UK businesses face a 'storm' of secondary legislation and a significant risk of change to their legal and regulatory environment as the UK prepares for Brexit

New analysis from Hogan Lovells underlines the scale of the task facing the UK Government and the challenge ahead for UK businesses

With just under a year until the UK legally leaves the EU, new analysis from the Hogan Lovells Brexit Taskforce has revealed that UK businesses face a ‘storm’ of secondary legislation as the UK prepares for Brexit, and further warns of significant risk of change to businesses' legal and regulatory environment across all sectors in the near to medium term.

Domestically, the UK Government will need to replicate 19,000 EU legislative acts in force, while also amending the 7,900 statutory instruments which currently implement EU law. There are also 759 bilateral EU treaties to deal with and 41 EU agencies to replicate. The Government predicts that it will need to enact between 800 to 1,000 statutory instruments in a short amount of time, many amending multiple pieces of underlying legislation that do not function appropriately after the UK leaves the EU.  This process has already begun, as the Government has published example statutory instruments in a number of areas.

Furthermore, the analysis from Hogan Lovells warns of a significant risk of change to businesses' legal and regulatory environment across all sectors in the near to medium term, either by design or by mistake.


(a)  By design: the UK Government proposes to adopt a raft of secondary legislation to 'correct deficiencies' in retained EU law using 'Henry VIII powers' provided under the EU Withdrawal Bill.  It claims that this will be a purely mechanical exercise; but, in some cases, even minor changes to the wording of a provision could dramatically alter the application of the rules in practice and therefore will inevitably involve policy choices.  For example, where a business is currently regulated by an EU agency, this agency will now need to be replaced by a UK public body; where licences and certifications are granted at an EU level or granted nationally but recognised across the EU, these will now need to be granted at purely domestic level and be adjusted to take account of the fact that the UK is no longer in the EU.

 

(b)  By mistake: even in more orthodox times, when Government legislates by adopting secondary legislation rather than leaving it to Parliament, this is already a reduction in parliamentary scrutiny.  Now, with Brexit set to continue to take up considerable bandwidth within Government and Parliament, the important and pain-staking task of trawling all soon-to-be-retained EU law for 'Brexit-glitches' is threatening to take place solely within Government Departments with minimal Parliamentary oversight and minimal consultation.  This lack of oversight and the pressure the Government is under to complete the task in time will undoubtedly cause flaws or unintended consequences to arise, which may not be noticed before they become law.

 

Charles Brasted, a Partner in Hogan Lovells’ Brexit Taskforce, said, "EU law touches all aspects of life, from health and safety to harbours and highways; from employment rights to exotic diseases.  If nothing is done between now and 29 March 2019, when the UK leaves the EU, thousands of EU rules will simply stop applying in the UK overnight, causing significant uncertainty as to how the remainder of UK law should function without them.

"The Government's proposed EU Withdrawal Bill, expected to be enacted around June 2018, is designed to address this challenge by transposing all EU law in force on Brexit day into UK law.  The intention is this will ensure continuity and legal certainty on day one and avoid undue disruption as the UK leaves the EU.

"However, EU law, as a body of rules that applies in and between different Member States, was not designed to operate purely in a post-Brexit UK.  As a result, adopting EU rules wholesale will not provide continuity in terms of the way the rules apply.  Instead, legislators need first to tweak EU rules to fit the UK's new situation and ensure they continue to function appropriately post-Brexit.

"The Government truly has a mammoth task ahead of it and will need to work quickly to complete the largest legislative overhaul ever undertaken in the UK which will fundamentally change the legal and regulatory environment of businesses across the country. 

"Given that Brexit is already taking up considerable Governmental and legislative bandwith, it is looking increasingly likely that the all-important task of trawling through all soon-to-be-retained EU law for any 'Brexit-glitches' will take place solely within Government Departments with minimal Parliamentary oversight and consultation.  This lack of oversight combined with the sheer scale of the task and the immense pressure the Government is under to complete it in time will undoubtedly cause flaws or unintended consequences to arise, which may not be noticed before they become law.

"Businesses will therefore need to look out for themselves more than ever before, and be ready to keep on top of the process to address risks, capitalise on opportunities and challenge outcomes, if necessary.  They will need to be vigilant to make sure no mistakes are made and the proposed changes work for them."



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