The UK Parliament passed the UK Internal Market Act in December 2020, without the consent of the Senedd.
Parts 1-3 of the Act set new “market access principles” in law. The market access principles create the presumption that (in general) goods, services and professional qualifications that can be sold or recognised in one part of the UK should be able to be sold or recognised in any other part, regardless of what the law in that other part of the UK says.
At the time, Senedd committees said the principles could reduce the practical effect of laws made in Wales.
This article looks at how the market access principles in the Act have been working so far and their implications for the development of Welsh law.
The Welsh Government’s legal challenge to the Act has been unsuccessful so far
In February, the Court of Appeal dismissed the case brought by the Welsh Government challenging the UK Internal Market Act.
The Welsh Government had argued that the Government of Wales Act 2006 is a “constitutional statute”, and that the UK Parliament can only amend such a statute by making express changes to it.
It argued that the Internal Market Act diminishes the powers of the devolved institutions not expressly but by implication, and so breaches this principle.
The Court of Appeal upheld the earlier decision of the High Court that the case was brought prematurely, saying that only when there is a specific Senedd Bill whose potential effect is said to be diminished by the Act can the Court make a decision.
The Welsh Government is seeking permission for an appeal to the Supreme Court. It’s not guaranteed that appeal will be granted.
The Act is already affecting the development of Welsh law
The market access principles in the Act mean that goods or services permitted to be sold, or imported into, any part of the UK, can be sold in Wales, regardless of whether those goods or services comply with Welsh law (with some exceptions). This has practical implications for the development of Welsh law.
New rules on trade in spreadable fats (like butter and margarine) can offer us a case study on how the market access principles will work.
When the UK was an EU member state, EU law provided for mutual recognition for food products between the UK, EU and EEA countries, where food law was not harmonised or only partly harmonised.
To ensure this happened, mutual recognition clauses were added to Welsh law. In the case of spreadable fats, the mutual recognition clauses still mean that:
- spreadable fats brought into Wales from Iceland, Liechtenstein or Norway can be sold in Wales, even if not compliant with some Welsh food laws; and
- spreadable fats imported into another part of the UK from Iceland, Liechtenstein or Norway, and then brought into Wales, can be sold in Wales in the same way.
However, now that the UK has left the EU, other countries worldwide could choose to challenge this position under the rules of the World Trade Organisation, arguing that the clauses give EEA countries preferential treatment. As such, the Welsh Government no longer considers the mutual recognition clauses appropriate.
The Welsh Government is therefore removing the mutual recognition clauses via the Food (Withdrawal of Recognition) (Miscellaneous Amendments and Transitional Provisions) (Wales) (EU Exit) Regulations 2022, with effect from 1 October. Equivalent changes have been made in England and Scotland. Under the Ireland and Northern Ireland Protocol, Northern Ireland can’t make these changes and must continue to align with EU law.
The new Welsh regulations will remove the mutual recognition clauses. This means that spreadable fats brought into Wales from Iceland, Liechtenstein or Norway will have to comply with Welsh law.
The regulations will also remove the mutual recognition clauses for spreadable fats imported into another part of the UK from Iceland, Liechtenstein or Norway and then brought into Wales.
This might be taken to mean that such spreadable fats will have to comply with Welsh law. However, the market access principles in the Internal Market Act will apply. So if such a spreadable fat were brought into (say) England, and could be sold under English law, that spreadable fat could then be sold in Wales, even if it didn’t comply with Welsh law.
The UK and devolved governments have agreed a process for agreeing exclusions from the Act
Sections 10 and 18 of the Act allow the UK Government to make regulations to create exclusions from the market access principles. This may be, but does not have to be, to give effect to an agreement that forms part of a common framework.
In December 2021, the UK and devolved governments agreed a process for considering exclusions from the UK Internal Market Act in common framework areas. This says that:
- the government seeking the exclusion should set out the scope and reasons for it;
- the governments should jointly consider the proposed exclusion through the decision-making process set out in the common framework, assessing evidence for the exclusion and its potential impact;
- when the governments make a decision on an exclusion, they should record their final positions and whether agreement has been reached; and
- if the governments agree to create an exclusion, the relevant UK Minister should make regulations to that effect.
The Scottish Government is already seeking an exclusion from the Act for new legislation for Scotland on single-use plastics, with the support of the Welsh Government. The UK Government says that “cross-Whitehall discussions are ongoing” about the request.
It’s not clear if or how the Welsh Government will use this process itself. In correspondence with the Senedd’s Legislation, Justice and Constitution Committee in March, the Welsh Government said its approach to seeking exclusions will vary and that it would notify the Senedd if it sought an exclusion.
New arrangements for overseeing the UK internal market are emerging
The Act set up a new Office for the Internal Market (OIM) within the Competition and Markets Authority to monitor and provide advice on the UK internal market and how the Act is working. Unlike the European Commission in the EU single market, the OIM wasn’t given any powers to enforce decisions. The Act was also silent on how the UK and devolved governments should work together to manage the internal market.
On 22 March, the OIM published an initial report on the state of the UK internal market. In an overview of changes to regulation since the end of the transition period, the OIM found no evidence of “substantial new policy divergence” between the different countries in the UK since the end of the Brexit transition period, but collated examples of areas in which future divergence could develop.
As part of the conclusions of the Intergovernmental Relations Review, the UK and devolved governments have now agreed to give the new Interministerial Standing Committee (IMSC) oversight of the common frameworks programme and responsibility to consider issues that “have an impact on regulatory standards across the UK for internal trade”.
It's not yet clear how the IMSC will carry out this work, but it could include oversight of how the Act is working, the process for agreeing exclusions from the Act, and the reporting of the OIM.
In the meantime, the Welsh Government and the Senedd will need to continue to consider the implications of the Act as they make new laws for Wales.
Article by Lucy Valsamidis and Gareth Howells, Senedd Research and Legal Services, Welsh Parliament