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The Conscious Uncoupling of UK and the EU Law: A Brief Guide to Brexit and its Impact on Litigation and Bilateral Investment Treaty Arbitration in the UK

March 03, 2020
Firm Memoranda

On 31 January 2020, after 47 years of membership, the UK left the European Union ("EU") ("Exit Day").  Like many long-term relationships that come to an end, the parties are going through a period of transition to allow them to move on from each other in an orderly fashion.  This period lasts from Exit Day until 11pm on 31 December 2020 ("IP completion day") (the "Implementation Period").  During this time the UK and EU will negotiate the terms of their future legal relationship, with the current expectation (at least from the UK's perspective) that legal certainty will be achieved by IP completion day.  This article provides guidance on the state of UK law during the Implementation Period and immediately thereafter, to the extent currently known.  It also sets out potential areas for Brexit-related litigation and arbitration and explains how certain legal regimes which can run alongside civil litigation - such as the extradition regime - are likely to become more inefficient and uncertain.

The Withdrawal Agreement (the "WA") and the Political Declaration (the "PD")

On 19 October 2019, the UK and EU agreed the terms of the UK's exit from the EU in the WA. The WA is the international agreement between the UK and EU that sets out the parties' respective rights and obligations following Exit Day, during the Implementation Period and, to some extent, thereafter.  The PD was agreed at the same time and sets out the framework for the parties' future legal relationship after the Implementation Period, which it describes as "an ambitious, broad, deep and flexible partnership".  It remains to be seen if this can be achieved, as the PD recognises that it must balance each parties' guiding principles, which conflict with each other, e.g. the UK requires its sovereignty and the EU the retention of its decision-making powers and the Single Market Imperative.  The parties' positions in this regard do not appear to have shifted materially since the PD was published with the UK Prime Minister openly promoting a trade deal that does not require the UK to adhere to EU rules, while the Commission's negotiating directives (which were published on 25 February 2020 and mandate its approach to the negotiations) state in terms that any deal with the UK "must respect to the integrity of the Single Market and the Customs Union".  As the parties stand in opposing corners, the stage is set for a robust trade negotiation.

The WA and the 2018 and 2020 Acts

The WA was implemented into UK law by the follow Acts of Parliament:

  • the EU (Withdrawal) Act 2018 (the "2018 Act"); and 
  • the EU (Withdrawal Agreement) Act 2020 (the "2020 Act"), which amended the (foundational) 2018 Act to account for the terms of the WA.

The WA, the PD, and the 2018 and 2020 Acts provide that:

  1. during the Implementation Period it is as if the UK were still an EU Member State. EU law applies in and to the UK and must be interpreted as before, including reference to the case law of the Court of Justice of the European Union ("CJEU"), and the European Commission retains jurisdiction over legal or natural persons in the UK.  These provisions come to an end on IP completion day. This means that there should only be one set of changes for businesses and individuals to respond to at the end of the Implementation Period.
  2. on IP completion day EU law no longer has supremacy over UK law and a body of law called 'retained EU law' shall be created and transposed into UK law.  Retained EU law consists of the following elements, as operative immediately before IP completion day: (i) directly effective EU legislation, e.g. EU regulations; (ii) UK legislation which is EU derived, e.g. domestic legislation implementing EU directives; and (iii) EU rights, obligations, remedies, etc., that are recognised and available in UK law.
  3. retained EU law shall be subject to special treatment. This includes that: (i) UK Ministers can amend it using statutory instruments ("SIs") in order to make it work effectively once EU law no longer has supremacy over UK law; (ii) the UK Supreme Court shall not be bound by any case law or general principles of the CJEU laid down from its inception up until IP completion day "retained EU case law" and may depart from such case law as it does from its own decisions; and (iii) the courts below the Supreme Court should interpret retained EU law according to retained EU case law (although this final point may change after IP completion day, as the UK will then have the power to amend the circumstances in which such courts are bound by retained EU case law).

The Importance of Politics

The UK and EU's ongoing trade negotiations will affect the legal issues considered in this article. Already the shifting politics has impacted on the integrity of the legal framework described above.  The previous UK government was more committed to close alignment between UK and EU law.  Accordingly, regulations passed during 2018/19 to amend UK law in preparation for a no-deal Brexit (which was then likely), mostly provide for such close alignment.  This means that, although those regulations and related guidance are referred to below, as potential indicators of the parties' future relationship, they may now be outdated and are likely to be amended or repealed in 2020 if the current UK government agrees a more distant legal relationship with the EU.

Set out below are the current and potential post-Implementation Period positions.

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If you have any questions about the issues addressed in this memorandum, or if you would like a copy of any of the materials mentioned in it, please do not hesitate to reach out to:
Kate Vernon
Phone: +44 20 7653 2002
Cordelia Rayner
Phone: +44 20 7653 2043