In an historic referendum held on 23 July 2016 Britain voted to exit the European Union. While this unprecedented action has led to immediate political, social and economic consequences in Ireland, it is still uncertain how its long-term legal impacts will play out. It is expected that, once commenced, the negotiations between the UK and EU will take a minimum of two years to conclude. Although there are no immediate changes to either Irish, UK or EU law, both Irish businesses who have any exposure to the UK and UK businesses with operations in Ireland, need to inform themselves of the likely consequences to their respective businesses and need to plan ahead to counter and deal with them.
Next Steps – Article 50 Negotiations
While many UK politicians have advocated that informal talks should commence now to negotiate the UK’s exit, recent media reports and statements by multiple European leaders suggest talks will only commence after initiation by the UK of the formal procedure provided for in the Treaty of the European Union. Article 50 sets out the procedure to be adopted when a Member State seeks to leave the EU, and provides that it is up to the country that proposes to leave to set the procedure in motion. Therefore, while other EU countries are keen to start negotiations immediately in order to stabilise market concerns, it appears to be still within the remit of the UK to determine when negotiations begin. Article 50 sets a two year deadline to complete negotiations but this period can be extended with approval of the other members. It is broadly anticipated that negotiations may take longer than the two year period prescribed due to the extent of the legal, social, administrative and economic considerations, the unprecedented nature of the exit and the fact that up to 40 years of legislation and regulation require to be considered and unravelled.
What Trade Model will the UK pursue?
In deciding how to proceed, the UK will undoubtedly consider (and one would expect has already considered) negotiating an ongoing Trade Model that best suits its needs going forward, taking into account the existing trade models with the EU, such as:
Switzerland is part of the European Free Trade Association and negotiates access to the Single Market on a sector-by-sector basis. Switzerland contributes to the EU budget and accepts the free movement of workers from EU countries.
Under the Norwegian model, the UK would remain part of the European Economic Area. It would remain part of the Single Market to the extent that no trade tariffs would exist, free movement of workers would continue and the UK would contribute to the EU budget. However, the UK would no longer have a veto or vote on how EU rules are made.
A trade deal has been in talks between the EU and Canada for several years but has yet to be ratified. If ratified, Canada will have limited access to the Single Market but have no say in rule making. Canada will not have to accept the free movement of workers or contribute to the EU budget.
Turkey has partial access to the Single Market in the industrial goods and processed agricultural goods sectors. It must adhere to EU law in these sectors but does not contribute to the EU budget and its citizens do not benefit from the free movement of workers (except through separate negotiations).
5. World Trade Organisation (“WTO”) Model
If no deal is reached before a UK exit the WTO model will apply. It would result in tariffs on all goods or services exported from the UK to the EU, no free movement of workers and no contribution to the EU budget or adherence to EU rules.