On 23 June 2016, 51.8% of voters in the UK voted in a referendum to leave the European Union. However, the process for formally leaving has been a journey into the unknown, leading to short term volatility in the financial markets and longer term uncertainty for businesses as they move into unchartered territory.
Whilst many businesses start to put in place contingency plans for the post-Brexit landscape, an unexpected procedural hurdle has been put up by a High Court ruling on 3 November 2016. Three senior Judges decided that the UK Government cannot invoke Article 50 of the Treaty of Lisbon (necessary to trigger the two-year period for the UK to leave the EU) without a vote in Parliament.
The legal challenge led by business-woman Gina Miller was concerned with procedural steps, not politics, but has raised again the uncomfortable and divisive fact that the referendum vote is not ‘legally binding’ – a point accepted by all parties in the litigation. The UK Government’s appeal to the High Court decision is due to be heard by all eleven Justices of the Supreme Court in December 2016.
The question of whether the Government has the power to invoke Article 50 without having a vote in Parliament is without legal precedent. It is nonetheless difficult to imagine that the Supreme Court will overrule with the High Court’s decision; it is more likely that the Supreme Court will uphold the High Court’s ruling and not bow to mounting pressure to side-step the fundamental constitutional principles of the sovereignty of Parliament.
The Government’s self-imposed timetable of March 2017 for the commencement of the formal two-year process is in jeopardy.
While the political and constitutional entanglements are played out in the judicial system and the media, the fact remains that for insurers based in the UK and in Europe the decision to leave the EU has significant commercial and regulatory consequences. Some London based insurers have opted to hedge their bets and set up operations in Ireland to allow Lloyds access to the European market. The current constitutional debate in the UK demonstrates a healthy democracy in action, but that comes with the side helping of prolonged uncertainty.