The impact of the referendum in the United Kingdom (''UK'') remains very unclear and this is not different for the chemicals sector. Once the procedure of withdrawal under Article 50 of the Treaty on the European Union (''TEU'') is initiated, the European Union (''EU'') will negotiate its future relationship with the UK. Only when these negotiations are finished, will the UK have left the EU and will not be bound by its rules. Until then nothing will change in practice. Article 50 TEU foresees 2 years for the negotiations, but allows the possibility of an extension.
Even when an agreement is reached, this does not imply that all EU rules will not apply anymore in the UK. Especially rules like the ones on chemicals, which are intended to protect human health and the environment, will probably not be overturned very quickly but the negations terms would most likely provide for some transitional arrangements. This will only happen when they have come up with some well-founded alternative legislation. In addition, chemicals legislation does not only apply in the EU, but also in the European Economic Area (''EEA'' – i.e. additionally Norway, Liechtenstein and Iceland) because it has significant effects on the internal market. This could be a deterrent for the UK, but it also means that the consequences of not applying chemicals regulations are far-reaching. There are three main options for the UK and the effects will depend on which option is followed. The UK can: (i) negotiate membership of the EEA; (ii) negotiate a bilateral agreement; or (iii) not negotiate a preferential agreement and rely on the World Trade Organization (''WTO'') rules.
In this complex political and regulatory context, companies will therefore need to develop a dedicated strategy and closely follow the direction of the negotiations for the purpose of regulatory compliance with EU chemicals regulations – i.e. Regulation (EC) No 1907/2006 ("REACH"), the Biocidal Products Regulation (EU) No 528/2012 (''BPR''), the Plant Protection Products Regulation (EC) No 1107/2009 (''Pesticides Regulation''), as well as food and cosmetics regulations.
UK companies turning into non-EU manufacturers under REACH, BPR and Pesticides Regulation
Unless the UK gains an EEA-like status, all UK companies will turn into non-EU manufacturers, and in line with the rule under Article 8 of REACH will have to appoint an only representative (''OR'') for their imports in the EU; otherwise their customers would be confronted with registration obligations under REACH. Equally, non-EU producers which had up until Brexit a UK-based company as an OR for the EU would have to consider choosing companies from different Member States.
With regards to the BPR, in accordance with the European Chemicals Agency's (''ECHA'') practice set in its Guidance on active substances and suppliers (Article 95 List), as potentially becoming non-EU, UK companies may be represented by an EU representative, for the purpose of inclusion in the Article 95 List,and be indicated on the list next to its EU representative. Conversely, like in the second OR scenario, UK companies which have acted as Article 95 representatives up until now, would most likely be replaced. Likewise, mutual recognition procedures involving the UK will be adversely impacted.
As regards compliance with the pesticides regime, there would be fewer concerns for UK companies placing plant protection products on the EU market, since the Pesticides Regulation does not lay down as strict obligations for importers in terms of representation in the EU as those applicable under REACH and the BPR (e.g. there is no equivalent to the REACH "OR" and Article 95 BPR representative). Nevertheless, there will be an impact on future mutual recognition and zonal application procedures in case the UK will no longer be recognised as an EU Member State of origin
Pertaining to compliance with the pesticides regime, there would be fewer concerns for UK companies placing plant protection products on the EU market, since the Pesticides Regulation does not lay down obligations for importers in terms of representation in the EU (e.g. REACH OR and Article 95 BPR representative).
Next, we advise both UK and EU chemicals companies to review the terms of commercial contracts concluded between them by putting in place appropriate ''Brexit'' clauses on compliance obligations.
Ongoing evaluations of substances
Besides all compliance complications which companies will be faced with, one should also not forget about the issue with the ongoing work of the UK regulator – i.e. the Health and Safety Executive (''HSE''). Where the ongoing assessment performed by the UK as an evaluating Member State for REACH substances, biocides and pesticides is not completed by the actual exit date, dossiers will have to be transferred to other national authorities. However, since the situation is unprecedented, it remains unclear how all of this will happen, which stakeholder will be taking the lead – i.e. the companies themselves or in collaboration with the European Commission and the other Member States?
In sum, the Brexit path which the UK decided to follow will result in complicated policy and legislative transformations and challenges which would inevitably have huge impact on regulatory compliance. Decision-makers will need to negotiate smart exit conditions, envisaging continued application of EU chemicals law, so that UK, as well as EU manufacturers and national administrations, can maintain relatively smooth compliance and enforcement practices. Meanwhile, both UK and EU-based chemicals companies should review their presence in the EU in terms of only representatives, authorised suppliers and importers. Moreover, companies should carefully review the terms of their commercial contracts by putting in place appropriate ''Brexit'' clauses and compliance obligations before and after the effective date of Brexit. The same may be true for Consortia and Task Forces involved in the ongoing evaluation of chemicals, pesticides and biocides which are expected to be finalised after the Brexit. The interplay between those proceedings and national rules will become more important than in the past, depending on whether the UK will negotiate a Norway/EEA-type of agreement or a less integrated approach. All these scenarios have to be included in regulatory and contractual strategies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.