Recent developments and the implications for some aspects of construction law

25 June 2018

The European Union (Withdrawal) Bill (informally known as the “Great Repeal Bill”) passed its third reading in the House of Commons on 17 January. While the bill has still to complete its passage through the House of Lords, it is unlikely to undergo significant further amendment. What impact will the bill, when enacted, have on construction law?

The economic implications of Brexit for the construction industry will be profound, but the purely legal effects on construction will be less marked. Contract law in general will continue largely as before. Certain aspects of construction law, however, have been marked by the influence of European law, and it is on these that we will focus, following an overview of the bill itself.

Overview of the European Union (Withdrawal) Bill

The main points covered by the bill are:

  • Repeal of the European Communities Act 1972
  • Preservation of existing EU-derived law
  • Interpretation of retained EU law
  • Dealing with “deficiencies”, i.e. aspects of retained EU law that are inconsistent with withdrawal from the EU

Repeal

This is dealt with in a single sentence: “The European Communities Act 1972 is repealed on exit day”.

The question is, what is exit day? Exit day is defined in the bill as 11.00 p.m. on 29 March 2019, being the date of expiry of the Article 50 notice period. However, if the EU treaties cease to apply to the UK at a different time and date under Article 50(3), in other words if agreement is reached with the European Council to postpone the withdrawal date, a minister may amend the definition of “exit day” so that it is the same as the agreed withdrawal date. So, it cannot be assumed that exit day will be 29 March 2019, although that is likely to be the case.

Retention of existing EU law

“EU-derived legislation” is the term used in the bill for existing domestic legislation that derives from an EU source, specifically delegated legislation enacted under section 2(2) of the European Communities Act 1972 in order to implement EU directives. Such legislation continues to apply after exit day as it did before it.

“Direct EU legislation” is EU legislation which has “direct effect” under EU law, i.e. it automatically becomes part of domestic law without the need for further domestic legislation. Examples of direct EU legislation are EU regulations and decisions (except for EU decisions addressed to a member state other than the UK). Such legislation will form part of domestic UK law so far as operative immediately before exit day. Direct EU legislation differs from EU-derived legislation in that the latter was already domestic UK legislation, whereas (in the absence of specific provision for it to be retained in domestic UK law) the former would fall away with the repeal of the 1972 Act.

The bill also provides for all “rights, powers, liabilities, obligations, restrictions and remedies and procedures” available under section 2(1) of the 1972 Act to continue to be recognised and available after exit day. This is designed to ensure the retention in domestic UK law of directly effective provisions of the EU treaties and associated rights. A question arises whether such rights include the principles of free movement and how these might be enforced. However, the bill excludes any right of action in domestic UK law after exit day based on a failure to comply with any of the general principles of EU law.

EU law not retained

By way of exception to the general principle of copying and pasting EU law as operative immediately before exit day, certain aspects of EU law are expressly excluded after exit day:

  • The principle of supremacy of EU law as regards any enactment or rule of law made after exit day[br]However, the principle can still be invoked so far as relevant to the interpretation or disapplication of any enactment or rule of law made before exit day, and also in relation to the modification of such enactments or rules of law, provided the application is consistent with the intent of the modification.
  • The EU Charter of Fundamental Rights (not to be confused with the European Convention on Human Rights, which is separate from the EU and not affected by Brexit)[br]During negotiations on the Charter, the UK negotiated a protocol which it regarded as an optout. While the European Court of Justice took a different view, the bill enshrines the UK view that it is not part of domestic law.
  • Jurisdiction of the European Court of Justice[br]The UK courts can no longer refer points of EU law for a decision by the ECJ. They also need not have regard to anything done by the ECJ after exit day, but may do so if they consider it appropriate to do so.
  • The “Frankovich principle”[br]Francovich v Italy (1991) established that an individual could claim damages from a member state for failing to implement EU law properly. The bill expressly excludes any right to such damages after the exit date, so it would not be possible to claim damages on the ground that any retained EU derived legislation did not properly reflect the EU directive from which it was derived.

Interpretation of EU law

Retained EU law is to be interpreted in accordance with decisions of the European Court up to exit day and any retained general principles of EU law. However, the Supreme Court is not bound by any retained EU case law and may depart from it using the same test as it would apply in deciding whether to depart from its own case law, i.e. “when it appears right to do so”.

As noted above, the courts may have regard to EU case law after exit day if they consider it appropriate.

Deficiencies arising from withdrawal

Although the overall approach is based on a broad “copy and paste” approach, this will not always work. The bill treats as “deficiencies” aspects of retained EU law that may not be appropriate after the UK has left. Examples would be where the relevant law confers functions on an EU entity, makes some other reference to the EU or depends on reciprocal arrangements being made with other EU member states.

The bill confers wide-ranging powers on ministers to remedy these deficiencies. These are known as “Henry VIII” powers (after the Statute of Proclamations of 1539, which effectively gave Henry VIII the right to rule by decree) and have generated much controversy. It is argued that such powers represent a usurpation of the role of Parliament by the executive. There is a certain irony here, as one of the most striking examples of a Henry VIII power in the current law is section 2(2) of the European Communities Act 1972, which allows ministers to implement EU directives by delegated legislation.

Clause 7 of the bill allows ministers to “make such provision as the Minister considers appropriate to prevent, remedy or mitigate

(a) any failure of retained EU law to operate effectively

(b) any other deficiency in retained EU law”.

Ministers will also have power to add new categories of deficiency by regulations.

Even more sweeping are:

  • clause 9, which gives ministers power to “make such provision as the Minister considers appropriate for the purposes of implementing the withdrawal agreement”; and
  • clause 17, which gives ministers power to “make such provision as the Minister considers appropriate in consequence of this Act”.

However, the power under clause 9 is subject to Parliament having approved the final terms of the withdrawal of the UK from the EU.

We will now look at how certain pieces of legislation relevant to the construction industry would be affected by the bill, if enacted in its current form.

The Construction (Design and Management) Regulations 2015 (CDM Regulations)

The CDM Regulations are an example of domestic legislation implementing an EU directive (EU-derived legislation), in this case the directive on minimum safety and health requirements at temporary or mobile construction sites.

As such, the CDM Regulations will continue in force after exit day and are unlikely to change in the short term. There is no obvious “deficiency” to be corrected, and health and safety will remain a key concern in the industry. The CDM Regulations have been amended before (in 2007 and 2015) within the constraints of the EU directive. Given that the Government will no longer be bound by EU law, in the longer term there will be much more scope for changing the law as it relates to health and safety in the construction industry. And it does not follow that such change will be in the direction of adopting a “light touch” or scrapping “red tape”. The contrary is just as likely.

The Construction Products Regulation

Unlike the CDM Regulations, the Construction Products Regulation is direct EU legislation (EU Regulation No 305/2011), although there are also UK regulations governing enforcement in the UK. The Regulation is designed to further the single market in construction products by ensuring the free movement of materials that meet certain “basic requirements” governing matters such as structural stability, safety in the case of fire and health and safety in use. Manufacturers must:

  1. draw up a declaration of performance when placing on the market a product covered by a harmonised European standard or technical approval based on the basic requirements; and
  2. apply the CE mark to any such products.

Member states must not prohibit or impede the making available or use of construction products which are covered by a declaration of performance and bear the CE marking.

The CE marking would clearly no longer be appropriate after the UK has left the EU, and so is likely to be dropped as a regulatory requirement, although of course UK manufacturers will still need to apply the CE mark in order to access the EU market.

Some modification of the retained EU construction products legislation is therefore likely. However, the substance of the UK regulation of construction products is unlikely to change significantly, as it would be disruptive for UK manufacturing to have a divergent regime compared to the EU market. It is also likely that any change would need to address the question of recognition of products entering the UK from the EU market that bear the CE mark. So in practical terms we may see the replacement of reciprocal arrangements within the EU with very similar arrangements between a post-Brexit UK and the continuing EU.

The Public Contracts Regulations

The Public Contracts Regulations 2015 are EU-derived legislation implementing a number of EU directives on public procurement and regulate the procedures for the advertising, tendering and award of public contracts. Unlike, say, the CDM Regulations, they have a significant EU dimension in that the key purpose of the directives is to further the single market by promoting access to government contracts across the EU.

The requirement for notices to be sent to the EU Publications Office for publication in the Official Journal of the European Union (OJEU) would no longer be appropriate as a regulatory requirement after the UK has left the EU. However, it is conceivable that some UK public bodies may still wish to advertise in the OJEU in order to generate competition. This may form part of any discussions regarding new mutual arrangements between the UK and the continuing EU.

The days of public contracts being awarded informally are long since gone, and the principles of transparency and fairness are likely to continue to be enshrined in some form of public contracts legislation, while taking advantage of the opportunity to avoid the complexity and prescriptiveness of the EU rules.

In any case, the UK will not start with a clean slate, because the Agreement on Government Procurement (GPA), under the auspices of the World Trade Organisation, is likely to come into play. At the moment the EU is collectively a party to the GPA, along with other countries such as the US, Canada, Japan and others, so after Brexit the UK would need to join in its own right to retain membership. It is considered likely that the UK would do so.

The GPA is less prescriptive than the EU public procurement regime, operating on the basis of general principles of non-discrimination and limiting the conditions for participation. The scope of public contracts covered by the GPA is also less than under the EU regime. It is thought that signing up to the GPA may be required as a minimum in order for UK suppliers to have access to EU public contracts, and in addition the UK may need to agree to extended coverage to match the coverage under the EU regime.