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I’m really very upset about the Brexit vote. Don’t worry; this isn’t going to be a long article explaining why. I just haven’t posted anything about Brexit on the internet at all, and want to make my view clear at the outset before I start writing a balanced article here, as I know otherwise anyone reading this will realise my not-so-subtle slant (ok full disclosure: my profile background on Facebook was the EU flag, and I shared a comparison photograph between Alan Partridge and Nigel Farage, but compared to most on the internet I have been comparably silent).

Leathes Prior’s position was fairly neutral. Not officially neutral, I should say, because one of our senior partners spent the day of the election walking round the close wearing stone linen chinos and a bright blue “I’m voting in T-Shirt”. And at a meeting between us and some local accountants to discuss closer referral links (who did have an official neutral policy, so they couldn’t easily argue back.  Which made us talking about it a bit mean, but we discussed Brexit anyway) another of our partners said that he simply backed anything that Boris backed. So our position was probably better described as “covering all bases”, rather than neutral.

Anyway, even if most are probably already bored of talking about Brexit, it is going to be debated for a long time to come, so I’m going to cover some very specific matters that may be affected that relate to the law governing many in the construction industry. As I said, I am very upset about Brexit (it would take almost a novel worth of writing to explain why to the full extent it deserves), and I think there has to be full disclosure about that, but I am going to try to write this in as balanced a way as possible.

As everyone knows, there is a hell of a lot of law from the EU, governing absolutely everything in our lives and in business (I think that’s one of the reasons many voted to leave, which is fair enough). The instinctive view is that all of that will need to go out of the window, and the UK government is going to need to spend years rewriting it all. Actually, that’s not really true, and also not desirable. 

There was an entertaining article in the Economist a few weeks back about why Leicester winning the Premier League is a bad thing; the reason is that predictability and certainty is a good thing for markets (hence politicians of all colours rushing to reassure that there should be stability). The same applies to the law. The whole common law, established by Henry II in the 12th century, is based on the principle that if something has been decided previously, it must be right (i.e. precedent). As long ago as 1275, the English parliament passed the Statute of Westminster, stating that if something happened before 3 September 1189 (time immemorial) it’s probably right. All of these were good ideas, and are the kind of thing that the UK legal system has been doing for hundreds of years since. Preserving the status quo is usually good for everyone, and change should be made incrementally (for the avoidance of doubt, change can also be a good thing, but slowly and predictably is usually better).

Fortunately, most EU law will remain enforceable in the UK, at least for the time being. I am talking from a legal point of view, of course. In actual fact, EU law remains in force right now anyway, given that the referendum was of no legal effect at all. Then we have two years after Article 50 is invoked. Given that Article 50 was specifically designed to give the EU a stronger negotiating position than the leaving country, it wouldn’t surprise me if that wasn’t invoked for quite some time. But EU law will linger for a lot longer than that.

First of all, probably the majority of relevant law that has come from the EU (I’m talking about my experience - I don’t have statistics to back that up) comes from directives, which have no direct effect on UK law (save that they are persuasive when it comes to interpretation). EU directives are then implemented into UK law by UK regulations (distinct from EU regulations, which I’ll come to).  Even if the European Communities Act 1972 were to be repealed tomorrow, those regulations would still be in force. They are an ordinary part of UK law.

There is a vast world of directives from the EU that has been implemented by the UK that affects the construction industry, and it would be impossible to cover even a significant fraction of them. The one that immediately springs to mind is EU Directive 92/57/EEC (catchy name, isn’t it?), from which the Construction (Design and Management) Regulations 2007 derives (and which were replaced last year with the Construction (Design and Management) Regulations 2015). Though with a reasonably mundane sounding title, the objective of the regulations is really quite important. It’s quite amazing that in this day and age, with compulsory seatbelts and smoking indoors prohibited, people still die on construction sites on an alarmingly regular basis. So the CDM Regulations seek to solve that problem. Most in the industry (i.e. those people who I have spoken to) seem to think that the CDM Regulations work rather well, and I don’t see them going anywhere any time soon. 

In the interest of balance, there are other UK regulations which have come from EU law, which may get looked at once the whole process of negotiating the constitutional issues has settled down. One example is Energy Performance Certificates, which are a part of UK law pursuant to a series of UK regulations, and which derive from Directive 2002/91/EC. Basically, when you sell a house you need an EPC. I do think they’re a complete waste of time, and help no-one, and it’s this kind of thing that can be looked at as part of UK law if and when the UK leaves the EU (I say “if” only because the whole process looks like it’s going to be extremely convoluted going forward). But, for the time being, they would form part of UK law even if we pulled out of the EU tomorrow.

Second, there are the EU regulations. For the sake of stability and certainty, they’re going to have to be incorporated into UK law, regardless of what some leave campaigners may have wanted. We are very unlikely to have a situation where vast swathes of law is just going to be repealed overnight. But then going forward, the UK can make regulations amending them as appropriate. For example, Regulation 305/2011 has brought in a mandatory requirement to have CE marking on certain construction products. Previously, the UK implemented the former directive by allowing those requirements to be optional, on the basis that many construction products are sold only in the UK. It is, going forward, going to be possible for the UK government to amend those regulations thereby removing that obligation (seen by some as fairly onerous) on SMEs producing construction products in the UK (they will still have to comply if they sell products to EU member states).

So EU regulations would be repealed if we pulled out of the EU tomorrow. But that’s not going to happen, and I would be very surprised if the EU regulations that are currently in force were not incorporated into UK law in their entirety. Boris Johnson has said, at the time I am writing this, that EU law is the only aspect that he does want to change, so watch this space, but expect to see some kind of UK legislation that simply incorporates EU regulations into UK law for the time being.

Then, third, there are the treaty rights and obligations. I’m not going to stray into that territory, as it’s very much political and a matter outside of the scope of legal advice. It looks like the UK will need to adopt many of the treaty provisions in order to get appropriate access to the single market, but time will tell as to whether that is the case, and the extent of the assertion that many seem to have made. 

In any event, other provisions of the EU treaties have already been incorporated into UK law. The Competition Act 1998 and the Enterprise Act 2002, for example, are derived from the EU treaty provisions on competition law, so there would be little change there, at least.

The simple, basic message from a legal perspective is to not worry. Nothing has changed in terms of the legal framework or the state rules to which we are to adhere.

One thing to look out for, of course, is a "Brexit clause". I have actually not come across such a clause myself, and I’m not wholly convinced that they're quite as prevalent as the Guardian might have us believe. Basically, the fear is that a lot of contracts contain a provision which says that if the UK pulls out of the EU the contract can be terminated, and some of the papers are asserting that some construction projects contained such a clause. If I had been advising on such a clause before the referendum, my advice would have been to only accept it if forced, and I would imagine they would only be contained in contracts which have lots of termination provisions.

However, it's worth looking over any contracts for such a clause. Obviously a contractor or sub-contractor is not going to want to spend a lot of time and resources on a project which may now be terminated by the employer.  Unfortunately, the reality is that if there are Brexit clauses around, there is likely to be a lot of uncertainty, which will lead to expensive litigation. 

More likely, there are going to be "material change of circumstances" clauses, which some parties may seek to interpret as meaning that they can now terminate or effect some other course of action. Whether or not that is possible will depend entirely on the circumstances of each case, and the interpretation of each contract. Worse, some parties may even try to invoke the doctrine of frustration, which again will depend on each individual case.

All of this just covers the legal side, of course, which may well be the only part of all of this that is relatively stable over the next couple of years. Businesses are going to have to consider access to finance for the foreseeable future if the economy takes a nosedive, the potential postponement of investment until more certain times arrive, possibly tumbling or stagnating property prices and reduced investment in the UK from abroad, at least in the immediate future. And then if immigration is reduced, then access to skilled and unskilled workers may be affected. And if the UK government does not provide the same financing resources that the EU government currently does, construction firms will need to seek alternative sources of funding.

It's going to be a bumpy ride, but at least the law will remain a steady constant. For now.