Brexit: Regulatory

The UK now has in place its own, independent regulatory regimes.  The Trade and Co-operation Agreement makes it clear that there will be no on-going system of mutual recognition of regulatory bodies between the UK and EU and no rules of equivalence. The impact that this will have will vary by sector, with more heavily regulated industries facing the greatest upheaval. However, all businesses are impacted to some degree.

One example of a wide-ranging impact is the product marking system, which indicates conformity with health, safety and environmental protection standards for certain products. The UK now has a new UK Conformity Assessed (UKCA) regime for goods sold on the GB market (England, Wales and Scotland), replacing the well-known EU CE regime. However, to ease the burden of this wide-ranging impact, the Government has confirmed that some goods placed on the GB market can continue to use the EU CE mark for a transitional period – but this will only be the case for as long as the EU and UK standards for the relevant goods don't diverge. The new UKCA mark is not recognised in the EU however. Accordingly, products exported to the EU continue to need to comply with EU product standards and, where required, be marked with the CE mark. In addition, the UK is now treated as a 'third country' under the EU regime and so UK based operators in a supply chain may have seen their classification as a 'manufacturer', 'importer' or 'distributor' change – and with it the regulatory obligations placed on them (and vice versa).

Packaging / labelling must also be updated, for example in relation to country of origin labelling. This impacts the vast majority of consumer goods businesses.  Clearly goods manufactured in the UK can no longer be labelled as "produced/manufactured in the EU".

Almost all UK environmental legislation derives from the EU and this is another area where regulatory developments will need to be monitored. The Environment Bill 2019-21 already proposes a new independent environmental watchdog and amendments to the current regime governing air quality for example. The Government's commitment to the green economy may mean we end up with a tougher environmental regulatory regime in the UK than in the EU.

Heavily regulated sectors are particularly impacted. For example:

Chemicals

The chemicals industry is now governed by a new UK REACH Regime, with the Health and Safety Executive (HSE) having taken over the functions of the ECHA (although the EU REACH Regulation continues to apply to Northern Ireland under the Northern Ireland Protocol). While existing EU REACH registrations and authorisations held by UK companies have been automatically transferred from the EU to UK system, UK companies need to notify and submit registration data to the HSE by 30 April 2021. This could lead to the need for new commercial data sharing agreements, increased administrative costs and potentially further testing if data cannot be shared.

UK companies importing substances from the EEA also need to notify the HSE using a Downstream User Import Notification (DUIN) of their intention to continue importing substances from the EEA by 27 October 2021 and then follow up with a new registration within 2, 4 or 6 years.  Alternatively, UK downstream users could encourage their EEA supplier to appoint a UK-based Only Representative (OR), or change their source to a UK registered supplier.

In addition, UK companies exporting chemicals to the EEA must still comply with the EU REACH regime. However, only companies based in the EEA may register directly with the ECHA. Unless UK firms have transferred their existing EU REACH registration to an EEA-based entity, the obligation for compliance with the EU REACH regime therefore falls on the importer of the chemicals – and so potentially on UK chemical companies’ EEA-based customers.

Life Sciences

In the life sciences sector, the MHRA has issued a series of guidance notes on how it will take over regulation from the European Medicines Agency in the post-transition period. The Trade and Co-operation Agreement provides for mutual recognition of Good Manufacturing Practice inspections and certificates.

Aviation

The Trade and Co-operation Agreement ensures that flights will be able to continue between the UK and EU post-Brexit.  UK operators will not be permitted to conduct point to point flights within the EU and vice versa. The Agreement does allow for the UK to negotiate with individual member states the right to provide cargo flights from the UK to that state and then on to a third non-EU country (e.g. London – Paris  - Beijing).

Code sharing will be permitted so long as each carrier concerned has the legal right to make the particular flight concerned.

Ownership rules remain unchanged with a UK carrier required to be majority owned and managed by a UK entity and similarly for EU carriers.

The UK ceases to be a member of the European Aviation Safety Agency but the UK and EU have agreed to recognise existing airworthiness certificates and to work towards a system of mutual recognition of safety measures.

The UK has committed to maintain EU law on passenger protection – e.g. compensation for delayed or cancelled flights.

The above are just a few examples of how the Trade and Co-operation Agreement will affect specific industries. Mishcon de Reya is committed to helping all its clients across a broad range of industries navigate the most effective path through the new regulatory environment.

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