Notwithstanding the fact that a draft deal has been agreed between the EU and the UK at a technical level, the developments of recent days and weeks have made it clear that significant obstacles will need to be overcome before any deal can be finalised and ratified. In light of this uncertainty, there remains a very real possibility that the UK could leave the European Union without a deal in place on 29 March 2019 (“Exit Day”).
The UK Government has been publishing a steady flow of Technical Notices setting out the high-level implications for UK citizens and businesses in the event of a “no-deal” Brexit. In tandem, the UK Government has begun an overhaul of the UK’s legal and regulatory environment of unprecedented scale and speed and is publishing up to 1,000 new pieces of secondary legislation, in the form of draft statutory instruments, to ready UK law for Brexit.
Notably, in relation to consumer law, the UK Government has so far published a Technical Notice on “Consumer rights if there’s no Brexit deal“, and two statutory instruments (the Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2018 (the “Enforcement Regulations”) and the Consumer Protection (Amendment etc.) (EU Exit) Regulations 2018 (the “Protection Regulations”)), setting out the future of UK consumer law and consumer rights after Exit Day. This blog summarises the key points from these documents and considers the main impacts of a no-deal Brexit for UK consumers.
What is a “no-deal” Brexit?
A “no deal” Brexit refers to the scenario where the UK and the EU fail to conclude a draft withdrawal agreement by the time of the UK’s exit from the EU. If there is a no-deal Brexit, EU law would stop applying to the UK, unless the UK expressly adopts it, on Exit Day.
What impact on consumer law and consumer rights does the UK Government anticipate in a no-deal Brexit?
The primary impact of the Technical Notice and statutory instruments considered in this blog is on the enforcement of consumer rights by UK consumers, both in the UK and in the EU, post-Brexit.
Both draft regulations make changes to UK consumer law. The Enforcement Regulations focus on making adjustments to the cross-border enforcement of consumer law post-Brexit (including revoking the Consumer Protection Cooperation Regulation which enables the EU and UK to cooperate in cross-border investigation and enforcement of EU consumer law breaches), whereas the principal changes made by the Protection Regulations are:
- Responsibilities in the Consumer Rights Act 2015 are moved from importers to the EEA to importers to the UK;
- Contracts choosing EEA state law are placed onto the same footing as contracts choosing the law of other third countries;
- Consumers will have a right to redress only when an importer into the UK (and not the EEA) engages in a prohibited practice under the Consumer Protection from Unfair Trading Regulations 2008;
- Users of EEA-based payment service providers are placed in the same (less protected) position as users of payment service providers in other third countries; and
- Obligations on UK Alternative Dispute Resolution providers to deal with disputes involving consumers resident in EU member states are removed and the operation in the UK of the EU Online Dispute Resolution Regulation for consumer Alternative Dispute Resolution is revoked.
As a result of these changes, UK consumers will continue to enjoy similar consumer rights after Brexit, but only within the UK. In relation to goods and services purchased from the remaining EU27 countries, UK consumers will have reduced rights. This may have a knock-on effect on UK consumer confidence when buying goods or services from the EU (and vice versa for EU consumers).
In addition to the broad-brush changes to the enforcement of consumer law, post-Brexit, the Technical Notice highlights some specific changes to certain aspects of consumer law as follows:
- Package Travel: Customers who purchase package holidays from EU-based traders who are not targeting activities at the UK may be unprotected if the provider becomes insolvent. The notice indicates that consumers will be responsible for ensuring they are provided with clear information, including of the applicable insolvency protection, before purchase.
- Timeshare: Consumers who buy a timeshare in an EU member state under a contract whose governing law is not English law will be subject to the timeshare protection available to consumers in that member state. Notably, they will no longer be able to insist on an English-language version of their contract.
- Textile labelling: The Secretary of State, rather than the European Commission, will be responsible for approving new textile names and manufacturing tolerances for the UK market. The existing EU law on labelling textile products will be retained through the EU (Withdrawal) Act 2018 but will be amended to ensure its effectiveness within the UK-only market. The details of these changes are set out in the Protection Regulations.
- Footwear labelling: The common labelling system for footwear will continue unchanged. However, responsibility for ensuring the accuracy of the labelling of footwear imported from the EU will fall on UK-based businesses. The details of these changes are set out in the Protection Regulations.
An inevitable reduction of consumer rights?
Currently consumers in the UK and the other EU member states buying goods and services from other EU countries can rely on consumer law and safety standards which are the same or similar in every EU member state. EU consumer law creates a minimum standard for consumer law and safety standards which every EU member state must meet. Some EU member states, such as the UK with the Consumer Rights Act 2015, even choose to give consumers rights and protections which are better than the minimum standard required by EU law. In addition to harmonised consumer rights, EU consumer protection legislation also gives UK consumers the right to enforce their consumer rights in the EU and vice versa.
Divergence: Post-Brexit, there may be a divergence between UK consumer law and consumer law in the remaining EU member states, starting on Exit Day, and potentially becoming more pronounced as time passes, even though the UK Government intends to retain some EU consumer law which is in force before Exit Day as domestic law. The UK Government is advising that, post-Brexit, consumers will need to check the terms of consumer protection offered by the seller and the member state the seller is located in to confirm if the level of protection is different from the UK level of protection. This divergence will not only affect consumers, as businesses that trade cross-border will also have to think about having terms and conditions which comply with UK law as well as terms and conditions which are suitable for trading in the EU.
Enforcement: Post-Brexit, making cross-border consumer purchases (e.g. online) may be less predictable for UK consumers purchasing goods and services from the EU, and vice versa, as UK and EU consumer law diverges and enforcing consumer rights cross-border becomes more difficult. At the moment, the UK consumer protection regime is supported by a reciprocal cross-border consumer enforcement framework which allows cooperation between EU member state consumer enforcement authorities and gives consumers access to redress, in their home courts, when their rights have been breached. This will change after Exit Day if there is a no-deal Brexit. A fundamental reduction of UK consumers’ rights will also result from the fact that UK consumers will no longer be able to use the UK courts to effectively seek redress from EU based traders. Even if a UK court does make a judgment, the enforcement of that judgment will be more difficult as the UK will no longer be part of the EU. Consumers in the rest of the EU will also lose some of their rights as they will no longer be able to enforce their consumer rights against UK traders though their own home courts.
Post-Brexit, UK consumers and UK traders will also have less access to Alternative Dispute Resolution to settle disputes with traders as they will not be able to use the EU-wide Online Dispute Resolution platform which is run by the European Commission for the EU member states.
The future of UK consumer law and consumer rights
While the UK Government remains intent on finalising and approving a deal before Exit Day, it is clear that Brexit (whether negotiated or no-deal) will have a significant impact on UK consumer law and UK consumer rights, particularly where a consumer wants to enforce its consumer rights against a trader based in one of the remaining EU member states. Although the UK Government’s aim is to ensure that, after Exit Day, UK consumers will retain the protections they currently have when buying from UK businesses, the UK will no longer be an EU member state, so there will be an impact on the extent to which UK consumers are protected when buying goods and services from the remaining EU member states.