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Clifford Chance

Clifford Chance

Insurance Insights

The Brexit Freedoms Bill and changing retained EU law

To mark the second anniversary of Getting Brexit Done, the Government announced on 31 January that it would bring forwards a new Brexit Freedoms Bill (the Bill) to make it easier to amend 'retained EU law', that is EU-derived legislation, rights and principles preserved at the end of the Brexit transition period under the European Union (Withdrawal) Act 2018 (EUWA).

The Government's clearest signal of its intention to strategically diverge from legacy EU law was made alongside the publication of a new policy document titled ‘The Benefits of Brexit: how the UK is taking advantage of leaving the EU’. This outlined the following measures: 

Reviews to meet UK priorities

The review of retained EU law will be prioritised, factoring in areas of greatest economic gain. Such a review is currently underway for Solvency II, with planned reforms to assist the UK insurance sector but particularly the life and annuity market. The Government hopes the Solvency II reforms will, in turn, make it easier for insurers to assist the UK economically, by releasing capital back into the economy and environmentally, by assisting the UK to meet climate change objectives.

As part of the review process, the Government is preparing a 'statute book' for Brexit across sectors. This will be a catalogue of retained EU law and will outline any changes, so will be a helpful addition to firms as it will be made public and accessible.

Allow for easier reform

The Government plans to create new "fast track" powers to provide an alternative way to reform and to make the process quicker and more efficient. Currently, most retained EU law is afforded the status of primary legislation (meaning primary legislation is required to amend such legislation). This means that any changes take a lot longer to deliver, even if minor or technical. The pipeline of primary legislation needed would dominate the legislative agenda for several Parliaments, reducing the Government's ability to deliver other domestic reforms.

The new powers would remove the need for primary legislation and with only limited Parliamentary scrutiny, given the changes would be made by statutory instrument. If these proposals are pursued, a key issue (besides the level of Parliamentary scrutiny) will be the extent of public consultation on any draft legislation. UK industry bodies and firms will be keen to retain the ability to feedback as seen from extensive engagement on Brexit reforms.

Remove the principle of supremacy

The “supremacy principle” is a concept that the Court of Justice of the European Union (CJEU) developed early in the life of what became the EU. The principle is that when the domestic law of a Member State conflicts with EU law, the latter takes priority. Under the EUWA, the supremacy of EU law continued after exit day (31 January 2020 at 11.00 pm) so far as relevant to the interpretation of retained EU law.

There is now a wish to remove the continued effect of the supremacy of EU law over UK domestic law.  The Government is therefore considering what might be the most appropriate relationship between these two bodies of law given the need to promote legal certainty. An option being contemplated is a bespoke rule that would address cases where retained EU law came into conflict with domestic law, that had the benefit of specific authorisation by Parliament. Any ancillary court powers could also be used for interpretation in cases of conflict.

Next steps

The Government's Future Regulatory Framework (FRF) Review which is considering how the financial services regulatory framework should adapt to post-Brexit is well underway, with changes expected to be in force by 2023-24. Alongside the FRF Review, the Solvency II Review is also underway with changes to apply from late this year/early next year.

No timing for the Bill has been published, but we expect an announcement to clarify the timetable in the next few months. Until the Bill has been passed and brought into force, the position of retained EU law remains as per the EUWA.

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