UK's Brexit planning for chemicals sector is fertile ground for court disputes

23 August 2018 6:41pm
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22 August 2018. By Matthew Holehouse

The UK’s contingency plans for a standalone chemicals regulator after Brexit face a major stumbling block: Replicating the EU’s vast database of analyses that underpin substance registrations will be hard. A quick-fix involving copy-pasting the EU’s registrations is likely to provide grounds for legal challenges in the years to come.

The UK will tomorrow unveil its contingency plans in case it fails to reach a deal on Brexit with the EU.

But planning for a standalone chemicals regime faces a major stumbling block: it could be hard to replicate the EU’s vast database of testing and safety data, which underpins the registration of 21,000 substances used in cosmetics, food and cars.

Plans to grandfather these registrations through secondary legislation, without obtaining the underlying dossiers with analyses, might offer some short-term stability for industry. But it will leave the UK regulator effectively blind, and lays the ground for future legal challenges that could be hard to defend.

— In or out? —

Chemicals regulation has been a weathervane for the UK's dithering position on Brexit.

In 2017, the environment department said the UK must exit the bloc’s system — known as Reach — to honor the country’s plan to exit the jurisdiction of the EU Court of Justice.

But Prime Minister Theresa May reversed this position in March this year when she announced the UK would seek continued membership of the European Chemicals Agency (Echa), and would remain in step with EU legislation in chemicals.

But the EU insists that Reach participation can only happen if the UK opts to remain in the single market in its entirety — something the UK government has ruled out.

Unless either party dramatically shifts position, the UK will be forced to become a solo regulator — either under a no-deal Brexit in March 2019, or after the transition period in December 2020.

— Trade secrets —

Under Reach, chemicals on the EU market must be registered at Helsinki-based Echa with a technical dossier. These run to several thousand pages, compiling all available information on properties, manufacturers and uses, including study results and risk assessments.

Once registered, Echa and the bloc’s member states examine the dossiers, and can demand further testing or impose restrictions on the use of a chemical.

In preparation for a potential no-deal exit in March 2019, the UK government is currently building a new IT system that mirrors the Reach depository. But it admits it will be extremely difficult to get hold of the commercially sensitive data that companies have previously provided.

The European Commission has said it won’t hand over the dossiers. Asking companies to resubmit their filings isn’t straightforward, partly because many registrations are joint submissions between manufacturers. These cost and data-sharing agreements might not be easily replicated, and it might be to a company’s advantage to stymie a rival registering to use a product in the UK.

In any event, the task of re-registering the Reach database with the UK could cost the industry 450 million pounds ($580 million), and take up to a year for an individual company to complete, according to an analysis by the UK Chemical Industries Association.

— Flying blind —

The UK is planning to replicate the EU’s list of registered chemicals into domestic law via a statutory instrument under the EU Withdrawal Act.

The government has told industry that it will then attempt to recreate a database using whatever information is publicly available, such as safety data sheets that accompany chemicals in the supply chain.

The aim is short-term stability, so that “we do not suddenly have a situation where all those chemicals become illegal for the UK market,” Gabrielle Edwards, deputy director at the Department for Environment, Food and Rural Affairs told a hearing of UK lawmakers in July.

“You would not necessarily need the full data package at that point, but you would need to know which registrations were valid.”

— Grounds for challenge —

This plan opens up a fertile ground for challenges from manufacturers and environmental campaigns seeking to shape the UK’s new regulatory landscape.

Under English law, legislation made by statutory instrument, and other decisions made by public bodies, can be challenged by judicial review.

In principle, the UK’s decision to grandfather the chemicals into domestic law without the underlying registration dossiers would likely be defendable. A court could be persuaded that replicating the Echa registrations was in line with the EU Withdrawal Act, and the only sensible course of action given the options available to ministers.

But challenges may come if a party argues that a decision made by Echa before Brexit, and subsequently incorporated into UK law, was flawed. Echa's appeals board receives around a dozen such complaints every year. The UK government might struggle to defend such a case without access to the original dossier.

— Evolution —

More problematic is the fact under Reach, substances are evaluated on a rolling basis after their initial registration and placement on the market. On Brexit day, the UK will exit this system.

Ministers will have three options: a) to abandon the process of rolling evaluation and become a light-touch regime; b) to set up a parallel system of registration and evaluation; or c) to simply copy Echa's decisions.

Industry has been told that under a no-deal scenario, the UK wouldn’t automatically copy Echa. But in reality, the pressure to mimic EU decision-making might speak louder.

However, without access to the underlying registration data, it might be hard to defend decisions made by the UK agency that effectively copied the Echa decision.

A manufacturer could argue that this amounts to the unlawful fettering of discretion. Challenges could also be brought on grounds of failure to take account of the relevant considerations, or procedural unfairness.

In this scenario the UK would likely need to take the costly step of building its own complete registration and evaluation system, said barrister Andrew McIntyre of Brick Court Chambers, who has represented manufacturers before the Echa appeal board.

“I’m struggling to see how you have a meaningful right of appeal against a dossier evaluation decision where the UK does not have the dossier, and where the appellant might not have it either,” he told MLex.

“What would a UK authority say? ‘We decided to follow Echa’? That might well be a case of it having unlawfully fettered its discretion.”

“If any regulator is taking decisions on the basis that someone else thinks it’s right and without itself looking at the relevant material, there’s going to be a risk of a successful judicial review,” said barrister George Peretz of Monckton Chambers. “As soon as decisions where we haven’t been in the room start working through, it’s going to be harder and harder to defend just blindly following them.”

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