UK: May: UK And EU Regulation To Be 'Substantially Similar' Post-Brexit

Last Updated: 9 March 2018
Article by Guy Lougher and Tobin Ashby

UK and EU regulation of goods will be closely aligned post-Brexit, UK prime minister Theresa May has said.

In a speech on Friday last week, May said maintaining "substantially similar" regulatory standards would help deliver a tariff- and quota-free arrangement for the supply of goods between the UK and EU in future.

The UK's commitment to close alignment of regulatory standards would come under a "comprehensive system of mutual recognition" for post-Brexit arrangements for the supply of goods, May said.

"Our default is that UK law may not necessarily be identical to EU law, but it should achieve the same outcomes," May said. "In some cases parliament might choose to pass an identical law – businesses who export to the EU tell us that it is strongly in their interest to have a single set of regulatory standards that mean they can sell into the UK and EU markets."

"If the parliament of the day decided not to achieve the same outcomes as EU law, it would be in the knowledge that there may be consequences for our market access. And there will need to be an independent mechanism to oversee these arrangements," she said.

May said that the UK is also keen to retain its membership of EU agencies such as the European Medicines Agency, the European Chemicals Agency, and the European Aviation Safety Agency, and would be willing to accept "the rules of those agencies and making an appropriate financial contribution" to achieve that.

May also said that the UK is open to exploring two possible options for future customs arrangements with the EU.

The first option, she said, is for the UK to "mirror the EU's requirements for imports from the rest of the world, applying the same tariffs and the same rules of origin as the EU for those goods arriving in the UK and intended for the EU". Under this option, all goods entering the EU via the UK would "pay the right EU duties", while the UK would be open to "apply its own tariffs and trade policy for goods intended for the UK market", she said.

The second option is a "highly streamlined customs arrangement" designed to "minimise frictions to trade" where there would be "specific provisions" made for goods being transferred over the border between Northern Ireland and Ireland, May said.

Under those arrangements, the requirement for entry and exit declarations for goods moving between the UK and the EU would be waived, as it is currently, and UK companies would not be obliged to pay EU duties when supplying goods to the rest of the world where those goods move through the EU market. A reciprocal arrangement would apply for EU goods being moved through the UK, May said. She also backed the use of technology to enable "trusted traders" to move freely between the UK and EU, and said automated processes could be used to cut the costs of customs administration.

May also used her speech to reiterate her opposition to a "hard border" existing between Northern Ireland and Ireland post-Brexit. She said that it would also be "unacceptable" for there to be a new "customs and regulatory border" between Northern Ireland and the rest of the UK "down the Irish Sea".

On the future model for the trade of services between the UK and EU, May called for a "broader agreement" which would deliver "different" access to the EU market for UK-based businesses than is currently the case. Those arrangements, however, should involve "new barriers" to such access "where absolutely necessary", she said.

On financial services, May confirmed that the UK government is seeking a bespoke agreement with the EU.

"The [UK] chancellor will be setting out [this] week how financial services can and should be part of a deep and comprehensive partnership," May said. "We are not looking for passporting because we understand this is intrinsic to the single market of which we would no longer be a member. It would also require us to be subject to a single rule book, over which we would have no say. The UK has responsibility for the financial stability of the world's most significant financial centre, and our taxpayers bear the risk, so it would be unrealistic for us to implement new EU legislation automatically and in its entirety."

"Our goal should be to establish the ability to access each others' markets, based on the UK and EU maintaining the same regulatory outcomes over time, with a mechanism for determining proportionate consequences where they are not maintained. But given the highly regulated nature of financial services, and our shared desire to manage financial stability risks, we would need a collaborative, objective framework that is reciprocal, mutually agreed, and permanent and therefore reliable for businesses," she said.

May also confirmed that, post-Brexit, the UK government would not follow EU policy making for digital markets. She said the UK government wants to ensure "domestic flexibility" to account for the "fast evolving, innovative" nature of the digital sector. This approach will "ensure the regulatory environment can always respond nimbly and ambitiously to new developments", May said.

On a future UK-EU trade deal, May said an agreement must include "reciprocal binding commitments to ensure fair and open competition" as well as an "arbitration mechanism that is completely independent" to ensure disputes can be resolved. However, the prime minister acknowledged that in some circumstances, the UK would have to accept, or choose to follow, rulings made by the Court of Justice of the EU (CJEU) post-Brexit.

The prime minister said: "Where appropriate, our courts will continue to look at the [CJEU's] judgments, as they do for the appropriate jurisprudence of other countries' courts. And if, as part of our future partnership, parliament passes an identical law to an EU law, it may make sense for our courts to look at the appropriate [CJEU] judgments so that we both interpret those laws consistently."

"If we agree that the UK should continue to participate in an EU agency the UK would have to respect the remit of the [CJEU] in that regard. But, in the future, the EU treaties and hence EU law will no longer apply in the UK. The agreement we reach must therefore respect the sovereignty of both the UK and the EU's legal orders. That means the jurisdiction of the [CJEU] in the UK must end. It also means that the ultimate arbiter of disputes about our future partnership cannot be the court of either party," she said.

Any future UK-EU trade agreement must also provide for "ongoing dialogue" between the UK and EU, including a role for UK regulators to work together with EU counterparts, a new arrangement for the movement of people between the EU and UK, as well as "the free flow of data".

"We want to secure an agreement with the EU that provides the stability and confidence for EU and UK business and individuals to achieve our aims in maintaining and developing the UK's strong trading and economic links with the EU," May said. "That is why we will be seeking more than just an adequacy arrangement and want to see an appropriate ongoing role for the UK's Information Commissioner's Office. This will ensure UK businesses are effectively represented under the EU's new 'one stop shop' mechanism for resolving data protection disputes."

May also said that she believes the UK and EU are "close to agreement on the terms of an implementation period" for Brexit. She said she is "confident" that remaining differences in position can be "resolved in the days ahead".

"Both the UK and the EU are clear this implementation period must be time-limited and cannot become a permanent solution. But it is vital to give governments, businesses and citizens on both sides the time they need to prepare for our new relationship," May said.

The UK's position is that a post-Brexit transition period should last two years, or possibly longer, while the EU favours bringing the transition period to an end on 31 December 2020, which is less than two years after Brexit is scheduled to formally take effect.

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