Regulatory autonomy in the Brexit deal – skating on thin ice?

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    Preserving regulatory autonomy is one of the main elements of the Brexit deal. This was a red line for the UK in negotiations. However, experts argue the right to autonomy must be exercised with moderation.

    The deal includes a rebalancing mechanism which can be triggered if significant divergences impact trade or investment in “a manner that changes the circumstances that have formed the basis” for the agreement. Exercising regulatory autonomy can indeed lead to economic impacts and ultimately to different circumstances compared to December 2020. The rebalancing clause “partly offset[s] this autonomy”, says the report of the House of the Lords on the institutional framework of the Brexit deal.

    The rebalancing mechanism is “unusual” and “utterly novel and remarkable” according to law experts Marie Demetriou QC & Prof Dr Holger Hestermeyer.

    Lord David Frost also acknowledged its uniqueness. He indicated it has been introduced as an alternative to an equivalence mechanism, that was requested by the EU.

    The practicability of the mechanism remains to be tested and will largely depend on how certain words will be interpreted – especially “significant divergence” – and the level of evidence required to prove a material impact on trade or investment.

    According to Lord Frost, if the rebalancing is used too much, it could trigger a broader renegotiation of the deal.

    Based on the report Beyond Brexit: the institutional framework, by the House of Lords

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