On 23 June 2016, the United Kingdom voted to leave the European Union by 51.9% to 48.1%. Shortly afterwards, David Cameron announced that he will step down as Prime Minister once the Conservative Party decides on a new leader later this year - now expected to be in early September. His successor will progress the mechanics of Brexit.


  • No immediate change to the UK's membership of the EU

The vote in favour of Brexit does not automatically trigger an exit by the UK from the EU. Instead, it has triggered a long and complex process and it will be some time before it becomes clear what form Brexit will take, and when it will occur. European Council President Donald Tusk issued a statement to provide reassurance that "...there will be no legal vacuum. Until the United Kingdom formally leaves the European Union, EU law will continue to apply to and within the UK".

  • Withdrawal notice must be served

The first step will be for David Cameron or his successor to serve notice on the European Council of the UK's decision to withdraw from the EU under Article 50 of the Treaty on European Union. It is not yet clear when this will happen.

  • Two-year negotiation period

The UK and EU will then start negotiations on the form that Brexit will take, and Brexit will occur on the earlier of agreement being reached, or once two years have expired from the date of the Article 50 notice. If agreement has not been reached by the end of that two year period, that period can be extended provided that the European Council unanimously agrees to do so. If the European Council does not unanimously agree to an extension, Brexit will automatically occur and the WTO model outlined below will apply by default.

  • How will agreement be reached?

When the UK and EU agree the form of Brexit, that agreement will need the support of a qualified majority of EU Member States in the European Council, and the consent of the European Parliament.


Five possible Brexit models have been the focus of discussion over recent weeks. A summary of each model is set out below. It is possible that the UK and EU will negotiate a bespoke Brexit model, similar but not identical to one of the following:


Norway is a member of both the European Economic Area (EEA) and the European Free Trade Association (EFTA), so has access to the single market. However, the UK would not be guaranteed equivalent membership existing members have a veto on new joiners. The Norwegian model would still involve a reduced contribution to the EU budget (approximately 80% of its current contribution).

Under this model, the UK would lose access to trade agreements entered into by the EU, but could sign up to existing EFTA trade agreements. It would be obliged to retain EU legislation in many areas, in particular in relation to the free movement of goods, services, capital and people (the `four freedoms'). It would not, however, have formal voting rights at EU level or the ability to influence EU legislation.

EU financial services legislation does not automatically apply in the EEA it must instead be incorporated and this is not a quick process. The EEA agreement does not currently cover the work of the European Supervisory Authorities (i.e. the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority).


This model was originally implemented as a precursor to a later Swiss accession to the EU which never occurred. It involves membership of EFTA, but not of the EEA.

The EU-Swiss relationship is governed by approximately 130 bilateral agreements but there is no bilateral agreement in respect of financial services. This means that Swiss banks have no EU passport and need to operate in the EU via subsidiaries.

The EU-Swiss bilateral agreements are not deemed to update as related EU legislation develops, so Switzerland must regularly review and amend its legislation to take account of relevant EU changes.

If Brexit followed this model, the UK would have to comply with particular EU rules to obtain single market access, but would not be entitled to negotiate or vote on those rules. Its EU budgetary contribution would reduce significantly to approximately 40% of what it is now. However, the European Council has previously stated that the Swiss model "...has reached its limits and needs to be reconsidered".


Like the Swiss model, the Turkish model was set up to facilitate a later Turkish accession to the EU which never occurred.

This model focuses on trade, but does not involve membership of the EEA or EFTA. Turkey is a member of the EU Customs Union, benefitting from a common trade policy, common rules of origin and a common external tariff.

Under this model, no duties are imposed on goods traded with the EU in return for Turkey's compliance with single market rules. However, Turkey cannot negotiate or vote on EU trade deals or those single market rules. Notably, this model does not cover financial services.


Under this model, the UK would have to negotiate a free trade agreement (FTA) with the EU. The UK's access to free trade, in particular in the area of financial services, would depend on the terms of its FTA.

Under this model, the UK could conclude its own bilateral FTAs with non-EU countries, but it is unclear whether all key countries (in particular, the USA) would be prepared to enter into FTAs with the UK.

A Brexit based on this model could take a considerable period of time to negotiate. The EU's FTA with Canada took several years to negotiate and the ratification process is ongoing.

Under the Canadian model, the UK would not be required to contribute to the EU budget.


This model would give the UK access the EU market under the World Trade Organisation (WTO) rules. As mentioned at the beginning of this briefing, if the two year UK-EU Brexit negotiation period expires without agreement being reached, and the European Council does not unanimously agree to extend that negotiation period, the UK will automatically leave the EU and the WTO model will apply by default.

If this model was followed for Brexit, the UK would not be able to access the EU on terms more advantageous than third countries that do not currently have FTAs with the EU unless its trading arrangements were the subject of a separate, negotiated, FTA. UK businesses would be subject to an EU common external tariff, putting them at a competitive disadvantage, although the UK would not be required to contribute to the EU budget. Again, this model also does not cover financial services.


Once the form that Brexit will take becomes clear, the legal implications across a wide range of areas will need to be considered in detail, including:

  • financial regulation, and whether, if the Norwegian model is not followed, UK regulated entities will need to seek authorisation in other EU Member States if passporting is no longer available;
  • funds, and how the UK will deal with the Alternative Investment Funds Managers Directive regime and the UCITS regime (again, this will be less of a concern if the Norwegian model is followed);
  • employment, in particular the ability of EU citizens to work in the UK, and the ability of UK citizens to work in other EU Member States;
  • contracts, including whether Brexit could constitute a termination event, whether those contracts contain provisions specifically linked to the UK's membership of the EU, and whether Brexit could trigger increased costs provisions;
  • capital markets and securities law, and what regimes might be developed in place of the EU-derived market abuse, prospectus and transparency regimes (this will be less of a concern if the Norwegian model is followed);
  • dispute resolution, including the impact on governing law and jurisdiction clauses;
  • insolvency law, and the impact on cross-border restructurings;
  • tax, and what regimes the UK might put in place instead of current EUbased rules;
  • data protection, and whether the UK will put in place a regime consistent with the existing EU regime;
  • intellectual property, and the impact of Brexit on European Union Trade Marks;
  • energy and natural resources, and in particular the implications for implementation of all-island markets, cross border trade and energy security
  • consumer law, in particular the rules in relation to the supply of goods and services;
  • competition law, in particular the type of clearance regime that might apply and the extent to which it could diverge from current regime;
  • procurement law, and the type of regime that might apply in a Brexit that does not follow the Norwegian model.

The potential implications may need to be considered more quickly in certain areas, particularly financial regulation, employment and funds.