Managing Regulatory Divergence through Intergovernmental Cooperation – Common Frameworks and the Threat of the Internal Market Bill: Part I

The controversial United Kingdom Internal Market Bill ‘UKIM Bill’) continues to attract public attention. On 9 November, the House of Lords voted to remove provisions in Part 5 of the Bill that would permit UK ministers to adopt regulations in breach of commitments made in the EU-UK Withdrawal Agreement and more especially the provisions on the Protocol on Northern Ireland.

 Having ditched the ‘backstop’ arrangement negotiated earlier by the May administration which would have kept the whole UK aligned with key EU rules on trade in manufactured and agricultural goods, the Protocol negotiated by the Johnson administration opted instead to carve out a zone of regulatory alignment for Northern Ireland alone to ensure an open border on the island of Ireland. The management of this carve out falls under the joint supervision of the EU and the UK through the Joint Committee established under the Agreement. Any difficulties with the operation of the Protocol are matters for intergovernmental cooperation and the dispute resolutions mechanisms established under the Agreement. As originally proposed, the UKIM Bill’s provisions would have equipped the UK Government with a unilateral override of the negotiated structure for intergovernmental cooperation between the EU and the UK.

But even without the offending provisions in Part 5, the Bill is similarly a cause for concern in Cardiff and Edinburgh. The devolved administrations have been working with the UK Government to agree ‘common frameworks’ to coordinate and manage the exercise of regulatory powers that have been repatriated from the EU and which overlap with devolved powers. This domestic system for negotiated intergovernmental cooperation equally risks being undermined by the UK Government’s unilateral insistence on enshrining in law legally enforceable market access principles that could ultimately result in regulatory competition within a highly asymmetric UK market.

Given that this may be less familiar terrain, the analysis of common frameworks falls into two Parts. In Part I, the background and context of common frameworks is set out. In Part II, the analysis focuses on the relationship between the UKIM Bill and common frameworks.

Devolution and Divergence

The transition period ends on 31 December. The constraints exerted by EU law on UK and devolved governments’ rule-making powers will, in general, fall away. By virtue of the European Union (Withdrawal) Act 2018, at the end of this period, all existing EU law applicable to the UK will be domesticated and form a new body of law called ‘retained EU law’. So, to the extent that common EU rules existed at the end of the transition period, those rules will continue to govern the offer of goods and services on the UK market. But how can these rules be modified and by which rule-making institutions? 

Section 8 of the 2018 Act creates a time-limited power for UK ministers to correct ‘deficiencies’ in how retained EU law operates outside of the context of EU membership (without making direct policy changes). But as the Act was beginning its legislative path through the UK Parliament it was also clear that the devolved authorities had an interest in exerting control where repatriated regulatory powers overlapped with areas of devolved regulatory competence. Both the Scottish and Welsh Governments introduced parallel legislation but only the Scottish Parliament proceeded to legislate in its first ‘Continuity Bill’. However, the UK Supreme Court ruledthat aspects of the Bill would conflict with provisions of the 2018 Act which cannot be overridden by devolved legislation. A new Continuity Bill is before the Scottish Parliament with the Scottish Government seeking a power to modify retained EU law to ‘keep pace’ with future changes in EU law (see here for an excellent analysis of the keeping pace power). 

Whether or not different UK nations pursue explicit policies to align with or diverge from, EU law, it is apparent that making different regulatory choices may lead to new internal regulatory divergences but without the discipline of EU law and its institutions to manage that divergence. As will be explored in Part II, that raises a question as to whether a substitute set of legal controls in the form of the UK Internal Market Bill is needed. For the moment, attention turns instead to the development of a programme of ‘common frameworks’ to coordinate and manage the exercise of regulatory powers in the UK. 

Common Frameworks: Cooperation in the Shadow of Command

Section 12 of the 2018 Act replaces the limit on devolved authorities from legislating contrary to EU law with a new potential restriction. Now, devolved institutions are prohibited from modifying retained EU law to the extent that UK ministers have restricted that power through regulations. Absent those regulations (or when they expire) then devolved authorities would in principle be free to exercise their powers including taking divergent approaches. 

But even without ministers exercising these ‘freezing’ powers – and so far no regulations have been made – devolved governments have agreed to work with the UK government on the development of common frameworks. At a meeting in October 2017, the Joint Ministerial Committee (European Negotiations) (‘JMC(EN)’) – the body through which UK and devolved governments are supposed to discuss matters of common concern – agreed the following three principles to guide the process by which common frameworks would be developed:

  1. Common frameworks will be established where they are necessary in order to: 
  • enable the functioning of the UK internal market, while acknowledging policy divergence; 
  • ensure compliance with international obligations; 
  • ensure the UK can negotiate, enter into and implement new trade agreements and international treaties; 
  • enable the management of common resources; 
  • administer and provide access to justice in cases with a cross-border element; 
  • safeguard the security of the UK. 

2. Frameworks will respect the devolution settlements and the democratic accountability of the devolved legislatures, and will therefore: 

  • be based on established conventions and practices, including that the competence of the devolved institutions will not normally be adjusted without their consent; 
  • maintain, as a minimum, equivalent flexibility for tailoring policies to the specific needs of each territory as is afforded by current EU rules; 
  • lead to a significant increase in decision-making powers for the devolved administrations. 

3. Frameworks will ensure recognition of the economic and social linkages between Northern Ireland and Ireland and that Northern Ireland will be the only part of the UK that shares a land frontier with the EU. They will also adhere to the Belfast Agreement.

Based on an analysis of the EU policy areas that overlap with areas of devolved competence in one or more devolved administrations – most recently updated in September 2020 – 154 areas have been identified as being within the scope of the programme. Of these, 40 are active areas where frameworks will need to be developed of which 22 will be non-legislative and 18 will require some level of primary legislation (in addition to non-legislative cooperation or changes to statutory instruments). 

Each framework moves through a 5-Stage process culminating in ministerial sign-off. Non-legislative approaches will typically be implemented via concordats between the UK and devolved governments supplemented by the existing memorandum of understanding on intergovernmental relations. Albeit under the shadow of command – the risk that UK ministers might exercise their freezing powers – what emerged was a negotiated structure for intergovernmental cooperation.

However, in the eighth statutory report to the UK Parliament on the common frameworks programme, it is noted that it will not be possible for all anticipated frameworks to be in place by the end of the transition period. The Covid-19 pandemic has given rise to capacity problems as officials have been deployed to manage the response to the pandemic. But to accelerate matters, provisional frameworks are now being published that set out the main terms of intergovernmental cooperation.

Parliamentary Scrutiny

An essentially intergovernmental process – driven by officials and ministers – raises important scrutiny issues for UK and devolved parliaments in terms of their ability to scrutinise the means and mechanisms by which future changes in retained EU law are either permitted or restricted. A key question for parliamentarians is how much ex ante scrutiny is needed of these frameworks as they progress to completition and how much ex post analysis is desirable to determine the fundamental factors driving the dynamics of regulatory alignment and divergence across the UK.

The UK Constitution minister Chloe Smith has written to UK Parliament Committee chairs to set out working methods for scrutiny with an indication that devolved administrations would take similar steps. The House of Lords has recently established a new Common Frameworks Scrutiny Committee to scrutinise work in this area and has itself written to the Constitution minister raising issues about its early experiences of scrutiny. However, unlike legal instruments such as Bills or statutory instruments, common frameworks are difficult to scrutinise because they are about the process for managing change from the status quo of retained EU law rather than being discrete substantive rules in themselves. Parliamentarians may feel that their time is better spent scrutinising how these frameworks interact with specific instances of future rule-making that interact with, and are subject to the cooperation and dispute-resolution mechanisms established by common frameworks.

UKIM Bill

Apart from the issues around scrutiny, the bigger challenge may come from the UKIM Bill. The Bill establishes legally enforceable ‘market access principles’ that can be deployed to disapply future exercises of devolved regulatory powers when these new rules are applied to goods and services originating elsewhere in the UK. It is the discipline of these market access principles and the regulatory competition they foster that is at the heart of devolved administrations’ concerns about the UKIM. The interaction of the UKIM Bill and common frameworks is explored in Part II.

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