The people of the UK voted in the referendum on 23 June 2016 in favour of the UK leaving the European Union.
Many businesses will already have carried out a high level analysis of what the principal areas of impact on them are likely to be. Some will have gone further, identifying areas which already merit detailed planning or active engagement in industry dialogue or government consultation.
Legal, regulatory and trading arrangements in particular present many complexities and uncertainties. These must be viewed in the context of the timing of an eventual withdrawal from the EU.
Faced with a wide array of possible outcomes, much of the planning activity at present is to identify potential issues, as a basis for making firm decisions as things become clearer. Effectively, there is still a large element of “wait and see”.
To start the formal withdrawal process the UK government will need to serve notice on the European Council (the “article 50 notice”). That will set in motion a two year period for a withdrawal agreement to be agreed. Withdrawal itself would take place at the end of the two years (unless agreement were reached with the European Council before then or the UK and European Council agreed to extend the deadline – requiring agreement of all other 27 member states).
On 2 October 2016 Theresa May (who took office on 13 July 2016 as prime minister of the UK) made clear in a speech that she intends to serve the article 50 notice by the end of March 2017. This would mean the UK leaving the EU in 2019 unless an extension of the deadline were agreed.
The UK Supreme Court ruled on 24 January 2017 that authorisation by an act of the UK parliament is required for the government to serve the withdrawal notice. The government introduced a bill on 26 January seeking that authorisation from the UK parliament – the House of Commons and the House of Lords.
The Supreme Court also ruled on 24 January 2017 that the devolved administrations of Scotland, Wales and Northern Ireland have no right of veto over the withdrawal notice, although the UK government has indicated a commitment to work closely with them in the withdrawal.
Commentators are generally of the view that UK parliament’s authorisation will be given in time for a withdrawal notice to be served by the end of March 2017.
Publicly the EU Commission and leaders of member states have indicated that no negotiations can begin until the withdrawal notice is given. That said, it is clear that there have been at least some preliminary discussions of principle.
Until withdrawal takes place, the UK is expected to continue to have the benefits and obligations of an EU member, albeit presumably with reduced influence.
The UK government has signalled (in the prime minister’s speech on 17 January 2017 and a white paper published on 2 February 2017, referred to below) a wish to reach agreement on a new partnership with the EU within the two year negotiation period and to avoid a “cliff-edge” for business or a threat to stability. A phased implementation process is envisaged following such an agreement, which would give businesses enough time to plan and prepare for new arrangements, whilst avoiding the creation of some form of unlimited transitional status.
The “cliff edge” remains at least a theoretical possibility in the background for negotiations, with the government saying that “no deal for the UK is better than a bad deal for the UK”.
The next UK general election is scheduled for May 2020. It is possible that there would be an early general election if at any time it were felt a fresh mandate were required. It is also conceivable that, as things develop, further validation could be sought through another referendum.
In this context, one unknown is whether the withdrawal notice is capable of being revoked without the consent of the 27 other EU members. A number of prominent international public law commentators have said that it may be revocable whilst others doubt that. Ultimately this would need to be determined by the European Court of Justice.
Elections in France in May 2017 and in Germany in October 2017 may have an impact on the course of Brexit negotiations.
Legal implications for leaving the EU would be considerable and far reaching and include:
It also needs to be remembered that much of the UK law is derived from EU law and the way in which EU law provisions have been implemented in the UK is highly complex, often involving a combination of amendments to existing primary legislation, new primary legislation, secondary legislation and other rules, such as those of the Financial Conduct Authority.
On 2 October 2016 David Davis (the secretary of state for exiting the EU) announced that the government plans to repeal the European Communities Act 1972, which gives direct effect to all EU law in the UK. This would also end the jurisdiction of the European Court of Justice in the UK. It would take effect from the date of the UK’s exit from the EU.
At the same time a new bill will convert existing EU law into domestic law, while allowing parliament to amend, repeal or improve any law after appropriate scrutiny and debate. It will be important to ensure these laws function in a post Brexit UK and where EU institutions currently have direct administrative powers, these will need to be replaced with alternative arrangements.
A white paper issued by the government on 2 February 2017 confirmed that there will be new primary legislation where there are significant policy changes, for example on immigration and customs (therefore allowing debate and scrutiny by parliament).
In a speech on 17 January 2017 the UK prime minister, Theresa May, set out a number of negotiating objectives and confirmed that it was the intention of her government for the UK to leave the EU single market and to enter into a free trade agreement with the EU. It was also the intention to re-draw customs arrangements to enable the UK freedom to negotiate its own trade agreements with other countries and to notify its own tariffs to the World Trade Organisation.
The 2 February white paper mostly repeated and enlarged on the points made in this speech. It clarified that the government would like to replicate as far as possible the UK’s current position as an EU member state, in relation to WTO tariff schedules, so that the interests of the UK and other WTO members are protected.
On movement of people the white paper confirmed the position set out in the speech that the UK would have control over the number of people coming to the UK from the EU. The white paper clarified that the UK “will always welcome genuine students and those with the skills and expertise to make our nation better still”.
In practice Brexit will require negotiation of a wide range of new arrangements with the EU and other countries. This may well result in the UK participating as a non-member in aspects of the EU on terms very similar to those currently in place, whilst other aspects are likely to be markedly different. Similarly, negotiations with non-EU countries could play out in a number of different ways. Taken together, this amounts to a wide range of possible outcomes, which will become clearer over time.
Taylor Wessing can help and advise you as the UK prepares for Brexit. We can help you navigate what, for most, will be a period of considerable remaining uncertainty.
If you are an existing Taylor Wessing client, please speak with your regular contact, or for general Brexit enquiries, in the first instance, please contact Andrew Telling, Head of Knowledge Management.
In the days since the result of the UK referendum on membership of the EU (‘Brexit’) became known on…
Financial services firms appear to be in a uniquely awkward position since the UK gave its opinion that…