Governance, Risk and Compliance, Channel markets

Brexit And The EU (Withdrawal) Bill: Five Things to Know

Author: Giles Derrington
Author: Giles Derrington

Formally known as the Repeal Bill, the European Union (Withdrawal) Bill, is a crucial part of the Brexit process. But while the function of the Bill is important, there is a lot that needs to be clarified before it passes in to law.

The Government recently published the European Union (Withdrawal) Bill. If the name doesn’t sound familiar it’s because up until a few months ago it went by a different name – the Great Repeal Bill. The name was changed at the insistence of the parliamentary draftsman who turn Government plans into law, showing yet again that, however well the Government negotiates with Europe, trying to change parliamentary lawyers’ minds will always be a step too far!

Despite the name change the Bill’s purpose remains the same – to make sure that on the day we leave the EU we still have a functioning statute book. Certainty about what the law is and how it functions is crucial to the millions of businesses who rely on EU rules to do their business, both in the UK and across the EU.

Three Parts of the Bill

To achieve its proposed intention, the Repeal Bill (as it is colloquially still called) breaks into three key parts:

1. Repeal – The most emblematic provision in the Bill is that it repeals the European Communities Act 1972, thereby ending our membership of the EU.

2. Convert – The Bill creates a process for bringing all EU regulations, alongside key elements of treaties which will continue post-Brexit, are brought into UK law from the moment we leave. It also ensures that the past precedents of the European Union Court of Justice (ECJ) are given the same status as rulings of the UK Supreme Court.

3. Correct – The most contentious part of the Bill creates a power, to last for two years, to allow Government to correct legislation brought back from the EU (and associated UK laws) to enable them to function correctly. This power enables the Government to make these changes via Statutory Instruments to a whole range of Primary and Secondary Law – a move that has worried many Parliamentarians who worry about Government overreach.

Regardless of the Bill’s current intentions, it still has a long way to go before it will become law. With a hung Parliament, and a House of Lords that is highly exercised but both Brexit and issues of constitutional complexity, it would be surprising if the Act that finally hits the statute book is the same as the current Bill.

Five Things to Note

With that in minds, what are the key things those in the tech sector should be keeping an eye on as the Repeal Bill starts its Parliamentary journey?

1. What are the regulations to come out of the Bill?

The most important thing to know about the Bill is that it is just the start of the process. The Bill enables the government to make the changes needed to correct the statue book, but the individual changes themselves will be what really has an impact on business.

Some of these changes could be very simply, for example removing a requirement to report an action to the European Commission, but others could be much more complicated, such as setting up entirely new regulatory agencies. The Government predicts about 800 to 1000 statutory instruments will have to follow the passing of the Bill to make our statue book fit for purpose, so the real work is yet to come.

All this leads to concerns about time. With 18 months until the end of the Article 50 process, businesses need to know exactly what changes are going to be made to the way they operate. That can’t wait for the year it may take for the Repeal Bill to pass. To increase business certainty, drafts must be published well in advance and businesses must be consulted on their contents.

It is therefore welcome that the Government have said it is their intention to publish drafts of as many of these new rules as possible before the Bill becomes law. However, this is not a firm commitment on every rule, not least because plans may have to change in response to what is agreed during the negotiations with the EU. Businesses will have to be ready to move quickly in response to sudden changes – not always easy for those rightly focused on running the business, not on the machination of Government and Parliament.

With so many changes already going on within the tech regulatory landscape, particularly around the Digital Single Market, as it continues to evolve, knowing what comes out of the Bill as soon as possible will be critical.

2. Fees

One thing that has largely gone unnoticed in debate around the Repeal Bill so far are the provisions hidden away in Schedule 4 surrounding charges, fees and fines.

There are a number of EU institutions which charge businesses for a service. For example REACH charges for the registration of chemicals, while some UK regulators also provide a license that, through mutual recognition, grants a license for the whole of the EU.

When regulators are brought back into the UK, they too will have to be funded, and so Schedule 4 provides that the Government can use their correcting power to impose fees or other charges, such as fines. While the Bill cannot be used to increase taxes, Schedule 4 means there could be significant financial implications on businesses of regulations brought under the correcting power.

This might come as a surprise to businesses, given that the Government’s impact assessment, while accepting the cost to business of the Bill is ‘unknown’ suggest it is likely to be small. No doubt it is one of the reasons the Regulatory Policy Committee said that this claimed required further evidence, and warned that the aggregate cost to business “could be significant.”

One of the reasons these costs might be even greater than previously presumed is the danger of ‘double charging’. Unless negotiations achieve some form of mutual recognition for each regulator who charges fees then, where a new UK regulator is set up, those businesses trading across borders could end up having to meet two fees- one for the UK and one for the EU. This could double the costs businesses face from licenses and regulations charges.

Clear progress will be needed to reassure business that they will not end up seeing their regulatory compliance costs shoot up post-Brexit.

3. Scrutiny

There has been a lot of talk about ‘Henry VIII Powers’ in the Bill. This is the traditional term given to powers in legislation that give Government the ability to by-pass Parliament. For example, this might include measures that allow Government to change a rule in Primary Legislation via Secondary Legislation, something which isn’t normally allowed. However, what it doesn’t mean is that there will be no scrutiny of changes the Government makes as part of the Repeal Bill.

Any change made through the correcting power will still require regulations to pass through parliament. The vast majority of these will be ‘affirmative regulations’ – Statutory Instruments that must approve them formally before they go into effect. While such regulations aren’t amendable in the way Primary Legislation is, it is still up to Parliament whether or not they happen.

How Parliament will deal with the huge number of regulations is another matter. The suggestion of the House of Lords’ Constitution Committee of strengthening the of the Delegated Powers and Regulatory Reform Committee in the Lords, which traditionally assesses regulations for those that overstep the mark, is a welcome idea to help Parliament do its job on Repeal Bill Statutory Instruments.

While most changes will come through the normal Parliamentary processes, there are measures in the Bill which allow for special processes in ‘urgent’ cases. Under these powers Government can make a change to the law unilaterally, though such changes will cease to have effect a month later (giving the Government time to pass the changes through parliament).

‘Urgent’ isn’t defined in the Bill, which is something parliamentarians are likely to question, but given its usual meaning, issues such as cyber security, economic and financial services processes and health related measures could all be seen as urgent. That means tech companies in these areas must be live to the risk of changes happening before Parliament has even seen. Whether these powers survive the House of Lords will remain to be seen.

4. Devolution

One of the concerns about the ending of EU law that over-arches UK legislation was the impact on the Devolved Administrations of Scotland, Wales and Northern Ireland. Areas such as procurement law are technically the responsibility of Devolved Administrations but, thanks to EU procurement laws, in reality are the same across the whole of the UK single market. When these EU rules cease to have effect, this could lead to a fracturing of UK-wide ways of working.

The Bill therefore makes special provisions, in Clause 11, that mean that those areas where EU rules would become the competence of the Devolved Administrations are retained at Westminster level for a transitional period. This is a welcome step to ensure that we don’t see sudden regulatory divergence within the UK.

However, the proposals are likely to come under significant Parliamentary challenge, particularly from the SNP, and so whether they are safe from amendment won’t be clear under well into the Bill’s Parliamentary journey.

5. What the Bill doesn’t cover

The final thing to keep in mind about the Repeal Bill is that everything in it, and all the regulations coming from it, are only intended to ensure the UK and EU law are equivalent on Day 1 of Brexit. They make no attempt to set out how the UK will deal with regulatory divergence post Brexit.

What, for example, will the UK Government do if the EU decides in July 2019 to make significant reforms to the Digital Single Market? Will the Government change UK law so that businesses operate under the same rules, or will we diverge from what the EU is doing, risking creating dual processes for those operating across border?

Similarly, once EU law is entirely converted onto the UK statue book, how will the Government and Parliament go about making changes that might be more considered? We know, for example, that EU law on the Free Movement of People, which will be brought back into UK law as part of the Bill, is set to change. On this and a whole number of other matters, future changes could be made that have significant impact on businesses and yet it is not clear within the Repeal Bill how this process will be handled.

These issues just scratch the surface of the kind of questions the Bill is likely to get as it progresses through Parliament. Aspects of arcane Parliamentary procedure are likely to suddenly become the interest of businesses and the media in way never seen before. Most people recognise the importance of getting a Repeal Bill into law ahead of Brexit, but there remains real disagreement about this particular version of the Bill, so expect significant changes to be made to it in Parliament.

Overall, it is vital we get this process right. Ensuring our statue book is correct for 2019 is crucial, but is nothing compared to the importance of managing the rules and regulations affecting business in the years and decades to come.

Giles Derrington is the Head of Policy for Exiting the European Union at TechUK. Read more TechUK blogs here.