Route map for retained EU law: new Court of Appeal Judgment

In this blog post, Jack Williams of Monckton Chambers discusses the Court of Appeal case of Lipton v BA City Flyer Ltd [2021] EWCA Civ 454, which contains a helpful distillation of the principles relevant to determining whether a Regulation forms part of domestic law (i.e. is “retained EU law”), and how the Trade and Cooperation Agreement (“TCA”) and the EU (Future Relationship) Act 2020 interacts with retained EU law.

The facts and decision of the Court of Appeal in Lipton v BA City Flyer Ltd [2021] EWCA Civ 454 (“Lipton”) can be stated shortly. Passengers whose flights are cancelled or significantly delayed are entitled to compensation under Regulation (EC) 261/2004 (“the Regulation”). The payment of compensation is not payable where the cancellation or delay was caused by “extraordinary circumstances”. The Court held that the captain’s non-attendance for work due to illness was inherent in the air carrier’s activity and operations and was not an “extraordinary circumstance” within the meaning of Article 5(3) of the Regulation.

What is of present interest, however, is not the outcome, but the reasoning. The judgment of Green LJ provides an admirably succinct and helpful distillation of the principles relevant to determining whether a Regulation forms part of domestic law (i.e. is “retained EU law”), and also how the Trade and Cooperation Agreement and the EU (Future Relationship) Act 2020 interacts with retained EU law.

The first step in any analysis concerning legal rights and obligations said to arise out of EU law post Brexit is to determine whether that law has been incorporated into domestic law and is thus actionable in domestic courts as “retained EU law” pursuant to the EU (Withdrawal) Act 2018 (“EU(W)A 2018”) (as discussed in detail here). As Green LJ observed ([53]):

“Submissions and argument advanced to us during the appeal proceeded very much as it would have done in 2019, when the UK was a member of the EU, or even in 2020 when the transitional period (“the Transitional Period”) governing the extrication of the UK from the EU was still in force (until 11pm 31st December 2020). However, the hearing took place in February 2021 when the transitional Period had expired. As at this point in time a new set of legal arrangements are in place which governed the relationship of the UK to EU law.  The Court cannot therefore assume that the old ways of looking at EU derived law still hold good.  We must apply the new approach. There is much that is familiar but there are also significant differences.”

Lipton concerned an EU Regulation. Lord Justice Green’s first enquiry, therefore, was whether that Regulation had been retained in domestic law. This, as by now is hopefully well-known, requires a forensic application of the EU(W)A 2018, in this case section 3(1). Finding that the Regulation was operative prior to IP completion day (11pm on 31 December 2020), Green LJ held that the Regulation was indeed retained EU law (retained direct EU legislation in this case) (see [58] – [62]). Consequentially, the provisions on supremacy (section 5 of the EU(W)A 2018) and retained case law (section 6 of the EU(W)A 2018) also applied.

Once you have identified retained EU law, the second step is to consider whether there have been any amendments in domestic law, for example pursuant to the deficiency correcting powers in section 8 of the EU(W)A 2018. One cannot simply apply the text of an EU Regulation blindly. In Lipton, Green LJ identified the Air Passenger Rights and Air Travel Organisers’ Licencing (Amendment) (EU Exit) Regulations 2019, which came into force on IP completion day and amended the Regulation. That was the applicable law which the Court was to interpret and apply. (There is an unsettled question as to what to call the retained version of a (previous) EU law and the amended version thereof so as to distinguish it from the EU law itself. My suggestion is “Retained Regulation [x] (as amended)”.)

One cannot stop there, however. The third step is to consider whether the retained EU law is the only game in town, or whether it is ‘trumped’ or otherwise amended by another international source (such as the Withdrawal Agreement and/or the TCA).

There are, in fact, three sources from which EU-related laws may stem in a post Brexit world: first, retained EU law (i.e. EU law that has been ‘domesticated’) (discussed here); second, relevant separation agreement law (i.e. rights and obligations flowing from the Withdrawal Agreement) (discussed here); and, third, relevant relationship agreement law (i.e. rights and obligations from the TCA and associated agreements) (discussed here).

The hierarchy between the three originating sources (EU law, the Withdrawal Agreement and the TCA, plus associated agreements) is complex. I have explored it in depth here and here. In short, “retained EU law” is supreme over all pre-IP Completion day domestic law, but not later law, and “relevant separation agreement law” is supreme over all other domestic law (including “retained EU law”), whether pre-existing or post-dating the “relevant separation agreement law”. This means, for example, that one has to not only consider whether a particular EU Regulation is retained EU law, but also whether it is mentioned in the Withdrawal Agreement. One could end up with a situation where the original EU Regulation forms part of domestic law in two different guises, retained EU law and relevant separation agreement law, at the same time.

In Lipton, the Court did not explore whether the Regulation is mentioned in the Withdrawal Agreement (it is not), such that the issue in the preceding paragraph concerning relevant separation agreement law did not arise. But the Court did have to explore the effect of the TCA and its incorporation into domestic law via the EU (Future Relationship) Act 2020 (“EURA 2020”) (as discussed in a blog post here and at 1h13 for ten minutes here ).

Lord Justice Green’s analysis of that Act is instructive.

Article AIRTRN.22 of the TCA provides that the UK and the EU “shall ensure that effective and non-discriminatory measures are taken to protect the interests of consumers in air transport. Such measures shall include … reimbursement and, if applicable, compensation in case of denied boarding, cancellation or delays, and efficient complaint handling procedures.”

The Court thus had to determine whether Article AIRTRN.22 affected the Court’s task in construing and applying the Regulation (as retained and amended). This involved two stages.

First, Green LJ found that Article AIRTRN.22 does not have direct effect in the sense that we have become accustomed to during the UK’s membership of the EU ([75] – [76]). That is because COMPROV.16(1) of the TCA provides that nothing in the TCA is to be construed as conferring or imposing rights or obligations “on persons other than those created between the Parties under public international law”.  Further, the TCA precludes direct invocation of its terms in domestic law. Nothing in the TCA permits it “to be directly invoked in the domestic legal systems of the Parties”.  In other words, stated Green LJ, “the TCA does not have direct effect” ([75]).

Second, despite that, that is not the end of the matter. That is because section 29 of the EURA makes quite extraordinary provision for the general implementation in domestic law of all other – otherwise unimplemented – TCA provisions (a “sweeping up mechanism” in the words of Green LJ at [77]). It provides that existing domestic law has effect “with modifications as are required for the purposes of implementing in [domestic law] the [TCA] …”. 

Lord Justice Green’s remarks at [78] – [82] on the operation of section 29 are worth citing in full (emphasis added):

“The section 29 mechanism provides that domestic law (as defined) “has effect … with such modifications as are required for the purposes of implementing in that law the Trade and Cooperation Agreement”.  The phrase “has effect” is important.  Parliament has mandated a test based upon the result or effect.  The phrase “has” makes clear that this process of modification is automatic i.e. it occurs without the need for further intervention by Parliament. The concept of modification is interpreted broadly in section 37(1) to “include” (and therefore is not limited to) amendment, repeal or revocation.  Section 29 is capable of achieving any one or more of these effects. This does not lay down a principle of purposive interpretation (such as is found in section 3 Human Rights Act) but amounts to a generic mechanism to achieve full implementation. It transposes the TCA into domestic law, implicitly changing domestic law in the process. Applying section 29 to domestic law on a particular issue now means what the TCA says it means, regardless of the language used.

…

Applying section 29 there are three steps to take.  The first is to identify the relevant domestic law.  This is Regulation 261/04 as amended. The second step is to determine whether the domestic law is the same as the corresponding provisions of the TCA.  If it is then under section 29(1) there is no need to apply the automatic read-across.  If there is inconsistency, daylight or a lacuna then the inconsistent or incomplete provision is amended or replaced, and the gap is plugged. As to this the TCA imposes a duty on the parties, in pursuit of a principle of consumer protection, to “ensure” that “effective” measures are taken to protect consumers in the field of transport including in relation to compensation for denied boarding and with ensuring “efficient handling complaint handling procedures”….”

This demonstrates the potency of section 29 of the EURA.  

Summary

In concluding his judgment, Green LJ provided a statement of 10 basic principles to guide practitioners and judges ([83]):

“i)                   It is helpful to summarise some basic conclusions. In this case, the task of the court has been relatively straightforward since as of the date of this judgment the new legal regime has been in place for only a few months and nothing of relevance in the case law of the CJEU has changed. As time moves on, and the case law of the CJEU evolves, then the differences between the current state of EU law and that which the Court is to take account of might become more accentuated.  At that stage the analysis might become more complex.  The basic principles of relevance in this appeal can be summarised as follows:

ii)                 Regulation 261/04 is direct EU legislation.

iii)               It takes effect in domestic law as amended by the Air Passenger Regulations 2019.

iv)               It should be given a purposive construction which takes into account its recital and other principles referred to in the body of the regulation and in the recitals.

v)                 To the extent necessary this process of interpretation would include any provision of international law that has been incorporated into the Regulation by reference.

vi)               The meaning and effect of the measure should be determined by reference to case law of the CJEU made prior to 11 pm 31st December 2020.

vii)             General principles of EU Law from case law and as derived from the Charter of Fundamental Rights and the TFEU, are relevant to interpretation.

viii)           In construing and applying such a Regulation the Court can depart from any retained CJEU case law or any retained general principles.  The Court is not bound by such principles and may depart from them if it considers it right to do so.  It has not been necessary to do so in this case.

ix)               The provisions of the TCA and the EU(FR)A 2020 may be relevant to the effect of domestic law insofar as the subject matter of the domestic law in issue overlaps with the subject matter of the TCA and/or EU(FR)A 2020 and in so far as domestic law does not already cover the subject matter of the TCA.

x)                 If domestic law does not already reflect the substance of the TCA then domestic law takes effect in the terms of the TCA.  In this case domestic law already implements the relevant provisions of the TCA and there is no need for any further transposition in order to achieve the requisite effect.”

As it happened, Green LJ found that “none of these principles caused any difficulty in the present case” ([84]). The wider value of Lipton, therefore, is not so much in the decision itself, but as an excellent summary of the analytical stages.

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