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Brexit vote raises legal questions – Uncertainty over how UK-based firms’ duties under REACH may change

The result of yesterday’s UK referendum in favour of leaving the EU raises important questions about how UK-based companies’ obligations under REACH will change, say law firms and consultancies.  Unless the UK decides unilaterally, and in breach of its obligation under the EU Treaty, to no longer be subject to existing EU Regulation, said Jean-Philippe Montfort of law firm Mayer Brown, REACH will continue to apply in the UK until it has left the EU. Once the UK government invokes these proceedings, the negotiations must be completed within two years.  But there may also be transition periods after this, said Mr Montfort, applying to a range of EU legislation applicable in the UK, including REACH. And the post-Brexit status of the UK “may well be such that it will retain application of some EU legislation, such as REACH, as REACH is currently also applicable in the European Economic Area” [comprising all the EU member states plus Iceland, Lichtenstein and Norway]. “So, in principle, Brexit should not affect the REACH 2018 deadline.”  Even if the UK decides to “jump the gun”, he said, “it is hard to imagine that it will immediately call off the application of EU rules intended to protect human health and the environment, such as REACH, before it has in place alternatives rules, and it is not likely that its priority will be to overturn REACH. But if it did, shipments of chemicals from the UK would be considered as imports into the EU from a non-EU country and thus be subject to registration by new EU importers. “This would obviously have profound consequences on the entire system.” UK manufacturers might need ORs  Unless the UK gains some sort of EEA status that allows continued application of REACH, “any company trading with the UK will need to review its situation”, said Mr Montfort. For example, UK manufacturers would become non-EU manufacturers and be required to appoint only representatives (ORs) in the EU to avoid their EU customers facing registration obligations. Conversely, ORs based in the UK would no longer be able to operate and the current non-EU manufacturers, which appointed them, should then consider appointing a legal entity in another member state to ensure continued compliance by importers.  UK chemicals suppliers and chemical service providers will need to reassure their customers that the resulting volatility will not affect the terms of supply agreements in the short term, said Riku Rinta-Jouppi of consultancy REACHLaw.  A lot now depends on the terms of the UK’s departure, he said, and the new relationship between the UK and the remaining EU.  Given that the mood seems to be that “out means out”, he surmised, a Swiss-style “out of REACH” solution looks more likely than a Norwegian-style “still in REACH” arrangement. UK exporters will still need to meet EU standards  Elizabeth Shepherd of law firm Eversheds said a period of review will now begin, in the UK, to understand exactly which environmental laws are derived from the EU, where the regulatory gaps will lie, and what should be repealed in whole or in part or changed. “The UK has the opportunity to reappraise and possibly reduce environmental regulation. There may be scope for some simplification, but radical changes are unlikely, given the increasing globalisation of environmental standards. In practice, meeting those standards will, in any event, be a precondition for sales into the EU and wider markets.  “It may no longer be possible for UK companies to undertake certain compliance tasks, including REACH registration, following exit,” she warned. “Any pan-EU business, sourcing products from outside the EU which has organised its supply chain so that its UK legal entity is “importer” for REACH purposes (and so holds the REACH registrations/pre-registrations for supplies to all group members in the EU), potentially has an immediate compliance problem. Once the UK leaves the EU, that business will not be REACH compliant unless one or more of its EU group members re-registers.”  Another issue, said law firm Steptoe & Johnson, is how the ongoing work of the UK competent authorities, such as dossiers for substance evaluation or restriction under REACH or work on biocides and plant protection products, will be transferred to other national authorities.