The effectiveness and influence of the select committee system Contents

Annex 1: Role of EU law and policy in the UK in different phases of EU exit

1)This annex seeks to provide an overview of the variable role of EU law and policy in the UK during the different phases of exiting the EU, as background to Chapter 3 of this report (“Select committees and the UK’s future relationship with the European Union”). Revocation is not considered in this annex as it is not an exit scenario: self-evidently, if the UK were to revoke Article 50 and the EU were to accept that decision, EU law and policy would continue to apply to the UK at present.

2)There will be some reduction over time in the role of EU law and policy in the UK in all foreseeable Brexit scenarios, other than in the highly theoretical scenario of the UK leaving the EU and negotiating a future relationship which involves it continuing to apply all EU laws and policies which currently apply to it. Despite this anticipated reduction, the UK’s geographic proximity to the EU and the deep regulatory and economic integration which exists between the two territories mean that EU law and policy will continue to play a strategically important role in all exit scenarios, including if there is no deal.

3)The precise nature of that role will change dynamically post-exit, depending on a wide range of factors including whether there is a negotiated or a non-negotiated exit, the phase of the exit process, the shape of any future relationship, and domestic policy choices of the UK and the EU. It will be articulated through some combination of: (i) international agreements and domestic provisions providing for continued application of EU law in the UK and/or participation in EU programmes, (ii) domestic policy choices which may provide for a degree of unilateral UK alignment with certain EU rules, and (iii) the impacts of EU law on UK stakeholders outside the scope of any bilateral agreement. Accordingly, the practical impact of how EU law and policy will impact on the UK and Parliament will vary considerably, and is likely to become simpler in some areas and more complex in others.

4)In terms of how the role of EU law in the UK will evolve over time post-exit, there are two basic tracks which the UK’s withdrawal could take, each of which contains different possible sequences of events and outcomes:

i)a negotiated withdrawal, in which the Withdrawal Agreement and the Political Declaration are ratified, with all of the consequences that entails, including a transition/implementation period, efforts to negotiate a future relationship based on the Political Declaration, and the backstop provisions potentially entering into force to the extent necessary; and

ii)a non-negotiated withdrawal (“no-deal”), which, rather than representing a terminus for the process of exiting the EU, would mark a new phase in the process, and which could develop in a number of ways.

5)These two tracks are set out in more detail below. It is important to note that, rather than simply superseding and replacing each other, in many cases the arrangements provided for in the different stages of the exit process described below may coexist at different points in time, representing different layers of the UK and the EU’s legal relationship.

Track 1: Negotiated withdrawal from the European Union

(i) The Transition/Implementation period as provided for in the Withdrawal Agreement

6)The current Withdrawal Agreement makes provision for there to be a transition/implementation period until December 2020.330 During the transition/implementation period most EU law and policy, including new EU laws that come into force and had to be implemented within the period, would continue to apply and have the same legal effects in the UK as at present,331 although a number of exceptions to this principle apply.332 EU laws would also be supervised and enforced by EU institutions as currently.333 This would happen as a matter of international law, from the EU/UK Withdrawal Agreement and domestic legislation giving effect to it, rather than as a function of EU law, and without formal UK participation in its creation.334

7)Whether new laws adopted by the EU during the transition/implementation period applied in the UK would depend on (i) whether that legislation had to be applied during the transition/implementation period, in which case they would, and (ii) if it did not, on whether either the backstop or any emergent future relationship between the UK and the EU provided for ongoing application of EU rules in that area, when the transition/implementation period had ended.

8)The transition/implementation period can be extended once for one or two years.335 If this occurred, there would be some further reduction in the scope of EU policy that would apply to the UK during this extended period: for example, the UK would by default cease to take part in all budget-funded Union programmes, including its system of agricultural subsidies and its research programme, although it could attempt to negotiate some degree of participation in these programmes (to the extent that EU rules permit it) on a case-by-case basis.

(ii) Other specific areas in which EU law will continue to apply directly in the UK as provided for in the Withdrawal Agreement:

9)In the event of a negotiated withdrawal, in addition to the transition/implementation period, there are a number of other areas provided for in the Withdrawal Agreement in which EU law will continue to apply in the UK after the transition/implementation period:

10)These obligations would no longer flow from the EU Treaties, but from the EU/UK Withdrawal Agreement and domestic legislation giving effect to it. However, they would need to produce the same legal effects in UK law as EU law does currently.337 Extensive arrangements concerning oversight of these provisions and resolution of disputes regarding them are provided for in the Withdrawal Agreement.338

(iii) The Protocol on Ireland and Northern Ireland (the backstop) as provided for in the Withdrawal Agreement

11)If the transition/implementation period ends and either a future relationship or alternative arrangements are not in place which would remove the need for any physical infrastructure or related checks and controls on cross-border activity between Ireland and Northern Ireland, then the Protocol on Ireland and Northern Ireland in the Withdrawal Agreement (the ‘backstop’) will apply.

12)Under the backstop, the whole UK would form a single customs territory with the EU (except for trade in fisheries and aquaculture products unless an agreement on access to waters and fishing opportunities is applicable between the EU and the UK, ideally to be concluded and ratified before 1 July 2020). The UK would conform to some specific EU legislation on customs and to provide a ‘level playing field’ the UK would commit to non-regression of EU environmental protection, labour and social standards, as applicable at the end of the transition/implementation period, and some alignment with rules on state-owned undertakings in respect of administration of tax, state aid and competition rules. The UK would also have to adhere to the standards set out in various EU equal treatment laws.

13)In addition to these UK-wide obligations, the backstop would require Northern Ireland to apply a range of additional EU legislation, in areas such as VAT and excise duties, product and technical standards for goods, agriculture and the environment, wholesale electricity markets, and the EU’s Customs Code. The May Government made a unilateral commitment to ensure “no divergence in law or in practice between the rules in Great Britain and Northern Ireland covered by the Protocol in any scenario in which the backstop took effect”.339

14)The backstop would nonetheless entail a significant reduction in the proportion of EU laws that were applicable in the UK, as the rules covered by it “constitute a small fraction of the single market rules that currently apply to the UK”,340 and exclude EU Single Market law concerning the free movement of persons, services and capital, as well as most non-economic EU law. That said, the mechanisms for the application and enforcement of EU law, where it continued to apply, would, arguably, become more complex.

15)These obligations would no longer flow from the EU Treaties, but from the EU/UK Withdrawal Agreement and domestic legislation giving effect to it. As the Protocol is an integral part of the Agreement, the provisions of the Protocol itself and in particular EU law that it applies to Northern Ireland would need to produce the same legal effects in UK law as EU law does currently.341

(iv) The future relationship

16)It is envisaged by the Withdrawal Agreement that the transition/implementation period will be succeeded by a future relationship, which the UK and the EU commit to negotiate based on the framework set out in the Political Declaration.342 The relationship would cover the full range of UK-EU relations, including data, fisheries, financial services, workers’ rights, security and trade in goods.

17)The Declaration, which was agreed at negotiators’ level and agreed in principle at political level, establishes that any future relationship must respect certain principles of the EU previously set out in Guidelines from the European Council343—notably, “the balance of rights and obligations” as well as “the integrity of the Single Market and the Customs Union and the indivisibility of the four freedoms”.344 These principles have the effect of making participation in the EU Single Market essentially a binary proposition, which would require continued acceptance of free movement of persons between the UK and the EU, alongside a range of other obligations.

Future relationship based on the Political Declaration

18)On the basis of these agreed principles and the UK’s intention to end the free movement of persons between the UK and the EU, the Declaration as drafted envisages a future relationship which envisages little ongoing formal integration between the UK and EU legal orders in the context of the future relationship (“the Parties will form separate markets and distinct legal orders”345). Instead of forming part of the Single Market, arrangements would be made for bilateral cooperation in a wide range of areas, which would involve a reduction in the role of EU law and policy in the UK (although the precise extent of that role would depend on the design of the new arrangements which were negotiated). One exception is the suggestion that the relationship should “build and improve on the single customs territory provided for in the Withdrawal Agreement which obviates the need for checks on rules of origin”.346

19)Two further factors might somewhat limit the overall looseness of the legal relationship sketched out in the Declaration. Firstly, such a relationship would not in itself remove the need for the backstop provisions in the Withdrawal Agreement to remain operative. Therefore, even if a low regulatory integration agreement like that envisioned in the Political Declaration were concluded, unless alternative solutions to the backstop were identified that were acceptable to the EU, the provisions of the backstop, outlined above, would remain operative. Thus, there is the possibility that, even if the UK sought to conclude a loose future relationship with the EU, it would effectively remain in a Customs Union with the EU, with Northern Ireland applying (primarily) EU rules relating to goods.347

20)Secondly, the Declaration signals that the UK could choose to unilaterally align with some EU rules, noting that this “would be taken into account in the application of related checks and controls”.348 If the Government chose to do this, some EU rules relating to products would effectively continue to apply in the UK as a matter, not of EU law or international law, but of domestic policy, meaning that EU law would remain of substantial relevance in these areas. Where the UK chose to align with EU rules domestically, there would still potentially be some reduction in the relevance of some aspects of EU law in these areas, as, because the UK would no longer be a Member State, the reciprocal, intra-EU arrangements between Member States provided for in EU law (e.g. regarding market access, recognition of regulators and approvals, and access to EU systems and procedures) would no longer apply to the UK.349

21)The Declaration also states, specifically in relation to law enforcement and judicial cooperation in criminal matters, that a closer partnership in this area would require commitments from the UK regarding alignment with EU rules.350

Future relationship based on an amended Political Declaration providing for a higher degree of ongoing regulatory integration or alignment

22)The Political Declaration is a flexible document: the EU has frequently reiterated its “openness to rework the Political Declaration in full respect of European Council guidelines”.351

23)The UK could, without breaching the principles that have been negotiated in the Declaration, pursue a very close economic relationship with the EU in which Single Market law would continue to apply in the UK in its entirety, and the UK would remain in a Customs Union.

24)Were this to happen, EU law would continue to play a direct and substantial role in the UK, effectively continuing to constitute a significant proportion of the UK legal order. To date, the most specific proposal for such an arrangement has been the “Common Market 2.0”352 model proposed by a group of MPs, which would involve the UK remaining part of the Single Market by joining the European Free Trade Association (Efta), and remaining in a common customs territory with the EU. This proposal would also see the UK leave a range of areas of EU law including the Common Agricultural Policy and the Common Fisheries Policy, thus entailing some reduction in the extent of EU law that would apply in the UK.

25)To negotiate such a relationship, the Declaration establishes that the UK would have to accept the continued free movement of persons between the EU and the UK (on the basis that the four freedoms of the Single Market are ‘indivisible’). There has not to date been a majority in the House of Commons for such an approach.

(v) Areas excluded from the future relationship

26)Where EU law and policy cease to apply directly in the UK under the future relationship, they will nonetheless often remain relevant to UK stakeholders engaged in cross-border activity with the EU. For example:

Track 2: Non-negotiated withdrawal from the European Union (“No-Deal”)

27)In the event of a “no-deal” exit, new EU laws would cease to constitute the UK’s legal order through obligations flowing from the EU treaties, and in the absence of any international agreements committing the UK to do so. Nonetheless, EU law would continue to play a significant role.

28)Firstly, even if there were no deal, the European Union (Withdrawal) Act 2018 (EUWA) would retain EU law in the UK legal order through the creation of a new category of domestic law (“retained EU law”). Where deficiencies in retained EU law would otherwise arise—for example, where provisions of EU law are reciprocal in character, and unilaterally retaining those provisions in UK law would not preserve their effects because EU Member States would no longer be obliged to reciprocate these provisions for a non-Member State—”corrections” can be made under Section 8 EUWA, which may amount to substantial divergence from EU law (for example, the regulations which abolished mobile roaming charges within the EU have been amended or revoked to reflect the fact that these reciprocal arrangements would no longer function.353. Nonetheless, EU law would continue to provide the basis, or at least the starting point, of a considerable part of the UK’s legal order at the moment of exit, even if there were no deal. Furthermore, Section 5 (2) EUWA 2018 provides that the principle of supremacy of EU law continues to apply to all pre-exit UK legislation, meaning that any pre-exit UK legislation which is incompatible with retained EU law must be invalidated or disapplied.

29)Secondly, during the initial period of a non-negotiated exit, and in the absence of negotiated bilateral arrangements, the array of unilateral “no-deal” contingency measures that the EU has passed would govern certain types of UK-EU activity, alongside the UK’s own unilateral preparations. Some of these EU measures would require UK stakeholders and the Government to comply with the level-playing field-type requirements contained in them if the Government wished to avail of the (reduced) market access provided for in them, which could be suspended were the UK to be found in breach of these conditions. The EU might adopt further measures in the aftermath of a non-negotiated exit, for example, relating to the Irish border.

30)Thirdly, even if there were a non-negotiated exit, the UK might seek to negotiate new bilateral arrangements with the EU which would mitigate the effects of a non-negotiated exit. The EU has anticipated this, and a recent Communication states that:

“In a no-deal scenario, these temporary contingency measures provide the United Kingdom the space in which to address the three main separation issues, which are a precondition for discussions on the way forward with the United Kingdom. As stated by President Juncker to the European Parliament on 3 April 2019, these issues are (i) that rights of EU27 and UK citizens who have exercised their right to free movement before withdrawal would still need to be upheld and protected, (ii) that the United Kingdom would still have to honour its financial commitments made as a Member State, and (iii) that a solution would still need to be found to preserve peace on the island of Ireland and the integrity of the internal market. The United Kingdom must fully respect the letter and spirit of the Good Friday Agreement.”354

31)There is thus the possibility that a non-negotiated exit would evolve into a negotiated exit, with new arrangements which could potentially include some ongoing application of EU law in certain areas. Equally, it is possible that there would be a protracted standoff with the UK declining to meet the preconditions for further negotiations specified by the Commission. In such a scenario, it is a political judgement as to whether, to what extent, and subject to what conditions, the Commission would in time be willing to soften its current position and conclude any new arrangements with the UK.

32)EU law would also, even if there was a non-negotiated exit, continue to limit the extent to which the UK would subsequently be able to conclude bilateral agreements with individual EU Member States in a wide range of policy areas, including trade.

33)Finally, in the event of a non-negotiated exit, EU law and policy would continue to specify the rules governing the placing of goods/services on its market for UK stakeholders and other cross-border activities, in the same manner as it would in the event of a negotiated future relationship for those activities for which new UK-EU arrangements were not agreed, as set out in section (v): “Areas excluded from the future relationship”.

Relevant developments in EU case law

34)Post-exit, EU case law may impact retained EU law or EU law that is otherwise relevant to the UK (for example where the UK has an interest in ensuring that UK law is recognised by the EU as being ‘equivalent’ to EU law).

Source: House of Commons staff

330 Part Four, Articles 126 to 132, of the draft Withdrawal Agreement.

331 The combined effect of Articles 127 and 4 of the draft Withdrawal Agreement.

332 Some laws concerning the rights of EU citizens and certain EU justice and home affairs laws which are not already binding on the UK by exit day will not apply during the transition/implementation period. The UK would be excluded from EU information exchanges, procedures and programmes which required access to security-related information (such as elements of the EU Space Programme and eligibility to participate in certain procurement tenders). The UK would no longer be able to act as leading authority for risk assessments, examinations, approvals or authorisations at the level of the Union or at the level of Member States acting jointly for those activities referred to in Annex VII of the draft Withdrawal Agreement.

333 Article 131 of the draft Withdrawal Agreement.

334 Article 128(2) of the draft Withdrawal Agreement.

335 Article 132 of the draft Withdrawal Agreement.

336 In the case of EU citizen rights, Article 158 of the draft Withdrawal Agreement provides for a continued role for the Court of Justice in their interpretation for a period of up to 8 years after the transition/implementation period, with the court’s judgments to be given the same legal effect in UK law as at present. Article 4 also provides that EU citizens may also rely on their rights under the Agreement directly in UK courts where they satisfy conditions for “direct effect” and for inconsistent UK statute to be set aside.

337 See Article 4 of the draft Withdrawal Agreement.

338 Although disputes about these obligations are to be settled using the JC and arbitration procedure, potential sanctions for non-compliance with arbitration panel ruling include lump sum fines or penalty payment and ultimately proportionate suspension of provisions of the draft Withdrawal Agreement or “any other agreement between the EU and the UK”. Also, questions of EU law relevant to the disputes must be referred by the arbitration panel to the Court of Justice to give a ruling to be binding on the panel.

341 In respect of EU law applying to Northern Ireland, Article 14 of the Protocol preserves the EU institutions’ supervisory and enforcement role, with the Court of Justice also retaining its jurisdiction to giving preliminary rulings on interpretation. Otherwise dispute settlement procedures envisaged by the draft Withdrawal Agreement would apply, together with the same specific requirements on referral of questions of EU law to the CJEU, fines and penalties and suspension.

342 Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom (25 November 2018)

343 European Council, (Art. 50) - Guidelines (23 March 2018)

344 Political Declaration, paragraph 4.

345 Political Declaration, paragraph 21.

346 Political Declaration, paragraph 24.

347 See paragraphs 6–12.

348 Political Declaration, Paragraph 28.

349 To provide one example, even if the UK unilaterally chose to remain aligned with EU goods rules, in which case it would copy EU industrial product standards, if it were no longer part of the Single Market and its system for the mutual recognition of national technical standards for goods, future changes to this intra-EU system would not apply directly to the UK (even if the Government wanted them to).

350 Political Declaration, Paragraph 83.

353 The Mobile Roaming (EU Exit) Regulations 2019, SI 2019/587

354 European Commission, Communication, Addressing the impact of a withdrawal of the United Kingdom from the Union without an agreement: the Union’s coordinated approach, COM(2019) 195 final

Published: 9 September 2019