Brexit Institute News

Brexit and Consumer Protection

by Rónán Condon, Assistant Professor in European Private Law, Dublin City University

It is difficult to speculate as to the future of the consumer protection acquis in a post-Brexit settlement, at a time in which the EU-UK negotiating teams seem locked in stalemate as to the three core Withdrawal Agreement issues, which require ‘sufficient progress’ so that the next round of substantive negotiations can commence. Consumer law is far down the current agenda. Second, the form Brexit takes on in the Future Relationship Agreement – whether hard, soft or bespoke – is of considerable importance: a so-called ‘soft’ Brexit whereby the UK remains within the EEA would mean that the UK remains legally obliged to adhere to EU consumer law including largely the CJEU’s interpretation thereof, whereas a ‘hard’ Brexit would mean that the UK is no longer legally obliged to uphold the acquis. A bespoke agreement is the least certain outcome as to consumer law rules. And what are these rules?

The consumer law acquis has developed steadily from the Single European Act onwards, largely adopted on based of Article 100a (now  Article 114 TFEU) – the internal market competence – and now represents a vast area of protective and regulatory European ‘private’ law. The acquis ranges, inter alia, from package holidays, to roaming charges, to product safety and liability, to contract formation, interpretation and remedies, to unfair commercial practices, to consumer injunctions, to financial services contracts and, more recently, to alternative forms of dispute resolution and beyond. In terms of its practical importance, EU legislation has greatly advanced consumer protection in the UK by providing a far more exacting review of contract terms, including exemption clauses, than the common law. Second, by providing recourse against misleading advertising and aggressive practices the EU directive goes beyond contractual misrepresentation and, in some cases, requires informed decision-making. However, perhaps most importantly, it attempts to solve a classic collective action problem by entrusting the Competition and Market Authority with enforcement powers. These are a few pro-consumer achievements, which largely address sharp practices, but there are many more left unstated. However, it is important to point out that these measures are two-faced: they are not only protective, in the sense of ironing out imbalances of power between businesses and consumers, they serve also as market regulatory devices. In either case, the CJEU is the final arbiter of their meaning.

While it is impossible to decipher what Prime Minister May’s ‘Brexit means Brexit’ tautology means exactly, and even more difficult to speculate on the volatile internal politics of the conservative party, the Withdrawal Bill, 2017, provides a benchmark or, at least, a sufficiently clear opening position from which to surmise. If it is followed through, it promises a bumpy landing. Article 6 indicates that the UK wishes to remove the possibility of preliminary reference to the CJEU, which follows logically from Article 5 – the end of supremacy of EU law. Yet, all existing EU law is supposed to carry over the cliff-edge into UK domestic law, subject to subsequent repeal. In other words, from a formal point-of-view EU law is demoted to the status of foreign law, but from a factual point-of-view the acquis remains the law on the books but loses its constitutional significance – where the British legislature sees fit, it is European consumer law à la carte.

The major problem with such an approach is that it is, from a consumer law perspective, a hard Brexit dressed as a softer separation. For consumer law, it means a breach with EU legal culture. The acquis will continue to evolve furnishing more and more consumer law interventions while UK law will chart its own path. That is, of course, dependent on a Brexit outside the EEA. If the UK remains in the EEA, then this is not a significant issue. However, if we follow the logic of the Withdrawal Bill this path is uncertain. It is inevitable that once the preliminary reference procedure is abolished, and once British courts no longer find themselves obligated to apply EU law in a consistent way, or indeed at all, significant divergences in the application of the law will emerge. This is the case even if the UK legislature continues to enact mirror image legislation to future EU consumer protection legislation. Courts unshackled by the host of EU interpretative techniques, and their outcomes, will most likely revert to a narrower interpretation of the scope of consumer law obligations. This is because the driver of much consumer law legislation and jurisprudence has been the need to complete the internal market based on Article 100a (now  Article 114 TFEU). This purposive competence (as Gareth Davies calls it) shapes the way in which EU law is developed; indeed, it impossible to understand EU private law without reference to its functional design. It is regulatory private law, which impacts on its rules (providing information, removing informational asymmetries, removing inequalities of bargaining power because a market failure, not exclusively or primarily as a matter of social justice).

More recently, a rights-focused Charter dimension has begun to supplement the economic motor. Together, these are the drivers of legal innovation in the interpretation of directives. Significantly, today, a large number of cases before the CJEU refer to the Charter of Fundamental Rights, which is set to play an increasingly significant role in the interpretation of secondary law. For example, in Mohamed Aziz, C-415/11, EU:C:2013:164, the Charter is explicitly referred to in the interpretation of the Unfair Terms Directive, whereas in  Boston Scientific, Joined Cases C‑503/13 and C‑504/13, ECLI:EU:C:2015:148, reference is more implicit (although see AG Bot’s opinion). It is instructive that the Charter is among the sticking points for the UK. To put this another way, if a significant motor of legal developments is taken out of the frame, it is difficult to see how UK courts will continue to interpret existing law, for example, the Unfair Terms Directive, in an expansive way. Indeed, when UKSC did have the occasion to interpret Aziz recently, their interpretation was restrictive (see ParkingEye Ltd v Beavis and Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67).

Now, what all this means is that disembedded from the EU-CJEU context, before a UK court that presumably has little interest in solving the balance between social justice and market justice in a unified legal order, divergence is inevitable. From an EU perspective it is highly undesirable, and simply repealing and re-enacting EU law does not resolve it. Without the autonomous interpretation of EU law, consumer law acquis is limp. This is not just bad news for UK citizens but also for EU citizens, because it may result in regulatory competition should the UK decide to undercut harmonised standards. For example, the removal of the Product Liability Directive could lead to a reversion from a regime of stricter liability to one of fault or negligence, which could potentially result in externalisation of the costs of accidents, giving UK companies a competitive advantage. At the other end of the product life-cycle, a hard Brexit requires the UK to develop its own product safety standards, which can presumably depart from the precautionary principle embracing a more cost-benefit risk assessment, and still comply with WTO rules should a harder Brexit come to pass. This would neither be in the interests of the EU or of UK producers, for whom the removal of automatic mutual recognition in product standards would generate medium term uncertainty; and arguably it would not be in the interests of British consumers either.