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On 29 March 2017 the UK government gave notice to the European Union triggering the formal Brexit process. This set in motion a two year period to finalise a withdrawal agreement and for the UK to leave. That period can be extended with agreement of all other 27 EU member states.

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 initial action.

Faced with a wide array of possible outcomes, businesses need to have in place a process which:

  • identifies Brexit sensitivities (risks and opportunities),
  • reviews those identified areas in more detail (due diligence),
  • clarifies “red flag” issues requiring immediate action and “amber flag” issues potentially requiring action as the regulatory and commercial landscape becomes clearer, and
  • establishes a system by which these issues are subsequently reviewed and implemented.

Taylor Wessing is well placed to advise on these matters from its offices in the UK and around the world.

Below is some further background on timing, negotiations and the legal implications.

Timing

The UK will leave the EU by 29 March 2019 unless the deadline is extended by agreement with all other 27 member states.

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.

Following the UK general election in June 2017, a minority UK government seems set to continue on substantially the path it set out earlier in 2017 as regards Brexit negotiations.

The UK government has signalled 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. An implementation period 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.

In a speech in Florence on 22 September 2017 the UK prime minister, Theresa May, said an implementation period should be strictly time-limited and that current considerations pointed to a period of around two years. That would mean a period ending around March 2021.

The “cliff edge” remains at least a theoretical possibility in the background for negotiations, with the government previously saying that “no deal for the UK is better than a bad deal for the UK”.

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.

The next scheduled UK general election is in June 2022. This would in principle leave room to extend a two year implementation period ending in March 2021 for a further year, if required, before a general election.

However, the uncertainties surrounding a minority government mean that a general election might take place earlier. This could, for example, be in response to difficulties passing legislation needed for the government’s preferred form of Brexit.

Negotiations

On 29 April 2017 the European Council adopted political negotiating guidelines for Brexit. These defined a framework for the negotiation and set out overall positions and principles that the EU will pursue. In a “phased approach”, the EU’s intention has been to hold talks first on withdrawal terms, covering such matters as the rights of EU migrants and outstanding financial liabilities of the UK. Only when the European Council determines sufficient progress has been achieved on this would negotiations pass to a second phase to discuss an outline for future UK-EU trade relations and any transitional period.

The guidelines set out the EU’s intention that any transition period for the UK leaving the EU single market will, if it involves continued application of EU laws, require the UK effectively accepting EU regulators, courts and budget contributions.

Linked to this, on 22 May the European Council authorised the opening of withdrawal negotiations and issued negotiating directives. This provided a legal mandate (covering just withdrawal issues) for the EU’s chief negotiator Michel Barnier. It included in particular: safeguarding the status and rights of EU and UK citizens, principles for a financial settlement between the EU and the UK and avoiding a hard border on the island of Ireland. Negotiations began officially on 19 June 2017.

It is expected that Brexit negotiations might adopt greater intensity once the position of the incoming German government is known following elections on 24 September 2017. This is set to emerge from coalition negotiations.

Legal implications of withdrawal

Legal implications for leaving the EU would be considerable and far reaching and include:

  • EU treaties, directives, regulations and rulings of the European Court of Justice would cease to apply to the UK, except to the extent that their effect up to the date of withdrawal were specifically preserved by UK national laws (such as the Withdrawal Act – see below).
  • UK citizens would no longer have the rights of EU citizens.
  • The rights of EU citizens in the UK would need to be redefined.
  • EU courts would no longer have any jurisdiction over the UK.
  • Intellectual property rights arising at a pan-EU level (trade marks and designs) would cease to cover the UK.
  • The UK would no longer be entitled to participate in agencies such as the European Supervisory Authorities in relation to financial services or the European Data Protection Board and probably a number of other EU working groups and bodies in which it currently participates.
  • EU agencies currently located in the UK, such as the European Banking Authority and the European Medicines Agency are expected to relocate to an alternative location in the EU.
  • EU funding for many organisations and projects would face uncertainty and need to be reviewed (although the UK government has already given certain assurances in this regard).
  • The UK would cease to benefit from the EU’s trade agreements with other countries.

Much of UK law is derived from EU law. 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 13 July 2017 the UK government published a first version of the European Union (Withdrawal) Bill, to sit at the centre of the legal framework for withdrawal. Assuming the Bill is passed, the Withdrawal Act would take effect from the date of exit from the EU. The Act would 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, with the exception of some proceedings already under way.

The Act would also convert existing EU law (as it applies to the UK) into national law on the day the UK leaves the EU. This is to try to ensure that the same laws and rules will apply immediately before and after withdrawal.

UK legislators (or in some cases the UK government, with review by UK legislators) will have power to make corrections to laws that would otherwise no longer operate appropriately once the UK has left the EU and to implement a withdrawal agreement. Where EU institutions currently have direct administrative powers, the Act will also enable new administrative bodies to be set up, so that alternative arrangements can be made.

There will be new primary legislation where there are significant policy changes (therefore allowing greater debate and scrutiny by parliament). This includes: immigration, international sanctions, nuclear safeguards, agriculture, fisheries, trade and customs.

In a speech by the UK prime minister, Theresa May, in January 2017 and a white paper published on 2 February 2017, the UK government set out a number of negotiating objectives including the following:

  • the UK will leave the EU single market and enter into a free trade agreement with the EU,
  • 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,
  • 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, and
  • the UK will have control over the number of people coming to the UK from the EU (with the white paper clarifying that the UK “will always welcome genuine students and those with the skills and expertise to make our nation better still”).

These objectives were reaffirmed by Theresa May in a statement to the House of Commons on 29 March, shortly after the withdrawal notice was given. She added that the UK wants to continue to cooperate with the EU over security matters, and to maintain the common travel area, without borders, in Ireland.

Following the June 2017 general election, Theresa May confirmed in her speech in Florence on 22 September that the UK government has retained these objectives.

The UK will need to align the Withdrawal Act with any transitional/ implementation period. If the EU and the UK agree the sort of two year period proposed by Theresa May on 22 September, the framework for those two years will be the existing structure of EU rules and regulations. The UK would no longer be in the EU from 29 March 2019 and so no longer sit on the European Council or in the Council of Ministers or have members of the European Parliament. However, the main thrust of Brexit in terms of the applicability of EU law would effectively be postponed until March 2021 (or whenever the implementation period ended).

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.

How we can help

Taylor Wessing can help you establish or move forward your Brexit planning process, looking at the risks and the opportunities. We can help you navigate what, for many, will be a period of considerable uncertainty.

Whilst the UK government has not committed to a formal consultation with stakeholders about the legal changes that will happen in consequence of Brexit, there has already been considerable informal consultation. A number of our lawyers are actively involved in that. As a result, we can help provide additional insight beyond what may be publicly available and can give guidance and support on opportunities to lobby for preferred outcomes on particular issues.

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.

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