Companies Operating in the UK – Should They Leave or Stay?

Kelley Drye Client Advisory

On 29 March 2017, the United Kingdom officially filed its notification of intent to withdraw from the European Union, triggering what has become widely known as its so-called divorce” proceedings with the European Union.  The historic decision of the UK electorate to part ways with the EU is one step closer to becoming reality, with Brexit Day” now scheduled for 29 March 2019.  While the UK proposes to negotiate both the terms of withdrawal and a new relationship with the EU, the European Council has been clear that it will not discuss the future until the details of the withdrawal are agreed.

For international companies operating in the UK, a key concern is what law will govern their activities as of March 2019.  The UK has sought to reassure the business community by announcing its plans to convert EU law into UK law by Brexit Day without any major changes in policy.   At the same time, it is evident that significant modifications will be necessary to have workable laws without legal gaps.  To achieve this aim, in May, the Government will introduce the Great Repeal Bill” to release it from legislation that effectuates EU legal obligations and to enable the Government to create a revised UK statute book with effect on Brexit Day.   The Bill is intended to enable the UK to function whether it reaches a deal with Brussels or not.

The Government estimates that between 800 and 1000 statutory instruments will be needed to convert some 12,000 EU regulations, including amending regulations, delegated or implementing regulations, into UK law.  Approximately 7900 statutory instruments implementing EU law exist today, with EU-derived elements found in many other statutory instruments.  Among other things, references to EU law or bodies, information sharing requirements, or aspects of laws that depend on reciprocal arrangements must be removed or replaced with alternative bodies, agencies or authorities. Secondary legislation will be used to address the many changes that cannot practically be addressed in primary legislation and to maintain flexibility as specific changes may be dependent on the details of the deal agreed with the EU.   UK courts would continue to rely upon judgements of the Court of Justice of the European Union (CJEU) and EU Treaties in interpreting this body of EU-derived law with CJEU judgements and decisions of the UK Supreme Court given equal weight.

EU-derived rules may not disappear overnight but broad changes in numerous areas can be anticipated.   A UK customs regime and immigration bills will be introduced in the UK Parliament due to the need for new frameworks in both areas.   Major EU bodies of law such as those that protect workers, consumers, and the environment would be preserved through EU-derived UK laws, with the extent of change dependent on the specifics of the laws.  For example, employment law is expected to require less change, whereas other areas of law will require substantial revision to avoid gaps and redundancies and to ensure workability post-Brexit.  The Government also anticipates further empowering devolved administrations to bring decision-making closer to the people who spoke through the referendum to leave.  This could result in greater differences between the laws of Scotland, Northern Ireland, Wales and England in future.  Post-Brexit Day, new legislation will be interpreted by UK courts.

As the Government has said, the Brexit Day statute book will continue to be the law of the UK only until legislators in the UK decide otherwise.”  The Government already has announced, for example, that it will publish a green paper this spring to closely examine” markets that are not working fairly for consumers.  Businesses will need to remain appraised of the legislative change coming their way.  They will certainly wish to take advantage of the opportunity to identify changes they would like to see come to fruition in a post-Brexit world.

A special Brexit Summit will take place in Brussels on 29 April:  put on your seatbelts.