Published On: Mon, Jan 9th, 2017

Brexit to Pose Legal Problems for Regional Governments

Brexit has been in the headlines for months, but for much of this time it was nothing more than a hypothetical idea. Although each side tried to paint a ‘bigger picture’, both crafted the image they portrayed in line with their own biased perspective. When it paid for them to scare us, they scared us; where it benefited them to reassure, they reassured.

Now, however, Brexit is a reality, and the maybes that were discussed are no longer theoretical. Local authorities will be forced to confront its impact, and yet up to this point, there has been little focus on the practical effect of Brexit on local government. Financial pressures will increase, EU legislation will have to be unraveled from the UK statute books, and the legal fallout will undoubtedly be felt.      

Here, we look at just a few of the areas where its consequences will hit:

photo/ screenshot YouTube

Public Procurement

Public procurement is one of the most vital and visceral interplays between local authorities and the European Union, and Brexit means that it is likely to face a significant overhaul in the near future. Although a regime of sorts will undoubtedly remain in place, as the existing rules are incorporated into our domestic legislation, the exact form it takes could undergo some significant changes.

In the short term, very little will change, with the UK having to maintain compliance with the EU procurement directives until it has officially left. This means the Public Contracts Regulations 2015 and Utilities Contracts Regulations 2016 will still have to be implemented throughout the entire time that Brexit negotiations go on for.

Once the negotiations have been finalized and the UK has officially left the EU, only then will we get a better sense of what the long-term implications for public procurement will be. In order to continue trading with the EU and remain a member of the single market, it is likely that the UK will have to agree to some of the organization’s procurement regime. One way the UK could do this is to follow the path taken by Norway, of joining the European Economic Area (EEA), to stay in the single market but also be bound to existing EU procurement directives.    

State Aid

Many have also questioned the impact of Brexit on Britain’s state aid regime, and all that we can say on this score is that it will still apply in one form or another. The shape it takes, however, will be dictated by the trading model we adopt, which means that any attempt at conjecture will inevitably lack accuracy.   

Assuming a free trade agreement comes into play, there are three potential options for the UK and its fresh state aid framework.

  1. UK joins the EEA: Like Norway and Iceland, the UK would be bound by the EEA Agreement. This replicates rules on competition law and state aid activities would be governed by the European Free Trade Association (EFTA) Surveillance Authority, which isn’t much different to the existing framework in place under the European Commission.
  2. UK joins EFTA but not the EEA: This would be the same situation as Switzerland, meaning the UK would no longer be bound by the EEA’s state aid rules. In the same way that many state aid rules that govern the EU and EEA are not applicable to Switzerland, but it has certain bilateral agreements (such as one with the EU on state aid in aviation) the future would remain unclear for Britain. It would depend on what agreements are made.
  3. UK has a free trade agreement but does not join the EFTA or EEA: In this scenario, the UK would not be bound by state aid rules, similar to how Canada has a comprehensive trade agreement with the EU while being outside the EEA and EFTA. However, for local councils it would be a lot like there had been a Brexit without a free trade agreement.       

Eurozone map photo/Economic and Monetary Union of the European Union wikimedia commons

Depending on which of these situations play out, the impact on local businesses and councils could go smoothly if it joins the EEA, or present a lot of legal uncertainty if not. There are various potential scenarios, so local councils will be keeping a close eye on the Brexit negotiations to see how things pan out.

EU Funding

Many local authorities have voiced concerns over the withdrawal of access to EU funds, with some questioning whether they could be asked to repay amounts already allocated. Although this should not affect anything until official exit negotiations have been completed, bodies in receipt of funding should take the time to thoroughly review their agreements, and ascertain whether they can terminate associated contracts if it should be withdrawn. According to legal experts Withers, they should also ensure that they follow the rules to the letter, so that claw back claims from the source would be a waste of their time.

Many local councils have been experiencing funding issues for years now, so having more taken away by leaving the EU looks set to be another major blow. Many believe there will be no way to fill the hole left by the withdrawal of such significant funds. However, local councils have a lot more power to raise funds through business rates, which was introduced in 2015 and could act as something of a saving grace.

There are also those who campaigned to leave who believe local councils could benefit from EU funding being taken away. The amount saved in membership fees should be redistributed by the central government to local ones. This in turn could be delivered as grants and see an increase in the funds local councils have access to. It will all depend on what actually happens to the funding and if any repayments are demanded when the terms of Brexit have been agreed.      

Waste Management

Before the UK’s EU membership referendum, one poll found that 80% of those in the waste and resource management industry favored remaining in the EU. This had a lot to do with the EU Circular Economy package and other environmental initiatives that have had a positive impact on the sector, and the worry that a lot of this good work will be undone by leaving.

As is the same with state aid, there are a few possible scenarios for waste management law that could occur after Brexit. Depending on the agreements, the UK could remain bound to EU waste management legislation, it could retain the existing legislation but not be bound by future changes, or it may simply develop its own laws and policies to cover the area. This will all depend on whether there is a hard or soft Brexit and on other agreements.  

Local councils will have to review their waste management practices too. The main legislation covering this topic is crafted from European sources, which means that domestic waste disposal authorities have been designed to comply with these. As a result, their focus will largely be on environmental benefits as opposed to economy. Thus, if tough decisions have to be made due to the financial fallout from Brexit, this is one area where central government may cut costs. The onus of implementing this end will be placed upon local councils, who will need to be able to deal with potential changes to collection, treatment, and land-fill arrangements.   

Trading Standards

There are many more areas that will be affected by Brexit, but the final one that we will focus on here is trading standards. Much of the legislation governing this subject is heavily based on EU regulations. According to a 2013 report, local councils have 89 statutory duties relating to these, but the changes we’re likely to see can be expected to significantly reduce this number. This will change the burden placed on local councils, but will not necessarily lessen it. Rather, it is probable that the UK will instead introduce new legislation, which the aforementioned bodies will have to get to grips with anew.   

The EU remains the UK’s most important trading partner, and will continue to do so whatever trading agreements are reached post-Brexit. Therefore, it is important that any new trading standards can be easily and successfully implemented by businesses and local councils. There will be more legal power for a number of UK institutions to oversee and implement fresh regulations that local councils will need to familiarize themselves with when trading within and outside of the UK.  

The fallout from this cannot be underestimated. Local councils will be left to familiarise themselves with a whole new set of rules, and thanks to the inevitable cuts in funding, they will have less money than ever to finance the all-important legal advice that could assist them. Brexit is here, but for local authorities, it must feel like there is very little to celebrate. Although only time will tell if the legal impact on local councils has a positive or negative effect overall.   

Author: Lolita Di

photo/ Gerd Altmann via pixabay

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