Inside Brexit blog

Tracking legal developments

The EU referendum result – a moment to reflect two months on

Andrew Sheftel
August 24, 2016

Posted in UK and EU legal framework

The first two months following the UK’s vote to leave the EU have seen any initial shock at the referendum result largely give way to a period of relative calm.

Politically, there has been considerable change: a new Prime Minister, Theresa May; a new cabinet; and newly created cabinet posts of Secretary of State for Exiting the European Union, David Davis and Secretary of State for International Trade, Liam Fox.

Legally, however, nothing has been changed by the result of the referendum. Nor is it likely to for some time, with indications that Article 50 (the legal mechanism under the Treaty of European Union by which the UK leaves the EU) will not be triggered before the end of the year. The courts first need to hear a legal challenge this Autumn as to whether the UK Government is even entitled to trigger Article 50 without the prior approval of Parliament. 

There is, as yet, no firm indication as to what Brexit will ultimately look like and little detail as to what the UK hopes to achieve as a result of the negotiations. Speculation has included discussions of the ‘Norway model’, which would provide full access to the single market but in return for adherence to EU regulations and standards but without any say on how they are set. However, this model would require an acceptance of free movement of people and continued contributions to the EU budget and would therefore be likely to face political hostility. Others have called for a model based on that being negotiated between Canada and the EU with a possible add-on for financial services and, most recently, it has been reported that a City task force will campaign for the UK’s Brexit to be based on a ‘Swiss model’, which would seek to preserve passporting rights for banks and financial institutions. The latter would involve a set of bilateral agreements governing access to the single market sector by sector, but resulting in the UK not having full access to the single market. Although perhaps more complicated than an EEA arrangement, it would not be outlandish to predict that the ultimate deal between the EU and the UK will be a fairly bespoke model which will not directly copy any of the existing models. On the other hand there have been warnings that the UK would not be able to ‘cherry-pick’ the benefits associated with the EU that it would wish to retain.

It is also important to bear in mind that it is not merely one deal that the UK will have to negotiate. At the very least, the UK will need to conclude an agreement on the terms of its departure from the EU under Article 50 and a separate agreement as to its new relationship with the EU (see previous post on timing). Given the time it may take to agree a new arrangement with the EU, it may also be necessary for a transitional settlement to be put in place. 

As well as entering into new agreements with the EU, the UK will also need to decide whether to try and negotiate bilateral trade deals with the 53 countries that currently have a trading relationship with the EU – and perhaps also seek to secure interim agreements to continue trading on the same terms as at present in the meantime. Further, there have also been suggestions that the UK will seek to progress bilateral trade agreements with countries which do not currently have bilateral trade agreements with the EU, and thereby open the UK up to new trade partners. The UK will also need to negotiate membership of the WTO in its own capacity.

There is no doubt a lot of work ahead for the UK Government but equally the possibility for new opportunities for businesses depending on how negotiations proceed.

The United Kingdom has voted to leave the European Union.

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