“The Brexit Freedoms Bill will enable the UK government to remove years of burdensome EU regulation in favour of a more agile, home-grown regulatory approach that benefits people and businesses across the UK”.
(Government press release, 22 September 2022)
“This has nothing to do with the merits of Brexit. It’s about how we make law in the UK. The bill is a recipe for legal uncertainty and, not for the first time, concentrates vast powers in the hands of ministers with less opportunity for democratic input.”
(Jonathan Jones KC -this quotation appeared in the Law Society Gazette)
The Retained EU Law (Revocation and Reform) Bill, which was introduced into the House of Commons in September 2022, was heralded by the government as the Brexit Freedoms Bill, and by others as a “bonfire of EU laws”. It is clearly not without its controversy. That controversy has continued to play out in Parliament over the last few months.
“It is clear that all Ministers—nothing against this Minister—in all Public Bill Committees are under instruction not to accept anything from the Opposition. If we moved an amendment that said, “Today’s Thursday”, the Government would keep talking until it was Friday and then vote it down.”
(Peter Grant, SNP)
“There is an almost terrifying inevitability that, in their desire to pile on the bonfire anything and everything that is remotely related to the European Union, mistakes will be made, things will be missed, consequences not thought through and impacts not understood.”
(Brendan O’Hara, SNP).
But enough of the quotations (although I hope you found them interesting!), how could all this impact the world of pensions? First, a bit of background.
The Bill as Originally Drafted
Let’s start with what the bill actually does. And remember that this is still a bill. It won’t be final until it has been debated by both Houses of Parliament, approved by Parliament and received Royal Assent. So, there is still scope for improvement/other change (let’s hope for improvement).
Revocation of EU Laws
When it was first introduced in 2022, the overriding aim of the bill was to remove the supremacy of EU law. All well and good. However, drilling down into the detail, the bill provided that the majority of EU laws that had been retained following the Brexit transition period (with certain exceptions) would automatically fall away on 31 December 2023, unless they had been been otherwise preserved into UK law. The government refers to this as “sunsetting” – with the sun due to fall on retained EU law at the end of this year. This broad-brush approach would apply whether or not a particular EU law had been identified and thought about. This meant that there was real scope for many vital laws to be inadvertently wiped away, only to be remembered on, say, 1 January 2024 – too late, leaving a gap in UK legislation. Even those laws that have been properly considered would be revoked with perhaps nothing suitable being introduced in their place, unless the relevant government department has found the civil service time to implement a replacement.
The government has created a dashboard of retained EU law. This sets out which government department is responsible for reviewing and assessing each piece of retained EU law. No problem, then, I hear you say. Well, the government has confirmed that the dashboard is not definitive. And, indeed, during a two week period in November, 1,400 pieces of new EU law were found and added to the dashboard. The number of pieces of EU law that would now need to be reviewed currently stands at 4,915 and it is growing every day. And all this would need to be done before 31 December 2023. No small feat!
What Has Changed?
Thankfully, last week the government made a bit of a U-turn. Sorry, not a U-turn, simply a refocussing of priorities. Either way, it’s a welcome change. The Minister for the Department for Business and Trade, Kemi Badenoch, published a ministerial statement announcing that instead of the majority of retained EU law falling away on 31 December, the government would table an amendment to the bill that would specify the exact pieces of retained EU law that would be “sunsetted”. This amendment has been approved by the House of Lords (where the bill is currently under review).
Does this mean that all uncertainty presented by the bill has been resolved? Well, not quite!
What Else Does the Bill Do?
The bill contains other provisions that give cause for concern. Two key areas spring to mind, both of which are rather ironic in the circumstances.
Removal of Parliamentary Scrutiny
First, the bill as currently drafted would give ministers greater powers to amend and make law without the need for parliamentary scrutiny which, as many have pointed out, is rather ironic given that one of the purposes of Brexit was to give back control over UK laws to Parliament.
Various amendments have been agreed to the bill by the House of Lords, which would bring back some element of parliamentary scrutiny. However, whether those amendments make their way into the final version of the bill that is enacted remains to be seen (unlike the amendments tabled by the government, which are almost certainly likely to form part of the final bill).
New Uncertainties Around Settled Case Law
Second, the bill would have an impact on the way in which the courts decide cases before them. Under the bill, EU case law would no longer be binding on UK appeal courts. Lower courts would be able to apply for a reference to a higher court to depart from EU case law and a higher court would be able to depart from its own retained domestic case law if it considers it right to do so. This is likely to cause uncertainty until we get a better feel for how the courts will approach this.
Of additional concern, is the introduction of a power for the Attorney General to be able to intervene in a case and refer a point of law arising on retained EU case law to the appropriate appeal court. This power would be capable of being exercised any time within six months of a court decision or, if the decision is appealed, within six months of that appeal being dealt with. So even if all parties to a case (involving an element of EU case law) are happy with a decision, they would have no certainty as to whether that is the final decision until the Attorney General’s six month appeal window has closed. The introduction of this new power for a law officer to intervene in a judicial decision also seems quite ironic given that it is a feature of how EU law operates, but it has never previously been a feature of UK law.
What Does All This Mean in a Pensions Context?
The government’s schedule of EU laws to be revoked on 31 December does not yet appear to include any laws that would affect pensions. However, the list is already being refined and amended so it is worth keeping an eye on. The government says that it will continue to review the remaining retained EU law to identify further opportunities for reform.
The dashboard of retained EU law notes that there are 227 pieces of retained EU law that have been identified for which the DWP is responsible, 5 of which have now been repealed (none of the repealed laws impact pensions). So, there may be some tweaking of pension law between now and the end of the year.
In particular, there are two CJEU cases affecting the level of compensation payable by the PPF, which the government has said do not accord with UK policy. The CJEU judgment in Bauer requires Member States to offer additional safeguards to former workers of a failed employer to stop them from falling into poverty, even if their pension benefits are already compensated by the PPF. This could mean the PPF having to provide compensation of more than 50% of benefits (as per the Hampshire decision), depending upon the individual circumstances of a PPF member.
During a debate in the House of Commons on the bill, Nusrat Ghani, in their capacity as Minister of State in the Department for Business, Energy and Industrial Strategy, said, “The Bauer judgment was raised. The UK has a strong record of setting high standards on workers’ rights, and we have been clear that we will continue to ensure that rights are protected. However, the Department for Work and Pensions does not intend to implement the Bauer judgment through the benefits system, as it is a European Court judgment that does not fully align to the UK private pension protection scheme.
The Hampshire judgment was also raised. The Hampshire judgment is a clear example of where an EU judgment conflicts with the United Kingdom Government’s policies. Removing the effects of the judgment will help to restore the system to the way it was intended to be.”
So, What Next?
The bill is due its third reading in the House of Lords on 22 May. After that, it will be sent back to the House of Commons for approval of the amendments made by the Lords.
It is highly likely that the government’s amendment introducing an exhaustive list of EU laws to be revoked will be approved by both Houses. Government departments will continue to identify and review retained EU law and, no doubt, further laws will be added to the list to be revoked.
It is unlikely, however, that the DWP will have much appetite for making wholesale amendments to pensions law, even where it will have the authority to do so. It has got enough on its plate as it is with (to name but a few) its planned review in late summer of the extent to which trustees are following the DWP’s statutory stewardship guidance, ongoing problems with the transfer regulations and implementing the enhanced notifiable events regime, for which there is still no implementation date.
Without wishing to tempt fate, so far as pensions law is concerned, it seems to be a case of “‘as you were” – for the time being, anyway.