The people of the UK voted in the referendum on 23 June 2016 in favour of the UK leaving the European Union.
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 active engagement in industry dialogue or government consultation.
Legal, regulatory and trading arrangements in particular present many complexities and uncertainties. These must be viewed in the context of the timing of an eventual withdrawal from the EU.
Faced with a wide array of possible outcomes, much of the planning activity at present is to identify potential issues, as a basis for making firm decisions as things become clearer. Effectively, there is still a large element of “wait and see”.
To start the formal withdrawal process the UK government will need to serve notice on the European Council (the “article 50 notice”). That would set in motion a two year period for a withdrawal agreement to be agreed. Withdrawal itself would take place at the end of the two years (unless agreement were reached with the European Council before then or the UK and European Council agreed to extend the deadline – requiring agreement of all other 27 member states, so thought to be difficult).
On 2 October 2016 Theresa May (who took office on 13 July 2016 as prime minister of the UK) made clear in a speech that she intends to serve the article 50 notice by the end of March 2017. This would mean the UK leaving the EU in 2019 unless an extension of the deadline were agreed.
Publicly the EU Commission and leaders of member states have indicated that no negotiations can begin until the withdrawal notice is given. It is unclear to what extent member states of the EU will be prepared, out of public view, to have informal discussion on Brexit before then.
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.
The next UK general election is scheduled for May 2020. It is possible that there would be an early general election if at any time it were felt a fresh mandate were required. It is also conceivable that, as things develop, further validation could be sought through another referendum.
Elections in France in May 2017 and in Germany in October 2017 may have an impact on the course of Brexit 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, unless their effect was specifically preserved by UK national law.
- 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.
- 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 may need 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.
It also needs to be remembered that much of the UK law is derived from EU law and 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 2 October 2016 David Davis (the secretary of state for exiting the EU) announced that the government plans to 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. It would take effect from the date of the UK’s exit from the EU.
At the same time a new Bill will convert existing EU law into domestic law, while allowing parliament to amend, repeal or improve any law after appropriate scrutiny and debate. It will be important to ensure these laws function in a post Brexit UK and where EU institutions currently have direct administrative powers, these will need to be replaced with alternative arrangements. .
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.
The announcement of a timeframe for serving the article 50 notice to withdraw from the EU is a significant milestone in working towards greater clarity.