The Retained EU Law (Revocation and Reform) Bill gained Royal Assent on 29 June 2023, becoming the Retained EU Law (Revocation and Reform) Act 2023. The original 'Brexit Freedoms Bill' aimed to sunset a large part of retained EU law, other than that relating to financial services, at end 2023, to give the Government additional tools to restate, revoke and replace retained EU law and to change the status of any remaining retained EU law as part of UK domestic law from end 2023. The 'REUL Act' as adopted significantly limits the scope of the sunset provisions but retains the other key features of the original Bill, including the provisions that apply to retained EU law relating to financial services and markets, with limited changes.

When the UK left the EU, the European Union (Withdrawal) Act 2018 (EUWA) provided for the retention of most EU law, as it applied in the UK on 31 December 2020, as part of UK law (with modifications to make it work effectively when the UK was outside the EU). This body of 'retained EU law' comprises UK domestic primary and subordinate legislation implementing EU obligations or relating to the EU, direct EU legislation (such as EU regulations and decisions) and directly effective rights and obligations under EU law and is interpreted applying general principles of EU law and 'retained case law' of the Court of Justice of the EU and the UK domestic courts. The EUWA also preserved, to a limited extent, the principle of the supremacy of EU law and provided that the authority of a new Act of Parliament is necessary to revoke or amend a large part of retained EU law.

The REUL Act makes changes to this framework with the aim of facilitating the Government's planned reforms to retained EU law. The powers under the new Act to restate, revoke or replace retained EU law overlap with the similar powers under the Financial Services and Markets Act 2023 (FSMA 2023), which also received Royal Assent on the same day, and the changes to the status of retained EU law also apply to the retained EU law relating to financial services and markets covered by that Act.

Limiting the sunset of retained EU law

The Bill as introduced into Parliament would have revoked all EU-derived subordinate legislation and all retained direct EU legislation with effect from end 2023, albeit excluding the legislation on financial services covered by what is now Schedule 1 to FSMA 2023 and the rules of the financial regulators. The Government would have been allowed to delay the revocation of individual legislation until 23 June 2026 (the 10th anniversary of the Brexit referendum), where it needed more time to consider the implications of revocation, and to exclude legislation from the sunset mechanism, where it decided to preserve the legislation as part of UK law.

However, the Government in the end accepted that the proposal would create legal uncertainty because it would be difficult to identify all the laws that would be revoked at end 2023. The Government's own retained EU law dashboard had originally identified 2,400 individual pieces of retained EU law but further work increased this to over 4,800 individual pieces of legislation (some of which are relevant to financial services or markets even though not covered by the FSMA 2023). The Government was also concerned that the growing volume of retained EU law being identified, and the risks of legal uncertainty posed by the sunset, was resulting in its reform programme becoming more about reducing legal risk by preserving EU laws than prioritising meaningful reform.

The REUL Act as adopted restricts the sunset at end 2023 to some 600 pieces of EU-derived subordinate legislation and retained direct EU legislation identified in Schedule 1 to the Act. The Government can make regulations excluding legislation from the sunset but it cannot make any such regulations after end October 2023. The list in Schedule 1 does not include significant legislation specifically relevant to financial services or markets (other than one statutory instrument on reporting of income by paying and receiving agents and one set of 'onshored' EU technical standards on anti-money laundering procedures).

Powers to restate, revoke and replace retained EU law

The REUL Act gives the Government and the devolved authorities in Scotland, Wales and Northern Ireland separate powers, until 23 June 2026, to restate and to revoke or replace all secondary retained EU law, i.e., any retained EU law that is not primary legislation and any retained EU law that is primary legislation the text of which was inserted by subordinate legislation, including secondary retained EU law that becomes 'assimilated law' at end 2023 (see below). However, replacement legislation cannot increase the overall regulatory burden.

Restated and replacement legislation will no longer be retained EU law (or assimilated law after end 2023). The Government or the relevant devolved authority will have a limited ongoing power to update restated or replacement legislation to take account of changes in technology or developments in scientific understanding.

These powers also apply to secondary retained EU law and primary legislation that falls within the scope of the FSMA 2023. However, it seems likely that the Government would use the powers under the FSMA 2023 to restate, revoke or replace legislation covered by that Act as those powers are not subject to the same constraints as those that apply to the powers under the REUL Act. Nevertheless, the powers under the REUL Act may be used to restate, revoke or replace some legislation relevant to financial services or markets, including where legislation only partly relates to financial services or markets and provisions of primary legislation inserted by subordinate legislation which fall outside Schedule 1 to the FSMA 2023.

These powers under the REUL Act came into force on Royal Assent and were not significantly changed during the legislative process. However, the final REUL Act includes changes requiring the Government periodically to update the retained EU law dashboard and to publish and lay before Parliament a report on the revocation and reform of retained EU law under the Act. As in the Bill, the Act also revokes the provisions of the Small Business, Enterprise and Employment Act 2015 on the setting of and reporting on business impact targets for regulatory change (with effect from two months after Royal Assent).

Retained EU law becomes assimilated law

The REUL Act as adopted does not make significant changes to the provisions of the Bill affecting the status of retained EU law as part of UK domestic law:

• With effect from end 2023, the REUL Act will repeal section 4 of the EUWA. This will revoke all retained EU rights, powers, liabilities, obligations, restrictions, remedies and procedures formerly recognised and available in domestic law by virtue of section 2(1) of the European Communities Act 1972 and recognised under section 4 EUWA, including those derived from legislation forming part of retained EU law that has not yet been repealed by end 2023. There is no power to delay this revocation which will also apply to EU rights, powers, etc. derived from the legislation covered by Schedule 1 to the FSMA 2023 even though FSMA 2023 also revokes the EU rights, powers, etc. derived from that legislation but only from a day or days to be appointed by regulations.
• With effect from end 2023, the REUL Act will end the residual supremacy of EU law, require remaining retained direct EU legislation or assimilated direct legislation generally to be read subject to domestic enactments (unless regulations say otherwise), abolish general principles of EU law as part of UK law, and change the designation of any remaining retained EU law, retained direct EU legislation, retained case law and similar categories of law under the EUWA to ‘assimilated law’, 'assimilated direct legislation', 'assimilated case law', etc. (and the Act now includes extensive consequential amendments to other legislation to reflect the new designations). The REUL Act also removes (with immediate effect) some constraints on making statutory instruments affecting retained EU law or assimilated law.
• Possibly even before end 2023, the REUL Act will give the UK's higher courts greater freedom to depart from retained or assimilated case law when interpreting retained EU law or assimilated law, allow the lower courts and Government law officers to refer questions on retained or assimilated case law to higher courts, enable Government law officers to intervene in court proceedings on questions of retained or assimilated case law, and permit the courts to make orders dealing with incompatibility between domestic enactments and retained direct EU legislation or assimilated direct legislation. These provisions come into force on a day or days to be specified by regulations.

These provisions might create some uncertainty as to the interpretation and application of the financial services legislation covered by Schedule 1 to the FSMA 2023 and other remaining retained EU law relevant to financial services or markets, although the practical impact of these changes on that law may generally be quite limited. However, there may some exceptional cases where the changes to the status of retained EU law might affect firms or transactions, such as in relation to transactions relying on the retained case law holding that the 1.5% charge to UK stamp duty reserve tax on the issue of certain securities into overseas clearance services or depositories is incompatible with the EU Capital Duty Directive.

Government's plans for reform

When the Government introduced the amendments to the Bill limiting the scope of the sunset in May 2023, it also announced that, since Brexit, the Government had already revoked or reformed over 1,000 EU laws and that, in addition to the around 600 laws revoked directly through the REUL Bill, FSMA 2023 and the Procurement Bill would revoke around a further 500 pieces of retained EU law (and referred to the more 30 'Edinburgh reforms' to financial services regulation announced in December 2022).

The Government also published a regulatory reform update, ‘Smarter Regulation to Grow the Economy’, setting out how it intends to reform regulations to support economic growth and changes to the Government's Better Regulation Framework to ensure that it only uses regulation where necessary, and that, where regulation is used, the impacts on wider government priorities including competition and innovation are understood. The Government at the same published a consultation on changes to retained EU employment law and has since published a call for evidence on reforms to non-financial reporting by companies. Other proposals are likely to emerge as Government departments and devolved authorities consider how to use the powers conferred by the REUL Act in relation to the retained EU law for which they are responsible. 

Authors: Caroline Meinertz, Christopher Bates and Sara Evans.