The draft Brexit agreement: what’s next for EHS?
The UK and EU have agreed on Brexit, releasing the “Draft Agreement on the UK’s withdrawal from the EU and Euratom.”
The UK and the European Union have reached agreement on Brexit and published the “Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community.”
Will it clarify matters around EHS? The agreement sets up a transition period after Brexit and addresses various areas of EHS, including the environment, import/export requirements, labor standards and UK participation in EU bodies, amongst others. Let’s take a look at some of these key issues…
Part Four of the agreement (Articles 126-132) regulates a transition period after the UK withdraws from the European Union at 23:00 GMT on March 29, 2019. The transition period will begin after withdrawal, which is when the agreement will officially come into force and will last until December 31, 2020. During this period, all European Union law will be applicable to and in the UK. This will mean that existing requirements and laws set by the EU will continue to apply in the UK, as will newly passed laws.
The agreement stipulates, however, that the UK will not be able to represent itself in any EU institutions, agencies or bodies. The UK will also not be able to carry out any competencies, such as risk evaluations, on behalf of the European Chemicals Agency (ECHA), for the EU.
The draft agreement further says that the UK would remain a part of the EU single market and customs union until the end of the transition period.
Import/Export of Goods
Goods, including chemicals, which were placed on the market before the end of the transition period will be treated as an intra-EU movement and will not require any additional labeling or product modifications. A movement of goods which started before the end of the transition period and ends thereafter will also be treated as an intra-Union movement and will not be subject to import/export regulations.
All existing EU labor and social standards will remain in force in the UK until the end of the transition period. Annex IV provides that, once the transition period has come to an end, the UK may not allow regulations and practices to fall below those applicable in the EU and the UK at that time. This applies to labor and social protection in terms of fundamental rights relating to work occupational health and safety, fair working conditions and employment standards, information and consultation rights at company level and restructuring.
Environmental Protection and Emissions Standards
Article 96 and Annex IV address environmental protection and emissions standards after Brexit. Article 96 sets out the regulations that remain applicable to the UK and therefore to companies based in the UK.
Specifically, monitoring and reporting for the last year of the transition period is required under:
- Article 12[2a and 3] and Articles 14,15 and 16 of Directive 2003/87/EC, establishing a system for greenhouse gas emission allowances
- Article 19 Regulation 517/2014/EU [fluoridated greenhouse gases]
- Articles 26 and 27 Regulation 1005/2009/EC [substances that deplete the ozone layer]
- Relevant vehicle carbon dioxide emissions under Regulation 443/2009/EC, Regulation 510/2011/EU, or Regulation 293/2012/EU
Emissions from 2019 and 2020 must be reported as per:
- Article 5, 7, 9, 10, 11, 17[1a], 17[1b], 19, 22 and 23 of Regulation 525/2013/EU on the mechanism for monitoring and reporting greenhouse gas emissions and for reporting other information at national and Union level relevant to climate change
- Article 3, 7, 11 of Decision 406/2009/EC on the effort of Member States to reduce their greenhouse gas emissions and meet Community reduction commitments
Further, under Article 5 of Regulation 389/2013/EU, the UK would continue to use its section in the EU registry for the Kyoto Protocol until closure of the second commitment period.
The EU will also provide the UK access to the Central Data Repository of the European Environment Agency up to one year after the transition period has ended to allow the UK to comply with Article 7 of the Montreal Protocol on Substances that deplete the ozone layer.
Annex II of the draft agreement envisions environmental protections after the end of the transition period. Crucially, it states that the UK may not reduce its environmental protection standards below the level applicable in the European Union and the UK at the end of the transition period. It provides four regulatory principles that must remain in UK law, which are defined by the 1992 Rio Declaration on Environment and Development:
- The precautionary principle
- The preventive action principle
- The principle or priority for rectifying environmental damage at its source
- The ‘polluter pays’ principle, which requires companies polluting the environment to pay for their emissions
Following this, the UK will be bound by Joint Committee decisions laying down minimum commitments for the reduction of national emissions of certain atmospheric pollutants and for best available techniques (BATs), including emission limit values, in relation to industrial emissions. These standards would apply after the end of the transition period.
Finally, the UK would also be required to implement a carbon pricing system similar to that of the EU, laid out in Directive 2003/87/EC, which establishes a scheme for greenhouse gas emission allowance trading.
The draft agreement requires the UK to provide domestic oversight, enforcement and reporting mechanisms for companies to meet their obligations under the various environmental standards enumerated above. The European Court of Justice would continue to have jurisdiction over the UK during the transition period.
The UK will not be able to participate actively in any EU body, including the European Chemicals Agency (ECHA). As the UK will largely also not be able to access any EU database or information systems (though some exceptions do apply), it is unlikely that UK companies could continue accessing the databases administered by the ECHA. These databases facilitate the registration, evaluation and regulation of chemicals in the European Union, including in the UK. The UK will not be able to conduct any chemicals evaluations on behalf of the ECHA if the draft agreement comes into force on March 29, 2019.
As the draft agreement does not provide any clarity on chemicals, it could be useful to look to what the UK has stated it would do in the event of a ‘no-deal’ Brexit. Since 2006 and 2008, respectively, the chemicals industry in the UK has been regulated by Regulation 190/2006/EC on the Registration, Evaluation, Authorisation and Restriction of chemicals known as REACH, and Regulation 1272/2008/EC on the classification, labellng and packaging of substances and mixtures, known as CLP.
After the UK withdraws from the European Union on March 29, 2019, the UK will transplant REACH and CLP into domestic law, ensuring that companies have continuity and can plan ahead. The UK would establish an independent standalone chemicals regime. The regulatory basis would remain the same, but the difference would be that all functions currently performed by the EU, including those done by the ECHA, would be carried out by the Health and Safety Executive. This could still be an option even if a draft agreement is reached where the UK cannot participate in the ECHA.
Apart from the agency administering the program changing, another area of change would be that companies importing/exporting chemicals between the UK and EU would be classed as importers/exporters and have to register their products in both the UK and EU. It is also likely that they would need to comply with additional risk management, labeling and packaging requirements.
Further, UK companies holding a product authorization within the EU system will need to transfer their authorization to a new holder within the remaining EU countries or the European Economic Area (Norway, Iceland, Liechtenstein or Switzerland). UK suppliers will need to appoint a representative within the EU/EEA and communicate their new representation to the European Chemicals Agency before Brexit or else they will be removed from the list of suppliers. Further, ECHA decisions concerning UK companies will only apply up until the day the UK withdraws from the European Union (set to be the 29 March 2019). UK companies likely won’t be able to access the ECHA appeals process after this date either.
Finally, the UK will implement its own IT system through which companies putting their chemicals on the market can notify the Health and Safety Executive and provide information regarding their product. This system is expected to be launched in early 2019 and will be operational by March 2019.
Now that the European Commission has published the agreement and it has been agreed upon by the European Council, which comprises the heads of EU member states, it must be consented to by the European Parliament. In the UK, it must pass a parliamentary vote before becoming effective. The agreement therefore still has several hurdles to pass and may not necessarily come into law. The current predictions are that it will not pass a vote in Westminster. That being the case, there would again be a lot of uncertainty. The EU’s message is clear—this is the best deal on the table and they will not renegotiate. The only remaining options on the table would then likely be a “hard” Brexit, or a “No Brexit”—a potential second referendum on Britain’s EU Membership.
Whatever happens in the coming weeks is interesting in terms of EHS-related provisions, it seems clear that the intent on both sides is for the status quo to be maintained for at least the transition period, but also in fact, as long as possible after that. The UK government clearly sees value and merit in the EU’s environmental and health & safety laws.
On January 15, 2019, the UK Parliament overwhelmingly voted to reject the Withdrawal agreement reached between Theresa May and European Union negotiators. Members of Parliament dealt a defiant blow to the deal, voting 432 votes to 202, even in the wake of EU leaders stating they would not renegotiate.
So what does this mean for Brexit, which is scheduled to take place on March 29, 2019? Only time will tell. If it does come to the dreaded ‘no-deal’ scenario, the UK would leave the Union without a transition period or any guarantee on the Irish border or trade. This uncertainty would carry over to EHS—and the impact would be felt immediately.
It’s not all bad news though. In preparing for a ‘no-deal’ scenario, Parliament passed the European Union [Withdrawal] Act 2018, which would (at least temporarily) retain EU law in the UK. Moreover, in preparing their ‘no-deal’ guidance series, Theresa May’s government has given interested parties some idea of what future regulation could look like. Initially, the focus would lie in maintaining the regulatory status quo and ensuring business could continue. Looking ahead, recent publications such as the Draft Environment Bill, the Draft legislation moving REACH into domestic law and the 2019 Clean Air Strategy provide insight into the English, Welsh, Scottish and Northern Irish EHS future. While employees would no longer be able to form European Works Councils, for example, worker protections would remain standardized with European protections, for the time being. Similarly, workers’ maximum exposure to chemicals as they are currently set by the European Chemicals Agency would remain the same and simply be adopted into domestic law. Further, while companies would possibly no longer have access to the UK section of the EU registry for the ETS and Kyoto Protocol, emissions standards and monitoring obligations would likely stay similar.
But a ‘no-deal’ Brexit is not the only possible outcome, even now that the agreement reached with the European Union has been abandoned. European negotiators could cave and come back to the table, as is the British Prime Minister’s current intention. Theresa May and her cabinet may also still succeed in convincing the House of Parliament that her deal needs backing. Other options include a second Brexit referendum, a delayed exit or a repeal of the triggering of Article 50 of the Treaty on the European Union—which is the article which triggered the Brexit countdown in the first place.
It is guaranteed to be an interesting, worrying but also fascinating couple of months as the UK gets ready to withdraw from the European Union.