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London & The World

Brexit: the White Paper
London & The World

London & The WorldIssue 4 | February 2017

Date
16 February 2017

Will Winch Managing Associate

Johnny Kelly Managing Associate, Professional Support Lawyer

Adam Rose Partner

Nina O'Sullivan Legal Director, Professional Support Lawyer

Kamal Rahman Partner

Steven Bostock Partner

The UK government recently published its white paper on Brexit. Perhaps it should have been called its red, white and blue paper on Brexit. The document sets out the government's plans for how we will leave the European Union.


Brexit: the White Paper

The UK government recently published its white paper on Brexit. Perhaps it should have been called its red, white and blue paper on Brexit. The document sets out the government's plans for how we will leave the European Union.It reiterates and builds on the Lancaster House speech given by the Prime Minister in January, identifying twelve key areas that will form the basis of the government's strategy. These include strengthening the union of the United Kingdom, resolving issues about Ireland's relationship with the UK, maintaining our position as a centre for science and innovation, and the steps needed to prevent crime and terrorism.

From the metadata of the document, it looks like it was being worked on up to the last minute – it seems that it was finished at 4.15am yesterday morning, before being hurriedly put in front of parliament after the vote to invoke Article 50 had already been taken.

In his preface, David Davis MP says that he 'wants the EU to succeed'. He says that "we have respected the decision of Parliament that we should not publish detail that would undermine our negotiating position", and certainly makes good on the promise. The 77 page document gives a broad brush, aspirational view of the coming negotiations. A road map for the future, it recognises a number of problems that will be faced, and says that the government aims to find the best possible resolutions to those problems. It does not go so far as to suggest how these aims may be achieved. One view would be because it might otherwise undermine our position.

Taking back control

The first two principles set out in the white paper deal with how we will go about taking back control – a key aim of the 'Leave' campaign. The paper acknowledges that 'Parliament has remained sovereign throughout our membership of the EU', but goes on to say 'it has not always felt like that'. The fact that the issue of control was, in fact, subjective, may come as a surprise to many.

The paper explains that the so called 'Great Repeal Bill' will convert the 'acquis' (that is, the body of existing EU law) into our domestic legislation. Note that convention dictates that it will not be called the Great Repeal Bill – or indeed the Great Repeal Act – when it is finally introduced. It is likely to have a much more prosaic title, such as the European Communities Act 1972 (Repeal and Consequential Amendments) Act 2019. Once this Act has imported more than 45 years of European law into domestic law, it will then be possible to sift through the laws and decide whether to keep, amend, or reject the provisions. It is interesting to note that the white paper envisages that the Act will enable changes to be made by secondary legislation. In other words, the changes may be made by government (acting through the relevant Secretary of State), rather than with full parliamentary scrutiny.  Known as 'Henry VIII' clauses, this may be a stumbling block when the Bill is debated in Parliament. 

Dispute resolution post-Brexit

The white paper goes into some detail as to how any eventual deal will be policed. At present, the European Court of Justice (also known as the Court of Justice of the European Union) will decide whether member states are behaving appropriately. Given that we will no longer be subject to the jurisdiction of the ECJ, it will be necessary to agree some sort of mechanism for dispute resolution. The white paper envisages that this likely to be via some form of ad hoc arbitration agreement, and gives examples of how other non-EU countries approach the issue.

Immigration

Immigration, unsurprisingly, takes up two of the twelve principles. Firstly, how the government will start controlling who can enter the country, and secondly what will happen to the UK nationals currently living elsewhere in the EU, and the EU nationals living in the UK. As to the first point, it is interesting to note that the government does not make any commitment to limit or reduce the overall numbers of immigrants. It just sets out that we can now have more control as to where immigrants come from. As to the second point, no solution is offered. However, the government asserts that it would have liked to resolve the problem before the formal negotiations begin, but commits to finding a resolution as soon as possible.

Workers' Rights

Protecting workers' rights is the seventh principle in the white paper. The government reiterates its commitment to protect and enhance workers' rights, made on a number of previous occasions. It gives examples of where the UK has gone beyond the mandatory minimums set out by the EU, in areas such as annual leave, family friendly rights, and the minimum wage. The paper sets out an unfortunately mislabelled graph, which appears to indicate that our entitlement to statutory holiday in the UK is currently 14 weeks. No such luck; it will take more than a typo to increase the entitlement beyond the current 5.6 weeks.

The paper goes on to refer to the current review into employment practices in the modern economy as an example of how we will continue to keep pace with the changing labour market. Whether the commitment to 'keep pace' with the market will be comforting to workers remains to be seen – it appears to allow for levels of protection to go down as well as up, in order to reflect the trends of an ever changing economy.

The paper reiterates the government's commitment to having some sort of representation for workers on boards, and for a review of executive pay and corporate governance in large private businesses, referencing the current green paper on corporate governance, issued in November 2016.

Trade agreements

Two of the principles deal with the trade agreements that the government hopes to secure, both with member states and with the rest of the world. The paper deals with some of the country's key sectors, including energy and transport; agriculture, food and fisheries; financial services; and other services. It recognises that the financial services sector is important to the country as a whole, noting that two thirds of jobs in the financial services sector are outside London. It hopes that our legal system, language and infrastructure will maintain the UK's position as a leading global financial centre.

It recognises that integrating different systems of regulation will be a key part of this, including in relation to data protection. The UK is implicitly recognising that to have free flows of personal data between EU member states and the UK, the UK will need to have kept the General Data Protection Regulation in place. That comes into force across the EU on 25 May 2018, and so will be UK law pre-Brexit, and the implication of paragraph 8.40 is that the UK will not use the General Repeal Bill powers to repeal it. What is missing, still, is any indication of what additional laws the UK will adopt to fill in the gaps of the GDPR, which require an element of local implementation, nor what the plan is if, having left the ECJ, EU law moves in a different direction to the UK local courts. In time, the UK's approach will inevitable have moved somewhat distant from the EU position, and the UK would then risk losing any special, approved status as a data transferee country, which would be very damaging to business.

Real Estate

The preservation of all rights and obligations that already exist in the UK under EU law will provide continuity for EU-based laws affecting real estate, such as:

  • environmental protection, including impact assessments for planning applications
  • energy efficiency, such as minimum energy ratings before properties can be rented out

The UK Parliament and the devolved legislatures will decide afterwards which elements of these laws to keep or change.

The white paper hints that in some areas, the law probably won't change very much. For example, the government says it is still committed to environmental protection, and will bring the current framework of environmental regulation into UK law. "The UK’s climate action will continue to be underpinned by our climate targets … which in turn support our international work to drive climate ambition." This does not sound as if the government is plotting any dramatic changes the minute we leave the EU.

The government's position on immigration post-Brexit is likely to have an impact on real estate occupiers in industries which depend on EU labour. Construction and agriculture, for example, will be looking for the government to allow immigration where necessary to fill skills shortages.

"Passporting" allows firms in member states to provide financial services across the EU, under a common set of rules and a single authorisation from their regulator. Both UK and EU firms benefit from these arrangements. For the UK real estate industry, this means banks and insurance companies from around Europe and indeed the rest of the world have been willing to locate major regional headquarters and staff in Britain. If passporting were to end, this might change. Property investors in the City of London and Canary Wharf will be watching closely.

The white paper says the UK government hopes to negotiate "the freest possible trade in financial services between the UK and EU member states." That depends, of course, on whether the 27 remaining countries will agree such a deal, given that the UK is determined to end free movement of people. Like much else, this will be up for negotiation during the next two years.

Intellectual Property

In a section headed 'Cross-cutting regulations', the white paper briefly references the existence of EU-wide systems which facilitate the protection of IP, such as the EU Trade Mark and Registered Community Design. However, it gives no further detail.  In particular, we still await details of the likely model by which such rights may be preserved in the UK post-Brexit.   

The discussion in the section on ending the jurisdiction of the ECJ meanwhile is interesting in the context of the ongoing uncertainty as to whether the UK can remain involved in the forthcoming Unified Patent Court regime post-Brexit (as discussed in our recent Inside IP bulletin). Whilst it confirms the intention to bring to an end the jurisdiction of the ECJ in the UK, the White Paper goes on to say that the UK "will of course continue to honour international commitments and follow international law". It also refers to dispute resolution mechanisms within international arrangements and notes that, unlike the ECJ, dispute resolution in these agreements does not have direct effect in UK law. Given that the agreement establishing the Unified Patent Court is an international agreement, this choice of wording could perhaps be interpreted in support of the UK remaining involved with the UPC regime post-Brexit.   

Frictionless exit

The 12th principle sets out the government's commitment to find as smooth and orderly exit from the EU as possible. However, the paper makes clear that 'no deal for the UK is better than a bad deal for the UK'. While it hopes that a deal can be done in the next two years, it recognises that there is likely to be a need for a limited period of transition thereafter, while the new arrangements are introduced on a phased basis.

Conclusion

The paper concludes with a statement that there will not be a second referendum.  It seeks to reassure the rest of the EU that the UK wishes to remain friends with our neighbours, and will put a strong partnership with the EU at the heart of the new, global UK.  How it actually achieves this will be the subject of negotiation and debate over the years to come.