October 07, 2022
The U.K. Government has published the Retained EU Law (Revocation and Reform) Bill, known as the Brexit Freedoms Bill, which aims to repeal or assimilate retained EU law and abolish the principle of the supremacy of EU law in the U.K. by the end of 2023. There is an option to extend the timeframe until no later than June 23, 2026, in some cases, as discussed further below. Some key elements of the Bill are as follows:
At the end of 2023, all retained direct EU legislation (e.g., EU regulations, decisions or tertiary legislation such as implementing and delegated acts that had direct effect in the U.K. prior to Brexit) will be revoked. The same will occur for any EU-derived secondary legislation (e.g., U.K. secondary, but not primary, legislation that implemented EU obligations that did not have direct effect, such as EU directives). There is an option for the revocation deadline to be extended by the U.K. Government until no later than June 23, 2026, but only for a specified instrument or specified description of legislation.
Significantly for the financial services industry, these revocation provisions do not apply to the financial services legislation affected by the Financial Services and Markets Bill, nor to any rules made by the Financial Conduct Authority, Prudential Regulation Authority and Bank of England or to any generally applicable requirements imposed by the Payment Systems Regulator.
The U.K. Government will be empowered to clarify, consolidate, restate or revoke (with or without replacing) any secondary retained EU law or secondary assimilated law (about which, see below) by statutory instrument, meaning that the policy effect of such legislation can be retained where required. Restated law will no longer be retained EU law.
Restatement powers may be exercised when it is considered appropriate to:
Section 4 of the European Union (Withdrawal) Act 2018 will be repealed from the end of 2023. This means the revocation of the rights, obligations and remedies developed by the Court of Justice of the European Union which have applied directly in domestic law, including, for example, directly effective rights contained within the EU treaties and in EU directives.
The principle of supremacy of EU law, under which EU law takes priority over national (such as U.K.) law in the event of a conflict with domestic law, will be abolished by the end of 2023 (with no option for extension). EU law will therefore no longer have supremacy over any domestic U.K. law, regardless of whether that law derived from the EU. The so-called “interpretive obligation,” for the Courts to interpret national law in light of EU law, is also being reversed. Instead, any remaining retained EU legislation that has not been revoked by December 31, 2023, will, from that point, be interpreted in line with domestic U.K. law so far as possible and will be subject to domestic U.K. law to the extent that it is incompatible.
The remaining effects of general principles of EU law will be removed from U.K. law from the end of 2023. However, EU principles will continue to apply in legal proceedings after the end of 2023 that relate to acts or events before then.
From the end of 2023, retained EU law that remains in force will instead be known as assimilated law.
The U.K. appeal courts (e.g., the Court of Appeal) will be no longer be bound by retained EU case law. This is already the case for the Supreme Court under the European Union (Withdrawal) Act 2018. The Supreme Court will also be granted new powers to depart from its own retained domestic case law (i.e., case law that was established prior to December 31, 2020, in relation to direct EU and EU-derived law and obligations), provided it considers it right to do so considering, among other things, the extent to which the domestic case law is influenced by retained EU case law. The courts (other than the Supreme Court), and certain law officers (including the U.K. Attorney General), will be empowered to refer a point of law which arises from retained case law to a higher court in certain circumstances.
The U.K. Government or a devolved authority will be empowered, until June 23, 2026, to make regulations specifying that domestic legislation should be interpreted consistently with retained direct EU legislation, or be subject to that retained direct EU legislation to the extent it is incompatible. The U.K. courts will, however, have the power to make an incompatibility order stating that a provision of retained direct EU legislation is in fact incompatible with, and therefore subject to, domestic legislation. The courts will be empowered to remove or limit the otherwise supreme retained direct EU legislation or determine the effect of the retained direct EU law in relation to the particular situation in question.
The Bill also proposes the abolition of the business impact target, which requires the U.K. Government to publish economic targets for the impact that a given piece of regulation will have on business activities. It was decided, in the Government’s Benefits of Brexit paper, that this requirement focused too narrowly on net costs to business and should be replaced with a more holistic approach.
Major changes are separately being made to U.K. financial services legislation across the board, by virtue of initiatives such as the U.K. Financial Services and Markets Bill (discussed in our previous client note) and the U.K. Wholesale Markets Review (further information on which is available in our prior client note).