Nicholas Kilford unpacks the potential impact of the UK Internal Market Act (UKIMA) replacing parts of EU legislation on devolved powers.
The context
In the aftermath of Brexit, one of the key policy areas repatriated from the European Union was the governance and regulation of the UK’s internal market. One of the legal frameworks chiefly responsible for that governance in the post-Brexit age is the UK Internal Market Act 2020 (UKIMA). This piece of legislation aims ‘to preserve the United Kingdom’s (UK’s) internal market… providing continued certainty for people and businesses that they can work and trade freely across the whole of the UK.’
The UKIMA makes provision for this in a number of ways (such as the common frameworks), but one key way in which it does so is by ensuring that potential regulatory barriers to trade within the UK, like bans on the sale of particular goods, or requirements to manufacture or to label goods in a particular way⎯what the UKIMA calls ‘relevant requirements’⎯ are largely neutralised so far as they would impact trade between the different parts of the UK.
Of particular importance are the ‘market access principles’. There are two market access principles: mutual recognition and non-discrimination, and they are helpfully explained in the UKIMA’s Explanatory Notes:
Mutual recognition means that any good that meets relevant regulatory requirements relating to sale in the part of the UK it is produced in or imported into, can be sold in any other part of the UK without having to adhere to additional relevant regulatory requirements in that other part. For example, a bag of flour made in one part of the UK that met the relevant requirements in that part (for example on the composition of the flour) can be sold in any other part of the UK without having to meet any other relevant requirements that apply there.
The non-discrimination principle means direct or indirect discrimination based on differential treatment of local and incoming goods is prohibited.
Direct discrimination is where an incoming good is disadvantaged compared to a local good because it originates from another part of the UK. For example, a requirement that incoming produce must be chilled but local produce does not…
Indirect discrimination is where incoming goods are not directly discriminated against, but where regulation disadvantages incoming goods and has an adverse market effect.
The problem
The effect of the UKIMA’s market access principles is, essentially, that such ‘relevant requirements’ are disapplied. For example, section 2(3) of the UKIMA provides that ‘[w]here the [mutual recognition] principle applies in relation to a sale of goods in a part of the United Kingdom… any relevant requirements there do not apply in relation to the sale.’ Equally, section 5(3) provides that ‘[a] relevant requirement… is of no effect in the destination part if, and to the extent that, it directly or indirectly discriminates against the incoming goods’.
The market access principles therefore pose a unique challenge to devolved law-making power: parts of devolved legislation which make up ‘relevant requirements’ will be ineffective in the circumstances provided by the UKIMA. The Welsh Government had, for this and other reasons, mounted a legal challenge against the UKIMA on the grounds that it impliedly alters the competences of the Senedd by limiting its ability to enact effective legislation within its areas of competence. This challenge, however, was found by the courts to be premature.
If devolved legislation is of no effect in certain circumstances, then is the legislature’s ‘competence’ over that area itself altered or impaired?
The issue is complicated by the fact that, in many circumstances (such as purely-internal ones, where goods are manufactured and sold within the same part of the UK), the market access principles will not apply and any relevant requirements in devolved legislation will remain effective. In other words, the UKIMA does not make devolved laws invalid, nor does it strike them from the statute book. In fact, it does not stop the devolved legislatures enacting relevant requirements, it simply stops them being effective or applicable in certain limited contexts.
Two approaches to competence
An important question flows from this: If devolved legislation is of no effect in certain circumstances, then is the legislature’s ‘competence’ over that area itself altered or impaired?
On one view, this is not the case. If competence is viewed as a narrow concept⎯one that means the power to make merely valid laws, rather than the power to make laws that are in every circumstance effective⎯then the UKIMA does not impair devolved competence. On this approach, because the UKIMA does not make devolved law invalid, the competence remains intact.
Syniadau uchelgeisiol, awdurdodol a mentrus.
Ymunwch â ni i gyfrannu at wneud Cymru gwell.
This approach, that devolved competence in relevant areas survives the UKIMA, recognises that the market access principles have only limited reach, applying in some, but not all contexts. However, it also affects legal certainty, adding an additional layer of complexity: a competence becomes, confusingly, the power to make in many circumstances unenforceable law. This therefore conceals what is potentially a seismic change in the de facto powers of the devolved legislatures. The UK Government can claim⎯as indeed it has⎯that devolved competences are unaffected by the market access principles. Although, on this approach, that would be correct as a matter of law, it is perhaps not an accurate description of reality.
A second approach provides a useful counterpoint. On this alternative approach, a power to make valid but rarely⎯if ever⎯enforceable law cannot be properly understood as a ‘competence’. Rather, a competence must surely mean a power to make effective (as well as valid) law. This view would, of course, more closely align the legal picture of competences with their real-world effectiveness, helping improve legal certainty. However, it is not clear that this is a realistic approach in practice: there might often be practical limits to the effectiveness of valid law.
What approach have the courts taken?
The courts have not yet provided a clear analysis of what a competence is, nor have they provided a meaningful distinction between disapplication and invalidity in this context. Further, the courts have not drawn a connection between disapplication and the nature of competence itself. The courts, therefore, have not provided a clear answer in this context, but some clues are available from case law in other contexts.
Perhaps the most useful clue can be found in the Supreme Court’s unanimous judgment in the Continuity Bill case. In that case the Court said this (with emphasis added):
An enactment of the Scottish Parliament which prevented such subordinate legislation from having legal effect, unless the Scottish Ministers gave their consent, would render the effect of laws made by the UK Parliament conditional on the consent of the Scottish Ministers. It would therefore limit the power of the UK Parliament to make laws for Scotland, since Parliament cannot meaningfully be said to “make laws” if the laws which it makes are of no effect. The imposition of such a condition on the UK Parliament’s law-making power would be inconsistent with the continued recognition, by section 28(7) of the Scotland Act, of its unqualified legislative power.
In this passage the Court appears to suggest that if the laws made by Westminster are ‘of no effect’, then Westminster’s competence to make them is essentially impaired. Although the context of this decision is quite different, this would suggest that the Court’s preferred view is that a competence is the power to make effective, as opposed to merely valid, law (the second approach outlined above). On this view, a significant qualification of a legislature’s power to make effective law would, therefore, qualify its competence.
However, there are two reasons to question whether this solves the problem: First, it is not clear the extent to which this broad interpretation of competence is itself reliant on ‘the continued recognition, by section 28(7) of the Scotland Act, of [Westminster’s] unqualified legislative power’. This protection, which is connected to parliamentary sovereignty, does not apply to the devolved institutions, nor do they benefit from any equivalent alternative. The Court’s approach appears to be more general than that, suggesting that effectiveness is a key component of competence regardless of whether the legislature in question would otherwise have unlimited legislative power. In other words, effectiveness is essential for a legislature to realise the full scope of its powers, however limited or broad those powers might be. Nonetheless, it is difficult to be certain about this given how thin judicial consideration of this issue has been so far.
A second reason to be sceptical is the recent ‘minimalist’ turn in the Supreme Court’s devolution jurisprudence. In its most recent case law, the Court has distanced itself from the generous and purpose interpretation of the devolution statutes that featured in earlier case law, preferring instead to emphasise the limitations in that legislation, interpreting their empowering provisions more narrowly.
The Court, then, has provided authority for a generous interpretation of competence, but it is not necessarily clear that it is one that will reach beyond the confines of Westminster and apply equally to the devolved institutions. It remains, therefore, arguably unclear how broadly the courts will construe the concept of devolved competence.
The UK Government has itself posited a different view, arguing that even with the UKIMA in force, ‘Senedd Cymru has competence to legislate in all areas which are not reserved… The boundaries of Senedd Cymru’s devolved competence set by the reservations in Schedule 7A to GOWA are […] unamended’. It would appear that, in its view, effectiveness and competence are distinct and the limitations to the effectiveness of devolved legislation entailed by the UKIMA do not, therefore, affect the Senedd’s competence. It is not clear how the UK Government squares this with the reasoning in Continuity Bill.
Why does this matter?
Westminster has the power⎯subject to various political limitations⎯to sculpt the boundaries of devolved competence. However, within those boundaries, the devolved legislatures have a relatively free hand. They cannot, for example, have their legislative choices challenged on the grounds of unreasonableness, and nor does their legislation need to be compatible with the body of Westminster’s own law. In fact, the devolved legislatures can, so far as it is within competence to do so, modify or repeal Westminster legislation. Indeed, section 5(6) of the Northern Ireland Act 1998 provides this expressly: ‘an Act of the Assembly may modify any provision made by or under an Act of Parliament so far as it is part of the law of Northern Ireland’. Although there is no explicit provision to this effect in the Scottish or Welsh devolution statutes, the same is clearly implicit in those schemes. If Westminster wishes to insulate a particular piece of legislation from this kind of interference, it can protect the relevant enactment or cordon off the policy area in question.
This has two consequences, one normative and one practical. On the normative side, devolution⎯at least on this view⎯provides for a system of legislative parity. The devolved legislatures’ constitutional stature is illustrated by their legislation, within competence, carrying equal normative weight to Westminster’s. Second, on the more practical side, the result is a dynamic settlement wherein, again within competence, Westminster and the devolved legislatures may engage in legislative ‘ping-pong’, each modifying or repealing the enactments of the other, creating a valuable policy laboratory. Westminster does retain the ability to foreclose some of this dynamism by narrowing devolved competences, but it remains, outwith that possibility, a key component of the settlement.
Although it is hoped that the courts will take up this opportunity with clarity and principle, no amount of legal theory can⎯or should⎯be relied upon as a substitute for political solutions.
However, if the broad approach to competence identified in Continuity Bill does not extend to the devolved legislatures, it would risk undermining each of these elements. As to the normative, it would introduce a new ‘bifurcation’ between Westminster and devolved legislation, suggesting that the latter is, even within competence, ‘second-class’ in a way not envisaged by the settlement. This would extend the normative distance between Westminster and the devolved institutions, representing something of a turning-point, albeit one perhaps consonant with the Supreme Court’s recent jurisprudence. On the practical side, it would erode the dynamism of the settlement, providing Westminster an avenue to require devolved legislation’s compatibility with its own legal frameworks. This would act as, in essence, a kind of supremacy clause, wherein Westminster can condition devolved law-making power in ordinary legislation, rather than solely by providing the extent of devolved competence in the devolution statutes. The UKIMA itself, through its market access principles, does provide exactly this kind of framework, but it has not yet been accepted by the courts that to do so is perfectly compatible with the nature of devolved competence. If this were accepted, it would certainly point towards this ‘bifurcated’ model.
There would also be a third consequence of a system that defined competence in one way for Westminster and in quite a different way for the devolved legislatures: It would conceal de facto changes in law-making capacity. If Westminster changes the law within devolved areas, or changes devolved competences themselves, this is subject to a variety of political constraints. Indeed, to make such changes would represent a policy choice, rightly exposed to debate and consideration, and for which Westminster could be held accountable. However, if changes to de facto devolved power are concealed⎯because, in qualifying the ‘effectiveness’ but not ‘validity’ of legislation, the ‘competence’ is technically unchanged⎯then this exposure is lost. It is arguably improper for such seismic constitutional changes to be effected so casually and without the scrutiny they warrant.
Challenges and opportunities
The UK Internal Market Act 2020 introduces a new problem for devolution. It, in limited circumstances, deprives devolved legislation of some of its effect, without rendering it invalid. Whether the courts find that this amounts to a limitation of devolved ‘competence’ depends, in part at least, on their understanding of that concept. There are suggestions, most obviously in Continuity Bill, that the courts’ understanding of competence does require that laws made pursuant to it are effective. However, it is not clear that this broad reading of the concept extends to the devolved legislatures. If it does not, then there are dangers that it might make devolved legislation ‘second-class’, as well as impairing the dynamism of devolution and concealing changes to de facto power.
Gofod i drafod, dadlau, ac ymchwilio.
Cefnogwch brif felin drafod annibynnol Cymru.
Regulating the UK’s internal market will require concepts like competence to develop where they are absent, and to mature where they are nascent. Although it is hoped that the courts will take up this opportunity with clarity and principle, no amount of legal theory can⎯or should⎯be relied upon as a substitute for political solutions. Clearly, bifurcating the meaning of competence so that it conceptually, or practically, subordinates the devolved institutions would be problematic, and it may be something that the courts will seek to avoid. However, there are limits to the protection that the courts can⎯or may be prepared to⎯provide. Nonetheless, ensuring the UK’s internal market accommodates the constitutional and democratic credentials of the devolved institutions is not the exclusive remit of the courts.
With thanks to Mark Elliott for his thoughts and comments on an earlier draft. Any errors or omissions are the author’s own.
Further reading
A broader and more legalistic analysis of this issue is explored here:
https://ukconstitutionallaw.org/2022/07/04/anurag-deb-and-nicholas-kilford-the-uk-internal-market-act-devolution-minimalism-and-competence-smoke-screen/
The Welsh Government’s legal challenge is explored in more depth here:
https://ukconstitutionallaw.org/2021/02/23/nicholas-kilford-the-uk-internal-market-acts-interaction-with-senedd-competences-the-welsh-governments-challenge/
All articles published on the welsh agenda are subject to IWA’s disclaimer.
