The over-arching aim of the Repeal Bill - or the European Union (Withdrawal) Bill - as set out by Secretary of State for Exiting the EU David Davis, is to ensure stability and certainty. The government’s efforts to promote continuity for the business community are welcome. Knowing there will be a robust legal framework in the UK on the day of exit from the EU is critical for business planning, and the need for clarity is growing quickly. While firms continue to invest in their plants, innovation and training, uncertainty is beginning to hit their ability to recruit and retain talent, and impact major decisions in the boardroom – with investments on significant projects like innovation centres and logistics hubs on hold.
This briefing examines the key questions that businesses will be looking for the Repeal Bill to address.
How will the Repeal Bill account for transitional arrangements if they are required as a bridge between the UK's exit and a final deal coming into force?
The agreement of transitional arrangements is an urgent priority for businesses. Many companies are approaching “tipping points” – moments in time where they will have to make decisions about putting contingency plans into place, future investments, or how to price products for sale after the UK’s exit from the EU. They are considering the risk that the UK and EU fail to agree a trade agreement within the Article 50 period, and are seriously concerned about the “cliff-edge” in such a scenario.
In terms of a regulatory cliff-edge, businesses have expressed fears leaving the EU without a deal would result in a two-stage EU exit, requiring companies to adapt to new regulatory regimes twice over. This twostage scenario creates severe difficulties for business planning and continuity as businesses will be faced with regulatory gaps, multiple and rapid changes in regulatory requirements and disruption to their day to day operations, followed by a second adjustment period once a free trade agreement enters into force. Transitional arrangements are therefore needed as soon as possible, and the CBI has proposed that the UK remain in the single market and a customs union until a final deal is in force.
Businesses will be looking to see how the Repeal Bill will account for the need for transitional arrangements, as this is not yet clear. It is possible the UK will be required to continue to adopt EU rules dynamically through a period of transition, which may have an impact on the timing of the Repeal Bill. Businesses will therefore be looking to see that acknowledged as a possibility.transiitionalarrangements
If the government has to alter policy through the Repeal Bill, how will stakeholders be consulted?
In order to deliver stability and certainty for business through this process, the government will need to avoid making significant policy changes, either through statutory instruments or through the drafting of the Repeal Bill. However, there may be moments where changes will need to be made – to tackle inoperabilities in legislation, for example – and businesses will be looking to see how they can input into these changes to make them work.
Given the range of legislation which will require alteration to meet the government’s objective of ensuring a fully functional legal system the day the UK leaves the EU, the use of statutory instruments (SIs) is 2 reasonable – as the government has commitment to use statutory instruments only to ensure a fully functioning legal system and not to make any policy changes. As companies oppose any policy changes made using SIs under the Repeal Bill, business will be looking for the government to outline in more detail how the SI process will work – in particular to learn what forward visibility of SIs will be given, and what opportunities the business community and other stakeholders will have to input on these SIs.
The Repeal Bill’s primary legislative processes should also not be used to make significant policy changes. Businesses are keen to explore potential improvements to regulation and the UK’s regulatory system – but only after Brexit. In the short term, stability and certainty are most important for businesses. Any changes in regulation once the UK has left the EU should be made in consultation with business and society, and in response to policy goals – not a “slash and burn” or “change for change’s sake” approach to regulation, and not at the cost of access to international markets. If changes in policy are to be made through the Repeal Bill, business will want to see how they can input to ensure those changes are practical and desirable.alterpolicy
How will the Repeal Bill respond to negotiations on important issues of regulatory cooperation?
Business understands that the Repeal Bill alone cannot deliver regulatory continuity, as this will be subject to negotiation. Cooperation between UK and EU regulation and regulators is critical to making a success of Brexit, as non-tariff barriers to trade can only be avoided through harmonisation between regulatory frameworks. For example, cooperation in regulation on data protection is necessary to ensure the free flow of data between the UK and the EU.
This cooperation is critical both in the short term – on the day the UK leaves the EU – and into the future. For many businesses, the evolution of existing EU legislation is vitally important to their business operations, including dynamic processes such as the on-going modification of technical details. For example, when, after exit, the EU makes a change to an annex of EU chemicals legislation, that legislation will diverge if the UK does not make a similar change. This risks creating technical barriers to trade which would have negative consequences for companies and consumers in the EU and the UK, such as increased compliance costs, multiple production lines, inefficiencies and difficulties placing goods on the market.
Businesses will be looking to hear more about how the negotiations on keeping the UK and EU regulatory frameworks aligned will be part of the Repeal Bill, as part of the government’s aims in the Article 50 negotiations when it comes to regulatory cooperation, as this has not yet been made clear.negotiations
If UK regulators, courts and agencies are given significantly increased responsibilities by the Repeal Bill, will additional resource be made available to them?
It is well understood that the Repeal Bill is intended to translate EU regulations into UK law, and the adjudication and enforcement of these pieces of legislation will become the responsibility of UK bodies unless shared authority is otherwise negotiated. If this is the case, it will be a complicated process. A single piece of regulation may be enforced by multiple bodies at present, for example some aspects of EU regulation around financial instruments are enforced by the UK FCA and PRA, some are enforced by EU agencies such as ESMA, and some rights are granted by judgements made by regulators in other EU states. For some regulators, it will involve significantly increased responsibilities – for example, if the UK Civil Aviation Authority has to adopt competence over airworthiness of planes, a large number of skilled individuals and new processes will be required. For some regulators, it is very hard to see how they will manage these increased responsibilities with current resource.
If the Repeal Bill does refer these additional powers to UK regulators, courts and agencies, businesses will want to see how any necessary resource is made available to them. These bodies should have sufficient personnel to ensure these additional responsibilities are carried out efficiently, and that the existing operations of such bodies are not affected by increased workloads.additionalresources
How will the Repeal Bill treat EU legislation passed before exit but implemented afterwards?
Companies are currently having difficulties with scenario planning as they lack information on what the government is trying to achieve in terms of the UK’s future relationship with the EU - in particular, how the government intends to treat pending EU legislation. This includes EU legislation which has been adopted into law and allows for an implementation window which straddles both sides of the UK’s likely departure date from the EU. If the government chooses not to implement this legislation, there may be unintended regulatory divergence as the rest of the EU implements this legislation over time, potentially giving rise to technical barriers to trade.
One example would be Medical Devices and In Vitro Diagnostic Medical Devices Regulations, where the EU has recently finalised modernising legislation dating back to the 1990s. Some aspects of the legislation will become legally binding within 6 months, whilst others will be legally binding in 2020 or 2022. This gives EU Member States a wide window to implement the provisions of the legislation in order to be in full compliance with the law come 2022. If the UK chooses only to partially implement this legislation, there is a clear risk of regulatory divergence from 2022 when all other EU Member States have fully implemented the new rules.
Businesses are hoping for certainty about the government’s intended approach in this area from the Repeal Bill, because some are currently implementing that new EU legislation, and investing funds in doing so.eulegislation
How will areas of regulation with devolved considerations be managed by the Repeal Bill?
The Repeal Bill will return to the UK some significant pieces of regulation that have significant to the devolved nations. For example, the UK’s withdrawal from the Common Agricultural Policy and the Common Fisheries Policy is expected, but both agriculture policy and fisheries policy are areas over which the devolved authorities have competence. This creates a challenge for the UK government, the devolved authorities, and for the business community.
Businesses will be looking to see how regulation with devolved considerations will be managed by the Repeal Bill, and to hear more about what structures the government might be considering in order to maintain an effective UK single market. The principle of devolution to the right level is something that the business community supports, but it will be important to avoid the creation of barriers to doing business within the UK.devolvedconsiderations