This article first appeared in the June edition of In-House Lawyer (online) on 10 June 2016.

It has been a busy time for Scotland's constitution. No sooner was the 2014 independence referendum out of the way than the debates and arguments began on new powers for the Scottish Parliament. That debate resulted in the Scotland Act 2016, passed shortly before May's Scottish Parliament election.

With that election over, Scottish voters and businesses have had to quickly turn their minds to June's referendum on whether the UK should leave the EU. An extra layer of constitutional complexity is added in Scotland by the argument that the UK voting to leave, while Scotland votes to remain, could trigger a second independence referendum.

In the meantime, proposals for significant UK-wide constitutional changes continue to simmer. Foremost among those is the replacement of the Human Rights Act 1998 with a British Bill of Rights, a change that could have significant and unique Scottish dimensions that are not always fully appreciated.

The Scotland Act 2016

The process of further devolution began the day after the independence referendum, when the Prime Minister appointed Lord Smith of Kelvin to head a commission to agree further powers to be devolved to the Scottish Parliament. The Smith Commission consisted of Lord Smith plus two appointees from each of Scotland's five main political parties, and within a short time it produced a report recommending a number of areas where power should be devolved. Legislation was introduced to the UK Parliament shortly after the 2015 general election, and the Scotland Act 2016 received Royal Assent on 23 March.

The most politically high-profile areas of change are in taxation and welfare. As of April 2017, the Scottish Parliament will become responsible for setting all tax rates and bands applying to Scottish taxpayers' "non-savings, non-dividend income (broadly including employment, self-employment, property and pensions income but excluding dividends and interest). The SNP has said it will not mirror the UK Government's plan to raise the threshold for higher rate tax to £45,000, so we will for the first time see a divergence in income tax rates based on where in the UK a taxpayer lives.

Whether someone is a 'Scottish taxpayer' is based on place of residence, not work. For most people this will be simple, but HMRC has developed rules to determine the status of those with more complex living arrangements (based on factors including where their family lives, where they vote, where their bills are sent and even where their dog lives).

Air Passenger Duty for Scottish airports will be devolved for the tax year 2018/19, and starting in 2019/20 the Scottish Government will be allocated the first 10% of VAT receipts raised in Scotland.

The Scottish Parliament will also gain control over certain welfare benefits that support the elderly, carers, the disabled and the ill, plus aspects of the housing cost element of Universal Credit. It will also have the power to 'top up' other benefits.

The Scottish Government will also gain the power to transfer Employment Tribunal proceedings in respect of Scottish cases to a Scottish tribunal. While the substance of employment law will not be devolved, the Scottish Government will have control over key administrative matters. It has already indicated an intention to scrap Employment Tribunal fees, which would significantly incentivise employees to bring employment claims in Scotland, if possible. Cross-border employers, in particular, should be following the progress of this issue closely.

The management of the Crown Estate's assets in Scotland will also be devolved, a move that may be particularly significant for the renewables sector, given that those assets include the foreshore and seabed.

Other areas in which the Scottish Parliament is gaining power include:

  • Equality: power to introduce gender quotas for Scottish public bodies and create a public sector equality duty relating to socio-economic inequalities;
  • Transport: power to change speed limits and road signs, regulate vehicle parking and allow public-sector operators to bid for the ScotRail franchise;
  • Oil & Gas: licensing of onshore oil and gas extraction underlying Scotland;
  • Consumer: consumer advocacy and advice;
  • Gambling: licensing of certain fixed-odds betting terminals; and
  • Abortion: power to amend abortion law in Scotland.

Several of these powers were formally devolved to the Scottish Parliament on 23 May this year, and the Scottish Government has already advertised plans to put them to use. There should therefore be brand new issues appearing in the forthcoming Programme for Government.

Scotland and Brexit

The EU referendum raises difficult political and legal questions, not least what the post-Brexit landscape might look like and what a 'leave' vote might mean for Scotland's position in the UK. These two issues are closely intertwined, so understanding the processes that would follow a vote to leave the EU is a useful first step to understanding not only its immediate consequences, but also its potential implications for the other, older Union.

While the SNP fell just short of another Scottish Parliament majority in May's election, together with the Greens they form a majority of pro-independence MSPs. While the Prime Minister has said the UK Government will not consent to another referendum, the political pressure might be difficult to resist if Scotland proved significantly pro-EU while the UK as a whole voted to leave. However, the complexities of the process make it unlikely that the often-floated 'snap' referendum would be permitted or even possible, as there would be real uncertainty about what a vote either way might mean.

The Prime Minister has said that if there is a 'leave' vote he will immediately hand in the UK's notice (under Article 50 of the Treaty on European Union), kick-starting a two-year period in which the UK's exit terms and the shape of the future UK-EU relationship would be negotiated. Agreement would be needed from the European Parliament and a qualified majority of the other Member States. If no agreement could be reached by June 2018, the UK would leave the EU at that point regardless, unless all the other Member States agreed to extend the deadline. Two years could be an ambitious timetable so, as long as negotiations had not completely broken down, an extension could not be ruled out.

The future trading relationship would be top of the negotiation agenda. Trade was almost always the focus whenever Scotland's potential EU status was discussed in the independence debate, and businesses would want certainty as soon as possible. Many voters, and particularly businesses, may currently find themselves in the difficult position of favouring a looser relationship with the EU but wanting to retain free access to EU markets, and worrying that there can be no guarantees on that pre-referendum.

The need for detailed negotiations, and the resulting uncertainty, significantly complicates the potential connection between Brexit and another Scottish independence referendum. Without some clarity on the future UK-EU relationship, voters could not know what a vote either way might actually mean for Scotland. There may well be Scottish voters and businesses whose opinion on staying in the UK would depend on whether access to EU markets could be retained post-Brexit.

Scottish voters would also want to understand what independence might look like in this new environment, which again could only become clear with time. It would mean re-opening one of the dominant questions of the 2014 debate: whether Scotland could transition to EU membership in its own right, and on what terms. While there would be great value in having that confirmed as part of the UK's exit negotiations, realistically that would not happen unless Scotland had already voted for independence in a second referendum (i.e. if a second independence referendum had already taken place, creating a chicken-and-egg problem). The independence 'prospectus' from the 2014 referendum would also have to be revisited, as proposals for a continuing currency union, shared regulation and open borders with rUK may not be viable if Scotland was inside the EU but rUK was outside. In particular, because the EU is a customs union, the border could only remain open if a UK-EU agreement permitted it.

Clarity on the post-Brexit UK-EU relationship would therefore be essential to a proper understanding of any subsequent independence proposal. A leave vote in June may therefore be only the start of another difficult constitutional debate.

A British Bill of Rights

Quite separate questions are also on the agenda as to the UK's future relationship with the Council of Europe and the survival or otherwise of the Human Rights Act 1998. The United Kingdom Ð as a signatory to the European Convention on Human Rights (ECHR) Ð is bound as a matter of international law to comply with the Convention in its dealings with its citizens (and others subject to its jurisdiction). Until the late 1990s it was only as a matter of international law that the UK was bound by the Convention and individuals who sought to assert their rights against the British state had only the option (relatively frequently used) of complaints to the European Commission on Human Rights and the European Court of Human Rights in Strasbourg.

The Human Rights Act 1998 was described by the Labour Government that introduced it as the vehicle for "bringing home the rights protected by the Convention. The Act imposes obligations directly on public bodies in the UK to act in a way that is compatible with Convention rights, and empowers individuals and businesses to bring claims (including claims for compensation) for breaches of their human rights in the UK courts.

This 'domestication' of the ECHR was given effect with particular force in the context of devolution. In each of the Acts of the Westminster Parliament that created the Scottish Parliament and the Welsh and Northern Ireland Assemblies specific provisions were included to make it clear that no devolved legislature or executive had any power to do anything that was incompatible with Convention rights. In doing so, each Act 'borrowed' or cross-referred to the Convention rights protected under the Human Rights Act.

The consequence of these specific provisions is that Ð in legal theory at least Ð the protection for human rights that exists in relation to Acts of the Scottish Parliament and the actions of the Scottish Government is even stronger than that applying to other public bodies in Scotland that are governed by the Human Rights Act. An Act of the Scottish Parliament "is not law to the extent that it infringes Convention rights: see Scotland Act 1998, s29 and Salvesen v Riddell [2013] UKSC 22).

The Human Rights Act has, however, been controversial since its enactment. Alongside a steady flow of sometimes shrill media coverage describing the way in which judicial protection of Convention rights has limited the power of democratically elected governments to implement policy priorities or to protect the public, there has been an ongoing political debate about whether the Human Rights Act should be repealed and Britain's membership of the Council of Europe brought to an end. Particularly in so far as the Council of Europe is concerned, that battle is often framed as being about national sovereignty and control: the view being expressed that the European Court of Human Rights has, in its interpretation of the ECHR, steadily moved beyond the original terms of the Convention to impose new and illegitimate requirements on signatory states.

The practical expression of this political debate has taken different forms, including inquiries conducted by the UK Parliament's Joint Committee on Human Rights and the establishment in 2011 by the Conservative/Liberal Democrat coalition of a Commission on a Bill of Rights. That cross-party Commission was asked to investigate "the creation of a UK Bill of Rights that incorporates and builds on all our obligations under the European Convention on Human Rights, ensures that these rights continue to be enshrined in UK law, and protects and extends our liberties. The underlying premise was that it might be desirable to replace an 'external' human rights regime with a wholly British regime, reflecting British values. The Commission struggled to reach consensus: relatively unusually, its final report included a dissent on the part of two members of the Commission and a 'personal explanatory note' by another. No reforming legislation emerged. The Conservative Party's manifesto for the 2015 general election included a commitment to abolish the Human Rights Act and create a British Bill of Rights.

Legislation to implement that commitment has not yet been forthcoming. The UK Government is itself divided on the proposal and it seems clear that any debate about the future of the Human Rights Act has been deliberately postponed until after the referendum on EU membership.

If there is to be repeal or reform of the 1998 Act, including by reference to British rights, the UK Government will face the same objections in Scotland as have been made consistently since the idea was first floated. How will any reform sit alongside the devolution legislation in which the ECHR is embedded? And, in an era of increasing decentralisation and assertions of national autonomy by the devolved administrations, is it meaningless to talk about a British Bill of Rights?