UK Supreme Court rewrites the rules on retained EU case law

The ruling may prompt the EU to raise concerns with the UK government about UK compliance with the 2019 UK-EU Withdrawal Agreement, and will create greater legal uncertainty for businesses and individuals as to whether other legislation across the UK statute book will be applied retrospectively, contrary to previous expectations.

Background

The Lipton v BA City Flyer Ltd  case (93-page / 490KB PDF) concerned a claim for compensation for a delayed flight, and whether there were ‘extraordinary circumstances’ within the meaning of Regulation (EC) 261/2004 which excluded the case from the duty to compensate passengers. The flight in question was in January 2018 and the claimants commenced proceedings shortly after this, and before Brexit. The court found that the sickness of the captain that caused the delay did not constitute ‘extraordinary circumstances’, but most of the judgment is taken up with arguments as to what law applied to the case, and whether Court of Justice of the EU (CJEU) case law on the meaning of ‘extraordinary circumstances’ was binding on the Supreme Court.

At the time of the flight, the UK was an EU member state. Therefore, the EU Regulation in question was directly applicable in UK law, and CJEU case law was binding on UK courts, by virtue of the European Communities Act 1972. However, when Brexit took effect on 31 December 2020, the 1972 Act was repealed and former EU legislation like this was incorporated into the UK legal system with some changes as 'retained EU law' by the EU (Withdrawal) Act 2018. It was renamed as ‘assimilated law’ from January 2024, with further reforms taking effect, by the Retained EU Law (Revocation and Reform) Act 2023.

These Brexit reforms prompted the question of which law applied in relation to the claimants’ case: was it the EU law as it applied under the 1972 Act in 2018, or was it retained EU law as it applied in 2024 under the 2018 Act? This in turn determined whether CJEU case law was binding under the 1972 Act, or whether the Supreme Court had a discretion to depart from CJEU case law under section 6 of the 2018 Act.

The orthodox position on transitions to changes in the law

The orthodox analysis usually applied to changes in the law effected by legislation is based on section 16 of the Interpretation Act 1978. This provides that – generally – a repeal or amendment made by new legislation does not have retrospective effect modifying the law as it previously applied to events at the time they occurred, unless the repeal or amendment is clearly expressed in a way intended to have retrospective effect. The provision reflects the principle that our common law may restrict retrospective effect that causes unfairness, or the Human Rights Act 1998 may restrict it where it impacts on human rights.

It is an established practice of successive UK governments and their legislative drafters that most government legislation does not have retrospective effect, with this result usually being achieved not by express words in the new legislation, but by the absence of words combined with reliance on the Interpretation Act. The 2018 Act follows precisely this approach, subject to a few notable exceptions not applicable in the Lipton case, where it expressly envisages some specific reforms applying in relation to new legal proceedings, whether or not they are based on pre-Brexit events.

The Supreme Court’s unorthodox approach to the transition

In the Lipton case, the Supreme Court turned this orthodox position on its head. Rather than taking the Interpretation Act’s presumption and looking for clear words in the 2018 Act to overturn it, it inferred from the overall scheme of the 2018 Act that it was intended to reverse the Interpretation Act’s presumption. This was the case for all the reforms made, and not only those on which retrospective effect was expressly provided for. To support this conclusion, the court referred to the 2018 Act’s Explanatory Notes as providing “no support” for the alternative position, and even suggested that the heading to section 6 of the 2018 Act was more significant than the wording of section 6 itself – a remarkable approach to statutory interpretation.

Tellingly, the court noted that if it instead applied the orthodox approach, this would mean it continued to be bound by CJEU case law post-Brexit when hearing cases that concerned pre-Brexit events. The judges felt that this outcome could not possibly have been intended by parliament, and this judicial instinct for a presumed intention of maximum control of their own decision-making remit appears to have dictated their overall approach.

It followed, said the court, that section 6 of the 2018 Act applied in all post-Brexit proceedings before the Court of Appeal or Supreme Court, whether concerning pre-Brexit or post-Brexit events, so that these courts had the discretion to depart from CJEU case law in any such case, where they considered it appropriate to do so.

Implications of the Supreme Court ruling

Strictly speaking, the court’s ruling on these issues was ‘obiter’ guidance and not a binding ruling for other courts. This is because it was not an essential part of its ultimate decision, in that it decided to agree with the CJEU case law on ‘extraordinary circumstances’ in any event. But as an analysis running to over 50 pages and supported by four of the five judges, the judgment will be very influential and hard to overturn.

Previously, in pre-Brexit proceedings on pre-Brexit events, CJEU case law would have applied automatically if the proceedings were concluded by December 2020. The new ruling means that, if those same proceedings continue, or are only started, post-Brexit, then the higher courts have some discretion to reach a different outcome and depart from CJEU case law, because the 2018 Act is applied retrospectively to the case. However, it is important to bear in mind that the UK courts have so far generally been content to continue following CJEU case law in most cases, just as the Supreme Court did in this case.

The 2018 Act was not intended to have retrospective effect on individuals’ existing pre-Brexit EU law rights in this way, and it is helpful to recall the context of the negotiations on the 2019 UK-EU Withdrawal Agreement. It was recognised then that the principles in Article 70 of the Vienna Convention on the Law of Treaties applied as principles of customary international law in relation to the UK’s withdrawal from the EU Treaties. Article 70 is similar to section 16 of the Interpretation Act, in making clear that withdrawal from a Treaty does not have retrospective effect releasing a state from any obligation relating to events taking place before withdrawal, unless clear wording is expressed to the contrary. The lengthy negotiations around the terms of the UK’s financial settlement of its prior obligations on leaving the EU illustrate the principle in action.

The Supreme Court’s assertion that it may now sweep aside pre-Brexit EU law rights and obligations where it chooses to disregard CJEU case law may well attract some attention in Brussels. Other comments in the judgment about Article 4 of the Withdrawal Agreement may also concern the EU, in that the Supreme Court appeared to suggest it does not consider itself bound to follow CJEU case law in relation to the EU law that continues to apply post-Brexit in Northern Ireland under the Northern Ireland Protocol and Windsor Framework. It would not be surprising if the EU raised concerns with the UK government about the Lipton judgment in their next Joint Committee meeting under the Withdrawal Agreement framework.

Broader implications

Further changes are coming in October 2024 to section 6 of the 2018 Act, as amended by the 2023 Act, regarding the way our higher courts exercise their discretion to depart from EU case law, and some new court procedures that will apply. However, the issues discussed in this judgment should not operate to make those changes retrospective in the same way, because on this occasion the new legislation expressly bars retrospective application of the changes.

The broader implications of this judgment may potentially be felt right across the statute book, far beyond the reach of retained EU law, wherever new legislation has been passed that relies silently on the Interpretation Act to prevent the retrospective effect of changes in the law. The Supreme Court has now cast serious doubt on that approach, suggesting that an intention to apply changes retrospectively may be inferred more readily, where new legislation has not expressly addressed the point. It is unlikely that courts will be prepared to go this far in many cases where retrospection would cause unfairness or infringe individuals’ rights based on the law as it stood at the time of their actions. But there is now considerable uncertainty as to how reliable the Interpretation Act is as a bar on retrospective effect, and that uncertainty is likely to fuel more litigation on the subject in the coming years.

We recently saw widespread criticism of the reforms to the treatment of retained EU case law that were made by the Retained EU Law Act 2023, on the grounds that they increased legal uncertainty. Uncertainty is bad for business, bad for government, bad for individuals and anyone else who relies on legislation and cannot be fully confident as to how it will be applied by the courts. It is unfortunate that the Supreme Court, in so readily turning orthodox principles of interpretation on their head, has done further damage to legal certainty.