The legal consequences for businesses and citizens

Brexit would make legal history. No Member State has ever left the European Union in its 60-year history – territories have left (Algeria, Greenland and Saint Barthélemy) but never a Member State. Moreover, the legal consequences for businesses and citizens are both unknown and unsure, writes  Dr Vincent Power, Partner at A&L Goodbody.

The legal regime for a Member State’s withdrawal from the EU has neither been designed fully nor tested before – a broad roadmap exists in Article 50 of the Treaty on European Union (TEU) but it is sketchy.

If the people of the UK and Gibraltar vote on 23rd June that the UK should leave the EU, it would be as dramatic as New York leaving the USA. It is not that trade or the movement of people between the UK and the smaller EU would stop, but both trade and migration would probably be more difficult in the absence of a satisfactory agreement between the EU and the newly departed UK.

Legally, if the UK wants to leave then it must inform the European Council. Negotiations would then commence after a mandate for negotiation has been agreed by the EU. The negotiation process may take however long is agreed but, by default, it would take two years. A two-year period is optimistic: to unscramble 43 years of membership and thousands of laws in such a short timeframe seems unrealistic. After all, the UK’s application process to join a slimmer European Communities took 12 years and had hiccups.

Post-Brexit Agreements and Law Changes

There would probably be post-Brexit agreements between the UK and the EU such as a “Withdrawal Treaty” and a “Relationship Treaty”. These agreements would legislate for many (but not all) of the issues which would arise. There is no precedent: the much mentioned “Norwegian”, “Canadian”, “Turkish” and “Albanian” models are all for countries which were never EU Member States and one would imagine that the UK would expect more from the “old club” than those who were never members. Conversely, the EU might not want to be generous to a departed member (so as to avoid encouraging others to leave) while some of the third party agreements are designed to encourage non-Member States to join. So, negotiation would be difficult.

There would probably be a “trade agreement” between the UK and the EU. There would also have to be clarity on the trade relationships between the UK and the rest of the world so this would probably mean many more agreements than just the UK-EU one. One should not underestimate the difficulties of reaching agreement on an EU-UK trade agreement: the 1,598 page EU-Canada Comprehensive Economic and Trade Agreement (CETA) is still not in place after a decade of discussions. Even the arrangements in place are complicated (e.g. the EU and Switzerland have over 100 agreements between them).

There would also have to be amendments to UK law to deal with the fact that the UK is no longer an EU Member State. Measures embodied in “Regulations” (e.g. the EU Merger Control Regulation by which businesses benefit from the “one stop shop” of EU merger control regulation) would no longer apply but “Directives” (e.g. on employment and environmental matters), which had been implemented into UK law (i.e. national UK laws that were adopted to give effect to EU directives), might have to be neutralised or reversed (if the UK wishes to do so) by adopting new UK laws. There is no doubt that there would be a period of legal uncertainty while the UK legislative regime is adapted to cope with the new reality.