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Legal Challenges to Chemical Regulatory Decisions in Europe After Brexit: The Opportunities and Threats from Parallel Legal Systems in the EU and the UK

I. Strategic Engagement with Chemicals Regulations in the UK and the EU

The impact of the UK’s departure from the EU runs counter to the general direction of travel for the regulation of chemicals. For decades global chemical industries, governments seeking open markets and international institutions such as the UNEP and OECD have been looking for ways to harmonise and standardise chemicals regulation and to reduce non-tariff barriers to trade by seeking common ground and consensus on a global approach. Chemicals, as the building blocks for the manufacturing economy, are a global commodity, often crossing multiple borders multiple times in the journey from raw materials to finished products or downstream use.

The UK’s decision to ‘take back control’ over its laws by leaving the EU, and exiting its Single Market and Customs Union, goes the other way: for global chemicals manufacturers, formulators and distributors, there are now two markets to navigate, with the inevitability of increased friction for market access.

What makes the development of particular interest, though, is that, for the first time, two entirely independent markets are based on the same legal text for the regulation of chemicals. Unlike all other markets, the question is not whether, and how quickly, the regulatory regimes will converge to reduce non-tariff barriers to trade, but rather how much, and how quickly, the EU and the UK will diverge. Divergence is of course an inevitability, and there is plenty of evidence of divergence in decision-making even within the first year of independence.

There is another important consideration arising from the circumstances of two independent markets operating under an almost identical rulebook, and that is the opportunity for proactive businesses to use the two systems strategically. Global enterprises seeking the grant or maintenance of regulatory approvals, or defending their products from potential regulatory management, or seeking competitive advantage from an innovative product or process with sustainability credentials, will need to decide how best to engage with the UK and with the EU, and whether there is strategic advantage to concurrent or sequential engagement. Given the common rulebook, positive regulatory decisions made in one market could be persuasive for decision-makers in the other, and this provides a significant advantage. The opposite, of course, is true for adverse decisions, which makes it all the more important that decisions can be effectively challenged both in the EU and in the UK.

In order to maximise the opportunities and to minimise the risk of adverse decisions in one jurisdiction being repeated in the other, it is therefore essential for business operators to understand the legal options for challenging regulatory decisions under both regimes.

II. Challenging Regulatory Decisions in the EU

In the fifteen years since the adoption of the EU REACH Regulation, rulings adopted on legal challenges against regulatory decisions of the competent EU authorities have played an important part in shaping the interpretation and application of key EU chemicals regulations. The extensive body of decisions and judgments developed over these years is an integral part of the sources which businesses with operations in or with the EU have to consider for a full grasp of their rights and obligations under EU chemicals regulation. Both industry and public authorities have at times had to change their practice as a result of some of these rulings, confirming their impact and hence the possible risk of dissonance should diverging rulings be adopted in the UK.

The system of remedies established under the EU REACH Regulation, and later extended to the EU Biocidal Products Regulation (“BPR”), is dual. Certain, clearly identified decisions taken by the European Chemicals Agency (“ECHA”) under both the EU REACH Regulation or the EU BPR may be subject to administrative review proceedings before an internal body of ECHA: its Board of Appeal. All other decisions adopted by ECHA, decisions adopted by the Commission, as well as the decisions of the ECHA Board of Appeal themselves, must all be subject to judicial review before the EU Court of Justice. Each forum has its own specificities and this undoubtedly had a role in the outcome of such appeals and in company’s decisions to bring legal challenges.

Specificities of ECHA’s Board of Appeal include its composition: the combination of legally qualified members and technically qualified members brings a different perspective to appeals that inherently touch upon technical and scientific matters. This contrasts with the Court of Justice and has led both the Board of Appeal and the Court of Justice to accept a different scope of review: whereas the review by the Court of Justice is limited to manifest errors of assessment in areas involving complex technical and scientific matters, the ECHA Board of Appeal can find any error of assessment sufficient grounds for annulment of the challenged decision.

Another important differentiator is the effect of bringing a legal challenge. Bringing an appeal before the ECHA Board of Appeal automatically suspends the effects of the ECHA decision being challenged. Before the Court of Justice, this is not automatic but must applied for in addition to the application for annulment. In terms of the final outcome, whereas both the ECHA Board of Appeal and the Court of Justice have the power to annul the contested measure, the ECHA Board of Appeal may in addition exercise any power which lies within the power of ECHA.

Ultimately though, the final authority lies with the Court of Justice who is competent not only for decisions which cannot be challenged before the ECHA Board of Appeal but also for actions against the decisions of the ECHA Board of Appeal. Many of the most important decisions in terms of impacts on industry are arguably reserved to the jurisdiction of the Court of Justice under the current regulations. This is the case, for example, of decisions adopted under the Authorisation title of the EU REACH Regulation and of decisions concerning approvals of active substances under the EU BPR.

As the EU prepares to translate the ambitious objectives of the Chemicals Strategy for Sustainability into concrete legislative proposals, one important element for industry to bear in mind is the impact of such changes on their legal remedies. On the one hand, changes to existing processes may result in widening the scope of review by the competent appellate body. This could be the case, for example, with the new concepts of “essential uses” and “sustainable-by-design”, whose criteria are yet to be defined in a legally binding manner and may need to be tested once imposed. On the other hand, this time of change also creates opportunities for the scope of decisions falling under the competence of the respective appellant bodies to be revisited. The biocides sector, for example, may consider seeking more decisions adopted under the BPR to be subject to the appeal mechanism of the ECHA Board of Appeal than is currently the case.

Such evolution is likely to influence the scope for divergence in appeal decisions taken in the EU and in the UK in the coming years.

III. Challenging Regulatory Decisions in the UK

One of the UK’s red lines during the Brexit negotiations was the role of the Court of Justice of the European Union. The line was drawn in early 2017 with the Government’s White Paper ‘The United Kingdom’s exit from and new partnership with the European Union’, setting out its policy aim to “bring an end to the jurisdiction of the Court of Justice of the European Union in the UK”. If anything, this position only hardened during the negotiations, leading to other policy ambitions, such as ‘associate membership’ of ECHA, being jettisoned as incompatible with its hard line on jurisdictional independence.

It is therefore no surprise that the resulting legal framework for chemicals provides the UK with a wholly independent system for appeals and judicial review of regulatory decisions.

The regulatory decisions themselves are taken either by the UK chemicals agency, the Health & Safety Executive (“HSE”), or by the relevant Secretary of State. For decisions under UK REACH, for example, this will be the Secretary of State for the Environment, Food and Rural Affairs, whereas responsibility for decisions under GB BPR resides with the Secretary of State for Work and Pensions.

As with EU REACH, under UK REACH there is a right of appeal against certain decisions taken at agency level. There is a defined list of HSE decisions that can be appealed under UK REACH (as listed in UK REACH Article 91, as amended), whereas under GB BPR, any decision of the HSE is subject to appeal (GB BPR Article 77, as amended). These are full merit reviews, with the original decision being suspended during the duration of the appeal.

However, unlike its EU equivalents, the UK decided against creating a Board of Appeal to hear these appeals, and instead it has utilised existing structures.

Appeals under UK REACH will be heard by the First-tier Tribunal, General Regulatory Chamber (the “GRC”). The GRC is part of Her Majesty’s Courts and Tribunals Service (“HMCTS”) and has jurisdiction to hear a number of somewhat disparate regulatory matters, from environmental appeals (which are similar in substance to UK REACH appeals) through to decisions concerning exam boards, driving instructors and pensions (which are not). The thread linking these together is that they are all appeals against decisions of regulators, and therefore the GRC can build an expertise in evaluating regulatory decisions. Further, the GRC has a lead environment judge, to build an expertise in those areas of environmental regulatory law that fall within the jurisdiction of the GRC, including – now – UK REACH.

One of the benefits of the GRC over the English Courts is that the matter can be heard by a panel, with a legally-qualified Tribunal Judge sitting with a specialist, non-legal, members. For appeals which are both technical and legal – as chemicals regulatory appeals so often are – this is a useful benefit, and reflects the composition of the ECHA Board of Appeal where the panel contains legally qualified and technically qualified members.

The GRC will carry out a full merits review, and has the power either to quash the decision and remit the matter to the HSE to take again, or substitute for the decision any other decision which could have been made by the HSE.

As is the case for decisions of the ECHA Board of Appeal, there is an opportunity to appeal a decision of the GRC to the Upper Tribunal, but only on a point of law: there is no opportunity for further full review of the merits of the decision. Appellants will therefore want to use the appeal process before the GRC to maximum effect.

Decisions of the ECHA Board of Appeal are not binding on the GRC, but where the same or similar issues have been argued before the ECHA Board of Appeal, we anticipate the panel will take an interest in them. Again, this presents an opportunity and a risk, and global businesses should make sure that they have good visibility on developments in both the EU and the UK.

Appeals under GB BPR will not go to the GRC, but will follow a different route. Because the HSE already had a decision-making role under EU BPR for national authorisation of biocidal products, there was already a mechanism for appealing the HSE’s decisions set down in the Biocidal Products and Chemicals (Appointment of Authorities and Enforcement) Regulations 2013, regulation 14 and schedule 1. The appeal is to the Secretary of State, who will appoint an ‘appointed person’ to hear and determine the appeal. In practice, this has never been used, and no person has as yet been ‘appointed’. Of course, the HSE has a much-expanded role under GB BPR, but this appeal mechanism has been retained for all HSE decisions.

In our view, this is an opportunity missed. From experience of both appeals to the Tribunal and appeals to the Secretary of State for other environmental matters in the UK, we are of the view that the GRC should have been chosen to hear all appeals against regulatory decisions of the HSE’s chemicals division. First, this would have enabled expertise to be concentrated within the GRC, to facilitate more consistent decision-making. Second, the GRC’s panel members (both Judges and non-legal members) are selected though an independent process run by the Judicial Appointments Commission, in advance of any appeal, whereas under GB BPR the Secretary of State will make the appointment as and when the issue arises, with no indication of who will hear the appeal before an appeal is commenced, leading to inevitable questions about independence. Third, the rules of the Tribunal are clear and well-tested, whereas the procedure for the GB BPR appeal is rather scant in the 2013 Regulations.

In practice, this creates within the continent of Europe three appellate bodies hearing similar administrative challenges (such as, for example, data sharing obligations): the ECHA Board of Appeal, the GRC, and the Secretary of State’s ‘appointed person’. This makes it all the more important for the appellant to ensure that it has visibility of decisions and emerging trends in all fora, so that it can use positive decisions to its advantage, and be prepared to counter adverse decisions that might be raised.

Of course, many of the most important decisions are reserved to the Secretary of State, such as decisions on UK REACH restrictions. Unsurprisingly, there are no rights of appeal against decisions of the Secretary of State. The sole option for aggrieved market participants is to challenge such decisions through the judicial review process, to the High Court. Judicial review in England is itself undergoing a period of change, and while a detailed analysis is beyond the scope of this article, the overall picture is that the courts remain reluctant to get involved in quasi-political decisions. While judicial review remains an important safeguard, it is no substitute for early and fulsome engagement in the decision-making process, ensuring that arguments are put forward clearly and coherently before final decisions are taken. Judicial review is an option of last resort, but when all other options are exhausted, it can be a powerful tool for an independent hearing in the English High Court on the legality of a decision.

IV. Final Thoughts

Understanding the different routes for appeals and legal challenges against regulatory decisions in the EU and UK is important to the chemicals sector from a reactive, defensive position of protecting legal rights. It has also become a necessary source of information for operators doing business in or with the EU from a regulatory compliance and strategic perspective. Further, for international chemical businesses, it should also be considered important from a proactive, strategic perspective, to maximise the opportunity afforded by parallel but independent regulatory regimes.


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