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Breaking up isn’t so easy to do

17th May 2016

Most post-Brexit analysis refers to negotiations aiming for a new settlement with the EU. But how easy would it be to effect the break up in the first place?

Executive Summary

  • More thought is required for the practicalities and mechanisms of Brexit.
  • The EU treaty provides for a two year withdraw process, but this is unlikely to be adequate.
  • With 7,500 UK laws containing EU law, the disruption will be huge.
  • Transitional provisions will likely be required; which will be complex to negotiate.
  • So to what extent will the UK wish to change UK laws that contain EU law before the final conclusion of the withdrawal treaty? In my view this is for the most part unlikely as:
    • The quantity of laws to be addressed is so great.
    • Legislators would wish to consider UK law changes in the context of any future deal with the EU, which would then be in the process of negotiation.• UK parliamentary procedures for new legislation generally take two years.
    • Internal UK political differences will delay further.
    • Third party treaties and UK gold plating of EU laws will add complexity.
    • Complicated consultation with business will be required.

Most post Brexit analysis refers to negotiations aiming for a new settlement with the EU. But how easy would it be to effect the break up in the first place?

Article 50 of the Treaty on EU (TEU) allows a member state to unilaterally leave the EU with no need for the endorsement of any other Member States. The TEU provides that the EU “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”.

Withdrawal will happen two years after the leaving State notifies the European Council of its intention to withdraw and this period can only be extended with the consent of the European Council. Prime Minister David Cameron seems to have indicated that he would start the two year leave clock ticking more or less immediately after a “leave” vote by giving notice under Article 50. During the following negotiations, the withdrawing Member State would continue to participate in other EU business as normal; at least from a legal point of view, given that the markets may not treat a Brexit vote as business as usual. Of course the leaving state would be excluded from the Council and European Council discussions concerning its exit.

Clearly, the huge disruption that withdrawal would cause, would require transitional arrangements to be agreed as part of the withdrawal agreement. To put this in context, it is considered that approximately 7,500 Acts of Parliament contain European law, to some degree. Similar demands for transitional deals would arise with the long term funding of EU projects and joint ventures. Some, such as Adam Lazowski, consider that there would need to be three treaties surrounding withdrawal: First, to allow withdrawal, a second to amend EU Treaties to remove references to the leaving State; and a third to establish a relationship with the departing State eg to join EFTA and remain in the EEA. The agreement would be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It would be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

The situation is made more complex by the withdrawal agreement falling between different categories of competence, which could be either shared between the EU and its Member States or exclusively of the EU.

It seems a generally shared view that the chance of the UK disentangling itself from EU membership, let alone negotiating a new relationship, within two years, is extremely unlikely. Importantly, many EU laws would continue regardless of the UK’s membership. In particular, any domestic laws giving effect to EU Treaty rights, for example transposing EU directives, would subsist until repealed or amended by Parliament. EU law transcribed into UK statute or regulations would not automatically be repealed just because the underlying treaty no longer applied.

For instance the Extradition Act of 2003 gives effect to the 2002 European Arrest Warrant framework directive. If it remained unamended, after EU Treaties stopped applying to the UK, it would still provide a legal basis for extradition requests from EU Member States. Whether requests from the UK would be acted upon in the other Member States would depend on the state of EU or national law there, but there would be no obligation to act on it after the expiry of the two year period.

So the further question is to consider to what extend UK legislators would wish to address changing UK laws, that contain EU law, before the final conclusion of the withdrawal treaty?

In my view this would for the most part be unlikely and the UK will look predominantly to retain the status quo, in the short to medium term, for the following reasons:

Many areas of EU inspired UK law are a mixture of: Firstly, regulations which would remain in place until withdrawal and then fall away (unless replaced by national legislation), or at least transition arrangements, are concluded. Of course if EU regulations were to fall away before an alternative UK structure could be put in place, the UK could face the bizarre prospect of legislating to maintain the (EU) status quo on a holding basis

Secondly, EU directives which could be acted upon by amending or abolishing the related UK implementing statute or regulations. However, the chances of wholesale changes being made to UK statute during the withdrawal negotiation process are unlikely; not least because changes to statute normally take place over a two year period and the amount of law to be changed would be immense.

Furthermore, with much of the UK regulations, legislators may be understandably unwilling to make changes until the form of the post Brexit arrangements have been agreed with the EU and other key trading partners. At the moment suggestions as to the model to be followed vary from the EEA to the Swiss to the Canadian and even the Albanian systems of relationship with the EU. There is no post Brexit agreed plan from the “Leave” campaign and Government departments have been told by Downing Street not to expend resources on planning post Brexit scenarios. So one would assume that regulatory changes would follow, rather than lead, the policy development.

Even if statute or regulatory changes were to be made, it cannot be assumed that there would be political agreement. Indeed EU law covers many of the most contentious policy areas, eg employment rights. These would be extremely hard fought if, say, there was a proposal to scrap the employment Transfer of Undertakings Regulations. To have an internal UK political bust-up going on at the same time as the Brexit position is being negotiated with the EU could be embarrassing to the UK and hinder its withdrawal negotiations.

It should also be pointed out that much of EU law is itself partially based on other law and accords which will differ from area to area; from the WTO in trade to Basle for banking and Rio for the environment. The result of this may, in some situations, mean either leaving EU directives transposed into UK law or initiating a complicated process of unpicking EU “gold plating” of the original accords; keeping in mind that every international Treaty to which the UK is a party, has to be incorporated into our law.

As for “gold plating”, this is something that the UK has itself delighted in, to no little extent over the years, when transposing EU directives into UK law. One can only imagine the legislative work involved in deciding whether such laws are to be retained, wholly or partly, post Brexit.

Finally, many of the proposals involved when amending British laws will need to be carefully consulted upon. For instance if banks based in London are, following Brexit, at risk of losing their EU passport there would need to be a decision taken as to whether banks should operate under two regulatory regimes or whether the UK should attempt to remain within the EU regulatory system and on what terms. What, for instance, would be the impact on capital requirements for an entity like Deutsche Bank which has its investment banking operations in London? Of course, if there were to be two regimes, banks themselves could decide to reject British regulation and retain their EU passport by relocating to, say, Frankfurt or Paris.

For all of these reasons it seems highly likely to me that UK legislators will wish only to unravel the minimum of EU law from the UK law books, until such time as Brexit has been finalised. Moreover, even following Brexit it seems highly likely that the process of unravelling EU legislation will be a long and complicated road which will still be ongoing long after the 2-year period has expired. Other related questions then arise: Where would we find the experienced civil servants and trade negotiators to undertake Brexit negotiations? Could we poach people from the European Commission, if we don’t have the expertise? Who would fund the significant expansion in public expenditure that would be necessary?

Whether the general public realise now or before their vote, that a “leave” decision in the referendum would be only the start of a long journey out of the EU let alone into something else, is yet to be seen. But the road out of Brexit will undoubtedly be a long and complicated one.

Jonathan Djanogly MP

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