Post BREXIT - what does our regulatory world look like?

I am still in  a state of shock over the result. For me it is a dark day.  I just needed to share that.

And, yes this is another Brexit article.  But, rather than being one complaining or worrying about what might happen or what has already happened today we have had a look at what is going to need to happen in the future to make things work in a similar way to now.  

Much was made of EU red tape during the course of the campaigning.  It is true that a vast amount of our regulation is or at least was of EU origin, but that of it self does not render it bad or red tape.  But given Farage's comments this morning about the ￡350m EU membership fee saving being spent on the NHS claim, let's not dwell on what was said and presented as fact, let's look forward.  

So, to help you plan for the future we have taken a look at some of the key areas of that will almost certainly require new domestic law, assuming we want to keep the same levels of protection.

So what regulation may be impacted?

I suppose the starting point has to be that the referendum result to leave does not have legal consequences, yet. The result is that UK is still subject to its legal obligations to the EU and vice versa, until an exit is formally concluded. The timetable for this, and any transitional regime that goes with it, will only start to emerge over time and while the EU is calling for that to be swift, there is the Tory leadership to be settled first. And, we also have the other issue about possible future departure of Scotland and/ Northern Ireland from the Union.

So what of specific regulation?  For health and safety legislation most of our laws flow from EU Directives so leaving (when it finally happens) should have little impact as the underlying domestic laws which have implemented those Directives will still remain.

It is a very different position for food, cosmetics and some area of product liability, trading standards, environmental, cosmetics regulation where most of our laws are derived from (directly effective) EU Regulations and they are not copied out in our law or the domestic law refers to a particular EU law rather than copying out the actual obligation out.

This means that we will need to re-draft these laws and may result in considerable change. The simplest answer would be to copy out the EU Regulation so that the status quo continues, however no one knows what the proposal will be and there is a good chance that it will be reviewed area by area.   However, that will not happen for some time and the EU laws stand until we do actually leave.

The areas are just a few that obviously will require domestic law and given the sheer size of those regulatory regimes the fact I have only listed eight shouldn't be mistaken for the scale of the task.   We will be providing a more detailed overview on the impact on individual laws in these areas in the coming weeks and of course with change there is opportunity, so this may be a positive thing.

What's next?

There is a complex legal mechanism for leaving. To start the exit negotiation process, the UK Government must notify the European Council, the body which brings together the EU’s 28 Heads of State and Government, of its intention to leave. The timing of this notification is entirely in the UK Government’s hands and is important. It will start the countdown towards the two-year deadline for reaching an exit agreement.  Having previously said he would give notice immediately, Mr. Cameron has now confirmed that this should not happen until a new Prime Minister can be chosen and this will take months not days.  Even many on the ‘leave’ side concur that giving notice and thereby forcing the timetable would not be wise until there is some consensus on what the alternative relationship with the EU should look like.

The UK government has to serve notice, under Article 50 of the Treaty on the Functioning of the European Union (TFEU), to leave the EU. This has not been invoked before but what it means according to the TFEU is that at least two- year process is then triggered, in which the outgoing Member State (the UK) must then negotiate the terms of its exit with the EU Council (as a representation of the other 27 Member States) and try to reach agreement on how exit will be managed and what the future relationship will be. Such agreement is to be secured by qualified majority within the EU Council, in default of which the UK would cease to be a Member at the end of the two- year period following the issuance of the notice (or the two year negotiation period could be extended if all Member States would unanimously agree). David Cameron has indicated notice will not be served until October so nothing is going to happen for a while.

At the end of the negotiations (or the two years) the TFEU would cease to apply to the UK and the UK’s new relationship with the EU would either be contained in the negotiated withdrawal agreement (it is to be assumed), or be subject to a new vacuum (the disorderly exit scenario). In parallel the UK would be expected to revert to individual membership of the World Trade Organisation (WTO), which would require certain commitments but would also seek to secure certain minimum standards in terms of the UK’s relationship not just with the rest of the EU (as a WTO member bloc) but also other countries too. Until now the UK’s trade relationship with the rest of the world (the other WTO members) has operated through the EU’s WTO membership.

Other European countries such as Switzerland and Norway have their own relationships with the EU (e.g. EFTA, EEA) which have been painstakingly negotiated over years and these offer example frameworks of what might in theory be achieved in time. These frameworks provide certain pillars of EU membership such as the free movement of goods to extend, but they require many conditions to be respected such as respect for competition rules and other regulatory controls, while not affording the “seat at the table” to those countries to negotiate the content of the regulation they are bound to apply.

If you would like to discuss the possible implications for your business, please contact Hilary Ross, Jonathan Branton or Dominic Watkins.