While I have been absorbing the "debate" about Brexit over the past few weeks, the comic operas of Gilbert and Sullivan have increasingly been coming to mind.
Gilbert and Sullivan were legendary for creating comic "Topsy Turvy" situations where absurd scenarios were taken to even more absurd, but apparently logical, conclusions to great comic effect. More recently the term "topsy turvy" has also come to mean "Upside down" and/or "a state of total chaos".And this connection with "
Topsy Turvyness" (absence of any comedy apart) has come about because, as I predicted in my blog in February, the debate has been dominated by politicians and pundits of all political hues and from both sides of the campaign projecting their wishes and aspirations as "facts" and using "dog-whistle" statements – trying to use emotive statements and extreme projections of the future – to provoke visceral responses from voters rather than seeking to ground the debate on more solid – albeit complex and dull – facts.
Clearly, subjective views and sentiment are very important and are likely to dictate the way that many people vote. What is also beyond doubt is that sentiment and uncertainty affect decision making – in particular around substantial and long term investments. This appears to be at least part of the reason why many reports have appeared recently about a Brexit-vote-driven slowing of economic growth and investment, stock market and exchange rate volatility and the marked softening of the housing market (also impacted by rising stamp duty generally and on "Buy to let" purchasers in particular). It is probable that this will persist until the vote and, at the very least, for a short period afterwards, while people and businesses digest the outcome of the vote, whatever it is.
However, as a lawyer, one of my main frustrations with both the debate and much of the media coverage of the debate is the way in which hard facts, informed current views from knowledgeable people and forecasts (ie extrapolations based on solid data and with carefully reasoned logic for the extrapolation) have frequently been given the same standing as pure hopes, comments from people who lack current relevant knowledge and "wish-casts" (ie what you would like to see happen in the future but have no substantive basis to demonstrate why your desired outcomes have any real prospect of success).
Illustratively, I wonder how many people have actually read the few lines of Article 50 of The Treaty on European Union which would determine how the Union would respond to an exit request even though it has started to be mentioned by the media and in campaigners in the past couple of weeks:
" ...the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union… concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament. The Treaties shall cease to apply to the State in question… two years after the notification…unless the European Council, in agreement with the member State concerned, unanimously decides to extend this period".
It is interesting to note that the leave proponents who were critical of the "limited" range of achievements that David Cameron managed to secure from a year of shuttle diplomacy with, essentially, the Council are also assuming that they would be able to secure in double that amount of time a full and satisfactory resolution of all of the things involved in a satisfactory exit with, essentially, the same group of people (under the Presidencies of Slovakia, Malta, Estonia and possibly Bulgaria over that time period) and with the 781 member European Parliament on "the other side"– forecast or wishcast?
In either case, what very few people from either camp would deny is that there would be a period of up to two years, possibly much longer (if other countries' treaty negotiations with the EU are anything to go by), when the end result of an exit and the transitional arrangements towards it would be uncertain as negotiations continue. During this time, civil service and government time would also have to be heavily focused on negotiating and planning for the exit which is bound to have some impact on "their day jobs".
And quite where all the expert trade agreement negotiators are going to come from to agree all of the details in the multiple treaties involved on behalf of the UK that will make the "headline deals" that the politicians wish to make into an operational reality is far from clear… but it matters as the details are how apparently small things can be used to create big practical problems for trade between a non EU member and an EU member as competition lawyers with longer memories can tell you. Such, illustratively, as the EU approach to VCR imports in the 1980s – the French approach of manually customs clearing each individual imported machine in Poitiers being particularly memorable.
In this context it was particularly interesting to note a recent Legal Week survey of in-house lawyers which indicates that 74% of the in-house lawyers polled do not want Brexit (for many of them, a significant proportion of their own work originates in the EU) and nearly 65% thought it would be bad for their employer and therefore also, by necessary implication, for their employees, suppliers and shareholders (5.5% thought that it would have a positive effect on their companies).
Given these views it is perhaps unsurprising that only 39% of the in house lawyers polled thought that the UK was likely to vote to leave. However, this view seems to be out of line with the population at large as, at the date of writing, the FT's Poll of Brexit polls indicates that the vote is evenly split.
And this makes it particularly important that, regardless of what in-house lawyers feel or wish for, they must be dispassionate in their advice to the businesses. After all trusted advisers – General Counsel to your businesses – need to be, and be seen to be, impartial in the advice that you give as well as being well prepared and on top of the relevant law in case a leave vote happens – as, based on current polling, exit does look possible enough that it should form one of your company's business planning scenarios.
Of course, as I mentioned in my first blog on the topic last July, the Referendum bill does not commit Parliament to action an exit plan only to have regard for the result - and the possibility has been raised by some politicians recently that attempts by Government to act on an "out" vote might blocked by rebellious Members of Parliament. Additionally some European political leaders have gone on to say that they would treat an "out" vote as triggering the start of the 2 year Article 50 negotiation period even if no formal notice is given to them by the UK Government.
So "out" might not actually become "out" but, despite not formally being an "out" notification, it might still be treated as being one... How Topsy Turvy.
So, it is clear that, if Leave win, then there will be some form of uncertainty impact for two or more years (many Brexiters talk about concluding negotiations by 2020, Remainers point to many other International treaty negotiations that have taken much longer to conclude) which may well affect term commitments, force majeure, supplier and customer stability and a host of other factors that touch on your contractual arrangements.
Additionally, legislative consequences of transitional arrangements and the new status quo to adapt to might have material impacts on the amount of legal work that your team needs to do and to be resourced for.
To help you in your thinking on these points some of my partners have provided an analysis on how Brexit would affect their areas of business legal expertise.
- Some areas would be largely unaffected – either:
- because that area of law remains relatively autonomous from the EU (either because it is purely domestic or, in many cases, because it is governed by other international treaties to which the UK is a party); or
- because the English law is already, essentially, European law and there are not many material changes to it that would obviously be made in the short term (i.e. we might gradually drift a little away from what Europe is doing over a large number of years); or
- where it would be disadvantageous for England and Wales law to depart significantly from EU law because of the impact on trade – eg would we really want to adopt US standards on GM crops in order to get a trade agreement with the US or would we want to stick to EU standards to help to facilitate some enduring agri-business with the EU?
- However, some areas would undoubtedly be much more affected, and they are ones that are all-pervasive for most businesses including:
- competition law;
- data privacy;
- intellectual property;
- employment and immigration;
- cross border tariffs, customs practices and taxes; and
- dealing with laws ranging from product safety and environmental compliance to product labelling and advertising in respect of their exports to and imports from EU countries (including, perhaps, Scotland) as those countries would have increasingly divergent standards from England over time.
So, I encourage you to read our guide to help you ensure that you have got a full and rounded view of the legal implications for your business of a possible exit. This will help you to shape your Board and your management's strategic thinking and business forecasting over coming months (and possibly years) – because, to misquote Messrs Gilbert and Sullivan, it is essential to doing your job properly that you have got all these issues on your list – and none of them are missed.