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House of Lords report on Brexit, the environment and climate change: the link between free trade and environmental standards

The report published by the EU Committee of the House of Lords on 14 February 2017 ‘Brexit: environment and climate change’ (“the Report” - available here; see earlier post by Heather Sargent) dealt with, among other things, some of the practical implications of the UK government’s proposed best-case scenario for Brexit, namely a comprehensive free-trade agreement (FTA) with the EU. The Government’s preference for an FTA was set out in its white paper on Brexit, published in February 2017, which also stated that the UK would not remain a member of the Single Market after leaving the EU. 

The Report noted in its discussion of the history of EU environmental legislation that much of what is now considered EU environmental legislation originated in the harmonisation of product and other standards, with a view to removing differences between environmental standards so as to facilitate the free movement of goods. It was only in 1987 that treaty powers explicitly authorising environmental action at EU level were established for the first time in the Single European Act in 1987; these powers are now contained in Title XX of the TFEU. 

The implications of the link between free trade and EU environmental law, which are discussed at some length in the Report, are a good example of the complexity and interrelatedness of issues with which the UK government will have to grapple in managing the UK’s exit from the EU. The particular importance of the issue lies in the fact that the UK aims to maintain a strong trading relationship with the EU post-Brexit. Around half of the UK’s overall trade (import and export) is with the EU, though this figure is higher in some sectors. The Report cited a number of sector-specific examples: around 4 million tonnes of waste are sent as fuel to the EU; 60% of all chemical exports go to Europe and 75% of chemical imports come from Europe. 

The interrelationship between environmental standards and access to the EU market means that the UK government will not have an entirely free hand in formulating a post-Brexit environmental policy.

As the Report notes, an FTA would not oblige the UK to adopt EU environmental acquis (i.e. accumulated legislation), but imports from outside the Single Market do need to comply with product safety and environmental standards. As such, equivalence between UK and EU environmental standards is likely to be required in order to remove non-tariff barriers to trade. Such equivalence would also need to keep up with any changes to the relevant EU legislation. 

Examples of regulatory areas where equivalence is likely to be required in order to permit trade with the EU include regulations such as the REACH Regulation, which makes provision for the registration, evaluation, authorisation and restriction of chemicals; and also product standard regulations such as the Classification, Labelling and Packaging Regulation, and the Ecolabelling Regulation. The Report highlighted that representatives of affected industries noted in evidence to the Committee that EU standards were not only a requirement for access to the EU market, but also tended to represent a benchmark for international acceptance. 

In short, therefore, the likelihood is that the UK would need to comply with, or seek to adopt measures equivalent to, EU environmental standards across a wide range of areas in order to be able to continue to trade freely with the EU. This did not mean, however, that the UK had to give direct effect to EU law; rather, the UK could simply demonstrate that its domestic law had an equivalent effect. The Report does also note responses from individuals who appeared before the Committee which suggested that the potential for legislative change after Brexit offered opportunities to achieve outcomes which might have been more difficult under the unified EU legislative scheme. Examples cited included regulation which reflected the differing needs of different regions within the UK; the greater flexibility which might be afforded for responding to challenges such as climate change with the removal of the EU’s state aid rules; and, in particular, the opportunity to develop a more holistic environmental policy which was integrated with broader industrial and agricultural policy. 

In terms of implications for the legal services market in the UK, one consequence suggested by the Report’s discussion of the policy of pursuing an FTA would be that enforcement of environmental standards would, to the extent that such standards were linked to the FTA, fall to be resolved under public international law principles governing free trade disputes, not under EU law. Thus, disputes about environmental issues may increasingly come to be resolved not in the CJEU, or in the domestic courts by the application of EU law, but in arbitration tribunals and under the dispute settlement rules of the World Trade Organisation.