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Digital Business Lawyer

UK’s Repeal Bill instigates further calls for clarity for the digital market

The Secretary of State for Exiting the European Union, David Davis, presented to Parliament the Great Repeal Bill: White Paper on Legislating for the United Kingdom’s withdrawal from the European Union on 30 March 2017, which presents the Government’s proposed approach to achieving a stable and smooth exit from the EU that will involve the conversion of the body of existing EU law into domestic law, and will create powers to make secondary legislation to enable ‘corrections’ to be made to the laws that would otherwise no longer operate appropriately. The UK Parliament will then decide on which elements of the law to keep, amend and repeal once the UK has left the EU, which ‘ensures that, as a general rule, the same rules and laws will apply after we leave the EU as they did before,’ states the White Paper.

Rob Bratby, Partner at Arnold & Porter Kaye Scholer LLP, fears that the White Paper “grossly over-simplifies the position and glosses over the very significant legislative and consequential business problems that will arise from the UK’s departure from the EU in the absence of a comprehensive and detailed free trade agreement. In particular, the White Paper ignores the fundamental problem that any cross-border issues cannot be dealt with by UK only legislation, but will require agreement with the EU. In many cases it is simply not possible for the UK to ‘convert’ or ‘correct’ EU legislation to work post-Brexit without the explicit agreement of the EU and consequential implementing EU legislation.”

Cross-border data transfer, according to Bratby, is a simple example to illustrate the problem. “Regardless of what the UK does to ‘convert’ or ‘correct’ its legislation, the EU legislation applicable in other Member States will treat the UK as being outside the EU,” explains Bratby. “So as far as cross-border data transfer is concerned, unless the Commission finds that the UK has an adequate level of protection, companies will need to put in place appropriate alternative safeguards for cross-border data transfers to the UK. In this case, there is simply nothing that the UK can do by means of unilateral UK legislation to fix this issue.”

Miriam Gonzalez, Partner and Co-Chair of Dechert’s International Trade and Government Regulation practice, expresses concern about the potential impact that the end to the jurisdiction of the Court of Justice of the European Union in the UK after Brexit could have on the UK’s digital market. “Many of the digital market rules are not just ‘market access’ rules, but harmonisation rules, based on the trust between authorities across Europe that agree to recognise the regulation from other EU countries. For such rules to work the jurisdiction of the European Court of Justice is key. By ruling out a role for the European Court of Justice, the Government is basically eliminating the chance for UK companies and citizens to have access to those benefits,” thinks Gonzalez.

The UK’s access to Europe’s Digital Single Market (‘DSM’) and the ongoing work relating to the European Commission’s Digital Single Market (‘DSM’) Strategy, which is accompanied by a package of legislative proposals and which remains a work in progress with none of its strands fully finalised, will be impacted by the UK’s exit from the EU. The UK Government has stated that despite Brexit it will continue to play a proactive role in DSM negotiations until the UK leaves the EU. The UK’s European Scrutiny Committee, which met on 22 March 2017, has stated that greater clarity is needed on the issues that the DSM Strategy seeks to address in the context of the UK’s imminent exit from the EU and has requested that the UK Government provide a case-by-case assessment of the extent to which the policy objectives of each of the DSM proposals could be achieved solely through domestic legislation or would require some form of bilateral agreement with the EU.

“Some say that Brexit might offer the UK a chance to make itself a more attractive place to grow digital businesses, free from some of the restrictions being proposed in Brussels,” adds Ben Allgrove, Partner at Baker & McKenzie LLP. “The principal concern for most will be data protection adequacy. If the UK and EU 27 do not come to an agreement that allows data to flow freely between the UK and the Continent, then that will be a major hindrance to the UK's digital economy. I'd expect that would be at the very top of the priority list for the UK in the negotiations. Any UK digital business should certainly be telling the Government that they need to sort this.”

The European Scrutiny Committee’s press release from the 22 March meeting states that although reluctant to discuss negotiation priorities, the Government has also told the Committee that it regards the free flow of data as fundamental to the functioning of the digital economy and that it sees global data flows as being of high importance.

The Exiting the European Union Committee - in its third report published on 3 April 2017 - on its inquiry into the UK’s negotiating objectives for withdrawal from the EU, identifies the digital industry as an increasingly important sector to the UK economy, which is reliant on the stability of data flows across UK and EU borders. The Committee states that ‘the UK Government must seek to maintain uninterrupted UK-EU data flows by securing a data adequacy agreement with the EU before the end of the Article 50 negotiations.’

“Unless the UK can agree a comprehensive free trade agreement with the EU, Brexit will only be negative for the UK’s digital economy,” concludes Bratby. “The ability for businesses in the UK to freely trade across the EU and employ skilled EU citizens are critical to the ongoing success of the sector.”

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