‘Charting a new course'? Uncertainty for businesses as UK introduces new measures to depart from EU case law

So far, the impacts of Brexit on the status of EU-derived laws have been muted

EUWA 2018 in large part preserved the pre-exit ‘status quo’ in terms of the interpretation and application of EU-derived law in the UK. 

For example, EUWA preserved EU regulations and EU decisions which were applicable in the UK immediately before the end of the post-Brexit implementation period (on 31 December 2020).  By creating a new concept of “retained EU law”, EUWA 2018 preserved not only the ‘black letter’ text of that retained EU law, but also the principles that informed its interpretation during the UK’s EU membership.  For example:

• the principle of the supremacy of EU law continues to apply as it did before Brexit (although not in respect of laws passed after Brexit), meaning that the domestic legislation still needs to be read compatibly with retained EU law or otherwise disapplied;
• retained EU law which implemented EU directives is still required to be interpreted consistently with the relevant directive; and
• retained EU law is still required to be interpreted  in light of the ‘general principles’ of EU law, such as the principle of non-discrimination.

EUWA 2018 also provided that the lower UK courts were still bound by past decisions of the UK courts and the Court of Justice of the European Union (“CJEU”) concerning the meaning and application of retained EU law.  It did so by introducing the concept of ‘retained case law’, and requiring that “any question as to the validity, meaning or effect of any retained EU law is to be decided … in accordance with any retained case law and any retained general principles of EU law”. 

Until now, the UK courts have appeared reluctant to use post-Brexit freedoms to depart from previously retained case law

EUWA 2018 did provide an exclusion to this general rule: the Supreme Court and Court of Appeal were not bound by retained case law, so far as it was in their view ‘right’ to depart from it.

However, the UK courts have so far very rarely considered it ‘right’ to do so.  For example, the Court of Appeal refused to use this new discretion in TuneIn Inc v Warner Music UK Ltd & Anor [2021] EWCA Civ 441, in which it was invited to depart from the CJEU’s interpretation of the expression “communication to the public” (an expression used in a number of international agreements and EU directives). The Court  declined the invitation to do so, including on the bases that the relevant domestic legislation had not been amended since EU exit; that the European court had “unrivalled experience” on the relevant point of law; and that departing from prior European judgments could cause considerable uncertainty.

Enter the 2023 Act

The 2023 Act will drastically reduce the extent to which retained case law remains binding on the UK courts.  The UK Government’s impact assessment of the 2023 Act is frank about the fact that the changes introduced by the Act in this area will create uncertainty:

“… the power for domestic courts to use greater discretion to depart from CJEU interpretations contained within the Bill may create additional uncertainty for businesses. The potential for UK courts to depart from past decisions on an issue could mean that in certain areas, businesses can no longer rely on previous rulings as a guide for future ones.”

Not all retained case law will remain binding

From 1 January 2024, the concept of retained case law will no longer exist.  It will be replaced by the narrower concept of “assimilated case law”, which will exclude cases concerning directly effective rights, general principles of EU law, the supremacy of EU law, and the interpretation of an EU directive.  This reflects the fact that these concepts will be abolished in UK law from the end of 2023.  As a result, the 2023 Act will ‘downgrade’ the status of a substantial volume of past judicial decisions based on these concepts.  These decisions will become, at most, of persuasive value. 

Assimilated case law will have a more precarious status

Even where assimilated case law does not apply these concepts (and therefore remains binding on lower courts), the Act imposes new factors that the Court of Appeal and Supreme Court must take into account when considering whether to depart from it.  

These factors include:

• (in respect of CJEU judgments) that decisions of foreign courts are not usually binding in the UK;
• that the circumstances in which a case was decided may now have changed; and
• that assimilated case law may restrict “the proper development” of UK law.

The clear indication from the 2023 Act is that Parliament wishes to ensure that the courts properly engage with the merits of diverging in a given case.  How judges will apply these factors in any given case is not yet clear, and it may take time for a common approach to evolve over time.

The 2023 Act will also introduce a new fast-track reference procedure enabling lower courts or tribunals to refer points concerning the interpretation of assimilated EU law to the Court of Appeal and/or Supreme Court for those courts to decide, where these points are of “general public importance”.  The courts may do so of their own motion, or in response to an application made by a party.  Such a procedure appears similarly to be intended to facilitate divergence by the UK courts from the established pre-Brexit interpretation of EU-derived law.

Read more about the wider changes introduced by the 2023 Act, including the UK Government’s new powers to replace EU-derived laws (which have not been considered in this article), here.

Click here to access UK- Retained EU Law (Revocation and Reform) Act 2023 Interactive Guide.

Next steps

Given the vast amount of EU-derived law that still applies in the UK post-Brexit, covering sectors as diverse as pensions, healthcare and industrial manufacturing, this ‘hard-reset’ of how such law stands to be interpreted and applied from 2024 onwards could have far-reaching implications.

• The 2023 Act is likely to prompt increased litigation, as both businesses and the UK Government/regulators test whether established interpretations of existing laws still operate in the same way. The UK Government has said that it anticipates ‘test cases’ in areas of legislation such as Employment, Tax, Data, and Competition. However, the implications of the 2023 Act are not limited to these areas and could have broader (and potentially unanticipated) impacts on the domestic statute book.  Businesses, for example, might consider whether the courts’ newly-strengthened powers to depart from previous decisions present an opportunity to re-assess whether an unhelpful EU-derived law could be re-interpreted more favourably (or create a risk that a retained EU law might now be re-interpreted less favourably). 
• The 2023 Act gives the UK Government broad new powers to alter, restate, revoke or replace retained EU law, including to codify the established interpretation of existing law where this would otherwise be lost by the operation of the 2023 Act.  Businesses therefore now have a clear opportunity to shape their regulatory environment by seeking to influence the future development of law that affects them. 

It will be for the courts to decide how to make use of their newly-strengthened powers to depart from previous decisions and chart a new course.  Whether and how they choose to do so, and as a consequence the precise impact that the 2023 Act will have in a given sector, will take time to become clear.  In the meantime, businesses should now be taking active steps to:

1. Identify the EU-derived laws relevant to their operations and the key UK and European judgments which interpret those laws.
2. Assess the extent to which the status of these laws and judgments will change: will they remain ‘good law’ following the end of 2023?  (For example, will the changes introduced by the 2023 Act prevent the domestic courts from reaching the same conclusion in future cases?)
3. Anticipate the commercial opportunities and risks that these changes create. (For example, new opportunities to pursue strategic litigation to change the law, or new pressure points for regulatory intervention.)
4. Engage with Government to shape their future regulatory environment.

Hogan Lovells has been providing market-leading analysis of the implications of Brexit for businesses operating in the UK since before the EU referendum in 2016. Our depth and breadth of knowledge of the legal, regulatory and policy drivers affecting a wide range of industry sectors means we can help you get a grip on events, navigate uncertainty and capitalize on opportunities to shape your regulatory and policy environment.

Authored by Andrew Eaton and Fraser Eccles