A ‘no-deal’ Brexit remains a very real possibility, as Parliament looks unlikely to approve the Withdrawal Agreement

As Parliament break for their Christmas recess with no Withdrawal Agreement in place and 14 weeks until 29 March (“Brexit Day”), the possibility of a ‘no-deal’ Brexit looms large.

This briefing looks at the implications on areas of law strongly dependent on EU legislation or with EU heritage – data, employment, procurement and the environment – of both an agreed and no-deal EU departure.

Data protection

The Department for Digital, Culture, Media and Sport (DCMS) has issued technical guidance that explains the potential consequences for the UK/EU data protection regime in the event of a ‘no-deal’ Brexit. In summary, the guidance states that:

• The UK does not plan to make any immediate changes to its own data protection standards, or proposed adoption of the GDPR:

1. The Data Protection Act 2018 will remain in place, and the European Union (Withdrawal) Act 2018 (together with an accompanying statutory instrument) will incorporate the GDPR into UK law.
2. The UK will continue to support the adequacy of the EU for personal data transfers, so UK-to-EU personal data transfers will remain valid without the need for further safeguards.
   
   

• However, the legal framework governing the transfer of personal data from the EU to the UK will change:

1. Short of any deal to the contrary, post-Brexit, the EU will treat the UK as a ‘third country’, and will ‘restrict’ personal data transfers from the EU to the UK.
2. In the same way as UK organisations currently employ adequacy safeguards for transferring data to non-EU countries without an adequacy decision, as set out below, in this scenario, adequacy safeguards will need to be adopted to support the lawful transfer of personal data to the UK.
3. The DCMS advises organisations to assist their EU partners in identifying a legal basis for EU-to-UK data transfers. For most organisations, the relevant alternative legal basis would be standard contractual clauses, approved by the European Commission (EC) to enable the free flow of personal data when embedded in a contract. In certain circumstances, an organisation’s EU partners may, alternatively, be able to rely on a derogation to transfer personal data.
4. Ultimately, the DCMS encourages organisations to be aware of this risk and be ready to consider the adoption of standard contractual clauses (or other appropriate transfer arrangements) in the event of a ‘no-deal’ Brexit.

The UK’s preferred negotiating position is to secure an adequacy determination within the EC withdrawal treaty, to maintain a free flow of data between the UK and the EU. However, as it currently stands, this is far from certain. Consequently, it is advisable for organisations to make contingency plans in the event of a ‘no-deal’ situation, such as looking to the Information Commissioner’s Office (ICO) for further guidance and practical support on the issue, including guidance on the overall framework for international personal data transfers and options for adopting standard contractual clauses. The ICO is still in the process of preparing this guidance, but it will be available shortly on the ICO website.

Employment

The two essential questions for employers and employees alike are:

• Can EU nationals, currently legally employed, remain and work in the UK?
• Will there be an overhaul of UK employment legislation affecting workplace rights?

For a ‘no-deal’ Brexit, the Government has made it clear in the EU (Withdrawal) Act 2018 that EU citizens will, in the immediate aftermath of the UK’s withdrawal from the EU, continue to have the right to work in the UK. The Government has been much-criticised for not making the medium or longer-term position clear, particularly in light of their failure to produce a white paper on immigration as promised. If the EU Withdrawal Agreement is signed, the picture for EU nationals is more complex and depends upon whether they have lived in the UK for more than five years at the end of the transition period (31 December 2020). If they have, they can apply for ‘settled status’ under the EU Settlement Scheme and then remain in the UK indefinitely. If they have not, they can apply for ‘pre-settled status’. Those with pre-settled status can remain until they have lived in the UK for five years and then apply for ‘settled status’. If they do not make relevant applications within six months of 31 December 2020, they will be deemed ‘illegal immigrants’. There is no guidance as yet as to individuals who arrive after 31 December 2020. For employers with a current reliance on EU nationals in the workforce, it will be a key priority to assist where possible with applications under the EU Settlement Scheme.

On the second question, although possible, no overhaul of current UK workplace rights is expected. There are a couple of areas of law that will no longer work (such as the right to form a European Works Council), but the Government has confirmed its intention to maintain EU-derived rights, such as the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), for the foreseeable future.

Procurement and State aid

The Government has made it clear that procurement obligations on the public sector and housing associations, together with State-aid obligations for organisations giving or receiving public funds, will continue in the short term, regardless of whether or not there is a ‘no-deal’ Brexit. Procurement and State aid are part of competition law, the main purpose of which is to enforce a level playing field under which trade deals are made – and the principles underpinning both sets of laws are likely to feature as part of any longer-term arrangement with the EU or any trading block.

The current procurement regulations (including the Public Contracts Regulations 2015) will have to be amended in a number of ways to ensure they can still function, particularly in the no deal scenario. Our partner Andrew Millross has published a briefing on the specifics here. Whilst many organisations would have gladly seen the back of the procurement rules, the World Trade Organisation (WTO) position contains similar, although less detailed, provisions on public procurement. At the least, under a no deal scenario, the Government may look in the medium term at the ambit of the regulations, to see whether certain bodies which are covered but currently on the periphery of the public sector (for example, universities and housing associations) could be removed from the regime. This will again depend largely on any future trade deals, which tend to agree some level of mutuality on making available public opportunities available to trading partners.

State aid regulation is a thorn in the side of many community and government organisations because it has such wide application. Many organisations would have welcomed taking a position more akin to the WTO position on “subsidies and countervailing measures” which is a considerably lighter touch regime for State aid. The WTO position would have removed the State aid regime from vast areas of community grants and the majority of local government intervention in local communities. Many Brexiteers will conclude that this was a missed opportunity to remove regulation.

Under the Withdrawal Agreement, the Competition and Markets Authority (CMA) will be the regulator for the State-aid regime in the UK from the end of the transition period, but in the event of no deal, the CMA will have to perform that function from Brexit Day. The CMA has indicated that it will continue in the same vein as the Commission regarding its approach to regulation and that it must be viewed as a regulator that is independent of Government.

Brexit and the environment

The breadth of environmental regulations implemented by the EU spans a multitude of areas from waste to water and air quality. In the forty-plus years the UK has been part of the EU, the EC estimates that there have been over 200 legal acts implemented that focus on improvement and expansion of environmental protections. While the EU (Withdrawal) Act intends to ensure EU-derived domestic legislation remains the same, on and immediately after Brexit Day, the same level of environmental governance may be difficult to continue in the medium term.

Many of the main environmental principles (polluter pays and the precautionary principle) derive from EU treaties. The UK Government seeks to replicate these under ‘maintenance of environmental principles’ in section 16 of the Act, requiring the Secretary of State to publish a draft bill with a set of environmental principles and an interpretation statement. The draft bill will also set out provisions for establishing a public authority to carry out ‘proportionate enforcement actions’. The overarching issues for many organisations within the UK will be the changes in compliance strategies and day-to-day operations.

Waste

The UK is currently bound by the EU’s legislative framework on waste, regulating its collection, transport, recovery and the disposal and permitting. The EC has published a warning notice to all concerned with the waste industry in the UK, highlighting the effects of a no-deal Brexit. In summary, import and export of mixed wastes will be either prohibited, restricted or will include a vastly increased regulatory burden. This will inevitably have a significant impact on local authorities and organisations responsible for the regulation and disposal of waste. The challenges will include increased costs, along with the difficulties of adhering to recycling targets during times of changing standards and responsibilities. Organisations responsible for waste should have already begun scoping how the waste supply chain, including costs and liabilities, will change in the event the Withdrawal Agreement cannot be concluded.

Air quality

A highly politicised area and a main focus for local authorities around the country is the impact on air quality standards and legislation after Brexit. UK-air-quality legislation currently comprises EU, national and international frameworks regulating acidification, high-level ozone and air pollution. It is likely that there will be calls from businesses to reduce the regulatory burden in these areas, and the degree to which there is longer-term divergence between the EU and UK on these points will be dependent on the trading relationship and the confines of the international treaty obligations that the UK must continue to meet.

In the more immediate term, whatever form of Brexit is eventually agreed, local authorities will still be under pressure to meet standards set within the UK framework, as well as internationally, with little or no budget. Many local authorities have already had to implement their own feasibility studies, setting out potential exceedances and recommended measures required to achieve compliance. This will need work in planning, manufacturing and transport, meaning new and potentially disruptive legislation. Major cities such as Birmingham have set up or are considering ‘Clean Air Zones’ to tackle the problem of air pollution, but this has led to issues in other areas such as the costs for local businesses and commuters, along with the increased need for new and affordable public transport.

Conclusion

The effect on local government and the third sector, already under considerable strain dealing with austerity and increased demand for services should not be underestimated. We can only hope that with the new year comes new clarity and certainty.

Further information

To discuss the potential impact of Brexit on your organisation, please contact the following specialists:

Peter Coe – data protection
Matthew Gregson – employment
Richard Brooks – procurement and State aid
Andrea Wadden – environmental

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