Devolved powers and the internal market post-Brexit

3 March 2022 by

R (on the Application of the Counsel General for Wales) v Secretary of State for business, Energy and Industrial Strategy [2022] EWCA Civ 118

The Court of Appeal decision handed down on 9th February 2022 is an important case concerning devolved powers.

The judgement concerns an application for permission to apply for judicial review made by the Counsel General for Wales to seek a declaration in the following terms:

The amendment of Schedule 7B of GoWA by section 54(2) of UKIMA, to add UKIMA to the list of protected enactments, does not amount to a reservation and does not operate so as to prevent the Senedd from legislating on devolved matters in a way that is inconsistent with the mutual recognition principle in UKIMA.

The application was dismissed, and the appellant appealed on the grounds that the Divisional Court was wrong to refuse permission on the grounds of prematurity.

Legal Framework

United Kingdom Internal Market Act 2020 [‘UKIMA’] was enacted to take effect upon the exit of the UK from the EU. During the UK’s membership of the EU, EU laws operated to govern the internal market for goods and services both across the EU and within member states, including the UK. The purpose of UKIMA was to promote the continued functioning of the internal market within the UK post-Brexit so that goods which have been produced in or imported into one part of the UK can be freely sold within another part of the UK.

Prior to the enactment of UKIMA, post-Brexit, devolved legislatures in the UK possessed significant law making power with the potential to affect the internal market within the UK.

Section 1 of the Government of Wales Act 2006 [‘GoWA’] provides for a parliament for Wales, known as the Senedd Cymru [‘the Senedd’]. S.107 of GoWA provides the Senedd with the power to legislate for Wales as well as the UK Parliament, however, UK parliament will not normally legislate with respect to devolved matters without the consent of the Senedd

Section 108A of GoWA provides that an Act of the Senedd shall not be law in so far as any provision is outside of the Senedd’s legislative competence. Subsection (2) lists scenarios in which a provision would be outside of that competence including:
(c) ‘it relates to reserved matters (see Schedule 7A)’; and
(d) ‘it breaches any of the restrictions in Part 1 of Schedule 7B, having regard to any exception in Part 2 of that Schedule from those restrictions’.

Schedule 7A is divided into two parts:
-Part 1 sets out general reservations where the Senedd does not have legislative competence; and
-Part 2 sets out specific reservations where certain matters are reserved to UK parliament but where there are exceptions in which the Senedd also has legislative competence.
Schedule 7B provides that an Act of the Senedd cannot modify specific areas of law and paragraph 5 of that schedule lists provisions protected from modification. Reference to UKIMA was inserted into paragraph 5 by section 54(2) of UKIMA.
Section 112(1) of GoWA provides for a procedure whereby the the Counsel General or Attorney General for Wales may refer a Bill of the Senedd to the Supreme Court to determine whether the Bill, or any provision within it, would be within the Senedd’s legislative competence.

Decision of the Divisional Court
The Divisional Court held that it be wrong to determine the issue in the absence of a specific Act of the Senedd. The Divisional Court referred to the judgement of Lord Phillips M.R in R (Burke) v General Medical Council [2006] QB 273 in which he referred to held that one

danger is that the court will enunciate propositions of principle without full appreciation of the implications that these will have in practice.

Furthermore, the Divisional Court considered the appropriateness of dealing with the issue under the judicial review process rather than under section 112 of GoWA but did not express a view on which route would be preferred.


Submissions

The Appellant argued that section 54(2) of UKIMA has the effect of extinguishing the practical effect of devolved powers in this area because any Act passed be Senedd which imposes restrictions on things sold in Wales can be passed but cannot be enforced in respect of produced which were produced in or imported into a UK territory other than Wales. The Respondent argued that it would be wrong to address the issue in the absence of specific legislation because any declaration might require caveats such as the extent to which the Senedd’s legislative competence was previously restricted by EU law.
The Appellant also argued that the provision would breach the rights of Welsh producers and importers as under Article 1 protocol 1 ECHR, read in conjunction with article 14, as they would be disadvantaged in that they would be subject to Welsh legislation but other producers in the UK would not be.
The Respondent argued that the appropriate route for such a determination is the mechanism provided by section 112 GoWA, rather than judicial review. In response, the Appellant argued that it would be in the public interest for the Court of Appeal to deal with the matter now as a referral under section 112 GoWA would require drafting of legislation, full consultation and determination as to competence by the presiding officer and person in charge of the Bill before a referral could be made. Furthermore, the Appellant raised concern that waiting until a specific Act was passed by the Senedd may cause an application for judicial review to be time barred.

Court of Appeal Decision

In her judgement, Nicola Davies LJ held that, although the Court did have the jurisdiction to determine a challenge as to the correct interpretation and effect of UKIMA in the absence of specific legislation, she did not consider this the appropriate course of action for three reasons:
(1) Jurisprudence cautions making an advisory declaration in the absence of a factual and legal context. With respect to the Appellant’s argument that the provision is discriminatory, it was held that determining whether a particular provision is discriminatory requires an appreciation of the specific terms of the legislation enacted. Again, it was held that this cannot be determined in the absence of specific enactment of the Senedd.
(2) There was no reason to be concerned as to an issue of delay in this case in respect of future proceedings because time will only begin to run for the purpose of any claim for judicial review when an attempt is made to pass legislation which is inconsistent with UKIMA.
(3) Parliament has created a route to address issues of competence in light of specific legislation through section 112 of GoWA. There is good constitutional reason to abide by the parliamentary process as set out in primary legislation.

Comment

Nicola Davies LJ didn’t hold that the Court didn’t have jurisdiction to determine the challenge as to the correct interpretation and effect of UKIMA, simply that she did not consider it appropriate to do so in this case.
The fact that UKIMA has been inserted into paragraph 5 of Schedule 7B of GoWA seems to necessitate an outcome that the Senedd’s legislative competence has been restricted. I do not consider that reference to specific legislation was needed to reach this outcome. To me, the discrimination argument appears to have muddied the waters as, in determining whether the effect of section 54(2) of UKIMA is discriminatory, the Court would need to reference a specific Act of the Senedd.
In considering the reasons why the use of the mechanism under section 112 of GoWA would be more appropriate, the judgement doesn’t appear to properly grapple with the reasons against doing so (the cost and time involved in enacting a Bill). Furthermore, this would not resolve the issue but would simply start the clock running for the process of challenging under judicial review.

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