Challenges to Validity of EU Instruments (EU Exit) Regulations 2019

Thursday 14th March 2019 Lords Chamber

Motion to Approve

15:11

Moved by

[Lord Callanan]

That the draft Regulations laid before the House on 12 February be approved.

Relevant document: 18th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)

[The Minister of State, Department for Exiting the European Union (Lord Callanan) (Con)]

My Lords, I am grateful for the opportunity to be here today to discuss the regulations presented before you. These regulations are part of the Government’s wider programme of secondary legislation before exit day to ensure that the UK’s legal system continues to function effectively when we leave the European Union.

The principal aim of these regulations is to ensure the effective continued delivery of justice as we leave the EU. It is clear that in separating our legal systems we must absolutely make sure that those who have sought justice through our domestic courts are not adversely affected by our exit from the EU. These regulations will guarantee that validity challenges originating in our domestic courts before exit will continue to be heard and that claimants can be assured that domestic courts will be able to hear them, independently of the Court of Justice of the European Union. These regulations would take effect when EU law ceases to apply to the United Kingdom. For example, if an implementation period is agreed, they would take effect at the end of the implementation period.

I will take a moment to remind noble Lords of the legal mechanics of validity challenges as they currently stand, before going into the details of what these regulations will change once we leave the EU. The right to challenge whether or not a law was made “validly” by the EU is currently set out in the Treaty on the Functioning of the European Union, referred to as the TFEU. The grounds are set out in Article 263 and they are: lack of competence; infringement of an essential procedural requirement; infringement of the treaties or of any rule of law relating to their application; or misuse of powers. In effect, such challenges are the EU equivalent of judicial review. It is important for noble Lords to be aware that rulings in validity challenges are always given by the CJEU. National domestic courts, both in the UK and other EU member states, do not have the legal jurisdiction to make judgments on these cases.

There are two ways in which cases make their way to the CJEU for judgment. In the first instance, claimants may bring their cases directly before the CJEU. Let me be clear: these regulations do nothing to amend or remove that right for UK nationals who may wish to pursue that route of challenge after our exit. Any UK national who complies with the relevant requirements in the TFEU and who wishes to take a case to the CJEU to challenge a relevant EU law on these grounds will continue to be able to do so after exit. However, post-exit CJEU judgments on validity will not of course apply to the UK.

I would like to highlight that the majority of challenges brought in this manner directly to the CJEU by UK-based claimants are against individual decisions that affect one business or individual, and are not generally against legislation of general effect. My officials have identified alternative domestic mechanisms for challenge post exit in the majority of these cases.

The other way in which validity challenges come before the CJEU is via the national domestic courts. During proceedings, questions of validity may arise, and where and when they do—unless judges consider that the question is so obvious that no reasonable doubt is left—national courts must pass these questions on to the CJEU for judgment. This is done via the preliminary reference mechanism. After judges have sent off for a ruling, the domestic case is put on hold until the CJEU makes its judgment. In legal parlance, the case is stayed or “sisted”—not “sistered” but “sisted”.

15:15

I should note at the outset that the number of validity challenge cases referred by UK courts to the CJEU is extremely small. Over the last five years, only 12 such cases have been referred by the UK courts. Of those, only one has been partially successful. This does not diminish the importance of access to justice for those who could be affected, but it does mean that any new arrangements we create must be proportionate to the scale of the potential problem.

I turn to the effect of these regulations. As I said just a few minutes ago, the Government’s intention in laying these regulations is to ensure the continued effective delivery of justice. The most obvious scenario in which access to justice would be restricted is in cases that have already begun, where reference to the CJEU has been made and cannot continue. Indeed, without these regulations, the effect of the European Union (Withdrawal) Act 2018 would be that these cases could not continue. Even if the CJEU were to rule on cases submitted by the United Kingdom, which in and of itself is not yet clear, the EU withdrawal Act makes clear that any future rulings are not binding in or on the United Kingdom and domestic courts could not find EU law invalid.

These regulations mean that those pending cases can continue. At the last count, there were three such cases. Indeed, the regulations go further, to cover cases where a domestic court has not yet made a reference to the CJEU but was planning to do so, and any case which began before exit in which a validity challenge may arise during domestic court proceedings. The effect of these regulations, therefore, will be to maintain the effective delivery of justice as we leave the EU by ensuring that all pending cases can continue. These regulations will also make sure that, where claimants have brought a case before exit day that may hinge on the validity of any EU law, they can be assured that there will still be a mechanism in place to ensure that rulings on validity can be provided domestically.

This will be done by giving judges a new, albeit time-limited, jurisdiction to rule on the validity of EU law, using the grounds set out in the TFEU immediately before exit day. This will be time-limited; domestic judges will be able to decide whether EU law was validly made only if the question was not resolved by the CJEU before exit day and if the case was started in domestic courts before exit day. Where judges do find that an EU law was not made validly, these regulations will grant them powers to declare it void. The effect of such a declaration by any domestic court will mean that the law was not valid for the purposes of migrating to the UK statute book—in effect, there was never a retained EU law version of it.

My department has of course been keen to make sure that the Ministry of Justice was closely involved in the making of these regulations. I am happy to report that senior lawyers and senior officials at the MoJ were involved in policy development and the legal drafting of the regulations. Of course, my officials have also been liaising closely with judicial policy officials to make sure that judges and Her Majesty’s Courts and Tribunals Service are aware of these changes and can thus manage any changing workload accordingly. Given the historical numbers of cases I referred to earlier, officials expect there to a very limited number of potential cases, aside from the three that are already currently pending.

Finally, let me turn to the issues addressed in the last two regulations. Regulation 5 stipulates that courts must give the appropriate UK authorities notification of their intention to declare an EU law void, and Regulation 6 stipulates that any UK authorities have the right to be joined as a party to any proceedings to which the regulations apply.

I must again absolutely highlight to noble Lords that the wording “relevant UK authorities” is defined in the regulations as a Minister of the Crown or a person nominated by him, the Scottish Ministers, a Northern Ireland department, and the Welsh Ministers. The wording is born of our fruitful and close working with the devolved Administrations on these regulations. Although the laying of this SI does not require formal consent from the devolved Administrations, I and my officials were keen to make sure that they were given ample opportunity to provide their views on our proposals.

Indeed, as a direct result of this engagement, we considered it appropriate that all the devolved Administrations be given the right to be notified and be joined as a party to a validity case, given that EU law can relate directly to their legal competence also. We have, of course, thanked the devolved Administrations for their extremely helpful input. My department has received letters from the Welsh and Scottish Governments, testifying to the fact that they are content with the final product.

I hope that noble Lords will therefore agree that these regulations are extremely important in making sure that courts in the UK can continue to deliver justice effectively once we leave the European Union and, as such, are a vital part of the Government’s preparations for leaving the EU. I beg to move.

[Lord Beith (LD)]

My Lords, I am grateful to the Minister for his careful exposition of the statutory instrument, and for the engagement of officials with the Constitution Committee and others. This is at the more microscopic end of looking at EU matters compared with what is going on at the other end of the building, but it is nevertheless important.

My concern with the SI and that of the Constitution Committee goes back to proceedings on paragraph 1 of Schedule 1 to the withdrawal Act, which prohibits challenges to the validity of retained European law on the basis that it was invalid immediately before exit day, unless the challenge was of a kind provided for in regulations to be made by a Minister of the Crown. That is what we are discussing. No draft of the regulations was made available when we were considering the Bill. The possibility arose that such a regulation might be selective and subjective in the type or subject matter of case permitted. Indeed, Ministers seem to be envisaging such selectivity, as I shall illustrate.

The background is that our constitutional system does not provide for courts to strike down laws on the basis that they are invalid. Parliament’s word, when set out in statute, is law. The Human Rights Act allows for statute law to be challenged and that challenge is posed to Parliament, but it does not strike down the law that it challenges. Neither I nor the Constitution Committee wanted to change the situation, but European law can be struck down for invalidity by the CJEU, as the Minister made clear, so what about retained European law after exit?

The Government originally took the view that they needed to retain the possibility of challenge and striking down. The noble and learned Lord, Lord Keen of Elie, the Advocate-General, said in this Chamber:

“Where we differ is that the Government recognise that, in some circumstances, individuals and businesses may be individually affected by an EU instrument … and should have a right to challenge it”.—[Official Report, 23/4/18; col. 1374.]


But in what circumstances, and how do you devise a statutory instrument that allows for some challenges but not others? Does this not set a dangerous precedent? Such an instrument might be hybrid, in which case you might think we would be protected from misuse by our special procedures for hybrid instruments, but not so, because provisions in paragraph 36 of Schedule 7 to the withdrawal Act allow hybrid instruments under that Act to proceed as if they were not hybrid.

No draft of the SI was produced, but we had discussions in this Chamber and I had an exchange of letters with the Solicitor-General, who was very helpful. A short consultation was arranged that enabled issues to be clarified. I appreciate that as well. My concern about selective and discriminatory use of the power to make such regulations was largely allayed by the very firm statement of the Government’s intent, and the statutory instrument we have before us is general in character and confined in purpose to pending cases. At one or two points where the Minister was explaining how it would work in those cases, the House perhaps needed reminding that only in pending cases would the opportunity arise to make that challenge. These are cases entered upon before exit day and not concluded.

But we now have a statutory instrument that is so limited in its scope that if the CJEU after exit day finds a pre-exit provision of EU law to have been invalid, it will cease to be EU law in the EU but it will continue to be on our statute book. It will still be in force as retained European law, despite the fact that, as explained in paragraph 2.4 of the Explanatory Memorandum accompanying the SI, if the CJEU has declared the law to be invalid,

“it is as if the law in question never existed”.

I agree with that. In my view, it therefore follows that it could not have been validly transferred into UK law on exit day. It did not exist and it could not be transferred. It was not valid and it is immaterial that we did not know that at the time. This would be an absurd situation. It could have the practical consequence that a UK business that had been penalised or disadvantaged by the application of a law that had been struck down would have no legal recourse to challenge its consequences, while EU businesses were successfully challenging it within the EU.

The Government, in correspondence with the Constitution Committee, have offered several answers to this problem. The first was that there will be very few such cases, if any, so in their view any solutions to the problem would risk being disproportionate. I do not buy that. Our job is to get the law right, not knowingly to create flaws that do not worry us because we think that not many people will be affected.

The Government’s second argument is that, in this as in other situations, if Parliament wants to change the law it of course can. It could take this course if problems arose because invalid EU law was still in force in the UK. When such a case came before the courts, it would be difficult to deal with the adverse effects experienced by an individual or business without resorting to retrospective and possibly hybrid legislation—not a course to be encouraged.

The Government’s third argument is much more complex and has been questioned by eminent public law specialists. Government lawyers believe that Section 6(3) of the EU withdrawal Act 2018 means that any post-exit CJEU ruling on the validity of EU law cannot affect its UK version in the form of retained European law because, under Section 6(3)(b) the courts must have,

“regard (among other things) to the limits, immediately before exit day, of EU competences”.

Under Section 6(3)(a) the court must decide the question in accordance with retained EU case law—that is, pre-exit case law. The court would be precluded from considering any post-exit case law and therefore, obviously, a declaration of invalidity. This seems to negate the purpose of Section 6(2), which permits the court,

“to have regard to anything done on or after exit day by the European Court … so far as it is relevant to any matter before the court or tribunal”.

I ask the Minister: what is the point of the permission in Section 6(2) to have regard to CJEU post-exit case law when it is subject to the requirement in Section 6(3)(b) that it must take account of the clear limits of EU competence after exit day? It is important because the Government’s view is that the scope of this statutory instrument cannot be widened in the way I suggest it should be because of that interpretation of Section 6.

This leads me to ask: why do the Government want to rule out the obviously desirable removal from effective UK law of retained EU law provisions whose parent provisions are found by the CJEU to have been invalid in the first place? Why would they want to keep that in UK law? A law that cannot have validly existed but remains in force is a new concept for me. Maybe it is because the Government get very hung up about the European Court of Justice and insisting that it will not have jurisdiction after exit day. What we are talking about is simply allowing UK courts to have regard to any case law subsequently developed by the European Court of Justice.

My last question has been answered, but I would like the Minister to emphasise the answer. This statutory instrument comes into force on 29 March, unless exit day is changed by another statutory instrument. However, in the event of an agreement, do the Government intend to use the withdrawal agreement Bill to suspend the operation of this statutory instrument until the end of the implementation period? I assume the answer is yes, but it would be helpful to have it on the record.

15:30

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I also thank the Minister for introducing this. As the noble Lord, Lord Beith, said, it is to correct something in paragraph 1 of Schedule 1 to the 2018 Act—which was perhaps a slightly erroneous judgment made at the time. It affects only a handful of cases, but nevertheless we certainly think that the ability to bring those cases is important.

I have a few questions. One arises from the last point made by the noble Lord, Lord Beith. My assumption is that this is a no-deal SI. Can the Minister confirm that, if we get a deal with a transition period—for the sake of this argument, if we get a deal there is bound to be a transition period—then the CJEU will, once we have amended the 2018 Act in the withdrawal and implementation Bill, have a continuing role in these matters? Can he also confirm that this is a no-deal SI, and that no deal is the only situation in which this SI would have a role?

If we have a deal, will paragraph 2.1 of the Explanatory Memorandum not be a bit misleading? It suggests that there will be no role for the CJEU. In a deal situation, there would be a role for it, not just in the transition but afterwards, because of the provisions concerning EU citizens’ rights. Can the Minister confirm that this SI would not be needed if we have a deal and a transition period? In fact, now that the House of Commons has voted against us leaving without a deal, perhaps the Minister could explain in what circumstances this SI would actually be needed. Is it correct that this SI would not be needed if we have a transition period?

My second question is absolutely not a trick question; it is asked out of my own ignorance. As the Minister explained, the courts will be mandated to inform the relevant Government of a case coming before them. Can the Minister inform the House whether there are any other instances in which any of our courts have an obligation to inform the Government of proceedings that are started before them?

Paragraph 10.7 of the Explanatory Memorandum recognises that we could find ourselves in the position—this point which has just been touched on—where some former EU legislation which has subsequently been ruled invalid by the CJEU remains on the UK statute book after we have left. Can the Minister outline how either his department or a successor department would monitor future CJEU rulings after Brexit to keep abreast of any such rulings which might be relevant to the UK statute book?

Finally, there is the important issue of compensation, which was only slightly touched on by the noble Lord, Lord Beith. The 2018 EU withdrawal act makes it clear that, after exit day, there is no right to damages under the current Francovich rules, except during a two-year grace period for cases that relate to events that occurred before exit day. Under the regulations being considered today, should our domestic courts find that any of our retained law is invalid under the sort of terms outlined, would there be a similar right to damages for two years similar to those allowed under the 2018 Act? That covers cases in which the event started before exit day, but even for cases which are pending on exit day—I think there are three at the moment—if it were found that those laws were invalid, would a Francovich-type compensation be available?

[Lord Callanan]

I thank the noble Baroness, Lady Hayter, and the noble Lord, Lord Beith, for their contributions, and I pay particular tribute to the noble Lord, Lord Beith, and the noble Baroness, Lady Taylor, who is not in her place at the moment, for the interest that they have taken in this important matter. We are extremely grateful for their contributions and for their engagement with officials—I know that the noble Lord has taken a close interest in this and I thank him for that.

As I set out in my opening statement, these regulations aim to ensure the effective delivery of justice as we leave the European Union. The regulations will do this by giving domestic judges a temporary jurisdiction to rule on validity challenges to EU laws in domestic courts after exit for cases that have begun before exit.

I will now deal with the questions. The noble Lord, Lord Beith, made some extremely valid points on what might happen if, after exit, the CJEU rules that EU legislation was invalidly made. Would this invalid legislation remain on the UK statute book? As he acknowledged, the short answer to his question is yes. Decisions made by the CJEU will not affect retained EU law. Even if the CJEU makes a decision to void regulation after exit day, as he pointed out, that law would remain on the UK statute book as retained EU law. This is because the EU withdrawal Act takes a snapshot of EU law as it stands on exit day. All law on the UK statute book at that point in time will be valid, as a result of it being made law under the EU withdrawal Act. After exit, it will be for Parliament to decide if and how to diverge from EU law.

I take the noble Lord’s point that, although unlikely, this may result in a law being declared void in European Union countries but not declared void in the UK. It is just a matter of policy disagreement. We would prefer that, after exit day, the Court of Justice of the EU is not given the power to strike down what will in effect be UK law at that point. However, I am sure that if such a circumstance arose, Parliament would want to take a look at the case, see if similar provisions should be made in the UK and see if the law should be changed or deleted.

In response to the noble Baroness, Lady Hayter, I can confirm that, in the unlikely event of this happening, we will of course closely monitor all pending cases that come back to Parliament with potential changes to any retained EU law. Building on that response, the rulings of the CJEU will not be binding on the UK. It would be for Parliament to decide whether to seek changes to mirror CJEU judgments.

The noble Baroness also asked about damages. Damages are already determined by UK courts. Nothing in this SI changes that scenario.

To answer both the noble Lord, Lord Beith, and the noble Baroness, Lady Hayter, the SI will be required in both a deal and a no-deal scenario. Therefore, if we agree a deal and pass a withdrawal Act, the effect of the SI will be delayed until the end of the implementation period.

The noble Baroness, Lady Hayter, also asked a good question about whether there are other instances where the courts must notify the Government of cases that are before them. The courts must issue a notice to UK Ministers and Ministers from the devolved Administrations in cases where it plans on making a declaration of invalidity. This is similar to the requirement under Section 5 of the Human Rights Act, when domestic courts issue declarations of incompatibility under that Act.

Without these regulations, no court in the UK would have the requisite jurisdiction to consider the validity of an EU instrument. Domestic courts would therefore find themselves at an impasse where a ruling on validity is simply not available, either domestically or from the CJEU. This would in turn prevent the effective delivery of justice. These regulations are intended to avoid such a clearly undesirable scenario. As I said in my introduction, my department has worked closely with the Ministry of Justice to make sure that the regulations are workable. The judges and Her Majesty’s Courts & Tribunals Service are well aware of these changes.

As I also said, these regulations provide that a Minister of the Crown, a Scottish Minister or a Welsh Minister or a Northern Ireland department may become a party to any cases concerning validity at any point. There are no impediments for the devolved Administrations to do so; they need only give written notice to the court. Again, this is in recognition of the fact that they may have an interest in the outcome of the case.

Although the number of validity challenges will be extremely small, it is none the less vital, as the noble Lord, Lord Beith, pointed out, that we ensure that justice can still be delivered in the few cases in which these regulations might apply.

Motion agreed.