Differences of opinion

The impending exit of the UK from the European Union (EU) is likely to present many challenges and uncertainties for businesses throughout the land in the months and years ahead. At the time this article went to press on Monday, Scotland’s first minister Nicola Sturgeon and UK prime minister Teresa May were readying themselves for a meeting in Edinburgh and the Scottish parliament debate on independence was set to resume on Tuesday. But, even if Sturgeon’s renewed attempts to trigger a second Scottish independence referendum falls flat, the UK’s exit from the EU has the potential to cause a greater divergence in the law relevant to the construction industry north and south of the border.

Scotland has a distinct legal system which was preserved by the Act of Union with England in 1707. A devolved legislature and government – the Scottish parliament and Scottish government – were then established in 1999, with legislative and administrative powers over a range of areas not expressly “reserved” to Westminster. These areas include justice, education and healthcare. The Scottish government is formed of the Scottish National Party, which favours Scottish independence within the EU, and the Scottish parliament, which comprises a majority of members who support independence.

After the EU referendum, which saw the majority of those in Scotland vote to remain in the EU, the first minister stated that a second Scottish independence referendum was “on the table”. The UK government is now considering the Scottish government’s post-Brexit plan, which argues that Scotland should remain in the European Single Market even if the rest of the UK decides to leave.

EU law covers a range of areas, some of which sit within the competence of the Scottish parliament, and some of which are reserved to Westminster. It sets the parameters within which the legislatures can act. When the UK leaves the EU, all the powers previously held by the EU will be “repatriated” to the UK. The UK legislatures would then be free to amend or replace EU law which falls within their competence. This would apply to the Scottish parliament in respect of devolved areas, assuming that there is no “repatriation” of powers previously devolved back to Westminster. In principle, once the parameters of EU law cease to apply, there may be more scope for differences to emerge in devolved areas.

We are at the start of long and uncertain road as far as Brexit is concerned

This is subject to a couple of qualifications: first, any new (or transitional) relationship between the EU and the UK may require the UK to continue to give effect to EU law and, second, there will almost certainly be international legal commitments that will still need to be respected across the UK.

An example of an area which is currently subject to EU law and which is devolved to the Scottish parliament is public procurement law. This is regulated at EU level by a number of EU directives which are implemented in Scotland by regulations of the Scottish parliament. On Brexit, the Scottish parliament will have competence to legislate on the matters covered by the directives.

Given that the Scottish government’s preferred option for Scotland is independence within the EU or, failing that, membership for Scotland of the European Single Market, then it might be expected that the Scottish government would maintain public procurement law broadly in accordance with European directives, despite not being legally obliged to do so.

However, it is possible that Westminster may decide to take a different approach south of the border. Although it is very unlikely that, in the event of a “hard” Brexit, public procurement will cease to be regulated altogether, participation in the World Trade Organisation’s procurement regime may provide scope for a more restricted application of procurement rules and more flexibility in the design of transparent award procedures.

It is also possible that a Brexit settlement between Westminster and Holyrood may involve further powers being devolved to the Scottish parliament, including powers repatriated from the EU in areas currently reserved to Westminster, such as health and safety at work and employment law. The Scottish government is seeking devolution of these and other areas in their post-Brexit plan. Although devolution of these areas seems unlikely, Westminster having resisted this in the aftermath of the 2014 Scottish independence referendum, things may change as Brexit gets closer, particularly in light of the Scottish government’s proposals for a second Scottish independence referendum. In that situation the distinction between reserved and devolved areas of law could, itself, have a limited shelf-life.

We are at the start of long and uncertain road as far as Brexit is concerned. It is difficult to predict with any degree of certainty what shape the UK’s arrangement with the EU will take after Brexit, and the current political dynamic between Westminster and Holyrood will undoubtedly continue to create tensions within the UK. However, firms operating in the construction sector would be brave to bet against increased differences in law and policy between the two jurisdictions in the years ahead.

Jonathan Gaskell is a construction lawyer and Gavin Deeprose is a professional support lawyer in the Edinburgh office of global law firm DLA Piper