On 23 June 2016, the UK electorate voted that the UK should leave the EU. The process of leaving the EU will be commenced by invoking Article 50 of the Treaty on European Union (Lisbon Treaty). Whilst the UK Government has indicated that they will not invoke Article 50 in 2016, once they do, the UK will have a period of two years to successfully negotiate the terms of their exit, after which time the EU can impose exit terms. The two year negotiation period can be extended, but only with the agreement of all the other Member States.
Until the terms of the UK’s exit are finalised there will inevitably be a period of uncertainty with a great deal of emphasis on the nature of the UK’s ongoing relationship with the EU post-exit. There will be a number of impacts for all sectors of UK business.
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Questions you have asked
Commercial dispute resolution
Which courts will have jurisdiction to hear claims in the EU?
The existing Brussels (recast) Regulation 1215/2012 currently applies in the absence of a clear contractual jurisdiction agreement. To avoid unnecessary complication, clear agreements should form part of trading relationships. Where non-contractual liability is in issue, the current Regulation determines which courts in which countries have jurisdiction to hear and determine particular claims.
Which law applies?
Currently Regulation (EC) 593/2008 and Regulation EC 864/2007 apply to determine which law governs a problem where the parties are in different member states of the EU. If the UK discontinues these regimes, they will still be applied by the remaining 27 member states even if the parties are domiciled in the UK. Clear governing law clauses should always be included as part of a trading relationship where possible.
Can UK judgments be enforced in the EU?
The current regime is aimed at making the recognition and enforcement of judgments across the UK as uniform as possible. Post-Brexit this regime may be disapplied and a new one substituted for it. Enforcing UK judgments in the EU may become more difficult, although it is far from simple even under the current “harmonised” regime.
Can I serve UK proceedings in the EU?
Under the current system you can do this without having to apply to the Court for permission. In a post-Brexit scenario, it is most likely that an application for permission will need to be made before service can validly take place.
What is the impact of the Brexit vote on existing and future major infrastructure projects?
In the short term there is no reason to believe that projects on foot will not continue. EU laws implemented into English and Welsh law will remain until a decision is taken on the terms of Brexit and as a consequence which, if any, laws should be repealed. It appears unlikely that laws relating to health and safety (including the CDM Regulations) or design standards would be repealed but there will have to be a watching brief over issues such as laws on procurement and environmental legislation.
Any change to rules on immigration (which seems to be the focus of government) will no doubt have an impact on infrastructure projects. There is an existing and well reported skills shortage and the UK relies heavily on immigrant skilled workers. Therefore any limits on immigration could lead to an increase in cost with demand outstripping supply, a lack of resource to complete major projects and a consequential potential for delays.
Existing and future projects will be impacted by available funds and investment. In the short term there has already been a reluctance by private investors to commit to investment fuelled by uncertainty and currency fluctuations. Whilst the government remains committed to infrastructure spending, and has set up interim measures to guarantee EU funding already in place, the position in relation to future funding, government commitment to that and what will or might have to replace EU funding remains to be seen.
Will Brexit mean that the UK moves to a US style ‘employment at will’ model without unfair dismissal rights?
No. Unfair dismissal is fairly entrenched in UK law and is not EU based or dependant on EU law. In any event there does not seem to be any political will to roll back UK unfair dismissal law.
What will happen to UK employment law post-Brexit?
A significant proportion of the UK's employment law derives from the EU, including discrimination rights, collective consultation obligations, transfer of undertakings regulations, family leave, working time regulations and duties to agency workers. In theory the UK Government could repeal all of this post-Brexit. However, in reality the Government is unlikely to take this step and it is far more probable that EU law will continue to exercise a significant influence on UK law even after we leave the EU. Some EU employment laws merely subsumed protections that were already provided by existing UK law. It is not likely that the Government would want to reduce these protections. For example the Equal Pay Act 1970 which requires that men and women should receive equal pay for equal work, was enacted before the UK joined the European Economic Community. As the Act pre-dates membership it is unlikely to be vulnerable following Brexit.
When the UK leaves the EU will TUPE continue to apply?
Probably. TUPE promotes dialogue with employees at times of business evolution and preserves jobs, so the Government is likely to think carefully before making a change. Furthermore, change may be unattractive because the goalposts are moved mid term for service providers who are in the middle of delivering contracts and the prospect of change destabilises procurement processes. Furthermore the UK has chosen not only to incorporate TUPE into domestic law but to go beyond the requirements European Law. Employment law on the transfer of undertakings applies more broadly in the UK than in the rest of Europe. In future we may see some attempts to remodel or refine TUPE to be more ‘business-friendly’ but the cores principles are unlikely to change.
Which aspects of employment law are most likely to change after Brexit?
It is not yet clear which, if any elements of UK employment law will come under review when we exit the European Union. However, it is rumoured that a post-Brexit Government might start by reviewing the Agency Workers Regulations (which entitle agency staff to the same pay and basic working conditions as equivalent permanent staff). The unpopular Regulations have been criticised by the CBI as a ‘drag on job creation’ and may be ripe for repeal. It has also been suggested that the Government may take steps post-Brexit to introduce a cap on the compensation payable in discrimination claims and to make it easier for employers to ‘harmonise’ employee terms and conditions following a TUPE transfer. However, nothing has been confirmed.
Will UK Courts and Tribunals still have to follow EU employment case-law after Brexit?
Currently, the UK courts must interpret EU-derived law in accordance with ECJ decisions (and a body of UK case law has built up that applies these ECJ decisions).However, on leaving the EU, the ECJ will no longer have jurisdiction over the UK courts and its future decisions will not be binding. It is unclear to what extent UK courts will continue to follow past ECJ decisions. It seems likely that the UK Courts will follow previously established precedents in order to preserve legal certainty. It is also possible that UK courts will continue to treat ECJ decisions (even future ones) as persuasive, even if not binding. The approach adopted will have a huge impact on the future direction of UK employment law because some areas of UK employment law such as working time, annual leave and holiday pay rely heavily on a string of past EU case-law.
Is EU case law binding?
Yes; until the UK exits the EU, the UK continues to be bound by any existing EU case law.
What do I tell employees from the EU who are concerned about whether they will be able to live and work in the UK following Brexit?
For those EU workers who are already living and working in the UK, the Government has said that it cannot offer guarantees about their position at this stage when it has not yet received assurances about UK workers living elsewhere in Europe. However, it has said that ‘when we do leave the EU we fully expect that the legal status of EU nationals living in the UK will be properly protected’. Therefore EU workers can be assured to an extent that this is the Government’s intention. We do not know however what sort of ‘cut off’ date may apply in terms of protecting the rights of EU workers who are already living and working in the UK. That may be the date that the UK exits the EU or it may be an earlier date to avoid a flood of EU workers coming to the UK.
For those EU workers who have lived continuously and lawfully in the UK for 5 years, they have a permanent right to live in the UK according to EU law. They can apply for a residence document to prove this and it may be advisable to obtain this document so that their status is clear in the longer term. EU nationals who have lived continuously and lawfully in the UK for at least 6 years are eligible to apply for British citizenship if they would like to do so and that may make sense in the circumstances.
Following Brexit, what immigration rules are likely to replace the current rules for EU workers which are simple to operate from an employers perspective?
We do not currently know what rules will replace the current regime. It appears that the Government does not wish to replace the current rules for EU workers with a points based immigration system. That may be a relief for employers provided that any new rules are sufficiently flexible for the needs of UK employers to recruit the staff they need and provided that there aren’t considerable visa costs of any new system. The emphasis appears to be on a new system that will give the Government more control over migrant workers so employers can expect more paperwork and less flexibility in future, whatever rules are introduced.
What does Brexit mean for Scotland?
The referendum result indicated that the population of Scotland was in favour of remaining in the EU by a very significant majority. Since the referendum, the First Minister for Scotland has noted that she is exploring all options to protect Scotland’s interests in Europe. Although the first Independence Referendum was intended to settle the issue of independence for a generation, the First Minister’s position is that leaving the EU is a ‘material change of circumstances’ that could justify a second Independence Referendum. However, she is likely to wait for an appropriate time before campaigning for this depending on how much support there is. In the meantime, Scotland is impacted by Brexit in the same way as the rest of the UK. The UK government will conduct negotiaPropertiestions on behalf of the whole of the UK once Article 50 has been triggered. At the same time as these negotiations are taking place the move towards increased devolution as set out by the Smith report will continue. This will make considerable changes to the legal landscape in Scotland.
Can Scotland Object to Brexit and stay part of the EU?
Scotland has no right to remain part of the EU as it remains part of the UK. It will be impacted by Brexit in the same way as the rest of the UK. However, some argue that the Scottish Parliament will have some influence over Brexit in that it will need to pass a legislative consent motion in order for Westminster to enact the Great Repeal Bill. This Bill will:
- repeal the European Communities Act 1972 (the legislation which facilitated the UK’s accession to the EU, which means that EU law has priority over UK law and which means that certain EU laws have direct effect); and
- result in EU laws being implemented into UK law for a transitional period which will enable Parliament to pick and choose which laws it wants to keep:
The Scottish Government argues that a legislative consent motion is required for this Bill because under the Sewell convention (contained in the Scotland Act 2016) the UK Parliament will not ‘normally legislate with regard to devolved matters’ without the consent of the Scottish Parliament itself. They argue that devolved matters will be impacted by Brexit. The UK Government’s view is that a legislative consent motion is not required. This issue will no doubt be the focus of some political arguments.