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    UK choice: an EU or US system for managing chemical risks?

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    Though both the US (TSCA) and EU (REACH) legislation on chemicals share the objective to protect the environment and human health whilst supporting the sector’s competitiveness, they could not be further apart.

    REACH has changed risk management governance by requiring companies to demonstrate safety, increase transparency and substitute toxic substances with safer alternatives, whereas TSCA (Toxic Substances Control Act) keeps the burden of proof on public authorities and retains most information as confidential. That is the theory, though in practice the differences are less sharp given that implementation of REACH has been found to be deficient.

    Whilst the EU’s regime appears to be less business friendly, with high regulatory costs, litigation expenses are lower and the EU’s chemicals trade surplus has grown by around 5% a year since 2007. The US trade surplus is smaller and declined over the same period.

    In this context it is worthwhile looking at China, where chemical production has outpaced both the EU and US. China opted to align with the EU and put in place a China REACH system.

    REACH and TSCA description
    CEFIC fact & Figures 2018
    American Chemistry Council 2018

    No deal raises risk of regulatory divergence

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    After the UK’s PM decision to postpone the vote on the Withdrawal Agreement, which was originally scheduled for 11th of December, all sides are stepping up preparations for a no deal UK departure.

    Whilst a lot of focus lies on dealing with immediate consequences arising from border issues, for example interruptions to the supply of essential goods, the UK has had to speed up the legislative work needed to close the gaps in UK’s statute book for when EU laws will no longer apply. Among those rules will be the EU’s chemical safety norms, namely the REACH regulation.

    Although the UK wants to copy across REACH into domestic law, ChemicalWatch reported that a Defra official confirmed that in a no-deal scenario the UK could start to diverge from the EU’s regulations and would consider what other regions such as the US are doing and weigh this against the UK’s interests.

    One flagship case is the REACH process of identifying substances which are found to be intrinsically hazardous (named Substances of Very High Concern) and become subject of substitution with safer alternatives. The UK has been known to raise objections to identifying such substances and the US chemical safety rules (TSCA – see next article) do not promote the substitution of toxic chemicals.

    Such a scenario brings to light a high risk of UK divergence from EU legislation post-Brexit, which would be detrimental to maintaining a level playing field between the EU and UK.

    European Union (Withdrawal) Act 2018

    Non-regression clause relating to environ­mental standards confirmed by UK’s legal position

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    The UK has published its legal position on the Withdrawal Agreement. The level playing field intended to secure a fair and open competition in the future single customs union is applicable to the whole UK territory. Regarding the environmental level playing field, the assessment confirms there is a non-regression clause with further UK’s commitments to be established by the Joint Committee. The UK should also pay regard to the effective implementation of multilateral environmental agreements and establish a carbon pricing system that is at least equivalent to the EU’s ETS. If the arbitration mechanism is not applicable to disputes related to these provisions, it can be used if the UK’s domestic monitorisation and enforcement are defective.
         
    Legal position on the Withdrawal Agreement (December 2018)

    Withdrawal Agreement: EU environmental principles to influence future UK legislation

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    A report by the UK’s Parliamentary Office of Science & Technology suggests that under the Withdrawal Agreement, a set of EU environmental principles will need to be incorporated into the UK’s legislation. Among the principles referred to, is the precautionary principle, preventive action, rectification at source and the polluter pays principle. Principles stemming from the Aarhus convention are also included: public access to environmental information, participation in decision-making and access to justice in regard to environmental matters.  

    The report presents the EU’s ban on genetically modified crops and neonicotinoids (pesticides associated with the decline in bee populations), where the precautionary principle has been invoked. Both cases demonstrate the far-reaching impact the precautionary principle could have on trade and the maintenance of a level playing field in the future EU-UK relationship.

    The application and interpretation of these principles will be determined to a large extent by the UK’s Environmental Principles and Governance Bill, for which a government proposal is expected in the next six months.
    However, the report puts up questions about the enforcement. According to the General Council of the Bar of England and Wales, the watchdog as proposed in Defra’s consultation on the Bill would lack equivalent powers to those of the European Commission.

    Parliamentary Office of Science & Technology, PostNote n° 590 (November 2018)

    The Norway option: a strong level playing field via autonomous re-enactment

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    The Norway Plus option made headlines this week as an alternative landing point to the customs union in the Northern Ireland backstop, which is the most contentious arrangement under the Withdrawal Agreement. It would entail UK’s accession to the European Free Trade Association (EFTA), the European Economic Area (EEA) and remaining within the internal market, plus a customs union arrangement to avoid a hard customs border in Ireland.

    The EEA Agreement provides for a dynamic alignment with EU environmental legislation and its Annex XX sets a list of those norms. It includes amongst others EU laws on water, air, chemicals or environmental impact assessments. EEA countries adopt EU laws, though often with some delay, a practice which is called “fax-democracy” in Norway (as laws used to arrive from Brussels by fax). Nature management (which covers the Birds and Habitat Directives, as well as Natura 2000 Network) are not included, but are subject to close co-operation. Annex XX is frequently updated according to new relevant EU legislation developments. Norway is also a member of the European Environment Agency and the European Chemicals Agency (as an observer of the latter). Hence, the level playing field requirements would be higher than those provided by the Northern Ireland backstop set out in the Withdrawal Agreement.

    European Economic Area (EEA) Agreement (1994)
    Annex XX of the EEA Agreement

    Staying within REACH and aligning with other EU legislation?

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    Within the Political Declaration, the EU and UK commit to “explore the possibility of cooperation” of the UK with three agencies, including the European Chemicals Agency ECHA, the EU’s regulatory body implementing the EU legislation on chemicals safety REACH. If the outcome of this is not entirely clear yet, one likely scenario would be to enable the UK to participate as an observer in ECHA’s proceedings. This would give access to the world’s largest chemical safety data base, but in return would require the UK to contribute finance and expertise, and to dynamically align with REACH legislation. Further, the UK would not be able to participate in decision-making processes and would be required to abide by the European Court of Justice’s rulings on this matter. In addition, the UK would have to transpose EU laws from other chemical related fields (e.g. industrial emissions, waste, water).

    Prime-minister May has already expressed the UK’s willingness to remain part of ECHA, but this was received with reluctance by the EU on the grounds of cherry-picking. These new developments have been welcomed by environmental and industry associations.

    May’s speech (2 March 2018)
    CHEM Trust position
    Cefic position

    Political Declaration: a level playing field for open and fair competition

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    The Political Declaration on the future EU-UK relationship describes in its last chapter on the economic partnership, in very general terms, the elements for a level playing field to ensure “open and fair competition”. It should cover state aid, competition, social, employment and environmental standards, climate change and relevant tax matters. These provisions should build on what already exists in the Withdrawal Agreement.

    Also, a new chapter on regulatory aspects was added last minute to the Political Declaration. Stakeholders believe this allows for deeper cooperation and for a dynamic alignment, which is a key element for policy areas with regular revisions, such as chemicals safety.

    Level playing field – all to be played for

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    Concerns about adverse impacts on the EU in the event UK lowers environmental and social standards in order to gain commercial advantages surfaced only after negotiations on the Withdrawal Agreement between the EU 27 and the UK had completed.

    The Northern Ireland Protocol, the magic piece of the puzzle meant to prevent a hard border with the EU, whilst also allowing the UK to restore its borders, contains significant rules relating to a level playing field. They have the potential to be applied for a long-time to come, even if unwanted. Essentially, the backstop requires Northern Ireland to follow the EU’s internal market rules, thus most environmental and health standards concerning industrial production. These include for example the regularly updated emission limit values under the Industrial Emissions Directive or the restriction of chemicals under the REACH regulation. They remain enforceable for Northern Ireland, but not for Great Britain. This means the UK could start to diverge from EU standards for England, Wales and Scotland.

    Environmental quality standards, such as for water, air and nature protection, are not covered by the Protocol, except for a “non-regression clause”, which freezes protection levels as soon as the protocol enters into force. Different procedures, such as a joint committee, are provided in the draft Withdrawal Agreement, to put meat onto the bones for enforcement, but are challenged by environmental NGOs (see Guardian article).

    Days before the Article 50 European Council of 25 November 2018, Denmark, France, Germany, Italy and the Netherlands demanded stronger level playing field requirements. These calls did not change the text of the Withdrawal Agreement, but were eventually accommodated in the Political Declaration for a future relationship, as well as in a separate statement by the EU27 leaders.

    The Guardian on NGO critics on Withdrawal Agreement
    Statement by EU27 leaders (25 November 2018)

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