January 30, 2017    12 minute read

After Brexit: Leaving, Unravelling, and the Dominance of English Law

The Law of the Land    January 30, 2017    12 minute read

After Brexit: Leaving, Unravelling, and the Dominance of English Law

The United Kingdom’s legal system has, over the past 40 years, become tightly wound with the European Union and thus a quick and clean exit is not possible. To truly leave the bloc, the UK will need to completely unravel the intricate loops that have been created as the UK grew ever closer to the EU. Within this, there is a series of very important questions. What legislation does the UK keep? What should be replaced? How does the UK plug the gaps between the two systems?

UK versus EU Law

Of course, there are even more specialist, legal, questions that arouse a great deal of anxiety and interest, such as whether a contract, depending on an EU law, will still be binding in the UK, if one no longer recognises the authority of EU laws. The actual amount of law that has been adopted as a result of EU requirements is debated; but what is certain is that there is a lot of law derived from the EU, from case law to regulations.

For the time being, it should be noted, that until the process of Article 50, the exit Article, has been completed, the UK remains well and truly bound by EU law as a result of the European Communities Act 1972 (ECA). Due to this, should a directive be passed by the EU, and the implementation period is less than the time taken to exit the EU, the UK will be legally obliged to implement it. The same goes for regulations; their directly applicable nature remains true until Article 50 is concluded.

This question is particularly important for the dominance of British law as a popular choice for commercial parties doing business internationally. It is predictable, stable and comparatively certain nature lends itself well to business use, alongside the expertise and independence of the courts that exercise the law.

With this in mind, the reasons for choosing English law as the language of one’s commercial activities is unrelated to its position in the EU.

The Process of Leaving

The process of withdrawing from the EU is set out in Article 50; that the UK must notify the Council of its intention; the council will then negotiate terms of the leave. The UK is excluded from the negotiations (Article 50.4). As a result of the recent Supreme Court verdict, the government cannot activate Article 50 via prerogative powers.

Instead, the Government must pass an Act of Parliament. This is due to the magnitude of rights of British Citizens that would be affected, something which the court found can only be done by the unequivocal word of an Act of Parliament. The government has relinquished its position on a White Paper – it will shortly publish both a draft bill and the white paper.

The paper is likely to be lengthy, outlining the position of the government in relation to the single market, the customs union and the type of Brexit deal the UK is seeking.

The Process of Unravelling

After activating Article 50, the government will want to begin with the repeal of the ECA as this provides constitutional grounding for the operation of EU law into the English legal system. Yet this is not going to be as simple as pulling a plug, as EU law cuts deep into key areas of English law. Once repealed, the question then turns to the measures and instruments the UK can use to ‘decouple’ domestic law from that of the Union.

A further issue remains in interpreting remaining EU law, who has the authority to craft the final opinion? Our courts under a law that does not recognise EU law or the Court of Justice of the European Union which is no longer binding? A closer look is needed.

The ECA s2.1 presents, simply, that provisions of EU law that are directly applicable or have direct effect, such as EU regulations, are automatically ‘without further enactment’ incorporated and binding in national law without the need for a further Act of Parliament.

Further, s2.4 and s3.1 give effect to the doctrine of supremacy (that being the principle that EU law is supreme over domestic law). As a result of s2.4’s rule of interpretation, all primary legislation is to be construed according to EU law to ensure compliance, and, as was decided in Factortame 2, this provision obliges the courts to disapply legislation which is inconsistent with EU law.

Lastly, s2.2 provides that EU measures requiring further implementation measures in order to be effective in UK law can be given effect in national law by secondary, or delegated, legislation, such as statutory instruments for example.

Revocation: The Effects

It is highly unlikely that the Government would be so blunt as to repeal the ECA without any accompanying measures. However, the repeal of the ECA would have the following, broad, effects:

The UK would no longer be subject to the Treaties of the EU directly. The ECA will be repealed, and the constitutional basis for EU law being effective in UK domestic law will be erased. Further, as Richard Gordon QC and Rowena Moffatt identify, the secondary legislation giving effect to EU measures would also cease, due to their authority being removed in s2.2.

Thus, subordinate legislation that results from the ECA to implement regulations such as the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016, will be automatically revoked should the ECA be repealed. Moreover, directives, which are EU instruments that require implementation, would be ineffective unless the UK expressly provides for their adoption.

Furthermore, since they require legislation to be adopted, unless and until the UK repeals the Act giving effect to the directive, they will continue to apply and remain unaltered as they are Parliament’s instruments and thus require express repeal. Whether this a positive, allowing for the individual scrutiny of the legislation before repeal, or a negative, drawing out the process of leaving, is entirely dependent on one’s view.

On this point, it is also unlikely that the Government will simply sift through the statute book and case history to purge the entire system of EU-derived law. As argued by Richard Gordon QC and Rowena Moffatt:

“It would be questionable whether a single Henry VIII clause allowing primary and secondary legislation to be amended or repealed by statutory instrument would be constitutionally acceptable given the wide areas that EU law cuts across and the limited Parliamentary scrutiny that subordinate legislation allows.”

In summary, therefore, in regards to the EU laws themselves, they will cease to have a direct effect on the UK system. No longer will the UK have to pass the laws of the EU.

However, indirectly affected is a separate issue. For starters, the EU is a supranational structure and has been involved in creating and supporting the adoption of many international standards. The international legal system has changed significantly due to the many international structures – the International Labour Organisation for example – due to this factor, the fact that the UK will no longer have a seat at the table which creates the European standard is troubling.

Thus a unique issue rears its head: whilst one does not have to directly comply with EU law any longer in order to trade with EU states, Britain may be required to mirror some of their standards in order to be a trade partner. Therefore, companies expecting to trade within Europe will have to comply with EU standards, such as cyber security standards, thereby placing extra time and financial burdens on businesses as result of new administrative tasks that are different to UK regulations.

To take competition law as an example, one can see the difficulty with any law that is expressly European in light of Brexit. Section 60(1) of the Competition Act 1998 displays the complex and interconnected nature of UK and EU law, as the law consists of regulations and directives in addition to the law outlined in the Act.

The section also provides for a rule of interpretation, that questions of competition law are dealt with in a manner that is consistent with community law, thus repealing EU law would hinder this rule of interpretation, essentially maiming our Courts’ ability to effectively answer competition-related questions.

Whilst our Judges would no longer be bound to interpret the question with regards to complying with EU law, the reality may be that such a practice is maintained in order to lend a hand to our companies wishing to do business in Europe. Of course, this point assumes that upon immediate revocation of the UK’s membership, the laws will differ vastly and differ immediately. The UK may still adopt the EU’s standard.

To that end, however, while UK companies will have to adopt practices in line with the EU to trade within the European Market, European Companies will have to adopt practices in line with the UK’s standard in order to do business in London. One could, therefore, argue that a strong UK could take charge of the situation and control more than its own laws.

The Dominance of English Law

However, does this mean the glory days of English law as a leading corporate powerhouse are over? No, far from it.

Why is English law a favourite? Strong business is conducted on clear terms, with certain agreements and clarity of thought and English law facilitates this perfectly.

English is not only a global lingua franca – it is also the language of international business. As a common second language, hearings, proceedings, documents and other legal processes that are conducted in English are accessible to a range of parties. That means that English, and thus English law, can be used anywhere in the World to do business in any other part of the World as it is easy to access.

Secondly, English law has a long history a strong body of case law and statutes, creating a rigid and secure structure with which to build business. Due to the precedence in the common law system employed, parties can estimate, with great certainty, the exact legalities of their agreements and arrangements.

As a result, the law can be relied upon to build executable contract clauses that both parties can be certain are going to be held up – alongside clear interpretive rules that will be applied. Furthermore, the Common law is flexible and can develop to reflect changing societal attitudes, including business trends.

Whilst some may argue that this creates uncertainty, the actual process of creating new precedents is a lengthy one (with appeals often visiting the UK Supreme Court) and thus the cases are unlikely to surprise anyone.

Thirdly, the English Legal system holds bases in the principle of Freedom of Contract. This means that the Courts generally give effect to the bargain between the contracting parties, thus limiting the room for implied terms or overriding public interests, reducing the capacity for courts to overwrite what has been agreed.

Additionally, this principle, backed by the Common Law, is more flexible than many civil law systems, which find basis in a more rigid and prescriptive civil code. Consequently, English law affords parties greater freedom to develop agreements, than would be found in Civil Law systems.

Fourthly, not only does English law benefit from a judiciary that have a global reputation for quality, the UK is an established and internationally renowned centre for Arbitration (with special designation in The Arbitration Act 1996 framework), as the UK has c

lear procedural rules and oversight, including a wide pool of arbitrators. To add, cross-border disputes can be tried in the English system, no matter the governing law. This goes hand in hand with the fact that the UK possesses a mature legal services market and that the UK is party to a number of international agreements, including the New York Convention, which allows for the mutual recognition and enforceability of arbitral awards.

Additionally, in matters of dispute, the ‘loser pays’ rule is a powerful disincentive for speculative claims, ensuring that litigation is only issued where there is purpose and cause. Combined with the Court’s wide discretion for costs, the Court’s ability to order injunctions, orders to freeze assets and seizure orders, provide the English Court with an unrivalled arsenal of tools to conduct cutting-edge business cases. Not to mention that London is a pre-eminent Financial and Commercial Centre, home to world leading, global law firms.

Thus using English law enables the use of English language and access to specialist lawyers who are qualified to advise on very technical and highly intricate business contracts, enabling parties to truly achieve business objectives.

The Brexit Effect

Allen & Overy, a global law firm, opined that:

“Substantive English contract law has largely been unaffected by the proliferation of EU law, at least in the context of general commercial contracts… Instead, the law on almost all key contractual issues including offer, acceptance, consideration, the implication of terms, exclusion clauses, interpretation, the basis on which contracts can be avoided, breach, frustration and damages derives principally from English common law.”

As a result, one could argue that there is a weak basis to assume that leaving the EU will displace this prowess and originality within the English law. Furthermore, there is no reason to believe that English law would lose or relinquish its flexibility post-Brexit.

Nor would leaving the EU reduce the effectiveness of English law as a commercial language, since English Law has been used outside of the EU before and this is unlikely to stop suddenly when the UK leaves.

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