City of London Law Society publishes opinion on Private Contracts and Schedule 8 of the European Union (Withdrawal) Act 2018

Paragraphs 1 and 2 of Schedule 8 to the European Union (Withdrawal) Act 2018 (EUWA) amend “ambulatory” references to EU legislation in in-scope instruments and documents so as to refer to:

  1. in the case of paragraph 1, which applies to references to retained direct EU legislation, the version of such EU legislation as it applies in the UK at exit day by virtue of the EUWA and, unless the contrary intention appears, as modified by domestic law from time to time; or
  2. in the case of paragraph 2, which applies to references to EU Treaties, EU instruments or other documents of a EU entity, the version that had effect immediately prior to exit day.

The Opinion explains that “ambulatory” references to EU legislation are, by virtue of paragraphs 1(1)(b) and 2(1)(b) of Schedule 8 to the EUWA, references to the relevant piece of EU legislation “as it has effect from time to time”.

The effect of these provisions is to ensure that existing references to specific pieces of EU legislation as amended from time to time, will be to the relevant EU legislation “frozen” as at the date the UK leaves the EU, except to the extent that the relevant EU legislation is incorporated into domestic law and is then or subsequently amended by domestic law.

For example, the opinion explains, where these provisions apply:

  1. an ambulatory reference to an EU Regulation becomes a reference to that Regulation as incorporated into UK law under the EUWA on exit day and, unless the context otherwise requires, as subsequently amended by UK domestic law; and
  2. an ambulatory reference to a EU Directive becomes a reference to that Directive as it was in effect immediately before exit day, irrespective of subsequent changes to that Directive in the EU.

The Opinion focuses on the question of whether private contracts governed by English law are within the scope of the Related Documents Provisions under paragraphs 1(1)(a)(iii) and 2(1)(a)(iii) of Schedule 8 to the EUWA, with the result that ambulatory references to EU legislation in such contracts would be amended in accordance with those provisions.

In the CLLS’s view, private contracts are not within the scope of the Related Documents Provisions. This is based on the following:

  1. the application of English law principles of statutory interpretation support a narrow construction of the Related Documents Provisions, such that private contracts do not fall within their scope; and
  2. the consequences of applying the Related Documents Provisions to private contracts would be significant and inappropriate in many circumstances, conflicting with the parties’ intentions and interfering with freedom of contract.

In other words, in the CLLS’s opinion, the application of UK rules of statutory interpretation means that the Related Documents Provisions under the EUWA would not capture private contracts. To construe the Related Documents Provisions as applying to private contracts could adversely affect parties who have chosen to have their arrangements governed by English law. Further, the concept of an “ambulatory” reference is difficult to apply to private contracts, which use a wide variety of drafting depending on the context, the sophistication of the parties and the overall purpose of the contract. Numerous uncertainties and conflicting approaches could arise if the Related Documents Provisions were applied to private contracts.

The opinion was prepared by a number of member firms on a joint basis. It sets out the common position of the Committee on the construction of paragraphs 1 and 2 of Schedule 8 to the EUWA. To access the opinion in full, click here.