Overview
Background
Since January 31, the UK is no longer part of the EU and the EU-UK relationship in a transitional period during which EU law continues to apply to and in the UK (see our Brexit Day Briefing). The transition period is scheduled to end on December 31, 2020[1] and the option of extending the transition period expired on June 30. At the same time, the political prospects for an EU-UK post-transition period deal to be in place by the end of 2020 look very dim (see here), so that "all business either in the UK or in the EU should be preparing either for no-deal, or for a "deal lite," which in either case assumes a hard transition."[2] This article addresses what this means for the chemicals sector specifically and sets out which preparations companies should take now to mitigate negative impacts.
A number of effects of Brexit on the chemicals sector have already been felt. For instance, under the Withdrawal Agreement, the UK no longer has a role in the scientific assessment of substances within the EU chemicals frameworks during the transition period.[3] In anticipation, biocidal active substances under the EU's review program, for which the UK was the evaluating authority, had already been transferred to the other Member States in 2018.[4] Similarly, substances scheduled for REACH substance evaluation by the UK on the Community rolling action plan (CoRAP) had been assigned to the competent authorities of other Member States in the 2018 update.[5]
However, chemical companies operating on both sides of the Channel will experience the largest impact on their activities at the end of the transition period. At that time, EU (chemicals) laws will cease to apply to the UK, entities based in the UK will no longer be considered as EU-based (subject to special arrangements for Northern Ireland) and the UK's specific chemicals legislation will enter into force.
Chemicals Legislation After the Transition Period
The UK has already adopted a number of specific pieces of legislation to transfer existing EU chemicals legislation into its national legal system. Those Statutory Instruments, which come into force on exit day (i.e., the end of the transition period, currently foreseen for December 31, 2020), will transpose existing EU law into national UK law and amend it, where necessary. Practically, this means that all relevant EU chemicals legislation (REACH, CLP, Biocides, Plant Protection Products, Prior Informed Consent, Cosmetics, etc.) will have a UK equivalent (often referred to as UK REACH or UK BPR).[6] The result of this transfer exercise will be a duplication of legal regimes and of the corresponding obligations thereunder, for those companies who continue to operate in both markets.
Addressing the myriad of individual implications of this exercise (both regulatory and commercial) would exceed the scope of this article. We highlight the most important effects below. We recommend that chemical companies carefully review their product supply chains to be able to identify - and address - potential impacts that will otherwise manifest themselves at the end of the transition period and could seriously disrupt market access. For example, we anticipate that some chemistry will cease to be supported under the future UK chemicals regimes and therefore will no longer be available. Since reformulation cannot be done overnight it is important to establish the intentions of other actors in your supply chain.
Requirement of Legal Establishment
Most of the EU chemicals legislation links the fact that entities are established in the EU to their status as holders of premarket approvals, with rights and obligations under those regimes. For instance, the REACH Regulation provides that registrants[7] are manufacturers or importers of substances that are based in the EU.[8] Manufacturers established outside the EU can appoint an EU-based "only representative" to comply with registration requirements.[9] Similarly, active substance or product suppliers of the Article 95 list have to be established in the EU (or appoint a representative).[10] Holders of biocidal product authorizations have to be established in the EU.[11]
After the end of the transition period, companies established in the UK (excluding Northern Ireland[12]) will no longer be deemed to be established in the EU. If those companies intend to continue placing chemicals on the EU market, they will need to, where possible, transfer those registrations/authorizations to EU-based entities to guarantee continued, compliant market access. For instance, the registration of an EU-REACH registrant which is based in the UK will be regarded as "non-existent" after the transition period. In the absence of any preparatory steps, the EU-based customers of the UK entity might risk becoming "accidental importers" with registration obligations under EU REACH. Assuming that no agreement, changing the current position, is reached before the end of the transition period, all preparations to comply with EU chemicals legislation and secure continued market access will need to be taken before the end of the transition period.
At the same time, EU-based companies seeking (continued) market access in the UK will additionally need to prepare for and comply with the new UK chemicals laws, which duplicate this requirement of "legal establishment" (in the UK). Whenever existing EU legislation requires that an entity governed by that legislation is established in the EU, entities operating under the equivalent UK framework will have to be established within the UK territory.
Transitional Rules
The Statutory Instruments that transpose EU chemicals legislation into the national UK system also contain specific provisions to transfer the existing, individual EU measures (registrations, authorizations, approvals, etc.) into the new UK system. Generally, the Statutory Instruments foresee an automatic carrying over of existing measures (such as REACH registrations or biocidal product authorizations) into the UK system. This carrying over is, however, conditional upon the concerned companies taking certain steps within a prescribed period of time. For instance, carrying over under UK REACH and UK BPR will require the following steps to ensure compliance:
UK REACH
As a first step, existing EU REACH registrations have to be notified to the HSE. Initially, this had to be done within either 120 or 180 days from exit day, depending on whether the EU registration that is being carried over was held by a UK entity or not. However, we note that these timelines seem to remain subject to change: Last week, the Department for Environment, Food and Rural Affairs (Defra) announced that one type of these notifications (the Downstream User Import Notification or DUIN) could be submitted for a longer period of time, i.e., until October 28, 2021.[13] As a second step, the full substance registration dossier, including all relevant data, has to be submitted for continued market access. Initially, the submission had to be done within 2 years from exit day, for all registrations irrespective of their tonnage band. However, according to Defra's announcement, tonnage band specific, staggered submission deadlines will apply for the full data sets. The full dossier would hence need to be submitted within 2, 4 or 6 years, starting from October 28, 2021, as set out below:
The recent announcement by Defra, just a few months before the end of the transition period, emphasizes the need to stay on top of changes in guidance and law which continue to come.
UK BPR
For existing biocidal product authorizations, relevant scientific information and data would need to be provided to the HSE (i) at either the renewal or amendment stage, or (ii) within 60 days from a request by the HSE. For pending biocidal product applications, the relevant scientific data generally has to be submitted (i) within 90 days from the exit date (where the HSE was the evaluating competent authority) or (ii) within 180 days from the exit date (where the HSE was not the evaluating competent authority).
In view of these very short timelines to submit the scientific information, we strongly recommend entering into data sharing negotiations now.
Data Rights
As set out above, the timelines within which full data sets (or letters of access thereto) will have to be submitted to the UK authorities are short - particularly compared to the tonnage-dependent timelines that were applicable for EU REACH registrations of phase-in substances. The requirement for all substances (irrespective of their tonnage band) to be registered and supported by corresponding data under UK REACH hence poses a challenge. The assessment of whether existing data rights (negotiated in the context of EU chemicals regimes) allow for the use of the data for purposes of compliance with UK chemicals legislation should therefore take place now. This should allow sufficient time for potential data sharing negotiations. Whilst the remedies in case of data sharing disputes are not identical, the same principles of fair, transparent and non-discriminatory cost sharing for data will apply in the UK after exit day.
Risk of Divergence
Even though the starting point for the UK chemicals regimes is the body of EU chemicals legislation (and the manner in which substances are currently regulated), there is a significant risk that the two systems will diverge in the future.
For instance, it remains to be seen in how far the UK will "follow" the EU in adopting specific pieces of legislation. For example, the UK might well decide not to include a certain substance in an amendment to technical progress of the CLP Regulation or not to adopt the same, new information requirements as the EU. The simple fact that decisions will not necessarily be taken at the same speed, by the UK in the EU, seems likely to result in outcomes which are not aligned. Since one of Brexit objectives was to gain independence from EU decision-making, it is entirely possible that the UK will decide to take a different approach.
Moreover, it is entirely possible that regulatory measures concerning one specific substance in the EU and UK will not be identical. This might occur due to different underlying data sets (resulting from the fact that not all data submitted for EU regulatory purposes will necessarily be submitted in the UK), or because different risk assessment guidance or risk management measures are applied. Regulatory divergence, i.e., that the same substance could be regulated differently in the EU and UK, is a real prospect that companies will need to navigate. While it might be possible to align products with the highest standard set in the UK or EU, to avoid having to comply with different standards, this assumes that the approaches taken in each market by regulators will not be mutually incompatible.
Lastly, the system of legal remedies under UK chemicals legislation will differ from that of the EU. Taking into account the impact that both the Court of Justice and the ECHA Board of Appeal have had in shaping the interpretation and application of EU chemicals law, legal divergence can certainly be anticipated. This also means that there will be an opportunity to build a new body of decisions and case law distinct from that developed in the EU. Companies should be aware of their rights and be prepared to engage with and potentially challenge decisions of commercial importance.
[1] Article 126 of the Withdrawal Agreement.
[2] See: Steptoe's client alert Brexit Brinkmanship: The Clock is Ticking for Negotiators and Businesses of July 24, 2020.
[3] Article 128(6) of the Withdrawal Agreement.
[4] Commission Delegated Regulation (EU) 2019/227 of 28 November 2018 amending Delegated Regulation (EU) No 1062/2014 as regards certain active substances/product-type combinations for which the competent authority of the United Kingdom has been designated as the evaluating competent authority OJ L 37, 8.2.2019, p. 1–21. For further background on this measure see Steptoe’s Biocides & Brexit Update of September 24, 2018.
[5] See: ECHA's Community rolling action plan update covering years 2018, 2019 and 2020 dated March 20, 2018.
[6] See: Statutory Instrument 2019 No. 758 - The REACH etc. (Amendment etc.) (EU Exit) Regulations 2019, as amended by Statutory Instrument 2019 No. 858 - The REACH etc. (Amendment etc.) (EU Exit) (No. 2) Regulations 2019 and by Statutory Instrument 2019 No. 1144 - The REACH etc. (Amendment etc.) (EU Exit) (No. 3) Regulations 2019 and Statutory Instrument 2019 No. 720 The Chemicals (Health and Safety) and Genetically Modified Organisms (Contained Use) (Amendment etc.) (EU Exit) Regulations 2019.
[7] Article 3(7) of the REACH Regulation.
[8] As per Articles 3(9) and 3(11) of the REACH Regulation.
[9] Article 8 of the REACH Regulation.
[10] Article 95(1) of the Biocidal Products Regulation
[11] Article 3(1)(p) of the Biocidal Products Regulation.
[12] Under the Protocol on Ireland and Northern Ireland certain provisions of EU law applicable also to and in the UK in respect of Northern Ireland. Moreover, in the Protocol, the EU and the UK have furthermore agreed that insofar as EU rules apply to and in the UK in respect of Northern Ireland, Northern Ireland is treated as if it were a Member State (Article 7(1) of the Withdrawal Agreement and Article 13(1) of the Protocol). The Protocol provides that Regulation (EU) No 528/2012 applies to and in the UK in respect of Northern Ireland (Article 5(4) of the Protocol and section 24 of annex 2 to that Protocol) and that Regulation (EC) No 1907/2006 applies to and in the UK in respect of Northern Ireland (Article 5(4) and section 23 of annex II to the Protocol.)
[13] Defra Guidance How to comply with REACH chemical regulations, last updated September 1, 2020.
