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December’s green light from the EU Council of Ministers for talks in early 2018 on a transition period takes some of the heat out of planning for a hard Brexit. However, much remains uncertain and the possibility of a ‘cliff edge’ cannot be completely disregarded.
To recap, 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:
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.
The UK will leave the EU by 29 March 2019 unless the deadline is extended by agreement with all other 27 member states.
The UK government has signalled a wish to reach agreement on a new partnership with the EU and to avoid a ‘cliff-edge’ on that date for business or a threat to stability. However, a ‘cliff edge’ remains at least a theoretical possibility.
A transition period (also referred to as an implementation period) is envisaged, 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 UK prime minister, Theresa May, has 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.
One unknown is whether the withdrawal notice is capable of being revoked without the consent of the 27 other EU members. There is little mainstream political talk of ‘calling off’ Brexit in this way but, just as a ‘cliff edge’ remains a theoretical possibility, so does ‘no Brexit’. A number of prominent international public law commentators have said that the notice 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 transition 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.
A large degree of clarity has been achieved for the status of EU citizens and the financial settlement. There is a lack of detail on the Irish border, effectively reflecting a reality that it will be more appropriate to define this once there is more shape to the terms of a final trade deal. However, if a trade deal cannot be agreed, the UK will maintain ‘full alignment’ with elements of the single market and customs union mentioned in the Good Friday agreement relating to Northern Ireland. That retains the potential to be highly controversial.
On 15 December 2017 the European Council issued guidelines for phase two, stipulating that during a transition period all existing EU regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will apply, including the competence of the Court of Justice of the EU.
Legal implications for leaving the EU will be considerable and far reaching and include:
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.
The European Union (Withdrawal) Bill will sit at the centre of the legal framework for withdrawal and remains subject to review in the UK parliament. Assuming the Bill is passed, the Withdrawal Act would take effect from the date of exit from the EU, subject to any transitional arrangements. 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.
Based on statements in 2017 the negotiating objectives of the UK government include the following:
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, assuming a transition period is agreed, the main thrust of Brexit in terms of the applicability of EU law would effectively be postponed until March 2021 (or whenever the transition 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.
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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