Brexit: What happens if Parliament fails to approve the new deal?
Brexit is a well-discussed but a scarcely-understood topic that has dominated headlines and news articles for the last few years. With the passing of the latest Deadline Day, in this article, we look at the various options now faced by the UK if it fails to ratify the new deal and the legal ramifications of each choice. The legal implications of passing the deal are discussed in our article Brexit What happens if Parliament passes the new deal?. There are 3 possible routes the UK could go down if the WAB has not received royal assent by exit day which, following an agreement with the EU on the 28th October to another extension, is now set to be 31st January 2020. First, as it has not yet left the EU, the UK could revoke its Article 50 Notice thereby withdrawing its intention to leave the EU. Were this to happen, there would be no change to the UK-EU legal relationship and the law would, therefore, stay the same. The second option would be to extend the deadline for Brexit beyond the currently agreed date of 31st January 2020. As with previous extensions, this could not be done unilaterally by the UK and would instead need the consent of the EU. Furthermore, it would only serve to delay the date on which the UK leaves the EU and the legal ramifications attached to this. Finally, the UK could leave the EU on 31st January 2020 without a deal. Following the passing of the EUWA, this does not mean that all EU Law no longer bears any relevance to the UK. Instead, for the most part, the EUWA transforms all EU law made before exit day into UK Law. These laws are known as the retained laws. This applies both to EU Law that was directly effective and applicable to the UK, as well as any law passed in the UK for the purpose of transposing EU law into domestic law (defined as EU derived law). This general rule is far-reaching as it includes all rights contained in the EU treaties up to exit day and pre-exit case law of the Court of Justice of the European Union (CJEU).
Exceptions to the General Rule
There are, however, some exceptions contained in EUWA to this general rule. The first exception is the primacy of EU law. Currently, if two primary laws are inconsistent, the law which was passed later will override the earlier law. A caveat to this is when one of those laws is an EU Law. Where this is the case, the EU law will take precedence over the domestic law, regardless of when the latter was passed. After the exit day, this will no longer be the case. Future parliaments will, therefore, be able to legislate against or away from what was EU Law. The second exception to the general rule of incorporation is the general principles of EU Law. Under this exception, no claim can be brought to the UK courts on the basis of the general principles of EU law after exit day. Similarly, no UK court will be able to disapply or quash any enactment or rule of law nor quash any conduct on the grounds that it is incompatible with such principles. There is an important caveat, however, to this exception. If the general principle has been recognised in a case decided by the CJEU prior to exit day, the general rule applies and this specific principle forms part of the retained law. Principles such as proportionality, equivalence and effectiveness should, therefore, be incorporated into domestic law. Finally, after the exit day, Francovich damages are excepted from the general rule of incorporation. Francovich damages are the compensation the UK could currently be liable to pay to individuals for a failure to transpose an EU directive either correctly or in time. After exit day, however, any future litigation about the failure or validity of transposition of EU directives created prior to exit day will not have that remedy available. A further exception, namely the Charter of Fundamental Rights, relates to the rights of EU citizens and therefore falls out the scope of this article.
Claw-Back Provisions The Exception to the Exceptions
The exceptions just set out, also come with three key caveats. Scenarios that fall within these caveats, fall outside the scope of the exceptions, meaning the general rule will apply. The first caveat confirms that the exclusion of the general principles and Francovich damages will not apply to proceedings which have begun before a UK court or tribunal but are not finally decided before exit day. As such, based on the currently set exit day, any claims based on the general principles and/or Francovich claims brought before 31st January 2020 can continue. The second caveat relates to the exclusion of rights of action based on the general principles of EU law. Pursuant to this caveat, any proceedings brought within 3 years of exit day can be based on the general principles provided that:
They do involve a challenge to anything which occurred before exit day (for example, the payment of unlawfully levied tax on 30th October 2019); and
The challenge is not for the disapplication or quashing of (a) an Act of Parliament, (b) rule of law, (c) anything else which enforce (a) or (b), or (d) anything else which could not have been different because of anything passed which falls under (a) or (b).
In practice, this caveat acts as an overruling limitation period for bringing actions based on general principles, whilst also maintaining the exclusion of the disapplication/quashing option currently available to UK courts. As exit day is currently set to be 31st January 2020, this would mean that such claims could still be brought up to and including 30th January 2023. Notably, the stipulation regarding the disapplication or quashing of Acts of Parliament and so on is not specified in the first caveat. Presumably, therefore, it will still be open to a court or tribunal to disapply or quash the relevant Act or rule of law if the relevant proceedings were brought before exit day. The third caveat relates to the exclusion of Francovich damages. This allows claims for Francovich damages to be sought provided that:
The claim is brought within two years of exit day; and
The proceedings relate to anything which occurred before exit day.
The EUWA also makes specific provisions regarding the relationship between the CJEU and UK courts. First, it distinguishes between laws made before exit day (retained law) and those made on or after it. In the case of the former, the Supreme Court is not bound by it. Similarly, the supreme criminal court in Scotland, the High Court of Justiciary, is not bound by retained law when determining certain matters under the Criminal Procedure (Scotland) Act 1995 and Scotland Act 1998. This does not mean these two courts will depart from EU law lightly as the test for departure will be the same for that used by the court for overturning its own previous decisions. All other UK courts and tribunals will only be bound by the retained law by reason of its domestic nature as primary legislation. These are the precedence rules. Subject to the precedence rules, after exit day UK courts will still be able to determine the validity, meaning or effect of any retained law. When doing so, any decision should be made in accordance with any pre-exit case-law and any retained general principles of EU law (as detailed above). Another factor which remains relevant to this decision is the competences of the EU. Here too there is a caveat, namely that if the relevant retained law has subsequently been modified, the decision can only be made (with regard to the relevant factors) in so far as to do so is consistent with the intention behind the modification of the law. The EUWA also confirms that UK courts and tribunals will not be bound by any principles or decisions made by the CJEU after exit day, nor may they refer any matter to the CJEU after exit day. However, the EUWA also stipulates that UK courts and tribunals may have regard to anything done by the CJEU, another EU entity or the EU in so far as it relates to the matter being decided by the UK court or tribunal. Presuming no further amendments are made to this provision, the discretion awarded to judges to have regard to EU law will likely be crucial in challenging any reliance on EU law which was valid up to exit day but which has since been overruled. This will be especially relevant to any parties who have had matters decided by the General Court or European Commission which are or may still be appealed to the European Court of Justice after the exit day.
The Price of Property
Helen McGhee looks at the present state of UK tax rules that must be considered when owning and disposing of UK property.
Inheritance tax problems in Finance Bill 2020
The rules on excluded property trusts are due to change with effect from royal assent. These changes are complex, and the new rules can have an unexpected and retroactive effect. Emma Chamberlain explores these rules to determine whether it may be necessary to exclude the settlor going forward as a beneficiary.
Trust Registration Service- 5MLD update
HMRC’s Trusts and Registration Service (TRS) was born back in 2017 as part of the implementation of 4MLD. 5MLD has mandated notable amendments to the operation of the TRS that clients and practitioners should not overlook. We have created a Q&A to help to navigate the new upcoming compliance obligations.
DAC6 – delayed but be alert!
Helen McGhee discusses the announcement by the European Commission, proposing to delay disclosure deadlines imposed by DAC6 by three months.