, and ensures that all EU regulations are treated as UK laws by the courts. Any UK legislation implementing EU directives is interpreted in light of any relevant CJEU case law and the guidance of EU bodies. Upon the UK leaving the EU, the ECA 1972 will therefore need to be repealed, to ensure that new EU lawswhich after Brexit would lack UK political input in the legislative process no longer have effect in UK law, nor primacy over UK laws. Achieving this outcome isthe main purpose of the Great Repeal Bill. However, the UK government’s proposals still leave a number of issues open, particularly regarding how existing directly applicable EU legislation, UK legislation which reflects EU directives and any associated guidance and CJEU decisions are dealt with.

“Great Adoption Bill” or “Great Repeal Bill”?

The term “Great Repeal Bill” is a misnomer. In fact, the European Union (Withdrawal) Bill enshrines thousands of EU laws directly into UK law and creates ministerial powers to make consequential amendments. The only thing being “repealed” is the authority of the EU to make new laws with effect in the UK.

Incorporation of EU Legislation Into UK Laws

The Bill deals with EU legislation by incorporating all domestic legislation derived from the EU, as it stands on the date that the UK leaves the EU (“Exit Day”), into UK law.[4] All UK Acts of Parliament and secondary legislation in the UK which have been enacted to give effect to EU directives, including any regulations made pursuant to the ECA 1972, will remain valid. Furthermore, all directly applicable EU law which is in effect prior to Exit Day will automatically become part of domestic UK law on and after Exit Day.[5] This includes all EU regulations, as well as EU decisions which affect the UK, and “EU tertiary legislation.” EU tertiary legislation is defined in the Bill as any provisions made under an EU regulation or directive, or implementing legislation enacted by the European Commission (the “Commission”), or certain decisions made in accordance with the Treaty of the Functioning of the European Union. Grandfathered legislation will therefore include “regulatory technical standards” and “implementing technical standards” that provide detail on the operation of EU regulations and directives that govern financial markets and some other areas.

The right of individuals to claim damages from the UK state for its failure to correctly implement EU legislation will be specifically removed.[6]

No Direct Incorporation of So-Called “Level 3” Measures or Other Explanatory Texts

It seems that EU tertiary legislation will not include guidance or associated “level 3” documents produced by the three European Supervisory Authorities (“ESAs”) for financial services or other EU bodies with similar powers. This will create a notable lacuna in relation to financial regulation, where much of the detailed rule-making and clarifications of ambiguous provisions are found in “questions and answers” documents produced by the ESAs and the Commission. Some of this guidance is produced under their general powers of the ESAs to produce such guidance, and some is produced further to powers delegated to the ESAs or other EU bodies in specific pieces of EU legislation. As the references in legislation to these EU bodies will be amended after Exit Day to refer to UK bodies, any documents produced by these EU bodies will no longer have any legal force, as they will have been produced by EU bodies which no longer have any authority or standing in the UK under retained EU laws.[7] UK bodies, such as its financial regulators, will therefore need to enact new “Q&As” to replace these documents.

Similarly, consultation papers and discussion papers produced by the Commission, the ESAs and other EU institutions before the enactment of relevant regulations or directives are also important documents for legal interpretation but will lack any formal legal force in the UK, at least under the current proposals. This is mitigated slightly by the fact that retained EU laws continue to be interpreted in accordance with the general principles of EU law (as they existed prior to Exit Day), which includes taking a purposive approach to interpretation and considering the working papers leading to the adoption of the measure.[8]

The courts may also choose to have regard to the ESAs, and therefore any guidance they issue. However, this does not guarantee that the UK regulators will have regard to these documents. Possible judicial interpretations may provide insufficient certainty to market participants. This structure will mean, however, that the UK regulators can take a sensible and pragmatic approach to future rule-making.

Other Rights

The Great Repeal Bill also incorporates rights, remedies and procedures which are available immediately before Exit Day, but under UK laws and not through CJEU jurisdiction. As such, both those rights which derive directly from the EU treaties, and those rights which arise from treaties between the EU and other third countries which were incorporated into UK law via the ECA 1972, are retained.[9] For instance, certain provisions of the Hague Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition, Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children that relate to cross-border children cases would continue to be directly effective under the Great Repeal Bill.

EU Case Law

Case law established prior to Exit Day, including decisions of both UK domestic courts and the CJEU which relate to domestic EU-derived legislation or directly applicable EU legislation, will continue to bind UK courts. The Supreme Court will be able to depart from CJEU case law after Exit Day, but only to the extent that it can depart from its own case law. Lower courts will be bound by pre-Brexit CJEU decisions as if there were Supreme Court decisions. Whilst technically the Supreme Court can depart from its previous decisions, in reality it does this very infrequently. It remains to be seen whether it will do so to a greater extent in the future as regards the retained EU laws, in particular in cases where the CJEU has reached a different conclusion from that reached in the Supreme Court itself.

UK courts will not be bound by any future decisions of the CJEU after Exit Day, and will not be able to refer any matter to the CJEU after Exit Day. However, a UK court may continue to have regard to the CJEU, another EU entity or the EU if it “considers it appropriate to do so.” It is not clear what guidelines will be introduced regarding when such referral is appropriate, but this may have been included to allow the continued role of the CJEU in some areas where a complete break is potentially problematic (e.g., in relation to nuclear cooperation and the EURATOM arrangements). Moreover, this provision promotes the continued presentation to UK courts of comparative law arguments based on the EU law position.

The Great Repeal Bill does not set out how cases which are pending with the CJEU are treated, but the UK government has published a position paper setting out its proposals for key considerations when determining if a case is “pending” with the CJEU, and so should therefore be decided by the CJEU even if such a decision is not made until after Exit Day.[10] The broad idea that is proposed is to allow cases of general policy importance to the EU, which have been progressed to a certain stage, to be considered as pending with the CJEU, while permitting cases at a more preliminary stage or where the issues solely relate to the UK’s compliance with EU laws to be decided by UK courts. Cases which do not meet the criteria to be considered as “pending” with the CJEU will be decided by the UK courts after Exit Day, even if the facts arose before Exit Day. It remains to be seen whether the EU will agree to such an approach, although as a matter of UK law, the Bill, if passed, will establish the effectiveness of CJEU proceedings in the UK.

The Supremacy Principle For New EU Laws

Currently, the supremacy of EU law means that Parliament is not able to repeal EU law by implication, with Acts of Parliament interpreted only so far as they are compatible with EU law.[11] After Exit Day, future Acts of Parliament may repeal existing EU-derived law either expressly or by implication, meaning that the retained EU law may be affected by future legislation which is not expressed to be in relation to that area but which nonetheless amends the retained law.

The supremacy of EU laws over UK laws will not apply to any enactment or rule which is made under UK law after Exit Day.[12] The supremacy of EU law is still recognised, so far as is relevant to the interpretation of any enactment made before Exit Day. However, the principle does not apply to any modification of EU law which is adopted in the UK after Exit Day, given that those subsequent EU modifications will not form part of the UK law, unless the UK Parliament effects the corresponding changes in the equivalent UK legislation. As such, retained EU law will have supremacy over other UK law (unless or until amended or repealed by Parliament or until the Supreme Court departs from previous case law), and should continue to be interpreted in light of EU law and CJEU decisions (unless and until such EU legislation or case law is changed).

Human Rights Laws

EU human rights laws, and some European court determinations in this area, have sometimes been controversial, and emerged as a major factor during the Brexit campaign.[13] The Bill provides that the EU’s Charter of Fundamental Rights will not be a part of domestic UK law, reflecting the current position under the British opt-out.[14] Fundamental human rights in the UK will therefore be as set out in Acts of Parliament such as the Human Rights Act 1998 or as determined in the common law.[15] The rationale for this is that the Charter does not contain any fundamental rights, but instead catalogues the rights that exist due to the European Convention of Human Rights (which is not an EU instrument and so will continue to have effect in the UK due to the Human Rights Act 1998). Moreover, specific EU legislation and pre-Exit Date CJEU decisions will continue to be recognised in UK law.[16]

References to the EU and its Bodies in EU-Derived Law

As described above, EU-derived law will be incorporated by the Great Repeal Bill into UK laws. Such laws can then be amended in the future by Acts of the UK Parliament. A number of features of EU-derived law will no longer make sense after Exit Day, such as references to EU institutions or bodies and the EU itself or to relationships between member states. As a result, wide-ranging powers are proposed to allow ministers to make regulations to mitigate any such “deficiencies” in the retained EU law.[17] This will include situations where retained EU law either: (i) has no practical application to the UK; (ii) confers powers on EU entities which they will no longer possess in relation to the UK; (iii) makes provisions for arrangements between UK institutions or government bodies and EU institutions or government bodies which will no longer be necessary; or (iv) contains other EU references which are no longer appropriate. For example, references to the EU itself will generally need to become references to the UK (or the relevant devolved authority). References to EU bodies will need to become references to relevant UK bodies, some of which will be new. Provisions dealing with interactions between member states and EU bodies or between different EU bodies will mostly become obsolete and will have to be removed.

Ministers will be empowered to make UK secondary legislation to address these kinds of issues at any point in the period lasting two years after Exit Day. In particular, such legislation can specify that any functions which would have been carried out by EU entities are instead to be carried out by a specific public authority in the UK, or can abolish such functions, or can establish new public bodies in the UK to carry out such functions. There are a number of limits to these powers, and the regulations may not (amongst other things) impose or increase taxation, create criminal offences or amend or repeal the Human Rights Act 1998. Whether all such changes will be made by UK secondary legislation, or whether in practice the UK government will further delegate these powers in specific areas to regulators, remains unclear at this point.

These wide-ranging powers to pass regulations to amend the “deficiencies” in EU law have been called “Henry VIII powers,” because they allow the UK government to pass laws on almost any topic without the approval of Parliament. Secondary legislation is often consulted upon publicly and is laid before Parliament for comment but there is typically no formal vote on it.[18] There is concern that the UK government may over-use its powers under the Great Repeal Bill and the UK government has responded by stating that these powers “can only be used to make corrections to deficiencies that arise as a consequence of the UK’s withdrawal from the EUit is not a power to change laws merely because the government did not like them before exit.[19] Various constraints in key policy areas such as taxation are stated in the legislation.

Will Parliament be a New Financial Markets Rule-Maker in the UK?

Much of the detail of UK financial regulation has traditionally been located in the rulebooks of the Prudential Regulation Authority and Financial Conduct Authority (or relevant predecessor regulators). This detail has increasingly been relocated into EU directives, regulations and technical standards, in particular as a result of the wide scope of the Markets in Financial Instruments Directive II and Capital Requirements Directive IV. All of these EU measures are being adopted into UK laws and made subject to Parliament’s jurisdiction, instead of the regulators’. It is possible that secondary legislation will need to entirely repeal many technical standards and grant the UK regulators new rule-making powers so as to locate EU rules in their natural and historical setting in the UK legislative framework. Amending every detail of financial regulation by Act of Parliament is likely to be impracticable and time-consuming and may not benefit from the in-depth industry consultation processes which UK regulators are accustomed to operating.

A Continuing Role for EU Bodies?

The Great Repeal Bill seems to imply that the UK government wishes to leave open the possibility of continued involvement of EU entities in some areas. The “deficient” areas of retained EU law include situations where such laws refer to “EU entities which no longer have functions in that respect” in relation to the UK. The inclusion of “no longer” wording might be a particular drafting style to describe Brexit, but more likely seems to suggest that some EU entities could continue to have functions in relation to the UK after Brexit, either on a transitional or permanent basis. Areas such as nuclear cooperation, aviation regulation, and Northern Ireland border issues have been flagged as potentially relevant future areas of cooperation.

Powers are also granted to ministers to make regulations to implement any withdrawal agreement entered into between the UK and EU. However, these powers are limited in time so that they may only be used in the period before Exit Day. Any withdrawal agreement will be a new international treaty and will therefore need the assent of the House of Commons before ratification, under the Constitutional Reform and Governance Act 2010. As a result, the proposed powers to make secondary legislation to implement any withdrawal agreement are likely to be less controversial than the other powers to implement regulations for “deficiencies” or changes in the UK’s international obligations, since the terms of the withdrawal agreement will be subject to Parliamentary scrutiny.

The Great Repeal Bill, Scotland and Devolved Authorities for the Other Nations

Much of the text in the Great Repeal Bill concerns the relationship between EU law and the devolved authorities in the UK. When devolving power to the Scottish Parliament, Welsh Assembly and Northern Ireland Assembly, the Westminster Parliament enshrined the principle of the supremacy of EU law in the relevant legislative Acts.[20] As a result, these authorities have no competence to pass legislation that would conflict with EU laws. The Great Repeal Bill amends these Acts such that retained EU legislation is still afforded supremacy over the Acts of the devolved authorities. The future amendment of retained EU laws will generally become a competence of the Westminster Parliament after the Exit Date. This potentially gives the Westminster Parliament a much greater role in the government of Scotland, Wales and Northern Ireland than exists currently in relation to non-EU matters. Friction may be created where “Henry VIII powers” are used to amend retained EU laws in a way which conflicts with the policies of governments of the devolved administrations. This risk is mitigated somewhat by granting powers to the devolved authorities similar to those of the UK government to make regulations to deal with “deficiencies” in relation to their areas of legislative competence. However, this is likely to remain a contentious area as the powers of devolved authorities to deal with “deficiencies” will not extend to the retained EU law. Under the Great Repeal Bill, such laws can be amended only by the UK government.

The situation in Scotland presents particular difficulties. In the run-up to the Scottish independence referendum in 2014, the three leaders of the main UK political parties (then Prime Minister David Cameron of the Conservatives, deputy Prime Minister Nick Clegg of the Liberal Democrats and leader of the opposition Ed Miliband of Labour) jointly signed a statement committing to a “devolution maximum” arrangement involving “extensive new powers” for Scotland in the event that independence was rejected. This led to the Scotland Act 2016, which devolved authority over a number of specific areas which had previously been within the UK Parliament’s competence. This legislation also dealt with the procedure for elections to the Scottish Parliament, and most importantly included the so-called “Sewel convention” within the legislation.[21] The Sewel convention provides that the Westminster Parliament will not normally legislate with regard to devolved matters without the consent of the Scottish Parliament.

As a technical matter, no issues of EU competence were available for devolution to Scotland at the time of the independence referendum or the Scotland Act 2016. However, some commentators, and especially the Scottish National Party, consider the approach in the Great Repeal Bill inconsistent with 2014 statement underlying the Scotland Act 2016. The Scottish National Party has already expressed its disagreement with the provisions relating to Scotland. The UK government has stated that it intends to enter into “discussion and consultation with devolved authorities on where lasting common frameworks are or are not needed” and that it expects that “the outcome of this process will be a significant increase in the decision making powers of each devolved authority.[22] It also recognises that it will need to seek specific legislative consent for these areas of the Great Repeal Bill, because “some areas in which laws are being preserved or converted would be within devolved competence” and it is “the practice of the Government to seek the consent of the devolved legislatures for provisions which would alter the competence of those legislatures.[23] Prime Minister Theresa May also recently announced an intention to reach cross-party consensus on Brexit issues, such as the Great Repeal Bill.[24] However, given the small Conservative majority in the House of Commons, the UK government’s reliance on Scottish Conservative MPs to pass any legislation, the large number of Scottish National Party MPs in the House of Commons and the possibility of another independence referendum after Brexit, these provisions may be subject to significant challenge. The provisions relating to Scotland (and other national assemblies) are those where changes seem most likely to be proposed during the legislative process.

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[1] These were both amended to their current form by the Treaty of Lisbon, which was signed in 2007 and entered into force on 1 December 2009.
[2] ECA 1972, s2(4).
[3] Footnote R v Secretary of State for Transport, ex p Factortame Ltd. More recently, the House of Lords has suggested that there may be more fundamental features of the UK’s common law which remain supreme over EU law (R (HS2 Action Alliance Ltd) v Secretary of State for Transport), although the issue has not been fully explored or resolved.
[4] Great Repeal Bill, s2. This means that where EU legislation is staggered so that it comes into effect in stages, it is only those parts that are in force on or prior to Exit Day which will be incorporated into UK laws.
[5] Great Repeal Bill, s2.
[6] This is the rule in Francovich, which is specifically excluded by the Great Repeal Bill, Schedule 1, s4.
[7] Although it should be noted that competent authorities and financial institutions are required to “comply with those guidelines and recommendations” issued by the three ESAs pursuant to Article 16 of the regulations establishing the ESAs (Regulation (EU) 1093/2010 establishing the European Banking Authority, Regulation (EU) 1094/2010 establishing European Insurance and Occupational Pensions Authority, and Regulation 1095/2010 establishing the European Securities and Markets Authority). On incorporation into UK law, these regulations will need to be amended so that UK financial institutions and regulators are no longer required to comply with this guidance produced by the ESAs.
[8] Pursuant to Great Repeal Bill, s6(3). As the UK government states in the Explanatory Notes to the Bill, at paragraph 105, “Non-binding instruments, such as recommendations and opinions, are still available to a court to assist with interpretation of retained EU law.”
[9] Great Repeal Bill, s4.
[10] Ongoing Union judicial and administrative proceedings.
[11] As noted, this principle was established in Factortame, but was elaborated further in Thoburn v Sunderland County Council where it was stated that certain statutes were “constitutional” as a matter of UK law, and as such were unable to be repealed by implication in a future statute. The ECA 1972, given its constitutional importance, was identified as one such statute.
[12] Great Repeal Bill, s5.
[13] One example is the European Court of Human Right’s temporary bar on the deportation of the extremist, Abu Hamza, to the United States in 2010. Although this is a decision of the ECHR, and not of the CJEU, there was concern amongst some parties regarding the decisions made by European courts in the field of human rights law.
[14] As contained in the Protocol to the Lisbon Treaty 2009. Both the UK and Poland secured an opt-out from the Charter during the negotiations at the time.
[15] Great Repeal Bill, s5(4)-(5).
[16] The Repeal Bill - Factsheet 6: Charter of Fundamental Rights.
[17] Great Repeal Bill, s7.
[18] The regulations made by ministers are either “negative resolution procedures” (whereby the regulation is law unless there is an objection from either House of Parliament) or in some cases, such as where a new public authority is established or an EU legislative function is transferred to a UK body, “draft affirmative resolution procedures” (whereby the instrument has to be laid before and approved by both Houses). In some specific cases, regulations may also be passed by “made affirmative resolution procedures” (whereby the regulation is law when passed, but cannot remain in force unless approved by both Houses within one month). These provisions are set out in Schedule 7 of the Great Repeal Bill.
[19] The Repeal BillFactsheet 3: The Correcting Power. The UK government has also produced a factsheet on workers’ rights (The Repeal BillFactsheet 7: Workers Rights), highlighting the increased protection afforded to workers under UK legislation when compared to the rights afforded under EU legislation. Of course, the current level of protection for workers in UK legislation in no way binds future Parliaments, and so does not directly address the concerns that such rights may be watered down as part of the Brexit process.
[20] S29(2)(d) of the Scotland Act 1998, s108A(6)(c) of the Government of Wales Act 2006, and s6(2)(d) of the Northern Ireland Act 1998.
[21]  As a new s28(d) to the Scotland Act 1998.
[22] The Repeal BillFactsheet 5: Devolution.
[23] European Union (Withdrawal) Bill: Explanatory Notes, paragraphs 68 and 69.
[24] On 10 July 2017, Theresa May told the House of Commons that there were “many issues on which I would hope we would be able to achieve consensus across this House.”

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