In this post, Alfred Artley of Monckton Chambers examines the mutual recognition and non-discrimination provisions in the UK Government’s Internal Market White Paper.
As part of its preparations for end of the Brexit transition period, the UK Government last month published a lengthy White Paper setting out proposals for ensuring frictionless trade and the continuing absence of regulatory barriers within the UK. The free movement of goods and services within the domestic market has hitherto been guaranteed and regulated at EU level; but looking ahead to when these rules cease to apply in January, the UK Government has correctly identified that a new domestic system will be required to fill the gap.
Harry Gillow has previously outlined the key elements in the White Paper on this blog and explained why the initial criticism from the devolved administrations – suggesting that the proposals amount to a challenge on the devolution settlement – may be overblown. This post instead focuses on what the White Paper omits to address: first, how the cardinal principles of mutual recognition and non-discrimination fall to be interpreted in practice; and second how disputes relating to these principles will be practically resolved.
Plus ça change: a continued role for European jurisprudence?
Part 2 of the White Paper proposes legislation to underpin the new UK Internal Market, and explains the aims and advantages of the twin principles of mutual recognition and non-discrimination upon which the new system will be based.
As regards mutual recognition:
- For goods, any product that can lawfully be sold in one territory can lawfully be sold in any other territories without having to comply with the latter’s particular requirements that would otherwise apply. Mutual recognition will cover mandatory requirements relating to lawful sale, such as product requirements and their related processes and production methods (for example, requirements on production, composition, quality, packaging or labelling). Other types of requirement not directly related to lawful sale will be excluded, however (examples here are conditions on transport, disposal or the manner of sale of goods).
- For professional qualifications, compliance with the regulatory standards of one territory can be used to demonstrate compliance towards professional recognition in another.
- For services, mutual recognition should already be guaranteed by the Provision of Services Regulations 2009. These require that any authorisation scheme provided for by a UK competent authority must be justified and minimally restrictive, and the criteria applied should prevent arbitrary assessment. Additionally, an authorisation issued by an authority with functions covering less than the whole UK should generally permit access to the whole UK market.
The mutual recognition principle will in turn be complemented by a non-discrimination principle, which is explained as the prevention of discrimination between individuals or businesses based on residence or origin within the UK. Direct discrimination will automatically be prohibited, subject to limited exceptions (such as ‘a public, plant or animal health emergency’). The Government is also keen to avoid indirect discrimination, where one economic operator is treated in a substantially unfavourable way by another administration compared with local operators when operating in another part of the UK, but wishes to consult on whether this should be prohibited at the outset in the new legislation.
What is studiously avoided here, though, is any reference to the equivalent EU concepts of mutual recognition and non-discrimination. Annex B of the White Paper looks at various examples of international Internal Market systems in federal states (Australia, Switzerland, and Spain), but not the EU system. In some ways, this is understandable, because the EU is of course a supranational institution, rather than a federal state. However, given that current proposals effectively amount to the preservation in domestic law of two key principles of the EU single market which formed part of UK law for the duration of our Common Market membership, the silence in this regard is notable.
However, even if Government is shy about acknowledging the European heritage of these principles, the courts will not necessarily show the same reluctance. Even if the proposals in the White Paper are fleshed out further in the legislation that follows, it would take a long time to develop an equivalent body of domestic jurisprudence to parallel the EU internal market acquis on Article 34 TFEU and the like, and to that end it is perfectly conceivable that UK judges may continue to find existing European rulings helpful and persuasive, not least in the absence of anything else to rely on. To the extent that the European approach is now more or less acte clair and has previously been applied consistently in the UK, to continue largely as before would also serve to ensure legal certainty going forward.
Quis custodiet ipsos custodes?
Although the finer details of future legislation are of course beyond the scope of a White Paper, one does expect the key elements of a proposal to be made clear; yet in respect of dispute resolution and enforcement – a key aspect of any internal market system – the paper is remarkably quiet, and says more about what will not happen in this area than what will.
Part 3 of the paper is headed ‘Governance, independent advice and monitoring’. This seems to envisage that inter-governmental collaboration will be sufficient to smooth over any disputes, using existing dialogue procedures such as ‘Common Frameworks’. Where this dialogue only leads to impasse, however, it is not clear what should happen next. Indeed, the emphasis in this section is chiefly on identifying where problems occur, via monitoring and advisory mechanisms. Supposing that the independent monitoring body identifies (for example) a Welsh licensing provision as discriminatory but the Welsh government disagrees, then there would appear to be stalemate. One thing the paper does make clear is that neither the advisory nor the monitoring function will lead to third-party determinations that directly overturn the actions of elected administrations. Nor will independent monitoring and reporting generate any binding recommendations, though the monitoring body will be permitted to note particularly distortive or discriminatory actions by any administration.
Businesses affected by breaches of internal market principles will need an effective mechanism to challenge regulatory barriers, however, and ultimately this would have to be by means of legal challenge in the UK courts. Although the White Paper barely acknowledges this, it is clear that such challenges are expected to be possible; hence the need for the new ‘legislative underpinning’, or else ‘courts faced with businesses seeking to prove their rights will lack clear guidance about governments’ intentions’. This is likely to lead to some politically charged litigation in years to come, as the legality of devolved measures is called into question; many disputes may find their way to the Supreme Court, which could gain a correspondingly enhanced role as the federal court of the United Kingdom.
Conclusion
Overall, the White Paper provides a starting point in addressing the internal market issues raised by Britain’s departure from the EU single market; but many of the details remain to be determined. To the extent that the UK legislature fails to give the courts sufficient guidance on what the key principles of mutual recognition and non-discrimination are to mean in a UK-specific context, existing EU jurisprudence may yet be pressed into service to fill the gap.
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