BREXIT – ARTICLE 50 & what the result means for the UK

Partner Roger Margand shares his views on BREXIT and what the result means for the UK politically, economically and legally.

roger-margand-spire-solicitors-norfolkI am not sure that the whole Chinese proverb about living in interesting times has ever been more relevant than over the last couple of weeks.

The immediate impact of the UK’s vote to Brexit is already been felt with substantial market volatility, particularly around the plummeting value of the £ which as at the date of this article is the lowest against the dollar it has been since 1985.

This could trigger legal issues in some businesses, for example under financing arrangements and clearly everyone is working on stabilising the markets as a key priority in the short term.

You may have realised that legally the Referendum result has no immediate effect and is semi-advisory in nature and that the UK remains a member of the EU.  It continues to be a member until the expiry over a two year notice period following its formal notification to the European Council and during this period it will still benefit from the subject of its terms of its EU membership.

There is some argument over whether this can be triggered by the Prime Minister or whether it can be triggered by Parliament.

Most constitutional lawyers seem to be suggesting that it requires a vote of Parliament rather than an executive order from the Prime Minister, but what is not being disputed is that on its exit, the UK will by default cease to have barrier free access to the single market, to be bound by EU laws or to be party to the International Trade Agreements to which it is currently party by virtue of EU membership.

In reality, there will be a lot of negotiation over the next two years once Article 50 Notice has been given (and there has even been commentary over whether this will even happen) which if will be about which if any elements of the UK’s current trade relationships will continue under new arrangements.

This is a massive undertaking and the omens for getting any new trade arrangements done within two years are not good.

By way of example, Canada’s free trade agreement with the European Union is seven years old in the making and still not agreed.

The other interesting thing, over the last week has been the calls from government for negotiators to help with the post Brexit negotiations indicating that resources and getting enough people may also be an issue.

In terms of practice areas, we think that businesses will need a significant amount of support once the waters have calmed somewhat and understanding what the legal implications are going to be, implementing contingency plans and developing effective strategies.

In the short term, businesses will need to support the UK government’s efforts during negotiations and any transition.  Ironically, this will mean more active engagement with EU institutions.  In relation to those laws that have been implemented as a result of EU directives, those laws continue as before and as stated above, until the UK leaves the European Union, then all current laws and regulations continue to apply.

There are existing trade arrangements that the UK could tap into such as the European Economic Area Agreement (alongside Norway and others) or indeed join the European Free Trade Association.

If the UK does leave but then wants to trade with the EU single market on equal terms, there seems little doubt that it would have to prove “adequacy” in other words any standards that the European Union has issued frameworks or regulations on would have to be in the UK equivalent to what is in the EU.

It would also seem to make sense that any European Regulations that are due to become effective in the UK before the two year Notice expires will still become effective.

The only alternative to the above is if the UK Parliament takes unilateral action to repeal the European Communities Act 1972 with the initial of rendering EU law ineffective in the UK without going through the Article 50 process.

This seems very unlikely as it would cause significant prejudice to the UK’s ability to negotiate favourable terms of future trade with the EU and there has been no suggestion either in the press or anecdotally that the UK government will take this course.

In conclusion, it is difficult to make too many bold statements about the above, given how much is still fluid and changing politically and therefore legally.

What can be said is there is a risk that when the new relationship between the EU and the UK comes into force through whatever medium, there may be new restrictions on the ability of UK businesses to provide services or goods or other EU member states and there may be a new risk that the new relationship will place restrictions or tariffs on importing exporting goods and services between the UK in the EU member states and change some of the legal processes in this country as a result.

I will be monitoring events closely but if you have any questions in relation to any specific area in the meantime, please get in touch with either me or any other member of our Business Team.