Last reviewed 22 February 2021

What does the Brexit trade agreement say about non-regression and what might this mean for environmental legislation? Laura King investigates.

On Christmas Eve, the UK and European Union struck a trade deal, The Trade and Cooperation Agreement (TCA), avoiding a no-deal Brexit and ushering in a new era for the UK’s relationship with Europe.

One aspect of the agreement that has featured heavily in negotiations has been the concept of a level playing field, a term that refers to both sides abiding by a common set of rules with the result that a business in one country cannot undercut a rival in another country.

However, although the concept of a level playing field is often a feature in free trade agreements, this was an area where the differences between the UK and the EU was most pronounced. On one side, the UK wanted the agreement to be much closer to a typical trade agreement and did not want any obligation to adopt future EU regulation or to be under the jurisdiction of the European Court of Justice. On the other side, the EU wanted clear commitments to maintaining a level playing field in line with the EU’s regulatory approach.

How has the level playing field been adopted?

A non-regression clause has long been cited as one way in which the EU and UK’s positions could be reconciled, and the TCA has adopted such a stance, honouring the UK wishes (Article 7.2(1)) but requiring that: “A Party shall not weaken or reduce, in a manner affecting trade or investment between the Parties, its environmental levels of protection or its climate level of protection below the levels that are in place at the end of the transition period.” (Article 7.2(2)).

“Environmental levels of protection” are defined in Article 7.1 and include areas of law such as industrial emissions, air quality, biodiversity and waste.

There are also additional levels of environmental protection over and above the non-regression clauses. Within the areas listed in Article 7.1, any targets that have been set by the end of the transition period (for example, 2030 air pollution ceiling targets) remain in place and there is a recognition that both Parties have a commitment to a shared biosphere. Furthermore, the agreement sets out the principles on which future environmental protection measures should be based, including the polluter pays principle.

Finally, there are also clear requirements in relation to carbon and climate action. In Article 1.1 (3), the agreement states that: “Each Party reaffirms its ambition of achieving economy-wide climate neutrality by 2050.” In Article 7.3 on carbon pricing, the agreement requires that each party has in place a mechanism for carbon pricing to which the non-regression clause also applies.

What would regression look like?

In a research paper on environmental protections and the level playing field by Brexit and Environment, some examples of regression were given. These included:

  • policy regression, for example by changing legislation or not updating policies to reflect new science

  • moving decisions to another arena, for example by moving enforcement into a different agency at the same time as cutting budgets

  • symbolic regression, for example by highlighting the benefits of regression by bemoaning the requirements necessary to uphold environmental standards.

How likely is regression?

A crucial aspect of the TCA is that the non-regression clause only applies to weakening of standards where it might impact on EU trade. As a result, its impact on other areas of protection, for example importing goods that do not meet certain standards or more general environmental protections, are not covered.

On 6 January 2021, the House of Commons Committee on the Future Relationship with the European Union took oral evidence from experts on the TCA and what protections and provisions it contains.

In the session, they outlined that although there was no materiality test for non-regression, the point at which a dispute could be triggered is difficult to pin-point. Using working time regulations as an example, Professor Barnard, Professor of European Union and Labour Law at the University of Cambridge explained that it might be hard to argue that a single change to legislation would impact trade: “it is quite hard to argue that some smaller changes, significant for employees, will in and of themselves be enough to trigger the threshold of affecting trade or investment, even without the criterion of materiality”. However, she also expressed uncertainty about when the impact of cumulative changes might tip the balance.

Indeed, the panel of experts agreed that although the potential fallout from regression (Article 9.3 and 9.4) is more severe than other countries’ trade agreements with the EU, the tipping point will remain unknown until it is tested.

In lieu of either Party adopting the dispute resolution mechanisms in the agreement, the TCA also allows for a rebalancing review in four years’ time to determine whether the non-regression clause has been upheld, and whether obligations under the agreement are working as both the UK and EU anticipated. If rebalancing is required then parts of the agreement could be suspended. A wider review is also permitted for five years’ time.

When asked where the likely areas of regression were, Sam Lowe Senior Research Fellow, Centre for European Reform said: “To put it crudely, it is a political question. What are the Government’s objectives? What areas have they identified as an opportunity for themselves in diverging from EU approaches, and what do they feel the consequences of that divergence will be?”

Ultimately, although there will be some policies that the UK is likely to stay in line with — climate ambition being one area that appears to have a strong footing — areas open to divergence are yet to be determined. Likely contenders identified by the panel included state aid, and labour and social law.

What role does the Environment Bill play?

The Environment Bill plays a key role in the TCA as it sets out how non-regression might be monitored, as well as legislating for the role of the Office for Environmental Protection (OEP) which replaces the European Courts.

On non-regression, the Bill currently requires the Secretary of State to review and report every two years on “developments in international environmental protection legislation which appear to the Secretary of State to be significant” (s.20), although there are no specific requirements to include developments in the EU. There is also a requirement when debating Bills that include environmental law to outline whether the provisions of the Bill will reduce existing levels of environmental protection (s.19). However, there is no requirements to act on these reports or statements, or clear consequences for weaking protections.

In adopting the role of the European Court of Justice, many environmental groups have called for the OEP to be an independent body. However, although the OEP must “act objectively and impartially” (s.22) and in Schedule 1 it states that the “Secretary of State must have regard to the need to protect its [the OEP’s] independence” there remains some areas of concern. For example, Schedule 1 states the body’s Chair and non-executive members will be appointed by the Secretary of State, which could be seen to hinder impartiality.

Summary

The TCA is considered by many to be better than a no-deal Brexit. Where it might impact on trade, it includes a non-regression clause that protects environmental standards at the current levels. However, although there is not a need to prove materiality to trigger the cause, there is currently no test for what could be considered as having an effect on trade.