BREXIT: Parallel EU/UK competition regimes likely to double compliance work

Out-Law Analysis | 27 Apr 2016 | 10:34 am | 2 min. read

FOCUS: The UK's competition rules are currently virtually identical to those of the EU, and the European Commission's broad jurisdiction in the competition area means that businesses often only have to deal with either the UK or the EU competition authority.

This is part of Out-Law's series of news and insights from Pinsent Masons lawyers and other experts on the impact of the UK's EU referendum. Sign up to receive our Brexit updates by email.

If the UK were to leave the EU, this would change. Businesses would be more likely to have to deal with the UK and the EU competition authorities concurrently even though, at least initially, the two systems would be likely to be interpreted and applied in a very similar way.

Over time however the two sets of regulations may begin to diverge, as new decisions are made by both the EU and UK courts, further complicating the decision-making process for any UK business working in Europe.

A further question would be how UK courts would deal with previous EU case law in the competition area, in the longer term.

In the area of state aid, the UK government may, free from the EU rules in this area, have more flexibility on providing state funding to business, although the UK would still need to comply with World Trade Organisation (WTO)  rules on state aid.

In public procurement, there may be UK government appetite for some regulatory changes away from the EU's control. However, that is unlikely to be high on the government's agenda as it struggles to adjust to an independent situation, so I foresee a parallel system may operate in that area for rather longer. 

Another area of concern is trade: tariffs and trading blocs will pose a significant challenge for UK business if voters elect to leave the EU.

If the UK left the EU it would fall outside of the many trading treaties that the EU is signed up to. It will take time to negotiate entry under these treaties for an independent UK, and it is hard to imagine that this could be done within the two years allowed for withdrawing from the Union under Article 50 of the Treaty on European Union (TEU).

If the UK fails to win an extension to that period, or unless transitional arrangements are put in place on an interim basis, it will be subject to World Trade Organisation (WTO) trading rules, putting it at 'arms' length' as a trading partner both in the EU and internationally.

This is just part of the uncertainty that a vote to leave the EU would bring. It is important to stress how difficult that level of uncertainty would be for both UK and EU business, and that it will go on for many years: it is not something that will be tidied up in 24 months.

The eventual results would depend on the direction that the UK government chose to take. I do not believe that we are likely to join the European Free Trade Association (EFTA) or to follow the Swiss model, because that would simply mean the UK accepting the great majority of the existing and future EU rules, including free movement of EU nationals, but with the UK having even less influence over future EU legislation.

A more likely scenario is that we will try to negotiate an agreement similar to CETA, the free trade agreement being agreed between the EU and Canada.

That, however, would see a long period of 'horse trading' as we negotiate terms that are acceptable to all sides, particularly given that the UK wants to gain free movement of services and goods without having to accept a corresponding free movement of EU nationals. 

Guy Lougher is a competition law expert with Pinsent Masons, the law firm behind Out-Law.com.