The UK’s new relationship with the EU changes the regulatory and compliance landscape for businesses trading across the two markets. This Regulatory Outlook is intended to be a starting point for you to understand what this means for your business, whether you are a UK or EU company trading with the other market or an international business with operations in both territories.
There are four main factors giving rise to these changes:
- A direct consequence of the UK falling outside of the EU Single Market Customs Union is the resurrection of non-tariff barriers for goods and services crossing borders. For example, businesses importing across the GB-EU border will need to comply with the Border Operating Model, the border checks required under the customs and other regulations and the ‘Rules of Origin’ provisions that will determine whether their goods can be traded tariff-free.
- The internal UK and EU regulatory regimes will inevitably diverge, even where that is not a specific policy goal. With the UK having imported the body of EU law as at 31 December 2020 onto the domestic statute books, the new UK / EU relationship began from a position of regulatory alignment. But the systems have already begun to move apart, as incoming EU laws come into force in the EU but not the UK. And the UK starts to take unilateral actions on issues such as sanctions. For example, a new EU regulation on organic foods came into force on 1 January 2021, which does not form part of retained EU law in the UK. However, the UK has agreed that it will seek to ensure that its future regulation of organic food will at least be equivalent, if not identical, to EU law.
- Other areas of regulatory difference will be more deliberate. When it comes to areas such as digital regulation or consumer protection, the UK will need to decide whether it wishes to follow the direction the EU is taking (with new laws such as the Digital Markets Act, Digital Services Act and Omnibus Directive), maintain the current position or adopt its own approach to regulation in these areas. The establishment of a competition Digital Markets Unit, and the incoming Online Harms Bill are examples of where the UK is looking to be a leader in regulation in its own right. The extent to which the ‘level playing field’ provisions in the TCA, designed to prevent regulatory divergence that leads to competitive advantage, affect the UK’s (or the EU’s) ability to diverge will then need to be considered as part of that policy debate.
- Finally, even where the regulatory positions remain largely or entirely aligned, businesses will in many areas need to deal with separate regulators in each territory. International businesses, for example, will no longer be able to nominate the Information Commissioner’s Office in the UK to be its lead supervisory authority across the UK and the EU under the GDPR’s one-stop-shop mechanism. Businesses may look to a new lead supervisory authority in the EU but will still need to be mindful of guidance from the ICO and may face dual-reporting and even facing double enforcement proceedings where there has been an incident that engages the legislation in multiple jurisdictions.
As we examine in the individual sections of this Regulatory Outlook, some of these changes have an immediate impact and may require businesses to take action now, while in other areas businesses will need to assess whether any organisational or compliance changes are needed to reflect the evolving position. The UK’s reputation for predictable, competent and relatively business-friendly regulation means that it will remain an attractive market for overseas businesses, but it will be important to ensure that your legal and compliance functions are geared up to make sense of the shifting requirements, risks and regulatory scrutiny wherever you trade.