Brexit means…..?

Houses of ParliamentThe High Court gave its judgment in the Article 50 judicial review proceedings on 3 November 2016.  The Court decided the UK Government does not have the power under the Crown’s prerogative to give notice pursuant to Article 50 for the UK to withdraw from the European Union.  The Government has confirmed its intention to appeal the decision to the Supreme Court.  The Supreme Court has said it will accept a leapfrog appeal (avoiding the intermediate step of a Court of Appeal hearing) and has reserved December 7th and December 8th for the hearing.  This will be the first time since the Supreme Court was formed in 2009 that a hearing will take place before all 11 justices, demonstrating the importance of the case.

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Brexit, Exit from Brexit and the loss of British Privileges as a legal consequence

In the wake of the impending Brexit declaration pursuant to Article 50 of the Treaty on European Union (TEU) there have been extensive discussions as to whether any Brexit notice could itself be withdrawn during the two year notice period.  This question has been identified as a crucial issue by the Lord Chief Justice during the hearings in October (and the judgment handed down on 3 November 2016) in the case of The Queen on application of Santos & Miller v. Secretary of State for Exiting the European Union (“Santos”) in which the Claimants are challenging the Government’s assertion that it is able to serve a valid notice of withdrawal pursuant to Article 50 TEU without being expressly authorised to do so by Act of Parliament.  One group of legal experts answers such question with a clear no, because Article 50 TEU does not explicitly provide for a right to withdraw the notice.  The other group of legal experts argues the answer is a clear yes, because Article 50 TEU does not explicitly prohibit a withdrawal of the Brexit notice.

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Parliament must vote on whether the UK can start the process of leaving the European Union, the High Court has ruled

This means the government cannot trigger Article 50 of the Lisbon Treaty – beginning formal discussions with the EU – on its own.

Theresa May says the Brexit referendum and ministerial powers mean MP’s do not need to vote, but campaigners argue this is unconstitutional.

The government is expected to appeal.

The prime minister has said she will activate Article 50, formally notifying the EU of the UK’s intention to leave, by the end of next March. This follows the UK’s decision to back Brexit in June’s referendum by a margin of 51.9% to 48.1%.

The EU’s other 27 members have said negotiations about the terms of the UK’s exit – due to last two years – cannot begin until Article 50 has been invoked.

BBC assistant political editor Norman Smith said, if the court’s decision is not overturned, there could be “months and months” of parliamentary hurdles ahead.

The government is expected to appeal against the decision, with a further hearing to be held in the Supreme Court.

Here is a link to the full judgement.

Brexit – Where the FX Are We?

Retail

UK retail has reportedly “shrugged off” Brexit, with August sales up 6.2% year-on-year. Sales to foreign tourists taking advantage of the weaker pound cannot, however, cancel out the longer-term flipside of costlier imports and rising suppliers’ prices. As our future in Europe remains uncertain even to those in charge of shaping it, retailers are asking what Brexit means for their commercial contracts. Clauses allocating the risk of future exchange rate changes are more common than express Brexit termination clauses. Retailers should check if they can rely on such clauses, or insist upon their future inclusion.

Read more from our Retail team in the latest edition of Retail Quarter.

Britain and the EU: Manufacturing an Orderly Exit

Brexit must be carefully-engineered to safeguard industry and secure new trade opportunities.  This report points to new findings showing that just 5% of British adults think that loss or damage to the UK manufacturing sector is a price worth paying for leaving the EU. And, while acknowledging that the Government faces a difficult balancing act between free trade and free movement of workers, it warns against rushing through a ‘clumsy’ Brexit plan that could do lasting damage to UK manufacturing and the wider economy.

The report is available to download now and was produced by EEF in partnership with Squire Patton Boggs.

House of Commons holds second EU Referendum Debate

When the UK voted in the Referendum on 23 June 2016 whether to remain or leave the European Union, the majority voted in favour of leaving. This was only the third UK-wide referendum ever held. They are rare because the UK relies upon the principle of Parliamentary sovereignty. However, the UK Government have instituted a process for the public to register petitions online. If a petition gets over 100,000 votes, the Petitions Committee will consider it for a debate in Parliament.

Even before the EU Referendum was held, on 25 May 2016 a petition was registered online calling for a second referendum to be held if the turnout was less than 75% and, based on that turnout, the majority was less than 60%. The results fell below both of those levels. There was a turnout of 71.8% of registered voters; 51.9% voted to leave (17,410,742 Votes) 48.1% voted to remain (16,141,241 Votes). Effectively, 37.33% of the Electorate voted in favour of leaving. In the days following the Referendum, over 4 million people signed the online petition.

The Government Digital Service verified the signatures on the petition and removed 77,000 fraudulent signatures. The Petition Committee then scheduled the debate on 5 September in Westminster Hall, the second debating chamber of the House of Commons. A debate in Westminster Hall does not have the power to change the law, and could not end with the House of Commons deciding whether or not to have a second referendum. It will be up to the Government to decide whether it wants to start the process of agreeing a new law for a second referendum.

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Brexit and Dispute Resolution

Signing Article 50 - BrexitThe vote, by the UK electorate to leave the EU, was just a vote. By itself, it does not alter the legal relationships of the UK, Europe and the rest of the world. First of all, the formal process of termination must commence pursuant to Article 50 of the Treaty on European Union (TEU) with a termination notice from the UK government to be given in accordance with the constitutional requirements prevailing in the UK, which will start a two-year period (Sunset Period) of negotiation on the details of the withdrawal (Withdrawal Agreement).

At this point, there is no certainty as to when the UK government will issue the notice of termination of its EU membership. Therefore, there is no certainty as to when the Sunset Period will commence, meaning that the actual date of Brexit remains uncertain.

However, to read more about how Brexit may affect dispute resolution practices, generally.

Brexit: EU and UK Constitutional Requirements

In its Opinion 1/91 of 14 December 1991 on the Treaty establishing the European Economic Area the European Court of Justice (“Court of Justice”) held that the EEC-Treaty, albeit concluded in the form of an international agreement, none the less constitutes the constitutional charter of a Community based on the rule of law.

Accordingly, Article 50 of the Treaty on European Union (TEU) which provides that Member States can notify to the European Council their intention to withdraw from the European Union is a constitutional rule of the European Union and the compliance with Article 50 by the leaving Member State, the European Council and the remaining Member States is subject to legal and constitutional review by the Court of Justice.

A number of constitutional issues which could be subject to review by the Court of Justice in the context of Brexit have been controversially discussed in recent weeks.

One of the most prominent issues is the UK constitutional controversy whether the UK’s Prime Minister could notify pursuant to Article 50 TEU the European Council of the intention of the UK to withdraw from the European Union without obtaining prior approval by the UK Parliament. This issue is currently pending in the English High Court, with the potential for the point of law to go all the way to the Supreme Court.

Since Article 50 (1) TEU provides that a Member State may decide to withdraw from the Union “in accordance with its own constitutional requirements”, the issue of whether approval by Parliament for Brexit is required under the UK’s constitution, turns into an EU constitutional issue as well, since it is debatable whether compliance with the relevant Member State’s own constitutional requirements is a pre-requisite for validly triggering the Article 50 TEU procedure and whether such compliance is therefore ultimately subject to scrutiny by the Court of Justice.

One potential avenue to proceedings in front of the Court of Justice could, depending on the circumstances, be Article 263 of the Treaty on the Functioning of the European Union (TFEU) in case of an infringement of the EU Treaties by the Council engaging in withdrawal negotiations where no constitutionally valid withdrawal notice within the meaning of Article 50 TEU has been given. Another avenue to the Court of Justice would be open pursuant to Article 267 TFEU in case that the question of whether the UK has actually ceased to be a Member State of the EU or not (which it only does if a valid notice pursuant to Article 50 had been given) becomes relevant in any domestic court proceedings (for example within commercial disputes) within any of the other 27 Member States of the European Union under any relevant circumstances.

In this respect one might assume that the Court of Justice would with some likelihood follow any ultimate binding decision rendered by the Supreme Court of the United Kingdom. Accordingly the degree of legal uncertainty which has arisen would be reduced considerably if there would either be an approval by the UK Parliament of any Article 50 TEU notice to be given or an ultimate decision by the Supreme Court of the United Kingdom on that point.
Another “constitutional” issue which is currently controversially discussed is what happens if the UK Government or UK Parliament changes its mind about a Brexit during the two year withdrawal negotiation period.

For a long time it had been the widely held view across Europe that any termination notice by the UK Government to the European Council cannot be revoked unilaterally since the wording of Article 50 TEU is said to be clear – it does not provide for a revocation right and provides that the termination notice kick-starts the two years negotiation period which automatically results in the relevant Member State leaving the EU after such two years unless an extension of the two year period is agreed unanimously by all Member States, and since Article 50 (5) TEU provides that any rejoining of the EU after withdrawal needs to take place pursuant to Article 49 TEU. This view has, for example, been set out in a research paper of the European Parliament published in February 2016.

In contrast to that view , on 4th May 2016 the European Union Committee of the House of Lords issued a report in which it proposes a contrary legal view that a withdrawal notice can be revoked unilaterally during the two years negotiation period. This report is based on a public evidence session which the committee held with Sir David Edward, QC, and Professor Derrick Wyatt, QC.

It should be noted that neither report discusses whether and to what extent Article 68 of the Vienna Convention on the Law of Treaties – which provides that certain notifications which target at ending International Treaties may be revoked at any time before they take effect – could become relevant for the interpretation of Article 50 TEU. In addition neither report considers how Article 50 TEU should be interpreted, in the light of the autonomous approach which the Court of Justice takes in respect of interpreting and applying European law independent from the individual domestic approaches of EU Member States and independent from international law and which might disregard Article 68 of the Vienna Convention. This is because the Court of Justice would argue that the European Union is a constitutional Union which exists outside of and beyond mere international treaties (see for example Opinion 1/91 of the Court of Justice of 14 December 1991).

Again, one potential course for proceedings in front of the Court of Justice could, depending on the circumstances, be Article 263 of the Treaty on the Functioning of the European Union (TFEU). This could arise in the context of an infringement of the EU Treaties by the Council, the Commission or the European Parliament in adopting acts implementing such withdrawal of the termination notice, or, in any event, the Preliminary Ruling proceedings pursuant to Article 267 TFEU as set out above.

Brexit and the Impact on UK Infrastructure

Infrastructure is one of the UK’s most vital sectors and, like all other considerations surrounding the consequences of the vote to leave the European Union, lies in a state of uncertainty. EU investment to UK infrastructure has been significant since membership began – including a huge £16 billion over the past three years alone – and would no doubt be a big loss to the UK if it were to be withdrawn completely. Generally, most commentators agree that one certainty following Brexit is a delay to the completion of a number of projects and the security of further funding, while the most crucial factor to address is the form of trade agreement to be negotiated. Robin Baillie, Stefanie Atchinson and Lydia Taylor evaluate such consequences and possibilities in our most recent article “EU Referendum: Brexit and the Impact on UK Infrastructure”, while attempting to explain the possible legal ramifications that the country may face in due course.

You can read the full article on our website.

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