Regulatory Risks

When the UK leaves the EU it can impose any product rules or practices it wishes. Apart from this, administrative bodies and government purchasing entities could place rules and requirements and restrictions that have the same effect as a regulatory requirement, effectively making import goods harder to comply and favouring domestic producers.

Apart from the areas where there are harmonised rules (CE marking)), there are very powerful EU wide rules that invalidate attempts by EU states to impose hidden barriers to trade. There can be any kinds of restrictive practices, local rules and requirements e.g. for local labour having a local office, the local composition of the product and multiple other hidden subtle and not so subtle barriers.

An important aspect of the European Union is that the courts in all states have the power to override any such rules as there are strong central EU treaty principles which invalidate them. In addition, the EU Commission are strong powers to challenge states which put in place regulation inconsistent with the basic freedoms to trade throughout the European Union or which make additional requirements where they are anything other than absolutely essential.

The strong protections basically make invalid rules and practice rules and practices which are anything other than wholly necessary. In effect, there is a very strong presumption that goods which meet the standards in one EU country should be entitled to be placed on the market in all states.

When the UK leaves the EU these powerful protections (which give long-term confidence to investors) will no longer be available. It might be that the current government makes no changes but it is always possible that some future government might do so. Moreover, a state may  simply permit industries which might want to introduce such rules. Trade bodies might simply impose practices of their own accord, without referring to any government or administrative body.

There are World Trade Organisation rules which seek to prevent hidden barriers which to some extent, look like the EU rules. However, the important point is that they are  vague and can only be enforced on a government to government faces. The ultimate remedy would be that one state after going through a long process through international courts and arbitration might be permitted to put in place countermeasures against hidden protections.

Although the same rules seem to exist they are not in any way remotely comparable to European Union rules which are much more effective. Any trader can simply walk into court or complain to the Commission and invalidate restrictions.

It is possible that the EU and UK may enter an agreement that has a little bit more teeth in relation to hidden barriers. The UK is very much against the European Court of Justice having any role so that the enforcement of the rules even if they are more precise than the WTO rules are likely to be still slow blunt and impractical

The UK at least during Conservative governments has a strong record of deregulation and removing red tape. However, in a post-Brexit would is hard to say what way things might go. Protecting local industry may be seen as important.

We are setting out the above only to give some background and context. This is what theoretically could happen in a worst-case scenario. It could happen if the same thing was happening to UK goods on the EU market. It is very hard to predict how these things may go.

 Most international standards are derived from ISO and other international bodies procedures and standards. There is no good reason why states should adopt differing standards in almost all instances The risk is more in the nature of restrictive practices favouring the UK producers or UK retaliating because the EU does something of this nature.