What Brexit could mean for trade, labour rights and corporate accountability

The UK’s political and economic journey creates opportunities for lobbying and collaboration across civil society. CORE will continue to work with our partners to defend standards and campaign for positive change.

Are decades of progressive EU legislation about to be done away with as the UK Government desperately tries to hang on to foreign investors? Will the UK dismantle hard fought social, economic and environmental protections in an even greater power shift towards corporations and capital?

Or could Brexit be a surprise opportunity for corporate accountability campaigners, opening up space for progressive trade deals and strengthened environmental and labour rights standards?

These were the questions that CORE sought to explore when we commissioned research into the implications of Brexit for corporate accountability. The research is now complete and combines legal analysis with intelligence from business representatives, civil servants, MPs, policy experts and lawyers.

An initial mapping exercise identified legal areas relevant to corporate accountability that would be affected by the UK’s departure from the EU. Around 13,000 pieces of regulation will be impacted by Brexit, covering a vast range of issues including treatment of migrant workers, biodiversity, climate change, fisheries and agriculture, trade and investment, international development, financial services, access to justice, company law, consumer protection, competition law, procurement, anti-corruption and tax – and more.

CORE and our partner organisations selected five areas of concern for more in-depth investigation: trade, the environment, labour rights, access to remedy for victims of corporate abuse and the Great Repeal Bill.

Hard landing?

The outcome of the UK’s negotiations with the EU, in particular whether or not we have a “hard” or a “soft” Brexit will determine the extent to which current standards are at risk. A hard Brexit would see the end of the UK as a trading partner in the EU single market and could put legal protections at greater risk of being unpicked. In contrast, a soft Brexit would enable the UK to remain within the single market and generally maintain the status quo. In mid-January, Prime Minister Theresa May declared that she would seek to take the UK out of the single market.

Labour rights at risk?

The EU has strengthened protection for UK workers, for instance through the Working Time Directive and Agency Workers’ Directive, and the UK government has exceeded EU legal requirements in some areas, such as modern slavery legislation and gangmaster regulation.

While there seems to be little political appetite to dilute workers’ rights at present, and proposals in the government’s new industrial strategy and corporate governance green paper indicate a potential opportunity to enhance workers’ rights, the need to develop new trading relationships outside of the EU brings a risk that worker protection will be deprioritised.

What kind of trade?

Under a soft Brexit scenario the UK, as a single market member would continue to be subject, to a large extent, to EU labour and environmental rules and broader EU strategies relevant to corporate accountability. A hard Brexit will almost certainly lead to deregulatory pressures as the UK seeks to make itself more attractive to alternative trading partners, which could lead to reductions in human rights, labour and environmental standards for companies. On the other hand, it may open up the potential to negotiate trade agreements within a stronger international development agenda, and with greater emphasis on human rights, labour and environmental standards.

Access to justice

Over the last twenty years, workers and communities from Nigeria, South Africa, Peru, Ivory Coast and Tanzania who’ve been injured or made ill as a result of UK companies’ international operations have received compensation thanks to cases brought in the UK courts. Despite these important developments towards improved access to remedy, serious and significant obstacles remain for people seeking justice for business-related harm. In many cases, these obstacles can prove insurmountable.

There is a risk that these obstacles could become even greater post-Brexit. Persuading a UK court to take jurisdiction over a case involving foreign harm could be more difficult, and getting judgments enforced in cross-border cases could be more complex and costly. On the other hand, Brexit may create opportunities to address some issues that have been problematic for claimants, such as the rules on the quantification of damages in cases of foreign harm which make it difficult to finance cross-border legal claims. For background information, see our report on access to justice in the EU.

Weaker environmental protections?

Since the 1970s, the EU has promulgated over 400 pieces of environmental legislation. A post-Brexit bonfire of environmental regulations has been predicted, however, much will depend on future trading arrangements; if the UK wants to continue to trade with the EU, we can expect that domestic environmental standards will track those of the EU.

Warnings that the Great Repeal Bill (see below) will be insufficient to put environmental protection on a firm statutory footing once the UK leaves the EU have led to calls for a new Environmental Protection Act, to ensure that on “Brexit Day” there are no serious gaps in regimes and that the UK remains in full compliance with all of its international environmental commitments.

The Great Repeal Bill

According to government announcements so far, the intention underlying the Great Repeal Bill is to roll over existing EU legislation into UK law, as far as possible. Our stakeholder sources indicate that “Henry VIII” powers are likely to be drafted into the bill, enabling Ministers to make adjustments to legal regimes by executive order instead of seeking Parliament’s approval. Ministers could be vulnerable to excessive corporate lobbying that seeks to water down social and environmental protections and the government will be under a lot of pressure to keep delegated powers to a minimum, and to ensure sufficient safeguards are written into the legislation.

The problems with the Great Repeal Bill do not end with Henry VIII powers. There is a question mark over the extent to which helpful past judgments of the European Court of Justice with respect to the interpretation of existing social and environmental regimes will continue to form part of UK common law after Brexit.

A global leader?

Brexit poses some major challenges to future work on corporate accountability, as the EU has, for the most part, been a positive force in pulling up standards in key social and environmental areas.  That said, the portrayal of the UK as the EU’s social laggard is not entirely accurate. The UK has spearheaded a number of initiatives on labour rights and gender equality, including introducing the landmark Modern Slavery Act in 2015.

The political fallout from the EU Referendum in June 2016 has also focused attention on unfairness and inequality which in turn has created momentum around the need for corporate governance reform, to provide a greater voice for workers and people affected by poor business practices.

Brexit has opened up space for discussion on possible improvements to trading relationships, business practices and working standards. These have the potential to support, rather than undermine initiatives to advance human rights, labour rights, environmental rights and corporate accountability. The government has indicated its desire to increase its influence on the world stage – will it seek to lead from a human rights or environmental perspective in this regard?

The path is currently unclear, but whatever the direction, CORE will continue to defend existing corporate accountability standards and to campaign for an end to irresponsible business practices, wherever they occur.