Are there examples of successful break-ups in the relatively recent past which could have lessons for Brexit? In this article, Jiri Sixta, Veronika Pazmanyova and Miroslav Ondas of the Czech and Slovak law firm Glatzova & Co. look back at the dissolution of Czechoslovakia in the early 1990s.
The decision by Britain to leave the EU surprised most of Europe. While catastrophic visions slowly fade away, a vast array of questions regarding the actual execution of the notorious Article 50 of the Lisbon Treaty remain. While a member state’s exiting the European Union is without any historical precedent, there are still some lessons history can teach us, mainly from the dissolutions of unions and separations of countries and federations. Although many of these were accompanied by violent conflicts, the dissolution of the Czechoslovakia in 1992 is referred to as the “Velvet Divorce” due to a lack of any conflict.
From the current perspective, it is hard to imagine that the split was agreed and executed in less than a year. The call for independence overcame all time restraints. Unlike Brexit, the dissolution of the Czech and Slovak Federal Republic was not preceded by a public referendum, but was a mere political decision by the newly elected main political parties of both countries. There were numerous reasons leading to the splitting of Czechoslovakia, one of them being the uneven distribution of power as Slovak wishes for a more decentralized system were never granted. Even though the political mandate to split has been questioned over the years, the public mood shifted from only 25% of the population who wished to split the federation to over 75% of people currently estimated to be satisfied with the decision.
The breakup of two countries is a break up like any other. You divide the assets, the people, the money, decide on how you want to be named afterward, and hope to remain friends with your neighbours.
Division of assets
The splitting of federal assets during the dissolution of the Czech and Slovak Federal Republic was executed in accordance with two main principles – the territoriality principle and the population ratio principle (the ratio between the Czech and Slovak population was approximately 2 to 1). It was agreed that all federal real estate would be allocated to the country where it was located, including any movable assets attached to it. Most of the other assets, including financial reserves, art collections and state debts, were divided by a 2:1 ratio (Czech Republic:Slovakia).
Citizenship and residency
From a Brexit perspective, residency and citizenship after the split of Czechoslovakia were not a complicated question. All citizens of the former federal republic were granted residency according to their existing residency records and were effectively granted the option to choose between Czech or Slovak citizenship.
The question regarding work and residency permits is among the most discussed questions in Slovakia relating to Brexit. It is estimated that there are up to 100,000 Slovaks living in Great Britain, mostly working or studying, but many already establishing their homes and families. Since the decision on the conditions for EU (and non-EU) residents to stay (work/study) in Britain will directly affect hundreds of thousands of people, they must be duly addressed in advance.
EU law after Brexit
From a legal point of view, one of the biggest challenges of Brexit is to ensure legal continuity in the legal system, which has incorporated many EU laws and regulations over the years.
Considering the timing of Brexit and to avoid legal loopholes, a “copy & paste approach” should be considered with respect to EU legislation effective in Britain. This is viewed as the standard approach in international law and was also used in the process of dissolving Czechoslovakia. In general, all pre-independence laws that were not in breach of the new constitution of each newly established country became part of its legal system. Some of the federal laws, albeit in amended versions, remain in effect even today, almost 25 years after the split.
Subsequent changes to the laws have been the biggest downfall to this approach. Even though the Czech Republic and Slovakia had the same legal system when they were created, amendments and enactments of new laws have pushed the legal systems further apart each year. Nevertheless, Slovak legislators are often inspired by Czech laws and vice versa. Slovak jurisprudence also frequently refers to Czech case law.
Finally, both legal systems came closer to each other again due to membership of both countries in the EU (which both countries joined in 2004).
Business implications
After the split of Czechoslovakia, adopting the copy-paste legal approach meant that business conditions did not drastically change. Many of the major changes relating to the subsequent privatization era were mostly a result of political decisions and the delayed effect of the end of communism and the rise of capitalism.
There are only a handful of countries that have as close a relationship as Slovakia and the Czech Republic. A common history, similar languages, and similar laws help. Although we will never know whether the countries would be better off if they’d stayed in Czechoslovakia, the split boosted each country’s self-confidence and growth. The focus shifted from solving their political relationship to solving the socio-economic problems of each country. One can only hope that this will also be the case for the EU and Britain after Brexit.
Glatzova & Co. is a leading independent law firm operating in the Czech Republic and Slovakia. In an excellent example of post break-up cooperation, this article was produced with input from lawyers in both countries.
Travers Smith comment: the 'Velvet Divorce' demonstrates that, with political will on both sides, a reasonably swift and amicable break-up is achievable. But whereas both sides in the Velvet Divorce agreed that breaking up was for the best, the EU does not share the UK government's view that the UK's departure will benefit both sides; it sees Brexit more as an exercise in damage limitation. Whilst this will undoubtedly create pressure for a deal to be struck, the EU has little incentive to go out of its way to assist the UK in making a success of Brexit.
It also helps if both sides know what they want to achieve – but as pointed out in our previous Brexit Latest post, the UK side still appears to be arguing amongst itself to some degree. That said, further UK position papers are expected in the coming weeks, which may clarify important aspects the government's position. We will report on these in future Brexit Latest posts.
