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

Debated on Monday 18 March 2019

The Committee consisted of the following Members:

Chair: Philip Davies

† Antoniazzi, Tonia (Gower) (Lab)

† Bacon, Mr Richard (South Norfolk) (Con)

† Blomfield, Paul (Sheffield Central) (Lab)

† Charalambous, Bambos (Enfield, Southgate) (Lab)

Cherry, Joanna (Edinburgh South West) (SNP)

† Coaker, Vernon (Gedling) (Lab)

† Efford, Clive (Eltham) (Lab)

† Hands, Greg (Chelsea and Fulham) (Con)

† Hardy, Emma (Kingston upon Hull West and Hessle) (Lab)

† Heaton-Harris, Chris (Parliamentary Under-Secretary of State for Exiting the European Union)

† Latham, Mrs Pauline (Mid Derbyshire) (Con)

† Lopresti, Jack (Filton and Bradley Stoke) (Con)

† Mackinlay, Craig (South Thanet) (Con)

† Paterson, Mr Owen (North Shropshire) (Con)

† Phillipson, Bridget (Houghton and Sunderland South) (Lab)

† Rowley, Lee (North East Derbyshire) (Con)

† Spencer, Mark (Comptroller of Her Majesty’s Household)

Mike Winter, Committee Clerk

† attended the Committee

Third Delegated Legislation Committee

Monday 18 March 2019

[Philip Davies in the Chair]

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

I beg to move,

That the Committee has considered the draft Challenges to Validity of EU Instruments (EU Exit) Regulations 2019.

It is a pleasure to serve under your chairmanship, Mr Davies; I believe this is a first for me as a Minister. I am slightly reticent as to any rulings that you might make. We have interesting times when people are in the Chair in this place at the moment.

The draft instrument is now the third that I have had the pleasure of debating under the affirmative procedure. A motion to consider the same regulations was passed in the other place just last week. The draft regulations are part of the Government’s wider programme of secondary legislation to ensure that the UK’s legal system continues to function effectively when we leave the European Union. They will take effect on exit day, or, if an implementation period is agreed, at the end of that period.

The overall intention behind the draft regulations is to make sure that validity challenges that originate in our domestic courts before exit can continue to be heard after exit. They will do that by making provision for UK judges to have jurisdiction to hear those cases. At present, they do not have that jurisdiction; only Court of Justice of the European Union judges have the right to deliver judgments on validity. Questions of validity arising in domestic courts must be referred to the CJEU for judgment.

The draft regulations mean that domestic judges will not be dependent on the judgments of CJEU judges to make rulings in domestic cases. Domestic judges will be empowered to make rulings independently of the CJEU, using the same grounds as are currently set out in article 263 of the treaty on the functioning of the European Union: a lack of competence; infringement of essential procedural requirements; infringement of the treaties or of any rule of law relating to their application; or a misuse of powers. I bring to Members’ attention that the number of validity challenge cases referred by UK courts to the CJEU is extremely small. Over the last five years, only 12 cases have been referred by the UK courts, and only one has been partially successful.

As I mentioned, the intention behind the draft regulations is to ensure that access to justice is not restricted after exit. Without the draft regulations, the effect of the European Union (Withdrawal) Act 2018 would be that pending cases for which references have already been submitted to the CJEU would not be able to continue. Indeed, whether the CJEU will continue to rule on validity cases submitted by the United Kingdom remains uncertain. The draft regulations will make sure that these pending cases can continue. At the last count, there were only three such cases.

It would be interesting for the Committee to know what those three cases are. Will the Minister go on to them?

I will happily go on to those cases. They are three basic tax cases: C-182/19, brought by Pfizer Consumer Healthcare, concerning the tax classification of certain therapeutic bandages; C-677/18, brought by Amoena, concerning a tax classification for accessories for artificial body parts—actually, mastectomy bras; and C-612/16, brought by C & J Clark International, concerning the anti-dumping duty and the import of certain leather footwear originating in the People’s Republic of China and in Vietnam. That last one was actually nearly a constituency case of mine. I hope that that helps the hon. Gentleman.

As I said, the intention behind the draft regulations is to ensure that access to justice is not restricted after exit. Without the draft regulations, the effect of the EU withdrawal Act would be that pending cases for which references have already been submitted to the CJEU could not continue. I have said that it remains uncertain whether the CJEU will continue to rule on validity cases submitted by the United Kingdom.

The regulations also cover cases where a domestic court has not yet made a reference to the CJEU but was planning to do so, and any case, other than cases begun before exit, in which a validity challenge may arise. That means that where claimants have brought a case before exit day that hinges on the validity of an EU law, there will be a mechanism in place to ensure that rulings on validity can be provided domestically. The regulations provide that where domestic judges find that an EU law was made invalidly, they will have the jurisdiction to declare it void. The effect of a declaration of invalidity will be that the law is not valid for the purposes of migrating to the UK statute book—in effect, there was never a retained EU law version of it.

I highlight to hon. Members the fact that my Department has worked closely with the Ministry of Justice in developing these regulations. In particular, officials from my Department have worked with judicial policy officials to ensure that both judges and Her Majesty’s Courts and Tribunals Service are aware of these changes and can manage any change in workload accordingly. Given the historical number of cases that I referred to earlier, my officials expect there to be a very limited number of potential cases aside from the three currently pending, which I have just talked about.

There are two final elements to the regulations that I would like to touch on. Regulation 5 stipulates that the 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 in which these regulations apply. In these regulations, “the relevant UK authorities” is defined as

“a Minister of the Crown (or a person nominated by him), the Scottish Ministers, a Northern Ireland department, and the Welsh Ministers”.

The effect of regulation 5, therefore, is that UK Government Ministers and all the devolved Administrations must be informed when a court is planning to issue a declaration of invalidity.

That particular requirement of the regulations was suggested by the Scottish Government following consultation with them on our proposals. Although the laying of this statutory instrument did not require formal consent from the devolved Administrations, my officials and I were keen to ensure that they were given ample opportunity to provide their views. As I said, as a direct result of this engagement we considered it appropriate that all the devolved Administrations, not just the Scottish Government, be given the right to be notified and be joined as a party to a legal case, given that EU law can directly relate to their respective devolved legal competences.

I have of course thanked the devolved Administrations for their extremely helpful input and received letters from both the Welsh and Scottish Ministers responsible for EU exit, testifying that they are content with these regulations. I would be more than happy to elaborate on any aspect of the regulation that the Committee might find useful. I hope that all members of the Committee will agree that the draft regulations are necessary and important to ensure that courts in the UK can continue to administer justice effectively once we leave the European Union.

If I may echo the Minister, it is a pleasure to speak to this statutory instrument with you in the Chair, Mr Davies. I thank the Minister for his detailed explanation of the instrument and his comprehensive response to the question asked by my hon. Friend the Member for Gedling.

Schedule 1, from which this statutory instrument flows, relates to section 6 of the EU withdrawal Act on the interpretation of retained EU law. The relationship between domestic law, EU retained law and EU law post exit will give rise to many legal complexities and this SI, though narrow in its scope, raises serious technical and constitutional questions that require clarification.

The Minister did not take the EU withdrawal Act through the Commons, but I am sure he paid close attention, and he will know that when we originally debated it over several long months there was no clarification of schedule 1 paragraph 1(2)(b), which exempted the ban on validity challenges where,

“the challenge is of a kind described, or provided for, in regulations made by a Minister of the Crown.”

This SI provides the necessary criteria, as the Minister set out, and we do not intend to divide the Committee on it.

There is a point on which I seek clarification from the Minister, and that is the decision not to provide a mechanism for the domestic courts to take into consideration future declarations of invalidity by the Court of Justice of the European Union and the potential impact on UK citizens or businesses. The justification for that, as set out by the Minister and in the explanatory memorandum, raises several questions and risks creating an ambiguous legal position. The concern was also expressed in the other place and by the House of Lords Constitution Committee. Paragraph 2.7 of the explanatory memorandum refers to the fact that

“domestic courts have never been able to find EU law invalid.”

That is true, but we are dealing with a new category of EU retained law that will require an innovative approach, as reflected in the fact that the SI gives domestic courts a time-limited power to rule on the validity of EU law.

Paragraph 2.9 of the explanatory memorandum asserts that the approach in the 2018 Act was

“to take a snapshot of EU law as it stands on exit day.”

I recognise that the Government believe that that will provide legal certainty, but I am concerned that it does not robustly tackle the complex questions that the provision raises. We believed that our post-Brexit relationship with the CJEU should be much more dynamic and we tabled amendments to that effect in our consideration of the Bill. However, we recognise that there was some acknowledgement that the influence of the CJEU could not be exorcised from EU retained law, and it seemed that the Government had some appreciation of that.

Section 6(2) of the 2018 Act permits domestic courts to take account of CJEU judgments post exit, but not be bound by them. That is a sensible approach that reflects the unique new category of law created by our departure. However, it is negated by section 6(3), which limits any questions on validity in accordance with retained pre-exit case law and pre-exit EU competencies. The Government’s justification for that in the SI relies heavily on their belief that it will affect a small number of litigants. The Minister made the point that cases are extremely rare. If the Government believe the cases are so few in number, would it not be more consistent and arguably provide more legal certainty to permit domestic courts to have regard to post-exit questions on validity? I recognise that the Minister is arguing that that creates uncertainty, but that is at odds with his argument about the rarity of the cases. We cannot predict that, and the relationship between retained EU law and other domestic legislation is likely to raise a host of questions for the courts.

The instrument risks denying courts what might be much-needed flexibility in dealing with the new relationship. Let us take one example. Paragraph 2.4 of the explanatory memorandum recognises that a declaration of invalidity by the CJEU leads to a disapplication of the legislation, which

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

Have the Government given any consideration to a legal challenge that there was no valid underlying EU law to be transposed into domestic law, therefore meaning it does not exist in EU retained law? This is not a question of parliamentary sovereignty, as per paragraph 2.9, which states that it would be

“for Parliament to decide whether and how to diverge.”

Rather, it is a case of whether that snapshot, as the Government deem it to be, was itself inaccurate. I would appreciate clarification from the Minister on that point.

It is a pleasure to serve under your chairmanship, Mr Davies. I have a couple of quick questions for the Minister. I completely understand the Government’s desire to achieve legal certainty, which is, as he himself said, the purpose of the regulations.

Paragraph 2.1 of the explanatory memorandum clearly states:

“On exit day, the EU Withdrawal Act makes clear that there will be no right in domestic law on or after exit day to challenge any retained EU law on the basis that, immediately before exit day, an EU instrument was invalid.”

Is that designed to oust a challenge on any other grounds? It sounds suspiciously like an ouster clause. The Minister will know from history that the courts in this country are reluctant to entertain Governments’ attempts to remove the purview of the courts entirely, and it does sound as if that is exactly what the provision is trying to do. For example, the grounds that the Minister gave include a lack of competence, an infringement of an essential procedural requirement or a misuse of powers.

If an applicant brought before a UK court after exit day an application in relation to a piece of EU law that had been completely transferred—not an application pending in the way that is described here, but rather one that only started after exit day—and the removal of the purview of the CJEU had taken effect, and the application related, for example, to a breach of the rules of natural justice, which a court would certainly wish to entertain, or to a Minister misinforming himself as to his powers, including on an EU law that had been transferred to the UK statute book and had not been challenged hitherto, or in relation to any infringement of procedural requirements, which I suppose would include the rules of natural justice, what would be the Government’s attitude to such an application? Are the Government trying to say that the courts could not entertain such an application? I hope not, and the Minister is shaking his head.

Secondly and finally, if there were a case where a court found itself saying, “This is an instance where we would recognise the validity of the applicant’s claims if we could, but thanks to this regulation we can’t, so we won’t”, what would then be the Government’s policy?

I think I agree with the hon. Gentleman regarding the questions that he has just asked.

I will say this again, and I say it in every SI Committee that I am on: there are numerous SIs that pass into law that have huge implications and people come to our surgeries and say, “When did this happen?” It usually turns out that it was under some SI, rather than a piece of legislation discussed in the main Chamber.

I am not a lawyer, but I will pick up on one or two things that the hon. Member for South Norfolk asked about. The Minister may say, “I have already answered this”, but for the benefit of those who might read these proceedings and non-lawyers, it would be helpful for us to understand better.

I take the point that the Minister made, when he very helpfully read out the court case numbers, which I failed to write down; I did write down the topics. But this is the point: those cases will be dealt with, because they have already begun. I understand that, because these cases were already entered into by the courts beforehand, so there will be an opportunity for our courts to make a judgment on them after exit day—should that happen.

I have no idea what challenges there are around therapeutic bandages or artificial body parts or anti-dumping duties on footwear from China, but I would hesitate to say that these issues are irrelevant or of no consequence, partly because in numerous SI Committees seemingly impenetrable things happen and impenetrable regulations are passed, and then sooner or later somebody comes to one of our surgeries and says, “You’ll never guess what: I have a footwear business and I do a lot of trade with China, and something has happened so that it’s been declared invalid and I can’t now do it.” I have no idea. I am not saying it is wrong or right; I just do not know.

However, I have a couple of questions and it would be helpful if the Minister could answer them. I ask the Minister’s pardon if this is obvious, but it is not obvious to me: is this a no-deal SI, or is it just an SI that is passed whatever the consequence or outcome, whether we leave with a deal or no deal? Is this in lieu of a no-deal Brexit?

Normally, under our constitution, the courts can interpret the law, but as I understand it this measure will allow the courts to strike a law down. So what part of our constitution is the Minister saying allows us to strike down a law? Can he more properly explain the operation of retained European law after exit? I thought it was just, “This is the law, these are the laws we don’t want, these are the laws we do want, so they become part of our law—full stop.” Now, if I am not a lawyer, somebody needs to explain what “retained” means, because what I have just said is what I would have assumed it meant.

That is my understanding as well—that retained EU law simply becomes part of domestic law. My questions to the Minister were around the case of something that—in these terms and for these purposes now, after exit day—would no longer be termed in retained EU law but simply for these purposes domestic law, and whether, as this purports to suggest, it would oust the ability of an applicant to get a court to entertain whether this was in breach, or whether the powers that the Minister was using, or purporting to use, under that—for these purposes—domestic law were wrong and invalid, and the Minister was acting inappropriately.

I agree with that. It is very well put and is a question for the Minister to answer, because it goes to the heart of what we are asking.

My final point in this brief contribution is important. What happens if the CJEU—I need to be careful here or I will confuse myself—finds a pre-exit provision of EU law to be invalid? It will cease to be EU law, but will it continue here? The CJEU will have found an existing piece of EU law, which, presumably, we have retained, invalid, so it will not operate in the rest of Europe, but, because it is retained, we will not have the opportunity—or will we?—to strike it down. Or will it simply continue here, even though it has been struck down in the rest of the EU, if the Minister understands me?

I think that is a really important question. On this invalidity in one part of the EU versus validity, the Committee, and certainly the people who read our proceedings, would find it helpful if the Minister explained that in non-legalistic terms so that people like me, if not anybody else, could more properly understand it.

Nobody has ever discussed this with me, and I have no idea whether anybody will, but I just know that, even though there are only three or four or maybe five or six cases, if a case turns up in one of our constituencies it becomes a very big deal. I do not want to be in a position—neither does anybody on the Committee—where somebody says, “Did nobody ask what this meant in terms of validity of EU law and retained law, or who could strike it down, or what the role of our courts was?” The Minister remarked on this, as did my hon. Friend the Member for Sheffield Central from our Front Bench, but a couple of answers to the questions posed by the hon. Member for South Norfolk and me would be helpful to our deliberations.

I thank the various members of the Committee and the shadow spokesman for their points, questions and contributions. I attempted in my opening speech to be relatively brief. Unfortunately, some of the questions raised are relatively complicated, so I am afraid my concluding remarks might take slightly longer.

I will go through some of the points raised. To give an example, one case that I mentioned was partially successful, and I should go into more detail so that people can understand exactly what sorts of case have been subject to validity changes in the past. The one that was partially successful was a tax case submitted by the first-tier tax tribunal. The case concerned the validity of regulations imposing anti-dumping duties on shoes containing specific leather parts. The hon. Member for Gedling is completely correct: such cases are very particular to certain Members of Parliament. I come from Northamptonshire. Shoe manufacturing is a big deal in my part of the world and the case was a big local news story at the time. The CJEU found that, although parts of the regulations were invalid, the parts imposing the anti-dumping duties were still valid, which is why the ruling was partial.

The claimant in the case, Clarks the shoemaker, a manufacturer, claimed that the EU had committed an infringement of an essential procurement requirement on the basis that the Commission had not adjudicated upon claims for market economy treatment and individual treatment by certain Chinese and Vietnamese exporting producers. The claimant argued, therefore, that the regulations imposing anti-dumping duties on specific footwear containing uppers—which, as members of the Committee will know, are the parts of the shoe that cover the toes, the top of the foot, the sides of the foot and the back of the heel—made from leather, and originating from Vietnam, China and Macao, were invalid.

The CJEU found that two EU regulations were partially invalid, but that specific requirements of regulations imposing the anti-dumping duties were still valid. In other words, the hon. Gentleman is quite correct. Although it is easy to brush over the effects of the judgments in a couple of sentences in Committee, they are quite significant judgments for big manufacturing companies across our constituencies. He and my hon. Friend the Member for South Norfolk were right to raise the questions that they did.

The first question is, does the measure reduce access to justice in certain ways? No, it does not. It allows cases begun before exit to continue largely as at present. Without regulations, it would not be possible to continue a validity challenge begun before exit. The decision that it will not be possible to challenge the law on the basis of validity after exit was taken and voted upon by Parliament when the EU withdrawal Act passed.

Another question was, what will happen if the CJEU rules after exit that EU legislation was invalidly made? Will that invalid legislation remain on the UK statute book? The answer is yes—decisions by the CJEU will not affect retained European law. The hon. Member for Gedling asked what EU retained law is. It is a snapshot of all European law taken the day we leave the European Union. It is being done by the National Archives, and will be accessible to every person in this country. I have been to visit the programme that is doing this. I promise the Committee that not only is it on budget, on time and able to do its job; it is ready to go now. There will therefore be a body of retained EU law that people can interrogate from their homes, should they wish to do so.

Even if the CJEU decides to void legislation after exit day, that law will remain on the UK statute book as retained EU law, because the European Union (Withdrawal) Act will take a snapshot of EU law as it stands on exit day, and all law on the UK statute book at that time will be valid as a result of its being made law under the Act. After exit, it will be for Parliament to decide whether and how to diverge from EU law, or indeed perhaps to take note of what might have happened at the CJEU, and to take action that flows from that.

Another question—raised, I think, by the hon. Member for Sheffield Central—was, why do the regulations not go further and include provision for future rulings of the CJEU to be taken into account, or provision for there to be consideration of future rulings? The decision to extinguish validity challenges domestically is coherent with the Government’s intention to re-establish UK parliamentary supremacy over UK law after exit. After exit day, it should and will be for Parliament to decide how, when and whether the UK should modify retained EU law.

The Minister is being very clear and has, to some extent, put my mind at rest. I have no issue with the idea that our domestic courts cannot challenge the validity of EU retained law—for these purposes, domestic law. In any case, an ability on their part to do that would seem to me to be a dodgy and suspicious foreign import to English jurisprudence, so I have no problem with that at all. I suppose what I am really trying to get at is simply whether I am correct in supposing that the SI does not purport in any way to limit at all the ambit of the judicial review of administrative action of any law, including the law to be imported as EU retained law into domestic law.

I can absolutely give my hon. Friend that assurance.

Returning to why the regulations do not go further, the statutory instrument could not act in contradiction to the explicit intention of the withdrawal Act. It could not, for example, make provisions so that UK judges followed validity rulings of the CJEU, or so that future rulings of the CJEU on validity would mean that retained EU law was invalid.

I hope that I have answered a couple of the questions. I am wary in that I might not have tackled everybody’s questions, so, as I begin to conclude, if I have missed anybody I would very much appreciate it if they let me know. My hon. Friend the Member for South Norfolk talked about an ouster clause. We have copied the CJEU grounds, and cannot currently challenge validity for any other reason. I hope that he is now completely satisfied on those grounds.

The regulations aim to ensure the effective continued delivery of justice as we leave the European Union. As such, they are an important part of the Government’s preparations for the UK’s withdrawal from the European Union. As such, I commend them to the Committee.

Question put and agreed to.


That the Committee has considered the draft Challenges to Validity of EU Instruments (EU Exit) Regulations 2019.

Committee rose.