UK Government plans for Self-Employed EU Citizens Working in the UK before Brexit

Self-employed EU Citizens from other EU states who work in the UK are at risk from UK Government plans in the event of a No Deal Brexit. It is vital to grasp that No Deal can come about in two circumstances: (i) if the UK Government abandons the Withdrawal Agreement, so that the UK exits on 31 January 2020;  or at a later date if a further attempt is made to renegotiate the Withdrawal Agreement  after the December 2019  UK General Election and that attempt fails; or (ii) if the UK Government ratifies a version of the Withdrawal Agreement but fails to agree a future status agreement to take effect at the end of the transition period (31 December 2020). In the latter case of No Deal, as regards  the future relationship after the transition,  all the UK  would be bound by  is the Citizens’ Rights section of a Withdrawal Agreement. Even then it would only be so bound  to the extent of the commitments spelt out therein.

Where the UK ratifies and implements the current version of the Withdrawal Agreement, then Article 25 of the Agreement appears to protect all the rights Self-Employed EU Citizens presently derive from the Treaty on the Functioning of the European Union (TFEU). But there are indications that the UK Government considers that the maintenance of some of these provisions to be inconsistent with Word Trade Organisation (WTO) rules and a problem when seeking to strike trade deals with other non-EU states after Brexit. Given this, a UK Government that takes office after the December 2019 General Election may return to Article 25 in an attempt to narrow its scope.

In anticipation of leaving the EU without any sort of deal in 2019 the UK Government published draft ‘The Freedom of Establishment and Free Movement of Services (EU Exit) Regulations 2019’ (‘the 2019 Regulations’), designed to take effect on the day the UK leaves the EU without any sort of deal. These would impair and reduce the rights of self-employed EU Citizens already in the UK on Brexit day, whether they are resident in the UK (established) or merely working in the UK on a short-term basis (providing services).

While the UK remains in the European Union, EU Citizens from other EU States may work in the UK as self-employed persons under Article 49 of the TFEU (freedom of establishment), or under Article 56 of the TFEU (freedom to provide services). There are equivalent provisions for nationals from European Economic Area (EEA) countries (Norway, Iceland, Lichtenstein) as well as Switzerland. These provisions form part of EU law. In anticipation of the UK’s departure from the EU, they have been incorporated into UK law by section 4 of the European Union (Withdrawal) Act 2018.

The draft 2019 Regulations aim to impair and reduce the rights of self-employed EU Citizens  already in the UK on the day the UK leaves the EU in a No Deal scenario, where those rights are currently entrenched in UK law by section 4 of the European Union (Withdrawal) Act 2018. Under the 2019 Regulations, as regards freedom of establishment and the free movement of services, any rights, powers, liabilities, obligations, restrictions, remedies, procedures that derive from the TFEU, cease to be available and recognised in UK law.

It is said that this cessation of such rights, etc., does not apply to any matter which falls within the interpretation, application, or operation of the (UK) Immigration Acts. The implication of that it does not affect rights of entry, residence, and exit. But if that is the case what is its purpose?

Further, the 2019 Regulations would remove the prohibition on discrimination on grounds of nationality that EU Citizens from other EU States presently enjoy. That too gives rise to concern.

The Explanatory Memorandum to the 2019 Regulations sheds some light on UK Government thinking, though it is not a helpful document. The Memorandum notes (paragraph 2.5) that:

“Collectively these rights of establishment and free movement of services ensure that nationals from EU Member State territories can be self-employed, own and manage a company, and provide services on a temporary basis under the same conditions as the State’s own nationals, and receive services, without facing certain restrictions in the EU Single Market. Freedom of establishment and free movement of services form part of the EU Single Market, which comprises the free movement of goods, persons, services and capital.”

Thus, the importance of the entrenchment of these rights to self-employed EU Citizens is understood.

The Memorandum then states (paragraph 2.10):

“If the UK does not exit the EU under the terms of a Withdrawal Agreement (i.e. a ‘no deal’ scenario), elements of reciprocity contained within directly effective rights of establishment and free movement of services, as derived from Articles in the TFEU…, would cease to function effectively in the UK.”

That statement is misleading. In the event of No Deal freedom of establishment and the freedom to provide services would remain protected by section 4 of the European Union (Withdrawal) Act 2018 and would function effectively for self-employed EU Citizens working in the UK. The importance of these rights to self-employed EU Citizens (whether as sole-traders, in partnerships, or in limited companies) is clear. Whatever regulatory environment they face, the regulatory measures that are liable to hinder or obstruct them their chosen field must be removed where contrary to EU law, while measures that discriminate against them (directly or indirectly) on grounds of their nationality (of an EU state) are prohibited.

The particular form of these regulatory measures will vary sector-by-sector and according to the area of concern (professional status, tax, service provision rules, etc.). A self-employed journalist who sells her work through a limited company for reasons of tax-efficiency, will face different regulatory barriers to a self-employed barrister who is a sole trader and subject to different professional regulation. But the point of protecting freedom of establishment and the freedom to provide services is to remove whatever obstacles impermissibly impair such work.

The 2019 Regulations propose to remove that protection. The justification is that ‘elements’ of reciprocity’ within the freedom of establishment and the freedom to provide services would cease to ‘function effectively’. But no-where in the Explanatory Memorandum is there any attempt to explain why this is so. No proper reason is given for this statement. That is not good enough to justify a measure of this kind. Nothing about how the freedoms work in the UK requires reciprocity with other states to work effectively.

Thereafter, there Explanatory Memorandum states (paragraph 2.11) that:

“To address any inoperability and to ensure UK law continues to function effectively, with legal clarity, and that the UK is compliant with its World Trade Organisation (WTO) obligations, including the General Agreement on Trade in Services, these rights need to be disapplied.”

Thus, the rights that self-employed EU Citizens already in the UK possess, are to be impaired and reduced because it is said that they may conflict with WTO rules in the event of No Deal. Once again, no proper reasons are advanced. There is nothing to show why such rights for EU Citizens who moved to the UK prior to Brexit, would cause a problem as regards WTO rules applying on and after a No Deal Brexit.

The Explanatory Memorandum says (paragraph 2.12) that “These directly effective rights of establishment and free movement of services would appear to have limited practical effect, post-exit in a no deal scenario.” But that is not so. The game is given away at paragraphs 2.14 and 2.15:

“2.14 This will… ensure that UK legislation or policies which would otherwise place restrictions on these rights have effect and cannot be challenged on the basis of these rights.

2.15  … This will have the effect of ensuring that EU nationals will be unable to rely on these rights to challenge any policy or law in the UK which places restrictions on their access to the UK Internal Market.”

In the event of No Deal, self-employed EU Citizens already in the UK on Brexit day, will no longer be able to use the law on freedom of establishment and freedom to provide services to protect their working lives in the UK. Yes, it seems, such persons will still have access to residence permits and thus lawful residence. But when a tax rule, rule of professional regulation, or service provision ruLe, etc.,  – either already in existence or yet to be made- impermissibly hinders or obstructs their work, or discriminates against them directly or indirectly on grounds of nationality, they will no longer be able to challenge such measures as unlawful. They will lose that protection.

At present, such legal cases may be few and far between but that is because the freedom of establishment and freedom to provide services are such strong rights that rules are made and thereafter interpreted so as to comply with them. Occasionally, where a rule is incompatible, it will be challenged in the Courts as a test case. But take away the protection of the freedom of establishment and freedom to provide services and the scenarios that give rise to such cases  may multiply as there will no longer be such a strong  prohibition, nor will there be any legal remedy. This is the harm and the vice that must be resisted. The 2019 Regulations or their equivalent must be resisted and must never be brought into force.

There are other problems that concern lawyers and others concerned with constitutional and administrative law. The 2019 Regulations have been made by a secondary law, a statutory instrument, not primary law (an Act of Parliament); they go beyond the so-called Henry VIII powers found in section 8 of the European Union (Withdrawal) Act 2018 to make such regulations; and no impact assessment has been carried out. But the main point to note is that regulations such as these would have a serious impact on the lives of self-employed EU Citizens already in the UK on Brexit day and need to be resisted.

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