Brexit and the Regulatory and Supervisory Gaps

Brexit is leading to the creation of new regulatory and supervisory agencies. The need to create these new institutions arises because of two reasons. Firstly, because new regulatory and/or supervisory functions have come into being as a consequence of Brexit. Secondly, because pre-existing regulatory and/or supervisory oversight competences exercised elsewhere – e.g. by the European Commission or its Directorates-General – have to be exercised by a domestic entity because the UK no longer participates in EU institutional frameworks. The effect of either development is that there are or will be gaps in regulatory and/or supervisory oversight over various aspects of economic and social life in the UK.  Therefore, over the coming years, new institutions will have to be created to plug these regulatory and supervisory gaps as they emerge. Using the case study of the creation of the Independent Monitoring Authority for the Citizens’ Rights Agreement (IMA), an institution which has come into existence because of the emergence of new supervisory functions, this post offers a framework by which we can understand and critically appraise these institution-building exercises.

The creation of the IMA is required by Part Two of the Withdrawal Agreement (WA) between the UK and the EU. Article 159 of the WA states:

[T]he implementation and application of Part Two shall be monitored by an independent authority (the “Authority”) which shall have powers equivalent to those of the European Commission acting under the Treaties to conduct inquiries on its own initiative concerning the alleged breaches of Part Two by the administrative authorities of the United Kingdom and to receive complaints from Union citizens and their family members for the purposes of conducting such inquiries.

Thus, the IMA is an institution anchored in a treaty between the UK Government and the EU. As the new IMA website confirms, the Authority was ‘launched’ at 11 pm on 31 December 2020 i.e. at the end of the implementation/transition period. The domestic incorporation of these international obligations into UK law is realised through Part 3 of the European Union (Withdrawal Agreement) Act 2020 (EU(WA) Act). Section 15(1) of that Act only declares that ‘A body corporate called the Independent Monitoring Authority for the Citizens’ Rights Agreement is established.’ Substantive aspects relating to the ‘constitution and functions’ of the IMA are provided in Schedule 2 of the EU(WA) Act. I contend that the legislative framework creating the IMA reflects a general pattern of how regulatory and/or supervisory institutions are created in the UK. There is no systematic approach to the installation of such institutions, nor is there any articulation of the principles which guide such enterprises.

In embarking on research into this important topic in the UK constitution, my working hypothesis is twofold. First, the latitude provided by the principle of Parliamentary sovereignty to the UK Parliament in bringing into existence any regulatory and/or supervisory institution it sees fit partly accounts for the ad hoc approach to the creation of these entities. Second, with much of UK Public Law converging on the organisation and practice of judicial review of administrative action, little judicial or academic attention is given to the nature and functions of regulatory and supervisory agencies as constituent parts of our public law landscape. With particular reference to understanding regulatory agencies and what they do, Aileen McHarg observes that, traditionally, ‘this has long been regarded as one of the least satisfactory aspects of UK administrative law.’ This is because in the specific context of ‘administrative rule-making’ in which McHarg writes, courts and academics alike have struggled to propound what she describes as ‘a coherent, and a clear, principled account of the conditions of legitimate administrative rule-making.’  And to that, I would add that the general ambivalence towards the institutional basis on which regulatory agencies are founded in the UK also accounts for the difficulty in establishing the parameters around the lawfulness of their rule-making function.

However, as noted above, Brexit is necessitating the creation of new regulatory and/or supervisory institutions instances where there may be institutional gaps because of withdrawal. Therefore, there is now a pressing need to appraise how these institutions are created on public law terms.

Adopting a framework put forward in an article published by Jethro Brown in the Yale Law Journal in 1921, I propose a framework with three components by which we can universally understand and evaluate the creation of new regulatory and/or supervisory institutions in the Brexit age. According to Brown, these ‘building blocks’ can be described as relating to the “organ”, “process” and “effect” of an institution. Although this framework may be criticised for being rudimentary and perhaps lacking the complexity required to address contemporary governmental institutions, I think it nonetheless gives us a much-needed starting point in a constitutional system where the supremacy of the legislature means, in theory, any set of institutional arrangement can be brought into being. Using the creation of the IMA as an example, I demonstrate how Brown’s framework can be a prism through which we can appraise the creation of new regulatory and supervisory institutions and the extent to which such agencies satisfy their stated public policy functions.

Organ, Process and Effect – The IMA Case Study

Organ

The organ dimension includes the composition, internal organisation and even the nomenclature associated with an institution. In the instance of the IMA, the fact that its title includes the adjectives “Independent” and “Monitoring” cognitively directs us to certain attributes which we may expect of an institution with such a name. We know from the text of Article 159 of the WA cited above and from policy papers published by the UK Government that, ‘independence’ – whatever this concept means – is to be a defining characteristic of the IMA as an organ.

Similarly, in terms of composition, Schedule 2, para 2(1) of the EU(WA) Act provides for the IMA to be composed of a combination of  ‘executive’ and ‘non-executive members’. Arguably, this composition scheme also reflects the aspirations of independence apparent in the IMA’s name. The relevant provisions require that ‘so far as possible’ those tasked with appointing personnel to the IMA should ‘ensure that the number of non-executive members exceeds the number of executive members’ (see EU(WA) Act, Sch 2, para 2(4)). Furthermore, the same part of Schedule 2 provides that ‘a person may not hold office as a member of the IMA if the person is a civil servant.’ However, other attributes point to the limits of the IMA’s independence as an organ. For example, Schedule 2 para 2(2) charges the Secretary of State for Justice with appointing the non-executive members of the IMA while para 2(3) subsequently empowers the non-executive members to appoint the executive members, subject to the Chair and 2 non-executive members being in office at the time. If independence is a defining characteristic of the IMA as an organ, this is arguably compromised by a scheme for appointment of members which relies on a combination of Ministerial and internal initiative.

Process

This element in Brown’s sequence for understanding how public institutions are created and later operate refers to the modes by which an organ performs its functions. When applied to a supervisory institution such as the IMA, this element relates to the way an organ makes decisions or determinations in pursuit of its designated functions. If we take processes adopted by the paradigm legal institution – a court – as an example, this aspect of institution-building includes how information which informs a decision is collected by a court and the form which a decision once made, is promulgated. The IMA is statutorily recognised as a complaints-handling body, charged with addressing grievances arising from breaches of Part 2 of the WA by UK authorities. However, the statutory scheme is silent on the specific procedures the IMA is to adopt in performing these functions. Schedule 2, para 9(1) of the EU(WA) Act provides that ‘the IMA may regulate its own procedure’ subject to several limitations. Of those limitations, the only potent one is found in Schedule 2, para 9(4) requiring a quorum of at least half of the members of the Authority to be involved in decision-making, and the majority of those members present being non-executive members. The mechanics of how individual complaints are to be lodged with the IMA or how the Authority is to apply principles of natural justice in its processes, for example, are all subject to determination by the Authority. This exemplifies the unprincipled mode by which regulatory and supervisory institutions are created in the UK and the unreflective way in which the sovereign Parliament can will any institutional arrangements into existence.

Effect

The “effect” element in Brown’s framework refers to the impact which institutions and their processes have on rights and liabilities of entities subject to their jurisdiction. The most obvious aspect of an institution’s effect is whether its determinations are binding on entities subject to its jurisdiction or whether they are just advisory of a possible course of conduct. Given the centrality of the issue of citizens’ rights in the discourse before and after the June 2016 referendum and the controversy around the conception of Part 2 of the WA, it is perhaps here where the biggest deficits lie in terms of how the IMA has been created. The IMA appears to lack sufficient powers to effectively monitor the fulfilment of the obligations in Part 2 of the WA by the UK – the very thing it was created to do. The high point of the effect of its determinations is the power to inquire into alleged breaches of the obligations in Part 2 of the WA by the UK (see Schedule 2, paras 25-26 of EU(WA) Act). The resultant report and recommendations of such an inquiry are to be published and sent to different public authorities including central government and devolved ministers (see paras 27 of Schedule 2 of the EU(WA) Act). In turn, the recipient public authority is obliged to ‘have regard to the recommendations’ in a report and respond within a 3-month timeframe. The statutory framework does not provide guidance on what constitutes ‘having regard’ to the recommendations nor does it indicate the satisfactory level of regard to be shown to the IMA’s outputs by the relevant public authorities.

In situating the IMA within the public law landscape, it is noteworthy that the power to conduct inquiries is complemented by the grant of standing for the IMA to initiate and intervene in judicial review proceedings. This is in instances where the IMA ‘considers it appropriate to do so in order to promote the adequate and effective implementation or application of Part 2’ of the WA (see EU(WA) Act, Schedule 2, para 30(1)). However, Schedule 2 does not structure the IMA’s discretion in this context and we can assume that the extent to which the IMA will be involved in litigation will be determined by the Authority itself, as with the other important aspects of its constitution and functions already highlighted in this post. What is evident from an analysis of the scheme as a whole is that the IMA has little scope to have much of a real or substantial effect on its own in fulfilling its functions without relying on other institutional actors such as Ministers or the courts. This again highlights the limits of the IMA’s operational and institutional independence and raises doubts about whether this institution has been created in a way that allows it to fulfil its functions.

Concluding thoughts

The extent to which the IMA has been built on any principles of institution-building is uncertain. This post has claimed that this is reflective of the general approach to the creation of regulatory and supervisory institutions in the UK. Through relying on Jethro Brown’s framework of studying governmental institutions in the British constitutional tradition, this post has sought to focus minds on three composite components of organ, process and effect which can potentially induce a degree of principle into institution-building in the Brexit age. Like all the other institutions, the IMA’s strengths and weaknesses will become evident over time as we assess the extent to which it meets its stated raison d’être ofindependently monitoring breaches of Part 2 of the WA by the UK. This post modestly puts forward an analytical framework for that critical work.

Byron Karemba is Global Excellence Scholar at the University of Western Australia. He is grateful to the Blog Editors and Ben Hulme for comments which have informed this post.

(Suggested citation: B. Karemba, ‘Institution-Building in the Brexit Age: The Case of the Independent Monitoring Authority on Citizens’ Rights’, U.K. Const. L. Blog (6th Jan. 2021) (available at https://ukconstitutionallaw.org/))