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PRESS RELEASE

Date: 5th July 2016
Title: BREXIT – What it could mean for regulation and doing business in the UK

This article was written by Christopher Hopkins, a specialist
regulatory barrister, who qualified at the bar following a
period of service in the British Army, and has spent the last
10 years as an in-house barrister both prosecuting and
defending criminal regulatory offences.

Award winning No5 Chambers is one of the UK’s largest
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The UK referendum on 23 June 2016 resulted in a vote to leave the European Union
(“EU”). Much has already been said about how eventual “Brexit” may impact upon the
UK politically but this article will instead explore what effect this could have on
regulation and doing business in (or with) the UK?

BACKGROUND

Reduced business regulation or “red tape” has long been a target of the UK
government. Following election in 2010, the previous coalition government launched its
“Red Tape Challenge” to reduce the overall burden of regulation. This touched upon a
multitude of different “themes” including health and safety, the environment,
employment and manufacturing. By the end of 2014, the coalition claimed to have
saved businesses £10billion. The coalition’s aims were undoubtedly frustrated by the
UK’s membership of the EU. For instance, it is estimated that between 80-90% of the
UK’s environmental legislation is derived from EU legislation making it difficult (if not
impossible) for the UK government to alter. New construction site safety regulations
were introduced in 2015[1] in part because the previous legislation exempted
homeowners from many of the requirements that commercial clients were subjected to
and this was not thought to comply with the underlying EU Directive.[2]
The drive to limit red tape has continued under the new conservative government
elected in 2015. Given that Brexit could ultimately oust or at least limit the reach of EU
legislation (and we will have to wait and see what, if anything, the UK is required to
keep or adopt when it comes to negotiate trade deals with the EU and others), it will be
of interest to both UK and foreign businesses how Brexit could impact upon key areas
of regulation associated with doing business in the UK – economic crime, export and
sanctions controls, health and safety, and the environment.

ECONOMIC CRIME

The UK has one of the strictest anti-bribery laws[3] in the world. This is a product of
domestic not EU law so is unlikely to change although proposals for a new corporate
offence of failure to prevent economic crime may be withdrawn. Likewise, the UK’s anti-
money laundering (“AML”) legislation ultimately stems from international agreements
that the UK is party to so is unlikely to be affected by Brexit. What may change,
however, is how these laws are enforced since there will be pressure to ensure that UK
businesses remain competitive and are not unduly restricted in doing business abroad.
The EU currently facilitates intelligence sharing between regulators in different member
states and concerns have been raised that the UK authorities will in future miss out
making it more difficult to detect bribery and corruption. However, the UK already
shares information with non-UK countries including the US and it is difficult to see what
could be gained through non-cooperation. Therefore, it seems unlikely that Brexit will
lead to the UK becoming a soft touch on economic crime.

EXPORT AND SANCTIONS CONTROLS

In principle, Brexit could lead to a divergence between the UK and EU on export and
sanctions controls similar to that which already exists between the US and EU in
respect of Iran. However, notwithstanding that military export controls are already the
responsibility of individual member states a level of harmonisation has been achieved
through the adoption of a “Code of Conduct of Arms Exports” and it seems unlikely that
the UK will seek to move away from the EU position on non-military export controls any
time soon (even less so if harmonisation becomes a condition of any trade agreement).
Also, the UK is already (along with the EU) directly party to a number of key
international agreements which will continue to determine its approach post-Brexit. One
more general but important change could be that the UK becomes a “third country” for
EU purposes, so exports moving from the UK to the EU become subject to import VAT.
Although the EU has imposed some recent sanctions autonomously, many have been
borne out of binding resolutions of the UN Security Council of which the UK will
continue to be bound as a member and to have influence.

HEALTH AND SAFETY (“H&S”)

The Health and Safety at Work etc. Act 1974 remains the primary UK legislation on
H&S and is unlikely to change post-Brexit. Over time, it has been supplemented by a
series of regulations derived both from the UK and EU directives including the
Framework Directive (89/391/EEC) which is implemented in the UK by the Management
of Health and Safety at Work Regulations 1999. The UK is proud to have one of the
best H&S records in the world and this has been reinforced by recent guidelines issued
to the courts in England and Wales, which increased the recommended penalties for
H&S offences. Brexit is unlikely, therefore, to result in any dilution of H&S requirements
in the UK and it is of note that Norway’s H&S legislation accords with the Framework
Directive despite its being outside the EU.

More complicated is what might happen to UK food safety and hygiene regulation. The
current enforcement provisions in England and Wales both refer directly back to the EU
Hygiene Regulations so this is an area that will clearly require consideration post-Brexit
with a view to possible new UK requirements being implemented. However, UK
businesses looking to export food (and indeed other products into the EU) are still likely
to have to comply with EU safety requirements.

ENVIRONMENT

High energy prices (caused, in part, by climate change legislation and targets) have
long been a concern for UK manufacturers and have an obvious effect upon their ability
to remain competitive, so will Brexit bring any reduction in the cost of energy or other
green taxes? The UK will of course remain committed to meeting its climate change
targets under international treaties and agreements (and the UK’s own Climate Change
Act 2008) so may well wish to continue within the EU emissions trading scheme in the
same way that Norway now does. Likewise, the UK may choose to retain its current
waste management laws because those standards will be required of businesses
exporting waste into the EU. It is unlikely that the existing environmental permitting
regime will change any time soon since the EU requirements were largely based on the
UK model.
The likelihood is, therefore, that Brexit will have no immediate impact on UK
environmental regulation although one downside may be that the UK can no longer as
readily influence EU environmental policy.

CONCLUSION

It is important to remember that any eventual Brexit will not be immediate and existing
regulatory requirements will remain in place until the UK withdraws from the EU and the
European Communities Act 1972 is repealed. It is likely that future UK requirements will
be influenced by what is agreed by way of any trade deals with the EU and others
(including the US) notwithstanding the UK government’s ongoing wish to limit “red
tape.” At present, it seems unlikely that the UK will want (or be able) to adopt a
significantly different approach on the areas highlighted above at least for the
foreseeable future. One downside could be, however, that the UK will no longer able to
exert the same influence over policy that current EU membership affords it.

[1] The Construction (Design and Management) Regulations 2015

[2] The Temporary Mobile Construction Directive

[3] The Bribery Act 2010

This press release was distributed by the International Trade Council.
International Trade Council Member news does not necessarily represent the views of the
Trade Council nor the Council's employees. For more information on the International Trade
council please visit http://www.tradecouncil.org or drop by on Twitter at
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