UK Internal Market Act passed into law

Out-Law News | 21 Dec 2020 | 11:00 am | 2 min. read

The UK Internal Market Act 2020 has been passed by the UK parliament, paving the way for its entry in force on 1 January 2021, when the Brexit transition period ends.

The Act limits the new barriers to trade that can arise as a result of regulatory divergence in different parts of the UK, once the EU's internal market rules cease to apply. The Act's core principles of mutual recognition and non-discrimination mean that rules set at Westminster would, by default, override future legislation on matters such as public health and environmental protection passed by the devolved legislatures in Scotland, Wales and Northern Ireland in the event they diverge.

Business secretary Alok Sharma said: "Today’s law will ensure businesses can continue trading unhindered from 1 January, while upholding the UK’s world-leading standards in food, the environment and workers’ rights, protecting jobs and helping us build back better from the pandemic."

David Thorneloe

David Thorneloe

Legal Director

In order to preserve free trade across the UK, the Act restricts [the devolved administrations'] legislative powers considerably

After dropping controversial Brexit clauses on the Northern Ireland Protocol, the UK government made concessions recognising that regulatory divergence could be agreed between the UK government and devolved administrations through the political process known as 'common frameworks'. This proved sufficient for the House of Lords to withdraw its remaining objections to the Act's impact on the UK's devolution settlement.

The concessions, however, have done nothing to dampen the anger at the Act of the Welsh and Scottish governments, with the latter describing it as “an act of constitutional sabotage”. The Welsh and Scottish governments have stated that they plan to bring a joint legal challenge to the validity of the Act, by way of judicial review.

Public law expert David Thorneloe of Pinsent Masons, the law firm behind Out-Law, said: "The reaction of the devolved administrations in Edinburgh and Cardiff to the passing of the Act is understandable. In order to preserve free trade across the UK, the Act restricts their legislative powers considerably. So if they wish to regulate retail sales in a way that promotes higher standards of environmental protection, for example, this can only take full effect for all goods in their territory if the UK government gives its agreement through the common frameworks process."

"However, their legal challenge is unlikely to make much headway. Reports suggest they will argue that the Scotland Act and the Government of Wales Act, as constitutional statutes, can only be modified by express amendment. Whilst that principle is important to prevent implied modifications, it is stretching things to apply it to the UK Internal Market Act, which leaves no doubt as to the effect it intends. It may be that the legal challenge is aimed more at the court of public opinion, with elections to the Senedd and the Scottish Parliament just a few months away."

The UK government has also announced that the new Office for the Internal Market (OIM) will not take up its new role of monitoring and reporting on the smooth running of the UK internal market until later in 2021, once the appointments process has been completed.

Competition law expert Alan Davis of Pinsent Masons, the law firm behind Out-Law, said: "The Act is likely to provide greater clarity to businesses trading in the UK in the years ahead, whether they are based here or overseas. If new regulatory barriers to trade within the UK are created, the Act can be used as a sword or a shield to overcome them."