To converge or not to converge? That is the question: post-Brexit UK policy on digital regulation

Last week the EU postponed two meetings:  the first was the EU-UK summit, which was pushed back following Kier Starmer’s resignation as leader of the Labour Party. The second was the Council vote on the Digital Omnibus which would (amongst other instruments in the EU’s digital acquis), amend the GDPR.[1]

The EU-UK package has no digital component:  it contains provisions on emissions trading, agrifoods and youth mobility.  But for the UK both packages present a question: do we want to follow EU standards or diverge?  And is the answer different for different sectors:  would we like to converge with the EU on goods and the US on services?  Is that even realistic, or an example of the kind of “cherry picking” which the EU simply won’t accept?  And more fundamentally, whilst the Draghi report[2] warned about low growth and overregulation in the EU, the EU’s attempts to deregulate appear both insufficient and potentially too difficult to deliver.   Where the UK has the chance to do things differently, should it seize that opportunity?  Or in this uncertain and dangerous age is it better to be part of a bloc than to go it alone?  And is going it alone even possible?

EU law in the digital space:  overregulation and the threat to the rule of law

Top German officials are privately likening the EU’s approach to regulation to that of Fredrick the Great, who ruled Prussia in the 18^th Century.  His general law of Prussia “Das Allgemeine Landrecht für die Preußischen Staaten” contained over 17,000 articles and was meant to create a comprehensive code for the regulation of all aspects of life in Prussia.  The law was too complicated and therefore ineffective, resulting in inevitable repeal.  

There is an enormous amount of legislation in the digital space in the EU.  The Bruegel thinktank has published a table detailing over 100 separate pieces of EU digital legislation. [3] Academic commentators have said that this tsunami of legislation is in part due to concerns about the rise of the far right. The European Commission, fearful of being unable to pass legislation due to the makeup of the European Parliament, rushed out legislation before they might be hindered from doing so. 

The result is a forest of legislation including the EU AI Act, the Digital Markets Act, and  the Digital Services Act.   These three instruments are described as “catastrophically interventionist and anti-innovation” by Rohan Silva, David Cameron’s former technology adviser.[4]    EU lawyers are now discussing the fact that even the richest companies able to afford an army of lawyers can no longer make sense of the regulatory landscape.   The effect on smaller businesses, as Draghi describes, is profoundly negative. 

But it is also worth considering whether the European Commission’s attempts to rush to get ahead of the far right actually play into their hands.  If nobody can understand let alone comply with the law, that in itself undermines the rule of law.[5]  That makes it easier to argue that our legislative landscape is full of law which is obsolete, suffocating and unnecessary and should therefore be torn up or simply ignored.  

EU attempts at deregulation

The EU is not oblivious to the problems of the burdens faced by companies attempting to comply with EU standards.  The Draghi report pointed out problems of “slow growth” and “overregulation which Draghi described as “self-defeating”.  He pointed out that “Only four of the world’s top 50 tech companies are European”. 

In response to Draghi’s report, the European Commission brought forward the digital omnibus package:  one regulation to simplify the EU AI Act and another designed to streamline other aspects of the digital acquis including the GDPR.  These changes were heralded by the European Commission as “Optimis[ing] the application of the digital rulebook” and as “technical amendments…selected to bring immediate relief to businesses, public administrations, and citizens alike, to stimulate competitiveness.”

In reality the proposed changes will do little to tackle the problems highlighted by Draghi.  The main amendments to the EU AI Act delay the obligations rather than reshaping the instrument’s fundamental architecture.  Commentators have criticised the legislation as being “stifling” for innovation and a “deterrent for investment”.[6] Likewise, proposed changes to the GDPR are inadequate to deal with the problems raised in the Draghi report.  They make no attempt to tackle the significant regulatory burdens imposed when (for example) European businesses want to transfer data overseas – something which is currently unavoidable given the heavy reliance on US tech firms and the lack of European capacity.[7]  At present even the adjustments to the GDPR appear unlikely to pass, leaving the instrument in a state variously described by academics as “dead”[8] or “the perfection of a dead end”. [9]

Adopting the parts of the EU’s digital rulebook which don’t already apply to the UK therefore appears unattractive, but going it alone is also difficult.

Rule taker, not rule maker

In a recent speech, former Brexit negotiator David Frost spoke of the benefits of Brexit being the ability to adjust to circumstances, correct mistakes and to make choices.[10]  But the reality is that many UK companies need to comply with EU law because they sell their goods or services into the EU, so alignment with EU law is something that is already required for their operations.  And the rules which UK companies have to comply with are still made in Brussels:  the difference is that the UK no longer has a seat at the table and has little ability to influence the content of EU rules.  In other words, as far as its companies operating in the EU are concerned, the UK is a rule taker not a rule maker. 

New partnerships

The Secretary of State for Science, Innovation and Technology, Liz Kendall MP, made an important speech on the UK’s approach to digital technology earlier this year entitled “Rebuilding Britain for the new world”. [11] She emphasised the disruption taking place across the world, created in part by new technologies, and the importance of the UK working more closely with our international partners, particularly other so-called middle power nations, including on setting the standards for how AI is deployed.  She explained that “Britain’s national interests are strengthened, not diminished when we work with like-minded nations.”  Interestingly the partnerships on AI technologies which she referred to were all bilateral:  a Strategic Science and Technology Partnership with Germany, including a £6 million joint quantum project; a new “Entente Technologique” agreed with France last year, joint work with Canada on AI security, and a Digital Partnership with Japan covering AI, cyber security and data.

To the question of whether to converge or not to converge with EU standards, the answer appears complex and nuanced.   But there is certainly a change of tone in the UK-EU relationship.  Commentators have speculated that Labour’s EU-UK reset is more of a “political device” to emphasise that our relationship is now warmer and more collaborative, but that it does not signal a wish to align with the EU’s rulebook in every area.[12]  Michel Barnier, the EU’s former Brexit negotiator, explained last week at an event to mark ten years since the UK’s EU referendum that “Brexit is a lose lose game” and that the EU and the UK are “stronger together”. [13] He thought that it was realistic for the UK to rejoin the EU quickly, but that it would take longer for the UK to decide whether to rejoin than for the negotiations to be settled.  But he also emphasised that there can be no “cherry picking”.  We cannot have our cake and eat it.

Subscribe to receive more articles like this here.