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Brexit update:  a policy of change and divergence - retained EU case law in the UK courts

Eleonor Duhs
The UK Government is proposing to make regulations under the European Union (Withdrawal) Act 2018 ("the 2018 Act") which would allow certain UK courts and tribunals to depart from retained EU case law after the end of the transition period. If made, these regulations could bring about relatively speedy divergence  between the UK and EU legal systems after the transition period ends on 31st December 2020, creating barriers to EU-UK trade.
The proposals also give rise to questions about legal certainty and the lawful exercise of powers in secondary legislation. The consultation on the proposed regulations is now open.

The policy of continuity

The central policy of the 2018 Act, drafted during the early months of Theresa May's Government, was continuity. Even if the UK was to leave the EU without a deal, the 2018 Act provided a safety net. Instead of losing vast swathes of EU law overnight on its departure from the EU, the UK would retain EU law in its legal system. This legislation would be known as "retained EU law" – a new form of domestic law. Retained EU law would give continuity to businesses, individuals and public bodies because the law regulating many areas of the UK economy would remain in place even in a no-deal scenario.    

The same logic applied to the interpretation of that law:  retained case law – the case law of the Court of Justice of the European Union ("CJEU") as well as domestic case law interpreting EU obligations - would also be saved. That would mean that the interpretation of retained EU law would not change on the day after the UK stopped being subject to EU law. The law being saved would, courtesy of keeping the case law, mean the same thing. There was a very limited exception: the Supreme Court and the High Court of Justiciary in Scotland would be able to depart from CJEU case law applying the same test as when departing from their own case law.

In the case of the Supreme Court it will depart from its previous decisions where it is "right to do so".  But the Supreme Court has only departed from its own case law on few occasions so this was a limited "safety valve" which was only expected to apply in a very small number of situations. The explanatory notes to the 2018 Act set out that, "because the supremacy of EU law will not operate on new, post-exit legislation, Parliament (and, within devolved competence, the devolved legislatures) will be able to decide which elements of that law to keep, amend or repeal once the UK has left the EU." 

Therefore, should retained EU law be repealed, and replaced with new domestic legislation (for example, replacing an EU regulation on product standards with UK regulations on product standards) the retained case law interpreting the EU regulation would also fall away.

The policy now is that the 2018 Act will come into force at the end of the transition period, and provide continuity and certainty in two scenarios: 

i. a trade deal with the EU (which we anticipate will be fairly limited); and
ii. no trade deal between the UK and the EU.

The proposals on departure from retained EU case law 

The European Union (Withdrawal Agreement) Act 2020, introduced in the House of Commons within days of Boris Johnson's victory at the polls in December 2019, contained an amendment to the provisions in the 2018 Act relating to retained EU case law. It set out a power for Ministers to make regulations which would allow UK courts, on a test to be determined, to depart from retained EU case law. The regulations were to specify which courts were to be given the ability to depart. This was a marked departure from the approach under Theresa May's administration. Instead of continuity, the emphasis was giving courts the ability to diverge after the end of the transition period from the meaning of retained EU law as it was during the transition period or at the time of the UK's EU membership. The recently-published consultation paper echoes this new emphasis. It states that "Extending the power to depart from retained EU case law to additional courts and tribunals would provide greater scope for the interpretation of case law to evolve to recognise the UK’s changing status" (see p7).
In deciding whether to depart from retained EU case law and/or domestic case law which relates to retained EU law the consultation paper states that the test to be applied by the relevant courts would be the same as for the Supreme Court: “whether it appears right to do so". Although the power to make the proposed regulations enables the Government to specify “the extent to which, or circumstances in which,” the court or tribunal “is not to be bound by retained EU case law” and to specify considerations which “are to be relevant” to the court or tribunal in coming to such decisions, the consultation makes no such proposals.
The proposals as to which courts should be able to depart from retained EU case law are

i.  the Court of Appeal in England and Wales and Courts of equivalent standing in Scotland and Northern Ireland; or
ii. the Court of Appeal and equivalent courts and the High court of England and Wales and equivalent courts.  This would also include the Upper Tribunal which comprises (amongst others) the Employment Appeal Tribunal.

How would this work in practice?

Take a fictional scenario. A case is litigated in the High Court.

The main issue is whether a product sold online conforms to the (fictional) EU Online Products Safety Regulation. The claimant relies on case law from both the CJEU and domestic courts on the meaning of a "prohibited substance" in the EU Regulation. The EU Regulation still applies in the UK because it has been saved as retained EU law by the 2018 Act. 
The defendant's counsel points to the UK regulations on departing from retained EU case law and urges the judge to depart from the case law on the meaning of a prohibited substance because it  is "right to do so". The UK regulations contain no criteria for the judge to consider in applying this test, but the defendant's lawyers point to the debate in the House when the UK regulations were being approved. The Minister explained that the rationale for bringing forward the UK regulations was the "UK's changing status".

Counsel says this means that the court must consider that the point of the EU Regulation was to harmonise safety standards across the EU Member States. Given that the UK is no longer in the EU, the court should not consider itself bound by EU case law on the meaning of a prohibited substance. The same sorts of arguments could be deployed in any area of retained EU law including data protection, employment law or financial services, to name a few examples. 

Problems posed by the regulations

The scenario set out above has the potential to create a number of problems. The most significant problem for businesses is a lack of legal certainty. There are also questions over the lawfulness of the exercise of powers by Ministers in relation to matters which should be for Parliament to determine. 

Lack of legal certainty

The test of departing from retained EU case law when it is "right to do so" would be difficult to apply. The House of Lords Constitution Committee pointed out that the power to allow courts to depart from retained EU case law would cause "significant legal uncertainty that would be damaging to individuals and companies" (see the Committee's Report on the Withdrawal Agreement Bill at paragraph 106). The fictional example above illustrates why. The outcome of a particular case could significantly change the business environment in which companies are operating. It takes time for appeals on these sorts of points to work their way through the system.

The proposals on departing from retained EU case law therefore exacerbate the precarious situation in which many businesses find themselves. Where the outcome of a case is a contradiction between the EU and UK versions of retained EU law this will increase difficulties for companies seeking to trade in both jurisdictions. 

Lawful exercise of powers in secondary legislation

The sort of argument set out above, that the UK has left the EU and so it is right to depart from retained EU case law, undermines the central rationale for the 2018 Act. The purpose of the 2018 Act is to create legal certainty in the UK by ensuring continuity in the law which applies after the end of the transition period. Retaining the case law is central to that aim. The lawfulness of using secondary legislation to undermine the central purpose of legislation which Parliament has enacted is questionable. Lord Judge warned when these powers were legislated for at the start of this year that their introduction was "not appropriate" because it "intrud[ed] into the proper role of Parliament"(see HL Deb vol 801 col 684-5, 15th January 2020). He went on, "even if it were appropriate for Ministers to interfere at all in this realm of judicial discretion, it is not appropriate for Ministers to do it by regulation. Such decisions ought to be made by Parliament in primary law".   

Where does this leave us at the end of 2020?

It is not certain, of course, that these regulations will be made. The Government has to make them by the end of the transition period. At that point the power to make them expires. What this consultation does signal, however, is that the Government is keen to facilitate change, not continuity, at the end of the transition period.  The general direction of travel is clearly away from the EU's way of doing things.

For businesses operating in the EU and the UK that means regulatory divergence, and barriers to UK-EU trade.
The consultation closes on 13th August 2020.

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