Inside Brexit blog

Tracking legal developments

What happens next?

Claire Berwick
June 24, 2016

Posted in UK and EU legal framework

There will be no immediate change on June 24, 2016. Following a vote to leave and in order to start the formal legal process the UK government will need to notify the European Council of the UK’s intention to withdraw from the EU. The service of formal notice will trigger Article 50 of the Treaty on European Union (the TEU), the mechanism by which an EU member state is able to legally withdraw from the EU under EU and international treaty law.

Will the UK government trigger Article 50 immediately?

Announcing his intention to step down as Prime Minister, David Cameron has stated that the Article 50 notification will take place after a new leader in place, likely to be by October.

What is the process and timeline for a UK exit under Article 50?

Following the service of notice on the European Council, Article 50 provides for a two year period for the withdrawal to take effect. There are likely to be negotiations between the UK and the European Commission1, as EU negotiator, based on guidelines issued by the European Council and in accordance with article 218(3) of the Treaty on the Functioning of the European Union (TFEU). The negotiating period can be extended by agreement of all EU member states. If no extension is agreed, the UK would automatically cease to be a member of the EU at the end of two years. A link to our Brexit timeline tracker can be found here. It is anticipated that even if there is a formal exit after 2 years, much of the detail of the negotiation will need to be dealt with over a longer period. Article 50 has never been used before so the UK would be setting a new precedent and this is likely to bring its own challenges for all parties involved in so far as there is “no clear legal framework for how it would work”2.

Will the UK still be a member of the EU following a vote to leave?

Yes the UK will continue to be a member of the EU until it ceases to be a member under Article 50 either automatically after a two year period of negotiation or after a longer period if an extension to negotiations is agreed by all EU member states.

Can the UK government decide not to withdraw from the EU?

The referendum result is not legally binding in the UK but, depending on the details of the result and political developments after June 24, it is likely to be seen as politically binding.

There has been some debate whether the UK might be able to change its mind about withdrawal at a later date. There is nothing to stop this prior to serving notice under Article 50. If Article 50 is triggered there is no mechanism to reverse the exit process once it has commenced. It may be that a formal amendment to Article 50 would be needed which in turn would need the unanimous consent of all EU member states3. There may or may not be the political will to do this. The UK could withdraw and reapply to become a member of the EU but this would in itself be a protracted and difficult negotiation. Any rejoinder would not necessarily be on the same terms (for example, as to currency and the Schengen passport-free zone) as the UK’s current membership.

What model is the UK likely to adopt to continue to trade and provide services inside the EU?

There has been a lot of speculation about what model the UK government is likely to try and negotiate with the EU in a Brexit scenario. For example, there has been a lot of speculation about a similar model to that adopted by Norway which benefits from a strong trading relationship with the EU and access to the single market as a member of the European Economic Area (EEA) and the European Free Trade Association (EFTA) but, in return, remains subject to EU regulations and standards and has agreed to free movement of people. However the Leave Campaign in the UK has distanced itself from the Norway model. Further details on the different models that the UK might consider can be found on our Brexit client site.

Until negotiations commence, there will inevitably be a period of “wait and see” before a clearer picture emerges of what deal the UK may be able to negotiate with other EU member states (in addition to deals with other countries outside of the EU), all of which may take a considerable period of time. Some have predicted that it may take as long as 10 years or more before the post-Brexit legislative, regulatory and trading landscape becomes clearer and businesses are in a position to start planning ahead with more certainty.

What will be the legislative impact of a UK exit from the EU?

A vote to leave would mean that the UK government would need to undertake a substantial review of the current UK and EU legislation and make decisions on what EU derived laws to retain, amend, replace or repeal. This would include a review of UK primary and secondary legislation implementing EU law as well as directly applicable EU law. For further detail on the challenges of the legislative review that would need to take place and the challenge of uncoupling UK and EU law, see the UK and EU legal framework section of our Brexit client site.

What impact will a Brexit have on the industry sector in which your business operates?

In the event of a vote to leave, businesses will be able to start planning around how a Brexit might impact on the wider industry sector in which it operates. Our Q&A brochures on industry sectors look at some of the questions businesses operating in specific sectors will want to consider including, for example, the potential impact on access to the single market for the financial services industry sector, potential legislative and regulatory changes specific to different industry sectors and potential loss of funding or membership of EU industry bodies and institutions for different industry sectors.

What forward planning can businesses start to do following a leave vote?

Following a vote to leave, businesses will need to start forward planning on the basis that there will be a minimum two year period before an automatic exit occurs once Article 50 has been triggered. During this two year period, businesses with operations and interests in the UK and Europe can start to plan around the potential impact of a Brexit, including, for example, future investment decisions, choice of location of business operations, the impact on employees (e.g. access to a skilled and mobile workforce and possible legislative changes to workers’ rights), the consequences for trade (e.g. possible changes to tariffs and customs duties), services which rely on the single market and existing and future contracts with a nexus to the UK.

Forward planning will be limited to some degree until the post-Brexit landscape starts to become clearer and there is clarity as to what legislation the UK intends to retain, amend or repeal which will directly impact on the day to day operations of a business. Further analysis on the impact of a Brexit on day to day business operations can be found here.

Footnotes

  1. EU Referendum, the process of leaving the EU, House of Commons briefing paper, April 2016.
  2. EU referendum: the process of leaving the EU, House of Commons briefing paper April 2016.
  3. Alan Renwick, Deputy Director of the Constitution Unit, An EU Referendum horror: why you need to know about Article 50. The clause the public didn’t know about (Dec 10, 2015).

Brexit: planning for the future as negotiations continue

We have created this Brexit blog to provide up to date analysis and legal commentary as the new Brexit landscape evolves, addressing key questions and topics of interest to our clients across the different industry sectors in which they operate.

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