Legislating the Byzantine way: the Brexit Procurement SIs

12 Mar 2019

Towards the end of last year, the Cabinet Office published a draft statutory instrument, the Public Procurement (Amendment etc.) (EU Exit) Regulations 2019 (“the first SI”), which was then laid before Parliament pursuant to Schedule 7 of the European Union (Withdrawal) Act 2018 (“the Act”). On 11th February 2019, a second SI ((The Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations 2019) (“the second SI”)) was laid before Parliament, which makes a number of corrections to the first SI.

Together, the SIs will modify various Procurement Regulations, including the Public Contracts Regulations 2015 (SI 2015/102), the Utilities Contracts Regulations 2016 (SI 2016/274) and the Concession Contracts Regulations 2016 (SI 2016/273), for the event of the UK’s departure from the EU.

The Cabinet Office has recently produced a helpful Procurement Policy Note (available here), which summarises succinctly the effects in both ‘deal’ and ‘no deal’ Brexit scenarios. There are, however, a number of questions arising out the draft SIs, which are not easy reads.

(1) Are there conflicts between the Act and the Regulations?

First, the definition of “the Retained Treaties” in Regulation 5(2)(g) of the first SI has the potential to create interesting knock-on consequences. That phrase, as defined in the first SI, is limited to those matters of retained EU law which are retained only by section 4 of the Act. That section, in turn, is confined to those matters which flowed into domestic law via section 2(1) of the European Communities Act 1972. The concept of “retained EU law”, however, is wider in the Act. Section 6(7) of the Act defines “retained EU law” as matters which forms part of domestic law under sections 2, 3, 4 and 6 of the Act. There is a risk, therefore, that the more limited expression in the SI (only referring to one section of the Act) leads to gaps.

This possible use of section 4 as a limiting-device is particularly evident in Regulation 5(57) of the first SI, which modifies Regulation 89 of the Public Contracts Regulations 2015. The first SI substitutes “enforceable EU obligation” in the PCR 2015 with “retained EU obligation that is enforceable by virtue of section 4 of [the Act]”. This appears to reduce the currently-enforceable obligations of EU law: presumably the drafters of the Act thought that section 4 alone was insufficient to copy all EU obligations and case law existing prior to exit day, hence the need for sections 2, 3 and 6 also. It is unclear whether reference to only section 4 is an intentional restriction by the drafters of the first SI in the procurement sphere, or whether the SI is compatible with the Act in this regard (e.g. the deficiency-correction purposes listed in section 8 of the Act, as to which see below).

(2) Do the regulations make other substantive changes – is that permissible?

Second, the first SI alters various substantive provisions, including those relating to abnormally low tenders and state aid. This is achieved by various instances to “omit “EU law”” and “to the extent that they are compatible with EU law”, and more express provisions such as Regulation 5(46) which removes certain references to state aid in the abnormally low tender provisions, e.g. Regulation 69 of the Public Contracts Regulations 2015. Another potential example (for which I am grateful to Albert Sanchez-Graells for discussing with me) is that found in Regulation 5(29) of the first SI, which omits Regulation 39 PCR 15 (procurement involving contracting authorities from other member states). It is arguable that this creates a legal lacuna, as transnational collaborative procurements would not be regulated. It is possible that this could have substantive effects in some areas, such as some cross-border collaborations of NHS commercial solutions through the European Health Public Procurement Association.

The second SI also extends rights of action to some economic operators beyond the scope of GPA coverage (Regulation 2(3)(c)), though how significant this will be in practice is unknown.

It is not, clear, however, whether these changes to the underlying substantive requirements are compatible with the deficiency-correcting power in section 8 of the Act. Sub-paragraphs (2) and (3) of that section list exhaustive instances where a deficiency arises. The policy intention behind the Act at least appeared to be a retention of the substance of EU law without alternation unless that substance was inherently linked to an (EU) internal market concept or EU institutions. The SI, however, appears capable of being read as altering content which could, conceptually at least, function on the domestic level. It is possible, therefore, that some aspects of the SI go beyond the scope of the deficiency-correcting power and could be susceptible to judicial review.

(3) Postponed amendments – are they ultra vires?

Third, Regulations 6, 8, 10 and 21 only come into force 18 months after the day on which exit day falls: Reg. 1(3) of the first SI, as amended by Reg. 2(2) of the second SI. These Regulations appear to provide economic operators from a party to the WTO’s Government Procurement Agreement (“the GPA”) continued rights and access for a period of 18 months at which point certain duties (such as those found in regulations 25, 68 and 90 in the PCR 2015) will end.

The deficiency-correcting powers in section 8(1) of the Act – under which the SI has been made – only exist where failures or deficiencies can be said to be “arising from the withdrawal of the United Kingdom from the EU”. It is, prima facie, difficult to understand how this competence to correct such deficiencies can occur only 18 months after exit day (as defined in the Act), such that it is only appropriate to use that purported power to trigger substantive changes at that point. Do such issues truly arise as a result from withdrawal if they only need altering 18 months later? If not, the Regulations are susceptible to judicial review on the grounds set out by Lord Neuberger in R (Public Law Project) v Lord Chancellor [2016] UKSC 39.

Perhaps the key to understanding this lies in the UK’s imminent accession to the GPA in its own right and possible differences in the UK’s and EU’s GPA schedules. Assuming that accession does occur more or less as expected, and assuming that these Regulations ever enter into force at all, does the need to modify domestic law nevertheless still not result from that (re)-joining of the GPA, rather than the UK’s withdrawal from the EU? The logical place to find statutory power for the making of procurement regulations implementing the GPA or, indeed, procurement provisions under FTAs would be in trade legislation. But with the Trade Bill stuck in Parliament, it is not clear where that will be found. Perhaps the legislator hopes that a broader reading of the phrase “arising from” in section 8(1) of the Act will suffice, such that the ‘looser’ sense of Brexit resulting in the UK having (at its election) to re-join the GPA will suffice.

That all said, perhaps the queries surrounding these postponed amendments will never arise. Given that the GPA Parties have accepted the UK’s independent membership of the GPA for a post-Brexit world, it is possible that these Regulations will never enter into force.

Final comments

The detail of this blog post may well become academic within the space of 72 hours if “no-deal” is taken off the table by Parliament. The issues which it raises about legislating by such statutory instruments, however, are nevertheless of longer-term constitutional interest. The byzantine structure of the SIs is not at all easy to navigate. Coupled with the fact that the legislative foundation of some of the proposed amendments is questionable, this is particularly problematic, not least for potential claimants or the poor parliamentary draftsman tasked with editing the underlying substantive Regulations. Whilst there may well be perfectly reasonable answers to some of the queries raised in this blog, the very complexity of the legislation is itself problematic.

The author, Jack Williams, is grateful for comments on a draft of this blog by Michael Bowsher QC and Dr Albert Sanchez Graells.