UPD

The issue isn't present in vue-loader@17

Issue

vuejs/vue-loader#1849 - vue-loader@16 patches Webpack in a way that prevents the usage of Webpack's layers.

1. It's an experimental feature: https://webpack.js.org/configuration/experiments/#experiments
2. There isn't much documentation to it: webpack/webpack#12327, https://webpack.js.org/configuration/module/#rulelayer, https://webpack.js.org/configuration/module/#ruleissuerlayer and https://webpack.js.org/configuration/entry-context/#entry-descriptor
3. However, the feature lets you process the same CSS differently when it's imported by a certain entry point or file, which cannot be accomplished in any other way.

How to Reproduce

1. cd into the cloned repo, run npm run build, get an error
2. checkout to 040fe39 where Vue Plugin isn't being used, run npm run build, get a compiled bundle

The Outcome

[webpack-cli] Error: Compiling RuleSet failed: Properties issuerLayer are unknown (at ruleSet[0]: [object Object])
    at RuleSetCompiler.error (/Volumes/Repos/vue-loader-and-webpack-layers/node_modules/webpack/lib/rules/RuleSetCompiler.js:373:10)
    at RuleSetCompiler.compileRule (/Volumes/Repos/vue-loader-and-webpack-layers/node_modules/webpack/lib/rules/RuleSetCompiler.js:196:15)
    at /Volumes/Repos/vue-loader-and-webpack-layers/node_modules/webpack/lib/rules/RuleSetCompiler.js:154:9
    at Array.map (<anonymous>)
    at RuleSetCompiler.compileRules (/Volumes/Repos/vue-loader-and-webpack-layers/node_modules/webpack/lib/rules/RuleSetCompiler.js:153:16)
    at RuleSetCompiler.compile (/Volumes/Repos/vue-loader-and-webpack-layers/node_modules/webpack/lib/rules/RuleSetCompiler.js:68:22)
    at match (/Volumes/Repos/vue-loader-and-webpack-layers/node_modules/vue-loader/dist/pluginWebpack5.js:156:35)
    at VueLoaderPlugin.apply (/Volumes/Repos/vue-loader-and-webpack-layers/node_modules/vue-loader/dist/pluginWebpack5.js:61:24)
    at createCompiler (/Volumes/Repos/vue-loader-and-webpack-layers/node_modules/webpack/lib/webpack.js:73:12)
    at /Volumes/Repos/vue-loader-and-webpack-layers/node_modules/webpack/lib/webpack.js:44:48

The Possible Reason

Vue Loader's set of rules doesn't match Webpack's

https://github.com/webpack/webpack/blob/4fb45402eec7efe1c70e641cab7b24331948ea8d/lib/NormalModuleFactory.js#L171-L193

https://github.com/vuejs/vue-loader/blob/b179fb9c1b3bc0507f021be208c359d0dedeec08/lib/plugin-webpack5.js#L10-L30