Regulation

Key facts:

• As a result of the Free Trade Agreement the UK is no longer part of the EU’s legal structure and will not be bound by EU rules and court rulings after the transition period ends (in principle). The European Court of Justice will have no jurisdiction over the English courts.  Disputes that cannot be resolved between the UK and the EU will be referred to an independent arbitration tribunal.
• A new balance between UK and EU regulatory systems has been struck after the transition period has expired on 31 December 2020. The European Union (Withdrawal) Act 2018 (EUWA) provides a new constitutional framework for the continuity of ‘retained EU law’ in the UK, replacing the EU treaties that had until that point applied in the UK. Thousands of amendments to that retained EU law also entered into force at the same time.

Many rules have an EU origin.  Until the end of the transitional period this allowed businesses to trade with EU countries without having to think about local rules for almost all products and for many services.

Businesses will now need to develop an awareness of the regulatory aspects of trading with the EU. After the transition period ended, new rules under the Free Trade Agreement introduce an added layer of red tape on import and export of goods in and out of the EU from the UK.  Thus, some new checks will be introduced at borders, such as safety checks and customs declarations. There are some new restrictions on certain UK animal food products. For example, uncooked meats like sausages and burgers can’t enter the EU unless they are frozen to -18C.

However, both the UK and the EU have expressed an intention to minimise barriers to trade.  The Free Trade Agreement seeks to prevent unnecessary technical barriers to trade, e.g. by providing for self-declaration of regulatory compliance for low-risk products and facilitations for other specific products of mutual interests, such as automotive, wine, organics, pharmaceuticals and chemicals.  However, businesses must prove that their products fulfil all necessary ‘rules of origin’ requirements, but traders can self-certify the origin of goods.  Also all UK goods entering the EU after 1 January 2021 will have to meet the EU’s regulatory standards, including on food safety (e.g. sanitary and phytosanitary standards) and product safety.

For now, EU laws will stay on the UK Statute Book to prevent disruption. Over time, Parliament will scrutinise and possibly modify or replace each piece of EU originated legislation. Also, there are new laws to reflect that the UK left the EU, and that it has own policies on, for example, trade, agriculture or nuclear energy.

To an extent they can either align rules or consider them to be “equivalent” or “adequate”.  However, issues in relation to data adequacy and the equivalence of the financial services are still under consideration

Until very recently the process of the UK leaving the EU had very little direct impact on the law and regulation applicable in the UK.  During the transition period under the Withdrawal Agreement, which came into force from 31 January 2020 the EU law has largely continue to apply in the UK as before, despite the UK no longer being an EU member.  However, from 1 January 2021, the EU laws has ceased to apply in the UK and the EU Withdrawal Act 2018, a UK Act of Parliament will create new species of UK law to fill the gap where the EU law used to be, the so called “retained EU law”.  This retained EU law will be based on the equivalent EU rules that it replaces, but the context in which it applies and the rules and principals governing its interpretation, application and interaction with other types of UK la will be new and untested.

Impact on businesses

This new framework of continuity of “retained EU law” in the UK means that vast amounts of existing previously EU-derived law and regulation in the UK will be on a new legal footing and potentially open to reinterpretation in its new post-Brexit context from 1 January 2021, in addition to the potential for new laws to be introduced in the UK that diverge from EU law over time.

Businesses in the UK whose operations are currently affected by EU law should notice and be prepared to manage the risks and capitalise on the opportunities that could arise from this legal uncertainty.  Any area of law, regulation or policy in the UK previously touched by EU law is potentially affected.

For the regulation around your product or service, it is advisable to closely watch the forthcoming parliamentary scrutiny of EU originated laws. Also, you will need to understand what it means to trade as a business from outside the EU (“third country”).

Businesses from third countries that trade with the EU will have to show at the border that their product complies with EU rules, or locally, with national rules in the destination country. This is true even if UK and EU rules are still the same. Also, there will be no recourse to the European Court of Justice in the event of a conflict.

To do

• Find out via the UK and the EU information portals what EU rules there are around your product or service, and how they may change, e.g. labelling, chemicals, e-commerce rules.
• Find out about the local rules in your customer’s country through the following links: Government’s country-by-country guides, EUGO Points of Single Contact, the e-justice database.
• Set up a partnership with the Primary Authority to ensure you receive the latest updates on regulatory compliance.

What’s next?

To see what the new trading terms mean to your business you can refer to the information and the guidelines published on the European Commission website, which also contains a link to the full text of the EU-UK Trade and Cooperation Agreement in different languages.