Brexit: impact on retail and food industries

The referendum result to leave does not have legal consequences, yet. The UK is still subject to its legal obligations to the EU and vice versa, until an exit is formally concluded. The timetable for this, and any transitional regime that goes with it, will only start to emerge over time.

For health and safety legislation most of our laws flow from EU Directives so leaving (when it finally happens) will have little impact as the underlying UK laws which have implemented those Directives will still remain. It is a very different position for food, cosmetics and some area of product liability, trading standards, environmental, cosmetics, medical devices and medicines regulation where most of our laws are derived from (directly effective) EU Regulations and they are not copied out in UK law. This means that we will need to re-draft these laws and may result in considerable change. However, that will not happen for some time and the EU laws stand until we do.

The priority will be to review the areas in the red box below.

Brexit Retail Box Image

What happens now?

There is a complex legal mechanism for leaving. To start the exit negotiation process, the UK Government must notify the European Council, the body which brings together the EU’s 28 Heads of State and Government, of its intention to leave. The timing of this notification is entirely in the UK Government’s hands and is important. It will start the countdown towards the two-year deadline for reaching an exit agreement. Having previously said he would give notice immediately, Mr. Cameron has now confirmed that this should not happen until a new Prime Minister can be chosen and this will take months not days. Even many on the ‘leave’ side concur that giving notice and thereby forcing the timetable would not be wise until there is some consensus on what the alternative relationship with the EU should look like.

The UK government has to serve notice, under Article 50 of the Treaty on the Functioning of the European Union (TFEU), to leave the EU. This has not been invoked before but what it means according to the TFEU is that at least two-year process is then triggered, in which the outgoing Member State (the UK) must then negotiate the terms of its exit with the EU Council (as a representation of the other 27 Member States) and try to reach agreement on how exit will be managed and what the future relationship will be. Such agreement is to be secured by qualified majority within the EU Council, in default of which the UK would cease to be a Member at the end of the two- year period following the issuance of the notice (or the two year negotiation period could be extended if all Member States would unanimously agree). David Cameron has indicated notice will not be served until October so nothing is going to happen for a while.

At the end of the negotiations (or the two years) the TFEU would cease to apply to the UK and the UK’s new relationship with the EU would either be contained in the negotiated withdrawal agreement (it is to be assumed), or be subject to a new vacuum (the disorderly exit scenario). In parallel the UK would be expected to revert to individual membership of the World Trade Organisation (WTO), the successor of GATT, which would require certain commitments but would also seek to secure certain minimum standards in terms of the UK’s relationship not just with the rest of the EU (as a WTO member bloc) but also other countries too. Until now the UK’s trade relationship with the rest of the world (the other WTO members) has operated through the EU’s WTO membership.

Other European countries such as Switzerland and Norway have their own relationships with the EU (e.g. EFTA, EEA) which have been painstakingly negotiated over years and these offer example frameworks of what might in theory be achieved in time. These frameworks provide certain pillars of EU membership such as the free movement of goods to extend, but they require many conditions to be respected such as respect for competition rules and other regulatory controls, while not affording the “seat at the table” to those countries to negotiate the content of the regulation they are bound to apply.

If you would like to discuss the possible implications for your business, please contact Hilary Ross, Jonathan Branton or Dominic Watkins.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Hilary Ross

Executive Partner (London) - Head of Retail, Food & Hospitality

Recognised by The Lawyer as one of the UK’s Top 100 lawyers, I advise clients on compliance and challenges across the EU in relation to products, systems and safety.

Dominic Watkins

Partner - Head of Food Group

I am Head of DWF’s internationally renowned food sector group as well as being Head of Regulatory in London.

Jonathan Branton

Partner - Head of EU/Competition

I lead the firm in EU/Competition issues, specialising in behavioural antitrust, merger control, public procurement and State aid, and all related issues of public funding, including the UK’s Regional Growth Fund, ERDF and ESIF. I also head up the firm’s Brussels office and the firm’s cross-discipline Central and Local Government sector group.